Jitu Report

8/3/2019 Jitu Report

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CHAPTER 1

INTRODUCTION OF BANKING SYSTEM

AND CO-OPERATIVE BANKING

1.1 INTRODUCTION OF BANKING SYSTEM

1.2 STRUCTURE OF BANKING SYSTEM IN INDIA

1.3 ABOUT CO-OPERATIVE BANK

1.4 THREE TIRE STRUCTURE OF CO-OPERATIVE BANK IN

INDIA

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1.1 INTRODUCTION OF BANKING SYSTEM :

Development of banking system is on inventible precondition for

healthy rapid development of national economy structure. Banking system

has contributed of the world and hence a banking institution is indispensable

in a modern society. It plays pivotal role in the economic development of a

country and forms crore of the money market in an advance country.

What is Bank?

The word bank derived from the latine word bancusorbancameaning a bench. A bank refers to the function of accepting deposits,

lending, repaying the deposited money on demand and functioning as an

agent of any national economic structure. The development of banking is an

inventible pre-condition.

The trace of the development of banking is found us early as 2000 B.C.

but in the middle 12th century banks were established at Venice and Genaca.

Bank of England came up in 1694 and in 1786 the general bank of India was

established for the first time in India.

Banking system in India: -

In the economic development of a nation bank occupy an important

place. Indian money market comprises both organized as well as

unorganized sectors. The unorganized sectors include moneylenders and

indigenous bankers and largely cater to the needs of person living in villages

and small towns. Financial institutions in the organized sector have grown

significantly. Among the institution in organized sector of the Indian money

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market Commercial banks, Co-operative banks, Regional Rural banks,

Development banks etc.

In 1770,first Indian bank known as bank of Hindustan was started and

was closed down twenty years later. Later on, the east India Company

started three presidency banks with government participation. There were:

Bank Of Calcutta 1806

Bank of Bombay 1840

Bank of madras 1843

Other banks such are

Allahabad bank came in to existence in 1865

Alliance bank of Simla in 1873

The first Indian joint stock bank known as Oudh commercial bank

was set up in 1880 and Punjab National Bank was launched in 1894. There

were as many as 648 commercial banks in India by the end of 1947 and as

many as 161 bank failed during 1913-14. Thus there was great need of an

institution to control and regulate banking in the country. As a result, The

RBI was set up in 1935 for regulating the banks in the country.

A scheme of social control on banks was enforced through statutory

measures with effect from 1st Feb 1969. The banking industry saw a

revolution after 14 major commercial were nationalized in June 1982. More

than 90% of the bank deposits come under the control of the government

Agricultural Credit Development, Rural Planning and Credit Cell and

agricultural refinance and Development Corporation were combined

together to set up Rational Bank for Agricultural and Rural Development. In

July 1982. Later the Exim Bank and National Housing Bank were set up in

1988 respectively.

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1.2 STRUCTURE OF BANKING SYSTEM IN INDIA :

1) Commercial banking

2) Central banking

3) Development banking

4) Co-operative banking

Others are

(1) Exim banking

(2) Regional rural banks

(3) Land development banks

(4) National bank for agriculture and Rural Development (NABARD)

1.3 ABOUT CO-OPERATIVE BANK :

A STATEMENT ON THE CO-OPERATIVE IDENTITY

As per the definition given by the international co-operative alliance

a co-operative is an autonomous association of persons united voluntarily to

meet their common economic, social and cultural needs and aspirations

through a jointly-owned and democratically controlled enterprise.

Co-operative is based on the values of self-help responsibility,

Democracy, equality and solidarity. In the tradition of their founders, co-

operative members believe in the ethical values of honesty, openness, social

responsibility and caring for others.

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CO-OPERATIVE BANK IN INDIA

The co-operative movement was started in India in 1904, with a view

to providing agriculturists with finance required for agricultural operation at

low rates of interest.

Under the co-operative credit societies at 1904 a number of primary

societies were set up in various part of the country.

Section 2(f) of National Bank for Agriculture and Rural Development

act, 1981 defines Co-operative society as a society registered or deemed to

be registered under the co-operative society act, 1912 (2 of 1912) or any

other law relative to co-operative societies for the time being in force in anystate.

According to section 5 of the National Bank for Agriculture and Rural

Development Act, 1981 that co-operative bank and a primary Co-operative

Bank.

In economy, co-operative banks have played a limited but important

role in the banking system of the country. In there are number of such banks

and societies, which include: State Co-operative Banks, Central Co-

Operative Banks, Primary Co-Operative Banks, Land Development Banks,

and Farmers Service Societies.

Unlike the commercial bank, the co-operative banks do not lend on

the basis of a prime-lending rate. They also are various tax sops because of

their holding pattern and lending structure and hence percentage on saving

deposits. Many these co-operative banks diversified in to specialized areas

like car finance, house loans, truck finance etc. in order to keep pace with

their public sector and private counterparts, the co-operative banks too have

invested heavily in information technology to offer high and computerized

banking services to its clients.

