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A
PROJECT REPORT ON
“OPERATIONS AND CREDIT FACILITIES OF THE RAJSAMAND URBAN COOPERATIVE BANK”
AT
THE RAJSAMAND COOPERATIVE BANK
IN THE PARTIAL FULFILMENT OF
MASTERS OF BUSINESS ADMINISTRATION
(M.B.A. FSM)
2008-2010
SUBMITTED BY
JIMMY CHHABRA
IN
FACULTY OF MANAGEMENT STUDIES, FACULTY OF MANAGEMENT STUDIES,
MLS UNIVERSITY, UDAIPURMLS UNIVERSITY, UDAIPUR
PREFACE
ACKNOWLEDGEMENT
“It is good to have knowledge; it is good to have enthusiasm,
But in order to achieve effectiveness, it is essential to have training”
No trainee can deny the intellectual debt that he/she receives from the organization
during the training period. I can’t in full measure, reciprocate the kindness shown and
contribution made by various persons on this endeavor of mine at “THE RAJSAMAND
COOPRATIVE URBAN BANK, UDAIPUR”. I take this opportunity to thank all those
who have been instrumental in completion of my training.
I owe my indebtedness to ‘Mr. G. L. SARDA’ (CHIEF EXECUTIVE MANAGER,
THE UDAIPUR MAHILA URBAN CO-OP BANK) for being benevolent enough to
lend his help and spare his valuable time throughout the project. I am thankful for his
continuous motivation and encouragement.
My special thanks and heartiest gratitude flows to Mrs. Preeti Jhamaria (Branch
manager), and Mrs. Kusum Baheti ( Banking Assistant).Their help in various capacities
towards making me familiar with the research problem and preparing the report is
invaluable.
I sincerely express my thanks to Dr. Anil Kothari (Placement-in charge) for imparting me guidance and help whenever required.
Last but not the least I’m sincerely thankful to my parents for their constant support and strongest motivation, which has been a source of inspiration for me at every step of my life
Table of Content
Preface Acknowledgement
1. Introduction
Banking industry
2. Industry profile
3. Company profile
Vision and Mission
Objectives
Service offered
4. Research Topic
5. Analysis and interpretation
6. Findings and suggestions
References
Bibliography
Annexure
BANKING….
A Bank is an organization, which is usually corporation that accepts deposits, makes loans, pays cheques and performs related services for the public and it can be justly stated as a crux of a business. It can also be described as a financial institution that accepts deposits and channels the money into lending activities.
Role of bank….
Banks provide funds for business as well as personal needs of individual. They play a significant role in the economy of a nation. Apart from functioning as a credit intermediaries they are also involved in a number of a Non-credit services where banks act as agent for customer in a number of bank related functions: initiating payment orders to third parties either by cheques or by electronic funds transfer, purchasing or selling securities, as for a trust account customer, and operating cash management for corporate customers. These Non-credit services are an important and growing source of fee income. Further bank also involved in the following.
1. It encourages saving habit of amongst people and thereby makes funds available for productive use.
2. It acts as an intermediary between people having surplus money and those requiring money for various business activities.
3. It facilitates business transactions through receipts and payment by cheques instead of currency.
4. It provides loans and advances to businessmen for short term and long term purposes.
5. It helps in national development by providing credit to farmers, small scald industries
6. Self employed people as well as to large business houses which lead to balanced economic development in the country.
Types of bank…
1. Central Bank
2. Development Bank
3. Specialised Bank
4. Commercial Banks(Public sector , Private sector, Foreign Bank)
5. Co-Operative Banks(Primary credit societies , Central Co-op banks , State Co-op banks)
Co-operative banks…
Introduction
The Co-operative banks has a history of almost 100 years. The Co-operative banks are an important constituent of the Indian Financial System, judging by the role assigned to them, the expectations they are supposed to fulfil, their number, and the number of offices they operate. The co-operative movement originated in the West, but the importance that such banks have assumed in India is rarely paralleled anywhere else in the world. Their role in rural financing continues to be important even today, and their business in the urban areas also has increased phenomenally in recent years mainly due to the sharp increase in the number of primary co-operative banks.