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Quite a few expert committees have recommended far reaching

reforms for the banking sector that that has been grappling with perpetual

problems of the asset quality astronomical overheads, low productivity, to

name but few. The Narasimha committee report made radical

recommendation for banking sector by emphasizing the need for de-

regulation and liberalization. Some specific recommendations were:

Deposit interest rates to be reduced along with reduction of Statutory

Liquidity ratio.

A separate body under the auspices of RBI to monitor the functioning

of banks. The capital base of banks should meet with international norms of

Capital adequacy.

The Statutory Liquidity Ratio and Cash Reserve Ratio should be

reduced to judicious levels coupled with the withdrawal of

concessional lending.

RBI should have centralized control over the banking system

PRINCIPLES OF CO-OPERATIVE BANK

The co-operative principals are as under: -

1) Principle of Voluntary and open Membership: -

Co-operative is voluntary organizations, open to all persons able to

use their services and willing to accept the responsibilities of membership,

without gender, social, racial, political or religious discrimination.

2) Principle of Democratic Member Control: -

Co-operative is democratic organizations controlled by their

members, who actively participate in setting their policies and decisions,

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men and women serving, as elected representatives are accountable to the

membership. In primary co-operative members have equal voting rights (one

member one vote) and co-operative at other levels are also organized in a

democratic manner.

3) Principle of Member Economic Participation: -

Members contribute equitably to and democratically control the

capital of their co-operative. At least part of that capital is usually the

common property of the co-operative Member usually receive limited

compensation, if any on capital subscribed as condition of membership.

Members allocate surplus for any of the following purposes: developing

their co-operative, possibly setting up reserves, part of which at least would

be indivisible, benefiting members in proportion to their transactions with

the co-operative and supporting other activities approved by the

membership.

4) Principle of Autonomy and Independence: -

Co-operative is autonomous, self-help organizations controlled by

members. If they enter in to agreements with other organization, including

governments or raise capital from externals sources they do society on terms

that ensure democratic control by their members and maintain their co-

operative autonomy.

5) Principle of Education, Training and Information: -

Co-operative provide education and training for their members,

elected representatives, managers and employees society that, they can

contribute effectively to the development of their co-operative.

They inform the general public particularly young people and leaders

about the nature and benefit of co-operative.

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6) Principle of co-operative Among co-operative: -

Co-operative serves their members most effectively and strengthens

the regional and co-operative movement by working together through local,

national, international structures.

7) Principle of Concern for Community: -

Co-operative work for the sustainable development of their

communities through policies approved by their members.

1.4 THREE TIRE STRUCTURE OF CO-OPERATIVE BANK IN

INDIA :

1) Primary Co-operative credit society: -

A Primary credit society can be started with ten or more person, normally

belonging to a village. So that the village co-operative credit society was

expected to direct deposits from among the well to do members

and non-members of the village. It should of the loan and advances to needy

members mainly out of these deposits.

2) Central Co-operative Bank: -

The Central Co-operative credit society is federation of primary credit

society in a specified area, normally a district and is usually located at the

district. The Central Co-operative banks have been under taking normal

commercial banking business also such as attracting deposits from the

general public and lending to the needy against proper securities.

3) State Co-operative Bank: -

State co-operative bank expectivelly co-ordinator the activities of district

&central co-operative banks and give them required guidance. State co-

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Agriculture Credit Non-Agriculture Credit

Co-operative Bank

Primary Agriculture Credit So

Grain Banks

Farmers Services Society

Urban Co-op.

Banks

Employees Co-op.

Credit Societies

operative bank is a between co-operative activity and countrys money

market.

STRUCTURE OF CO-OPERATIVE BANK: -

CHART: -

State Co-operative Bank

Centralized Co-operative Bank

(Figure:1)

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State Co-operative Bank

Central Co-operative Bank

Primary Co-operative Bank


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CHAPTER 2

INTRODUCTION OF VARACHHA

CO-OPERATIVE BANK

2.1 HISTORY & DEVELOPMENT OF THE BANK

2.2 BOARD OF DIRECTORS

2.3 ORGANIZATION CHART

2.4 TIME KEEPING SYSTEM & INSURANCE FACILITIES

2.5 FINANCIAL POSITION OF THE BANK

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2.1 HISTORY & DEVELOPMENT OF THE BANK :

The Varachha co-operative bank was set up with license no. UBD

GUJ 1153:P on 1st July 1995 and registered on 27th January 1995. The

registered office of the bank is at Affil tower, L.H.Road, Surat-6.Within the

period of four months after obtaining license the bank has started it working

on 16th October 1995. The opening of the bank was done by the Swami

Sachidanand in present of other many important guests. Varachha co-

operative bank was having fourteen directors during its first year.