While the co-operative banks in rural areas mainly finance agricultural based activities including farming, cattle, milk, hatchery, personal finance etc. along with some small scale industries and self-employment driven activities, the co-operative banks in urban areas mainly finance various categories of people for self-employment, industries, small scale units, home finance, consumer finance, personal finance, etc.
Some of the co-operative banks are quite forward looking and have developed sufficient core competencies to challenge state and private sector banks.
According to NAFCUB the total deposits & landings of Co-operative Banks is much more than Old Private Sector Banks & also the New Private Sector Banks. This exponential growth of Co-operative Banks is attributed mainly to their much
better local reach, personal interaction with customers, and their ability to catch the nerve of the local clientele.
Though registered under the Co-operative Societies Act of the Respective States (where formed originally) the banking related activities of the co-operative banks are also regulated by the Reserve Bank of India. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965.
Overview
Categories
There are two main categories of the co-operative banks.
(a) short term lending oriented co-operative Banks - within this category there are three sub categories of banks viz state co-operative banks, District co-operative banks and Primary Agricultural co-operative societies.
(b) long term lending oriented co-operative Banks - within the second category there are land development banks at three levels state level, district level and village level.
The co-operative banking structure in India is divided into following main 5 categories :
1.Primary Urban Co-op Banks:
2.Primary Agricultural Credit Societies:
3.District Central Co-op Banks:
4.State Co-operative Banks:
5. Land Development Banks
Significance of Banks
The importance of a bank to modern economy, so as to enable them to develop, can be stated as follow:
(i) The banks collect the savings of those people who can save and allocate them to those who need it. These savings would have remained idle due to ignorance of the people and due to the fact that they were in scattered and oddly small quantities. But banks collect them and divide them in the portions as required by the different investors.
(ii) Banks preserve the financial resources of the country and it is expected of them that they allocate them appropriately in the suitable and desirable manner.
(iii) They make available the means for sending funds from one place to another and do this in cheap, safe and convenient manner.
(iv) Banks arrange for payments by changes, order or bearer, crossed and uncrossed, which is the easiest and most convenient, besides they also care for making such payments as safe as possible.
(v) Banks also help their customers, in the task of preserving their precious possessions intact and safe.
(vi)To advance money, the basis of modern industry and economy and essential for financing the developmental process, is governed by banks.
(vii) It makes the monetary system elastic. Such elasticity is greatly desired in the present economy, where the phase of economy goes on changing and with such changes, demand for money is required. It is quite proper and convenient for the government and R.B.I. to change its currency and credit policy frequently, This is done by RBI, by changing the supply of money with the changing needs of the public. Although traditionally, the main business of banks is acceptance of deposits and lending, the banks have now spread their wings far and wide into many allied and even unrelated activities.
The Rajsamand Urban Co-Operative Bank
PRODUCTS OFFERED BY THE RAJSAMAND URBAN
CO-OERATIVE BANK:
Bank offers various products in terms of servicing its customers. The bank has tried to tab
the growth of the retail sector & has come with various products, Priority Banking being
one of them. Bank has pushed the retail banking through a wide spread distribution
network & through the growth of the bank’s product & customer base. Bank has also
tried to enhance cost efficiency by leveraging technology that is continuous upgrading.
RETAIL BANKING:
The bank has continued to provide a sustained push to retail banking through an
expanding network & through the distribution of a large range of products to a fast-
expanding customer base. Retail liabilities, assets & fees have therefore shown
significant growth during the year 2009-2010. Saving’s bank deposit grew by 89%, while
retail assets grew by 103%. Bank offers wide variety of Deposit Products to suit your
requirements.
Saving Account:
A safe and easy way to save your money is with a bank savings account. A savings
allows you to deposit money in the bank and earn interest own that money over the
course of time. A savings accounts allows you to deposit money (add money to your
account) or withdraw money (remove money from your account) at any time. In return
for keeping your money at the bank, the bank pays you money, also known as interest.
KYC NORMS:
Saving Account:
1. Saving account cheque of other bank (self cheque), if cash then introduction by others
account holder of the bank.
ID Proof (Preferably 2): Voter ID, Passport, DL, Letter from the Employer (Reputed firms),
Photo Ration Card , Credit card with sign , ID Card of reputed firms, Pass book with attested
Photo, letter from village pradhan , ID card of recognized collage (student account), etc.
2. Address Proof (preferably 2 ): voter ID, Passport , DL , Letter from the Employer
(Reputed firms), Photo Ration Card , Pass book with Attested Photo , Photo ration Card,
ITR, letter from village pradhan , Credit card Statement (<2 months), Utility bills (<2
months) , LIC premium receipt along with policy , etc.
CURRENT ACCOUNT:
Current Deposits plan is ideal for professionals and provides flexibility through overdraft facility.
The most basic and flexible deposit option for those whose transactions take the form of an
everyday exercise.
a. A running account supporting unlimited withdrawals and deposits.
b. In a Current Account, a customer can deposit any amount of money any number of times.
c. He can also withdraw any amount as many times as he wants, as long as he has funds to his
credit.
d. Current Accounts are meant neither for the purpose of earning interest nor for the purpose of
Savings but only for convenience of the business.
NORMAL/GENERAL CURRENT BANK ACCOUNT (AQB 10000):
Current account is ideal for carrying out day-to-day business transactions. With General
Current Account, you can access your account anytime, withdraw and deposit cash, issue
and encase cheques, make balance-inquiries or ask for mini statements, and even request
for cheque books any time.
KYC NORMS (Brief):
Current Account:
Proprietorship Accounts:
1. Proprietor ID.
2. Proprietor Firm ID Proof : Sales Tax Registration , Establishment Registration by
municipality , Acknowledge ITR in Firms name , SSI Registration certificate issued by
registrar of firm , Import /Export code , Utility bill in firm’s name (only Water &
Electricity Bills).
3. No Introduction required if all formalities complete.
4. Account opening cheque from Proprietorship account.
5. PAN Card/From 16(firms& proprietor).
Partnership Account:
1. All partners ID & Address Proof.
2. Firms ID &Address Proof.
3. Account opening cheque from Partnership account.
4. No Introduction required if all formalities complete.
5. Partnership deed attested by all partners.
6. Partnership letter signed by all partners in format given.
Mode of operation letter declaration signed by all partners.
FIXED DEPOSIT:
A Deposit received by a bank for a fixed period and which is withdrawal only after the expiry of
the said fixed period and shall also include deposits such as recurring, cumulative deposits .
The superior Fixed Deposit to invest in, for a secure future
Interest Rates
If you believe in long-term investments and wish to earn higher interests on your savings,
invest your money in Fixed Deposit. By investing in the Bank’s Fixed Deposit scheme
your money not only stays secure but also accumulates good interest over the period of
deposit. Partial withdrawal from your Fixed Deposit before maturity can bail you out in
times of need.
Note:
Interest rates are subject to change from time to time. The Bank will announce applicable interest rates as on the date of receipt of the funds.
Recurring Type Savings:
In this type of saving account you can save your monthly saving with very minimal amount for a fixed period and you get interest on it. It is to be deposited for a fixed period of time if you withdraw money before maturity due to any reason then you have to pay certain charges for it. The rate of interest is different according to the time and rules and regulation of the bank.
LOANS:
Basically The RajsamandUrban Cooperative Bank aims at women employment and give maximum services to women only. The rate of interest and repayment method varies according to the type of loan.
VEHICLE LOAN
LOAN AGAINST JEWELLERY
HOUSING LOAN
LOAN AGAINST DEPOSIT SCHEME
OVERDRAFT FACILITY AGAINST SECURITY
LOAN AGAINST PROPERTY
TRADERS LOAN
PERSONAL LOANS
EDUCATIONAL LOANS
CORPORATE LOANS
CREDIT POLICY AND PLANNING
Introduction
Lending money is one of the main business activities of banks. The Rajsamand Urban
Cooperative bank deploys a major portion of funds by way of loans and advances.
Lending business provides a major part of their total income. Since bulk of the funds lent
belongs to the depositors, it is necessary that the funds are deployed on a sound and
realizable basis and they earn optimum returns. While lending the wider national
objectives of economic and social development are also taken into consideration.
Long Term Strategic Plan
The Long Term Strategic Plan is the basic instrument for Credit Policy and Planning of
the bank. Prepared by the Corporate Office, it takes into consideration:
i) The mission, vision, corporate philosophy and basic business objectives of the
Bank.
ii) Share holders’ expectations in terms of the Return on Assets (ROA) and Return
on Equity (ROE).
iii) Issues that would influence the long-term strength and success of the Bank.