After starting working on 16th Oct, 1995,The Varachha co-operative

bank made a giant leap in short period of 5 years. During progress the

Varachha co-operative bank has became fully computerized. The banks first

branch was opened at Ring Road. It is because of textile market area, thus

the branch was become more activated and the bank was continuing in

progress. After ring road branch, the Varachha banks directors have decided

to set up other branch at Kamrej. Thus, continue in progress, the bank has set

up its other Branches at Kadodra, Kapodra, and at Katargam. These

branches are result of smooth, speedy and healthy relative activities, services

and highly facilities to its customers and members.

The Varachha Co-operative bank is providing accident insurance

scheme to its members and his customers. The Varachha bank has offered

attractive Interest on deposit and loans to its customers.

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2.2 BOARD OF DIRECTORS NAME ARE AS FOLLOWS :

Name Post

Mr. P. B. Dhakecha Est. Chairman

Mr. Pravinbhai V. Pansuriya Chairman

Mr. Dr.Lavjibhai M. Nakrani Loan Committee Chairman

Mr. Dhirubhai L. Ghevariya Staff Committee Chairman

Mr. Bhupendrabhai K. Ribadiya Vice President

Mr. Bhavanbhai B. Navapara M.D.

Mr. Kanjibhai R. Bhalala Director

Mr. Jivarajbhai K. Patel Director

Mr. Narendrabhai M. Kukadiya Director

Mr. Kanjibhai R. Vadariya Director

Mr. Vallabbhai P. Savani Director

Mr. Prabhudasbhai T. Patel Director

Mr. Kanubhai V. Savaliya Director

Mr. Babubhai V. Mangukiya Director

Mr. Manjibhai M. Patel Director

Mr. A.D. Bhalani (Head Office) General

Manager

Mr. B.C. Sorathiya (Head Office) Manager

Mr. V.B. Dhanani (Kapodra) Manager

Mr. B.V. Patel (Kamrej) Manager

Mr. K.A. Dobariya (Ring Road) Manager

Mr. S.D. Kakdiya (Kadodra) Manager

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Mr. A.V. Patel (Katargam) Manager

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2.3 ORGANIZATION CHART :

(Figure:2)

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BOARD OF DIRECTORS

CHAIRMAN

MANAGING DIRECTOR

GENERAL MANAGER

BRANCH MANAGER

OFFICERS

HEAD CLERKS

CLERKS


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2.4 TIME KEEPING SYSTEM & INSURANCE FACILITY

Time Keeping System

The Varachha co-operative bank has no separate department for time

keeping system headed by manager or officer. As far as payment of wages

and salaries are concerned. Present managers, officers, clerks and peon of

the bank are required to sign in attendance register. These records are send

to general manager of the bank.

There is one shift in a day.

Monday to Friday 10.00 A.M.to 5.00 P.M.

Saturday 10.00 A.M.to 3.00 P.M.

Insurance Facility

The Varachha bank has provided a special facility of accident

insurance to its members, each and every account holders.

Staff Member Accident Insurance 10 lacs.

Mediclaim up to 2 lacs.

Share holder Accident Insurance 2 lacs.

Account holders

(1) Saving/Current

& Fixed deposit Accident Insurance 50,000

(2) Loan Accident Insurance 1 to 3 lacs.

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2.5 FINANCIAL POSITION OF THE BANK :

Capital structure: -

(RS.IN

CRORE)SR NO PARTICULARS 2001 2002 2003

1 Share Capital 2.51 3.11 3.44

2 Total deposit 101.83 123.04 129.79

3 Total loan 55.21 67.32 67.25

4 Profit 3.67 4.70 4.73

5 Working capital 115.83 146.41 159.35

(Table:1)

BANK PROGRESS CHART

0

20

40

60

80

100

120

140

2001 2002 2003

YEAR

RS.INCRORE

DEPOSIT

LOAN

PROFIT

(Graph:1)

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Progress in number of Members: -

The no. of Members are: -

SR NO PARTICULARS 2001 2002 2003

1 Members 6887 7342 8148

2 Account holders 58222 66109 75435

3 Borrowers 5098 5727 5055

4 Audit class A A A

5 Dividend 15% 15% 15%

(Table:2)

MEMBERS PROGRESS CHART

0

10000

20000

30000

40000

50000

60000

70000

80000

2001 2002 2003

YEAR

NO.OF

MEMBER MEMBERS

A/C HOLDERS

BORROWERS

(Graph:2)

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CHAPTER 3

LIMITATIONS

OF STUDY

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LIMITATIONS :

The limitations of this study are as follows: -

The time period is limited for this study.

The comparative study is limited to only two banks.

There is also difficulty to get properly loan relevant information of

comparative bank.