Annual Budgets/Plans
Based on the policy document prepared by the Corporate Office, credit plans for the
branch and strategies to achieve them are developed and finalized. The plans are made
specific and quantitative in nature, combine realism and challenge and provide periodic
break-up of the targets. The resources are clearly defined - infrastructure, manpower
(including skill levels) and other support systems-required for carrying out the plans,
activities. The plans, guidelines performance for measurement, control and review are
provided in. The following main parameters are included:
A. Business Levels
Major objectives and business exposure levels for major customer/ business segments
like:
i) Medium and Large Corporate.
ii) Small Corporate and Traders.
iii) Priority Sector [Agriculture, Small Scale Industries, Other Priority Sector (Small
Road and Water Transport Operators, Retail Trade, Small Business, Professional
& Self Employed, Educational Loans etc.)]
iv) Exports (spread over above three segments)
v) Personal Banking (Car Finance, Consumer Finance, Advances Against Shares,
Housing Loans, Advances Against Term Deposits & Other Securities,
Unsecured/Clean Advances etc.)
B. Plan Implementation Strategies
Specific products, pricing, service delivery and marketing strategies to achieve the
objectives are developed and documented.
C. Recovery and NPA Monitoring
The credit plan, budget for recovery and reduction of Non Performing Assets (NPA) are
provided, a mechanism to monitor and review these aspects as well as details of actions
proposed and developments expected to reduce NPA.
D. Monitoring and Review of Performance
The dynamic environment in which bank is operating, calls for the plans to be constantly
monitored and reviewed periodically. Comprehensive review of the plans is carried out
every half year.
BASIC PRINCIPLES OF LENDING
The basic principles of lending are given below. While canvassing the credit business and
managing the credit portfolio these are followed:
Safety
Ensure safety of the funds lent with respect to:
i) Borrower
The Borrower should have the means, ability and willingness to repay the advance along
with interest as per the terms of finance. These aspects are further summarized under
three “Cs” of a borrower:
a) Character - borrower’s honesty, integrity, business ethics, regularity,
dependability, reputation and promptness to keep promise.
b) Capacity - representing the ability of the borrower to employ the
funds profitably and repay the advance as per terms of sanction.
c) Capital - signifying that the borrower should have adequate stake in terms
of resources/capital in the business to which the Bank is to
providing finance.
ii) Purpose
Credit facilities are to be provided to meet the gap in resources needed for setting up
running legitimate, productive and profit making business activity.
iii) Security
Adequate tangible security is required to ensure safety of advance. The assets purchased out of the credit facilities are the primary security to be charged to the Bank.
iv) Need
Proper assessment of the actual credit need of the borrower and providing adequate
finance is essential. Over finance may lead to over trading, piling of stocks and diversion
of funds to other activities. Under financing may affect the completion of the project or
inadequate stock or the borrower resorting to market borrowing at high rate. Both may
lead to failure of the project or affect its viability.
v) Diversification
The loan portfolio of the Bank should be sufficiently diversified in terms of number of
borrowers groups, geographical area and type of industries activities. This would
minimize the overall risk arising out of failure of some groups, recessionary trends in
certain industries or natural calamities or political disturbances in some areas.
Liquidity
Ensure that the funds lent are backed by securities that are easily marketable and
realizable. Matching of Assets and Liabilities is very critical from this point of view.
Profitability
The bank should have a proper mix of credit portfolio, which would earn sufficient
income, to defray the cost of funds, meet establishment and other expenses, provide for
contingencies and risky assets, build reserves and pay adequate dividend to the
shareholders.
WORKING CAPITAL FINANCE
It offers working capital facilities - both fund-based and fee-based. Fund-based working
capital products include cash credit, overdraft, bill discounting, short-term loans, and
export financing (pre-shipment as well as post-shipment). Fee based facilities include
bank guarantees.
Working Capital facilities are provided to finance the day-to-day business requirements.
Funding requirements are structured to finance procurement of raw materials, stores and
payment towards manufacturing costs and other overheads. Sales are financed against
sundry debtors, receivables. The Bank offers a combination of operative cash credit and
working capital demand loan to meet the domestic working capital requirements of our
clients.
CLASSIFICATION OF ADVANCES
An advance can be classified in various ways. The criteria for classifications, which are
frequently used, are: -
i) Type/Nature of Facility
ii) Purpose of Advance
iii) Type of Borrower
iv) Nature of Security
v) Size/Extent of the limit
vi) Priority Sector - Non-Priority Sector
Vii) Performing- Non -Performing
Type/Nature of Facility
Credit facilities could be funded or non-funded. Funded limits are those where the outlay of the Bank’s funds is involved. Such limits are also known as borrowing limits. Non-fund based limits are those where the Bank has to meet the commitment or promise made by borrower and endorsed by the Bank only if the borrower fails to honour it.
Fund Based
Fund based limits are generally granted by way of Overdraft, Cash Credit, Demand Loan,
Term Loan or Bills Purchased/Discounted. Usually the security offered, the purpose and
size of advance, repayment terms and requirements of a customer decide the type of
facility to be granted. Though there is no hard and fast rule to determine this, there are
well set practices.
Overdraft and Cash-Credit:
In Overdraft/Cash Credit the borrower is allowed to carry out debit and credit transactions up to a limit. The interest, unless otherwise stipulated is charged on the daily debit balance in the account.. Overdraft is generally a continuing limit granted against the security of term deposits and other financial securities. Occasional over drawings/debits in current account and also for continuing limits granted for personal purposes.
Cash Credit is generally used for continuing limits granted for working capital requirements of commercial establishments. Beyond a particular amount the working capital limits are required to be split into Cash Credit and Loan component.
The limit up to, which the drawings are allowed in the Cash Credit/Overdraft account, is called Drawing Limit. It is the lower of the Sanctioned Limit and Drawing Power. Drawing Power is Value of Security less Margin.
Cash credit/overdraft limits are repayable on demand. However, unless a decision is taken to recall the advance and subject to the stipulation of periodic (generally annual) review/renewal, the limits are of continuing nature. No repayment is generally stipulated for such limits. In certain cases, however, the seasonal limits are stipulated. There are also cases when a phased reduction in limits is prescribed.
i) Demand Loans/Loans
Demand Loans are repayable on demand. They are also at times referred to as Loans. Though technically repayable on demand, a repayment of the loan in instalments spread over a period of up to 3 years or so is generally stipulated. These limits are allowed to be drawn in full initially and no operations in the accounts are permitted except credits by way of repayment of loan instalments, settlement of insurance claim etc. and debits by way of interest, insurance premium and other charges.
Composite loans given for working capital and for fixed assets as also loans for fixed assets where repayment period is stipulated upto 3 years are generally granted by way of Demand Loans.
As per the Reserve Bank of India’s directives on “Loan System for Delivery of Bank Credit”, the limits for working capital beyond a particular ceiling are required to be bifurcated into “Cash Credit” and “Loan” components. At present the instructions are applicable for borrowers with working capital credit limits of Rs. 10 crore & above.
ii) Term Loans
Term Loans are generally granted for acquisition of Fixed Assets. They are repayable by
specified number of installments spread over a period of 3 to 5 years or some times more.
Normally a term loan, which is repayable upto a period 3 to 5 years, is called Medium
Term Loan, where the repayment is longer than 5 years, it is called Long Term Loan.
iii) Bills Purchased/Discounted
Bills Purchased/Discounted facilities are normally meant for financing working capital requirements in the post-sale part of the operating cycle of a unit. The facilities are for purchasing/discounting bills drawn by the customer for goods sold.
Non-Fund Based Limits
The common Non-Fund based facilities are Guarantees and Letters of Credit, which are discussed later.
Purpose of Advance
Banks lend to a borrower to meet his working capital requirements or for acquisition of
Fixed Assets. Subject to certain restrictions banks may also lend for consumption
purpose. Based on the type of activities or business financed the advances are also
classified as Industrial, Agricultural, Trade, Service, Personal sector advances.
The Reserve Bank of India has stipulated that a part of a Bank’s total credit should be given for certain types of activities like Agriculture, Small Business, SSI, Exports etc. Details on this are given under Priority Sector Advances.
Types of Borrowers
Advances can be classified on the basis of types of borrowers such as Individuals, (single, joint or HUF), Sole Proprietorship, Association of Persons, Partnership Firm, Private & Public Limited Companies, Trust etc. Depending on the constitution of the borrower certain formalities are required to be completed and precautions need to be taken while dealing with them.