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CHAPTER 4

DESCRIPTION OF LOAN

& ADVANCES

4.1 MEANING OF LOAN

4.2 GENERAL LOAN PROCEDURE

4.3 KINDS OF LOAN

4.4 SIGNIFICANCE OF LOAN

4.5 DRAWBACK OF LOAN

4.6 LOAN PROCEDURE OF THE VARACHHA CO-

OPERATIVE BANK

4.7 VARIOUS TYPES OF LOAN & ADVANCES ISSUED BY

VARACHHA CO-OPERATIVE BANK

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4.1 MEANING OF LOAN :

Loan is a such types of promises under which bank gets ready to

lending money to a borrower for a fixed period. Borrower needs it for

specific purposes so bank is ready for lending him a credit for a specified

period. In this period borrower has to repay it with interest and installments.

In other words when a banker makes a advance in a lump-sum which

can not be paid wholly or partly and which the customer has permission to

withdraw subsequently, it is called a loan.

Loan are promises for future payment, they have to be repaid in

periods beyond a year and are therefore long-term liabilities.

Loan can play a significant role in times when borrower needs funds

for fixed assets or non-respective type of activities and thus seeks money

from the bank that is withdrawn in one lump sum. The loan amount is

normally repaid in installments. Loan may be shot-term, medium-term or

long-term.

Loans and advances are classified in to secured and unsecured.

Secured Loan or Advance: -

Secured loan or advance means a Loan or Advance made on the

security of assets. The market value of which is not at any time less than the

amount of such loan or advance.

Unsecured Loan or Advance: -

An unsecured loan or advances means a Loan or advance not so

secured. A partly covered loan or advance is partly covered by the security

of assets, the market value of such securities being less than the amount that

has been lend or outstanding at any time.

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4.2 GENERAL LOAN PROCEDURE :

Normally various National and Co-operative banks adopt following

procedure for loan sanctioning.

(1) Submission of Loan Application: -

The borrower may submit the application to any of the term lending

institution .The borrower is required to fill out a common application form

which seeks comprehensive information about the project the common

application form covers the aspects like promoters background, particulars

of the industrial concern, particulars of the project, cost of the project meansof financing, marketing and selling arrangement, profitability and cash flow,

economic consideration etc

(2) Initial processing of Loan Application: -

When the application is received, an officer of the receipt institution

reviews it to ascertain whether it is incomplete the borrower is asked to

provide the required additional information when the application is

considered complete, the recipient institution prepares a Flash Report. It is

evaluated at the senior executive meeting .for the conveniences of borrow,

financial institution operates a scheme of participation for rupee term loans

and underwriting assistance.

(3) Issue of the letter of sanction: -

After the board of directors of the lead financial institution approves

the proposal, a financial letter of sanction is issued to the borrower this

communication to the borrower the assistance sanctioned by the lead

institution and the assistance sanctioned/to be sanctioned by other

participating in the consortium arrangement Each of the participating

institution would, after approval by its board of directors or other

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appropriate authority, convey sanction of its shares of assistance to the lead

institution under a advice to the borrower. If a participating institution is not

able to make available its shares of assistance, the same will be shared on

prorates basis amongst the lead and other participating institutions.

(4) Acceptance of the Terms and Condition by the borrowing units: -

On receiving the letter of sanction from the lead financial institution,

the borrowing unit convenes its board meeting at which the term and

condition associated with the letter of sanction are accepted and an

appropriates resolution is passed to that effect. The acceptance of the terms

and condition has to be conveyed to the financial institution within thirty

days.

(5) Execution of Loan Agreement: -

The lead financial institution after receiving the letter of acceptance

form the borrower, sends the drafts of the agreement to the borrower to be

executed by authorized person and properly stamped as per the Indian stamp

act, 1899.the agreement, properly executed and stamped, along with other

document as required by the financial institution also sings the agreement, it

becomes effective.

(6) Disbursement of Loan: -

Periodically, the borrower is required to submit information on the

physical progress of the project, financial status of the project, arrangement

made for financing the project, contribution made by the promoters,

projected funds flow statement, compliance with various statutory

requirements and fulfillment of pre-disbursement conditions. Based on the

information provided by the borrower, the lead financial institution will

determine the amount of terms loans to be disbursed from time to time.

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Before the term loan is disbursed the borrower must fully comply with all

the term and conditions of the loan agreement.

(7) Creation of Security: -

The term loans and the differed payment guarantee assistance

provided by the all India financial institutions are secured through the first

mortgage by way of deposit of title deeds of immovable property and

hypothecation of movable properties. As the creation mortgage, particularly

in the case of land, tends to be a time consuming progress, the institution

permit interim disbursement against alternate security. The mortgage,

however, has to be created within a year from the date of the first

disbursement otherwise the borrower has to pay an additional charge of 1%

interest.

4.3 KINDS OF LOAN :

Generally National and Co-operative bank grant loans for different

period like shorts, medium and long and for different purpose. Broadly, the

loans granted by banks are classified follows

Bank Loans

(Figure:3)

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Medium

& Long-

term loan

Short-term

Loans

Composite

Loans

Consumption

Loans


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(1) Short-term Loans: -

Normally Short-term loans granted for short time period such as for

less than one year. Short-term loans are granted to meet the working capital

needs of the borrowers. These loans are granted against the securities of

tangible assets mainly the movable assets like goods and commodities, share

debenture, etc.