Nature/Types of Securities
The basic classification under this could be clean Advances and Secured Advances.
Clean Advances
Clean advances are those, which are granted without obtaining any primary tangible
security.
Secured Advances
Secured Advances are the advances fully secured by the assets financed by the Bank,
commonly termed as principal security or the other assets of the borrower and the assets
of the guarantor, which are categorized as collateral security.
Size of the Limit
Classification of advances by size of limit is required for internal monitoring purpose. The RBI has stipulated exposure limits to banks, beyond which they cannot extend finance to a borrower. The directive aims at better risk management and avoidance of concentration of credit risks. The extant guidelines prescribe the ceilings as under:
i) Individual borrower - 25% of a bank’s capital funds.
ii) Group of borrowers - 50% of a bank’s capital funds.
iii) Exposure limit is arrived at on the basis of 100% of fund-based credit limits and 50%
of non-fund based credit limits. The sanctioned limit or outstanding, whichever is
higher, is reckoned for arriving at the exposure limit. The limit applies to all
borrowers including public sector undertakings to which limits of single borrower
exposure limits are applicable. Each Bank is however free to determine any lower
limits, if desired.
Priority Sector / Non-Priority Sector Advances
Certain types of borrowers like Small & Marginal Farmers, Professional and Self Employed, persons below Poverty Line and certain activities sectors like Agriculture, SSI, Retail Trade, Small Business, etc. are important from the point of view of socio- economic development objectives of the country. Advances to these borrowers/activities/sectors are called Priority Sector Advances.
i) Advances to Priority Sectors - 40% of Net Bank Credit.
ii) Advances to Agriculture - 18% of Net Bank Credit. *
iii) Advances to Weaker Sections - 10% of Net Bank Credit. *
These are the sub-targets within the overall target of 40%.
Performing / Non Performing Advances
Advances are also classified on the basis of their conduct i.e. accounts operated or conducted within the terms of sanction - Performing Advances (Standard Assets) and accounts were the interest and installments are not realizable - NPA (Substandard, Doubtful, Loss Assets).
Credit Risk Rating
Accounts, particularly with large credit requirements, are assigned credit risk ratings on the basis of Credit Risk Determination Models developed internally by the Bank. Interest rates chargeable on such accounts are also linked to these ratings. Advance accounts are also at times classified on the basis of these ratings.
ADVANCE AGAINST POSTAL CERTIFICATES AND LIFE
INSURANCE POLICIES
ADVANCE AGAINST NATIONAL SAVINGS CERTIFICATES (NSC)
Eligibility
Consider finance to applicants maintaining a satisfactorily conducted account for
last six months. However, relaxation can be made by the Branch Manager in case
of well known parties or high net worth individuals.
Type of Facility
Grant advances against NSCs by way of Demand Loan repayable within a
maximum period of 35 months or maturity of NSC whichever is earlier.
Purpose
Provide finance for personal needs and production activities but not for
speculative purposes.
Maximum Limit
No maximum limit.
Margin
Not less than 25% of the original investment on the NSC without taking into
accounts accrued interest.
Rate of Interest
As per the interest rate schedule advised by the Corporate Office taking into account the
purpose, and amount of advance and type of borrower.
Guarantor
Not required.
Documents
Obtain following documents for granting advance against NSC.
i) Demand Promissory Note
ii) Letter of Waiver
iii) Term Loan Agreement
iv Letter of Lien & Set Off
v) Letter of Pledge
vi) Record the Bank’s lien on the NSCs pledged with the Post Office.
ADVANCES AGAINST LIFE INSURANCE POLICIES
Eligibility
Consider advances against life insurance policies only to the policy holders, either in
their individual names or jointly with others. But there is no objection to take the
insurance policy of a partner or sole-proprietor as collateral security for an advance
granted to the partnership or proprietorship firm.
Type of Facility
Grant advances against life policies by way of overdraft and/or demand loan, the latter
being repayable by instalments over a fixed period.
Security
Consider advances against life insurance policies, which can be assigned in favour of the
Bank do not grant advance against life polices that are not validly assignable in favour of
the Bank. The policies offered, as security must be at least three years old.
Ensure that the premium is paid up-to-date, no premium is outstanding and the policy is
currently in force.