(2) Term Loans: -

Medium and long-term loans are usually called term loans. These

loans are granted for more than a year and are meant for purchase of capital

assets for the establishment of new units and for expansion or diversification

of an existing unit. Such loans constitute a part of the project finance which

industrial enterprises are required to raise from different sources. These

loans are usually secured by the tangible assets like land, building, plant and

machinery, etc.

(3) Composite Loans: -

When a loan is granted both for buying capital assets and for working

capital purpose, it is called a composite loan. Such loans are usually granted

to small borrowers, such as artisans, farmers, small industries, etc.

Maximum time period for this loan is 3 to 4 years.

(4) Consumption Loans: -

Normally banks provide loans for productive purpose only, but as an

exception loans are also granted on a limited scale to meet the medical needs

or the educational expenses or expenses relating to marriages and other

social core monies etc. of the needy persons such loans are called

consumption loans.

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4.4 SIGNIFICANCE OF LOAN :

1. To Develop Business: -

Loan and advance can play a significant role in development of

business because it become helpful to meeting capital needs timely. For

developing of business large capital is needed to take new technology adopt

so at time machinery loan and other term loans are used to expand business

activity.

2. Financial Discipline on the Borrower: -

As the statement suggest that a time repayment of the loan or itsinstallment is fixed in advance, this system ensured a grater degree of self-

discipline on the borrower as compared to the cash credit system.

3. Periodic Review of local Account: -

It is necessary for every bank to make a periodic review of local

account of any loan account or banks other account. Whenever any loan is

granted or its renewal is sanctioned the banker get an opportunity of

automatically reviewing the loan account.

4. Profitability: -

The system is comparatively simple; interest accrues to bank on the

entire amount lend to customer.

4.5 DRAWBACK OF LOAN :

1. Inflexibility: -

In the lending system of loan there is more inflexibility in Co-

operative bank. Borrowers may borrow in excess of their exact

requirement to provide for any contingency.

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2. Abuse of funds: -

Banks have control over the use of funds borrowed by the customers.

However, banks insist on hypothecation of the assets purchased with loan

amount.

3. Indistinct period: -

Though the loans are for fixed period but in practice roll over, i.e. they

are renewed frequently.

4. Complexity for document: -

Loan documentation is more comprehensive as compared to each

credit system.

4.6 LOAN PROCEDURE OF THE VARACHHA CO-

OPERATIVE. BANK :

The loan application passes through the following process: -

1. First of all, there is submission of loan application with all relevant

documents normally required, and submitted by borrower to the bank.

2. After submission of application, needed securities be obtained by

bank and appraisal made on the security as well as on the loan

borrower and on its business.

3. The next step is that proposal put forward in the Loan committee.

4. After clear searching on the proposal, the board can give approval for

sanctioning a loan.

5. Many times a specific conditions received from board.

6. After solving the conditions the borrower must make documentation

as required and signing of paper as per needed by bank.

7. At the last stage, bank make disbursement of loan, it is under the types

of loan scheme.

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4.7 VARIOUS TYPES OF LOAN & ADVANCES ISSUED BY

VARACHHA CO-OPERATIVE BANK :

The Varachha co-op. bank has performed good work by issuing many

type of loan. So bank also bring new changes time to time for increasing its

effectiveness. The various types of Loan are following way: -

1) Term Loan :

The Varachha Co-op. Bank sanctioned loan to applicant who want to

purchase a new technology, Machinery, equipments and material or stock

for developing his business by expaning it bank can give loan amount of

70% of the quotation.

Limit: - There is no limit for Term loan

Rate of Interest: -

Particular Interest rate Rebate Net rate

Term loan

Up to Rs 2 lacs 14%

Above Rs 2 lacs 15%

2%

2%

12%

13%

(Table:3)

Margin: - Margin for Term loan is 25% to 35%.

Security: - Bank provides loans against up to mortgage and hypothecation

provide by applicant.

Requirement for Term Loan: -

All Basic documents: -

Xerox of rationing card of proprietor as well as two guarantors.

Two photocopy of loan applicant and one-one photocopy of

guarantor

Lightbill/telephonbill xerox of applicant as well as two guarantors.

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Housing tax bill xerox of applicant and two guarantors.

Evident of shareholders.

Other Documents: -

Income Proof for loan applicant as well as two guarantors.

Directors signature is required for recommendation.

Photocopy of property file is submitted to bank.

Duplicate copy of city survey.

Last three years firms statements and Income tax return copy.

Quotation of purchasing new machinery.

2) Vehicle Loan :

The Varachha co-operative Bank provides loan for purchasing various

types of vehicle such as two, three and four-wheeler.

Generally vehicle loan is completed within 2 year but above one lacs

loan or generally four wheels loans is completing within 3 years with

monthly installments.

Limit: - There is no limit for Vehicle loan. Bank provide loan amount up to

70% of quotation

Rate of Interest: -


Vehicle loanUp to Rs 1 lacs 13%

Above Rs 1 lacs 14%

1%

1%

12%

13%

(Table:4)

Margin: - Margin for Vehicle loan is 25% to 30%.

Security: - Bank provides loans against equitable mortgage and against

hypothecation.

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Requirement for Vehicle Loan: -

All basic documents.

Income evident of loan applicant as well as two guarantors.

Photocopy of property submitted to bank.

Register certificate (RC) book of vehicle is kept by particular banks.

When totally installment of vehicle loan is at that time RC book and

other original documents are given back to them.

3) Cash Credit/Over Draft Loan :

A Cash Credit is a facility by which a banker allows his customer to

borrow money up to certain limit against either a bond of credit by one or

more securities. This is most common mode of borrowing by large

commercial and industrial house in India because the advantage that

customers need not borrows the whole amount at one times but may draw

such amount as he requires at different times.

The bank provides these facilities to borrower for meeting their

temporary needs and to solve problem with related to short-term capital.

Limit: - There is nolimit for Cash Credit and Over Draft loan.

Rate of Interest: -


Cash credit &

Over Draft loan

Up to Rs 2 lacs 13%

Above Rs 2 lacs 14%

-

-

13%

14%

(Table:5)Margin: - Margin for Cash Credit and Over Draft loan is 15% to 20%.

Security: - Bank provides loans against up to mortgage and hypothecation


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Requirement for Cash Credit and Over Draft loan: -


Evident of other income of proprietor or partner.

Director signature.

Firms last three years balance sheet and income tax return copy.

Statement of last six month of firms account in the bank or other

banks.

To include certificate of company registration and articles of

association if applicant is private limited company.

4) Machinery Loan :

The Varachha Co-operative Bank sanctioned a loan to applicant who

wants to adopt new technology, machinery, equipment etc. for expanding his

business.

Limit: - Maximum limit for Machinery loan is Rs. 30,00,000/-

Rate of Interest: -


Machinery loanUp to Rs 2 lacs 14%

Above Rs 2 lacs 15%

2%

2%

12%

13%

(Table:6)

Margin: - Margin need for Machinery loan is 25% to 35%.

Security: -Bank sanctioning loans against up to mortgage and hypothecation


Requirement for Machinery loan: -


Machinery list and xerox of bills.

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Invoice of purchasing new machinery.

Evident of other income of proprietor or partner.

Director signature.

Firms last three years balance sheet and income tax return copy.

Statement of last six month of firms account in the bank or other

banks.

5) Fixed Deposit Loan: -

The Bank provides loan against fixed deposit. In fixed deposit loan

applicant takes loan against fixed deposit certificate. During this time

certificate lien under the bank. This loan is based on renewal and any

applicants invest his money in fixed deposit scheme with different rate.

Limit: - Bank can give loan 75% of against fixed deposit.

Rate of Interest: -


Fixed DepositLoan

F.D. rate + 2% -- F.D.rate+2%

(Table:7)

Margin: - Margin need for fixed deposit loan is up to 25%.

Security: -Bank kept fixed deposit certificate of borrower.

Requirement for Fixed Deposit loan: -

All basic documents relevant to applicant. No need of guarantors.

Fixed deposit certificate of borrower.

6) Loan Against Government Security: -

The Varachha co-operative Bank provides also loan against

government security such as National Saving certificate, Kishan Vikash

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Patra etc. For this loan, before making an advance on the securities of the

NSC& KVP, the bank should take an applicant in the prescribed form from

the borrower in whose name the certificate stand. This certificate should

then be sent to the concerned post office or the issuing authority for transfer

to the lending banks name. Banker should grant the advance after made on

the certificate or after new certificate.

Limit: -Bank gives advance up to 65% against the NSC/KVP certificate.

Rate of Interest: -


NSC/KVP Loan 13% -- 13%

(Table:8)

Margin: - Margin need for NSC/KVP loan is 35%.

Security: -Bank kept NSC/KVP certificate of borrower.

Requirement for NSC/KVP loan: -

All basic documents relevant to applicant. No need of guarantors.

NSC/KVP certificate of borrower.

7) Surity Loan: -

The Varachha Co-operative Bank is issued this type of short-term

loan. Bank issuing loan with a few documents requirement for them.

Limit: -Bank gives advance up to Rs. 30,000/-.

Rate of Interest: -


Surity Loan 14% 1% 13%

(Table:9)

Margin: - No need margin for Surity loan.

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Security: - There is no need of any security.

Requirement for Surity loan: -


Employer must present salary certificate, which is approved by

appointing organization.

Employer ought to two guarantors who work in same organization or

working under that organization and also necessary salary certificate

of two guarantors.

8) Gold Loan: -

Sometimes people need some financial help to meet their dailyrequirements. In these circumstances the bank gives loan against the

mortgage of their jewelry considering the report of the bank. The bank

issued major part on gold because gold loan is safety one. Borrower has not

need to ought any guarantor.

Limit: - Loan sanctioned against the gold. So on the bases of gold provide

by applicant bank issued advance to him. Bank gives advance up to 60% of

gold value.

Rate of Interest: -


Gold Loan 13% -- 13%

(Table:10)

Margin: - Margin need for Gold loan is 40%.Security: - Loan provides against gold ornaments.

Requirement for Gold loan: -

All basic documents and personnel information of applicant. No need

of guarantors.

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As a security gold ornaments provide by applicant.

9) Self-employed Loan: -

This loan is given to the various self-employed people like doctors,

engineers, charted accountant, advocates, etc. This loan is provided for

starting their practices as well as to expansion the area of their business. The

bank providing a loan to educated unemployed people for started them own

business. Bank provides a loan amount of 70% required by borrower.

Limit: -There is no limit for Self-employed loan.

Rate of Interest: -


Self-employed loanUp to 2 lacs.14%

Above 2 lacs.15%

2%

2%

12%

13%

(Table:11)

Margin: - Margin for this is 25% to 30%.

Security: - Bank gives loans against up to mortgage and hypothecation

provide by applicant

Requirement for Self-employed loan: -

All basic documents and personnel information of applicant as well

as two guarantors.

Bank gives loan on behalf of certificate of degree.

Evident of shareholders.

10) Staff Loan: -

This loan is providing only to the staff members of the bank. This loan

is provide to staff members for meeting any financial needs, for any social

occasion in family and for purchasing any respective items such as vehicle.

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Limit: - Bank gives loan amount up to Rs 30,000/-.

Rate of Interest: -


Staff loan 6% -- 6%

(Table:12)

Margin: - No need of margin for Staff loan.

Security: - Bank needs salary slip of applicant required for staff loan.

Requirement for Staff loan: -

One photocopies of applicant as well as two guarantors the work in

the bank.

Personnel information of applicant as well as two guarantors.

Submit the application form with salary slip.

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CHAPTER 5

COMPARATIVE ANALYSIS OF

LOANS & ADVANCES

5.1 LOAN SANCTIONED BY VARACHHA CO-OPERATIVE

BANK IN YEAR 2001-02 & 2002-03

5.2 COMPARISON OF INTEREST RATE ON LOAN SCHEME OF

VARACHHA BANK WITH SUTEX BANK

5.3 COMPARATIVE STUDY OF LOAN SANCTIONED BY BOTH

BANKS

5.4 COMPARATIVE STUDY OF LOAN SANCTIONED (IN

PERCENTAGE) BY BOTH BANKS

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5.1 LOAN SANCTIONED BY VARACHHA CO-OPERATIVE

BANK IN YEAR 2001-02 & 2002-03 :

(Rs. in Lacs)

Sr.

No

Types of

Loan

2001-02 2002-03

Amount Percentage Amount Percentage1 Term Loan 567.63 8.97 934.10 14.44

2 Vehicle Loan 678.10 10.70 433.23 6.70

3 CC/OD Loan 3628.95 57.33 3698.60 57.17

4 Machinery Loan 611.72 9.66 621.84 9.60

5 FD Loan 207.26 3.27 233.65 3.61

6 NSC Loan 52.08 0.83 57.00 0.88

7 Surety Loan 87.31 1.40 60.42 0.94

8 Gold Loan 410.60 6.48 359.49 5.55

9 Self-employed 74.96 1.18 57.81 0.89

10 Staff Loan 11.08 0.18 13.86 0.22

(Table:13)

LOAN SANCTIONED BY BANK

0.00%10.00%20.00%30.00%40.00%50.00%

60.00%70.00%

TermLoan

VehicleLoan

CC/ODLoan

MachineryLoan

FDLoan

NSCLoan

SuretyLoan

GoldLoan

Self-employed

StaffLoan

Name of Loan

Percen

t

2001-02

2002-03

(Graph:3)

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LOAN SANCTIONED IN YEAR 2001-02 :

LOAN SANCTIONED IN 2001-02

Term Loan Vehicle Loan CC/OD Loan Machinery Loan

FD Loan NSC Loan Surety Loan Gold Loan

Self-employed Staff Loan

(Graph:4)

LOAN SANCTIONED IN YEAR 2002-03 :

LOAN SANCTIONED IN 2002-03

Term Loan Vehicle Loan CC/OD Loan Machinery Loan

FD Loan NSC Loan Surety Loan Gold Loan

Self-employed Staff Loan

(Graph:5)

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5.2 COMPARISON OF INTEREST RATE ON LOAN SCHEME OF

VARACHHA BANK WITH SUTEX BANK :

SR.

NO

TYPES OF

LOAN

VARACHHA

BANK

SUTEX

BANK

1 CC/OD Loan 14% 14%

2 FD Loan 11.5% 11%

3 Machinery Loan 15% 13%

4 Vehicle Loan 13% 12.5%

5 NSC Loan 13% 10%

(Tabe:14)

INTEREST RATE

0%

5%

10%

15%

20%

CC/OD

Loan

Machinery

Loan

Vehicle

Loan

NSC Loan FD Loan

Name of Loan

Perce

nta

Varachha Bank Sutex Bank

(Graph:6)

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5.3 COMPARATIVE STUDY OF LOAN SANCTIONED BY BOTH

BANKS :

(Rs. in Lacs)

TYPES OF

LOAN

VARACHHA

BANK

SUTEX

BANK

2002 2003 GR(%) 2002 2003 GR(%)

CC/OD Loan 3628.95 3698.60 1.92 989.65 1185.73 19.81

FD Loan 207.26 233.65 12.73 576.35 429.19 (25.53)

Machinery Loan 611.72 621.84 1.65 6678.10 6726.05 0.72

Vehicle Loan 678.10 433.23 (36.11) 635.76 573.32 (9.82)

NSC Loan 52.08 57.00 9.45 121.05 135.38 11.84

(Table:15)

GROWTH RATE

-40

-30

-20

-10

0

10

20

30

CC/OD

Loan

FD Loan Machinery

Loan

Vehicle

Loan

NSC Loan

Name of Scheme

Percenta


(Graph:7)

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COMPARISION OF LOAN SANCTIONED BY BOTH BANKS IN

2002 :

LOAN SANCTIONED BY BOTH BANKS IN 2002

0

1000

2000

3000

4000

5000

6000

7000

8000

CC/OD Loan FD Loan Machinery Loan Vehicle Loan NSC Loan

Name of Scheme

Amount


(Graph:8)

COMPARISION OF LOAN SANCTIONED BY BOTH BANKS IN

2003 :

LOAN SANCTIONED BY BOTH BANKS IN 2003

0

2000

4000

6000

8000

CC/OD Loan FD Loan MachineryLoan

Vehicle Loan NSC Loan

NAME OF S CHEME

AMOUNT

VARACHHA BANK SUTEX BANK

(Graph:9)

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5.4 COMPARISON OF LOAN SANCTIONED (IN %) VARACHHA

BANK WITH SUTEX BANK :

Sr.No Types of Loan Varachha Bank Sutex Bank

1 CC/OD Loan 80% 75%

2 FD Loan 75% 70%

3 Machinery Loan 75% 75%

4 Vehicle Loan 70% 70%

5 NSC Loan 65% 70%

(Table:16)

LOAN SANCTIONED ( IN % ) BY BOTH BANKS

0%20%

40%

60%

80%

100%

CC/OD

Loan

FD Loan Machinery

Loan

Vehicle

Loan

NSC Loan

Name of Loans

Percentage

VARACHHA BANK SUTEX BANK

(Graph:10)

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CHAPTER 6

FINDINGS & SUGGETIONS

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(A) FINDINGS:

Loan sanctioned in current year is same as compared to previous year.

The banks interests on some loans are comparatively high than the

Sutex Bank.

The vehicle loan has decreased by 36% in current year as compared to

previous year in Varachha Bank.

The growth rate of Cash Credit loan and NSC loan is less than as

compared with Sutex Bank.

Loan procedure is simple but time consuming because board of

meeting is held on a Monday in monthly. So process for passes the

proposal is goes for long-time.

Rate of Interest on machinery loan and NSC loan is higher then Sutex

banks interest rate.

Bank provides Insurance facility to its loan a/c holder, which is

added service of bank.

Interest rate on Cash credit loan, fixed deposit loan and vehicle loan

are comparatively similar in both banks.

Varachha Bank adopted a rebate system for fast repayment of loan.

Bank gives 2% rebate on term loan. Machinery loan and self-

employed loan is higher than Sutex bank. It is for purposes that

borrower should paid a loan installments regularly on a time.

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(B) SUGGESTIONS:

Documentation of loan should be simple and copy to some extant so

that loan procedure will easy and more borrowers can attract by bank.

The Varachha Co-operative Bank should provide a loan to an

enthusiastic and ranks student, which come from middle or lower

level income group for education purposes.

The Varachha bank should provide a loan a people who want them

own house for housing loan purposes.

The Varachha Bank should reduce the interest rate on same loan

scheme such as machinery loan etc. the bank can increase its

customers.

The Varachha Bank should take a directive action in sanctioning of

fixed deposit loan because fixed deposit loan rate is decrease by 30%

in current year as compared with previous year.

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BIBLIOGRAPHY

Name of book Author Publisher

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Banking Law & Transaction T.J. Rana, B.S. Shah

J.B. Shah & Other

Banking Theory & Practice P.K. Shriwastav Himalaya

Banking Theory & Practice Gordon & Natrajan Himalaya

Annual Report of Varachha Bank (Year 2001-02 & 2002-03)

Annual Report of Sutex Bank (Year 2001-02 & 2002-03)

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ANNEXURE