Margin
Maintain a minimum margin of 25 % of the surrendered value of the policy.
Assignment
Before advance is disbursed, get the policy assigned by assured in favour of the Bank on
the policy itself. Simultaneously obtain from the assured a Notice of Assignment addressed
to the Corporation, as the assignment of life policy is required to be registered with the
Corporation. Send this Notice of Assignment to the Corporation along with the policy for
registration of the assignment in their books.
Ensure that the written acknowledgement of Notice of Assignment and the policy are
received from the Corporation.
Repayment
When an advance against a life policy is fully repaid, re-assign the policy in favour of the
assignor - borrower. The exact wording of re-assignment to be signed by the Bank. Send
the re-assigned policy thereafter along with the notice of re-assignment direct to the
concerned office of the Corporation for registration of the reassignment in their books.
When sending the re-assigned policies to the concerned office of the Corporation for
registration of the re-assignment, point out clearly in the covering letter that the policy is
being sent (a) for registration of re-assignment and (b) for subsequent transmission thereof
to the policy holder (Bank’s customer). Advice the policy holder suitably.
Procedure for Recovery of Surrender Value on Non-repayment of the
Advance
If an advance granted against the security of life policy goes out of order due to
non-payment of instalments or interest, and there is no other recourse but to get
the advance liquidated by surrendering the life policy, obtain the amount of
surrender value from the Corporation after giving a notice to the borrower. Send
a copy of the notice to the Corporation at the time of claiming the surrender value
to obviate the formality of the Corporation issuing a notice to the policy holder.
The Corporation would effect payment to the Bank on the basis of the claim letter
and the copy of the Registered A.D. notices.
MAJOR FEATURES OF CREDIT FACILITIES PROVIDED BY
The Rajsamand cooperative BANK
Credit Facilities Against Specified Securities-LIC/NSC/KVP/RBI
Bonds
Features UMUC Bank solves your liquidity problem without
liquidating the long term securities like NSCs, KVP and
RBI Relief Bonds, LIC Policies (single premium) bonds
by a cost effective scheme
Nature of facility Demand/Term Loan or Overdraft
Margin 25% of face value / for LIC of surrender value
Security Pledge of specified security, Demand Promissory Note
Quantum No ceiling
Rate of Interest Variable
Period Maximum of 36 months
Repayment Bullet payment at the time of maturity OR
Equated Monthly Installments
Processing Charges Nil
Best For Salaried class and IT payers ,students and personal
purpose
Traders Advances/CC limit
Features The Rajsamand Cooperative bank extends Cash
Credit/Working Capital limits to small traders and
businessmen on the basis of turnover and other financial
parameters
Nature of facility Demand Loan/Overdraft
Margin Variable as per stock
Security Primary security of stock, debtors and collateral security
of property, Hypothecation, Guarantee deed, DPN
Quantum Variable as per stock available
Rate of Interest
12% (Pricing according to credit rating)
Repayment Monthly instalments/ Annual Review
Processing Charges On above 50,000 limit
Credit Facilities Against Term Deposits (FDR)
Features The Rajsdamnd urban Cooperative Bank solves your
liquidity problem without liquidating the long term
deposits by a cost effective scheme
Nature of facility Demand Loan or Overdraft
Margin 10% of FD amount
Security Pledge of specified security (FDs)
Quantum Maximum 90% of FD
Rate of Interest +1% of deposit rate
Period Till Maturity of deposit
Repayment Bullet payment at the time of maturity OR
Equated Monthly Installments
Processing Charges Nil
Best For Useful for all
Best For Wholesale/Retail traders with valid license/registration
CASH CREDIT LIMIT
In Cash Credit the borrower is allowed to carry out debit and credit transactions upto a limit. The interest, unless otherwise stipulated is charged on the daily debit balance in the account. These are more operative accounts and have chequebook facility. Cash Credit is generally used for continuing limits granted for working capital requirements of commercial establishments. Beyond a particular amount (Rs.10 crore at present) the working capital limits are required to be split into Cash Credit and Loan component.
The limit upto, which the drawings are allowed in the Cash Credit account, is called Drawing Limit. It is the lower of the Sanctioned Limit and Drawing Power. Drawing Power is Value of Security less Margin.Cash credit limits are repayable on demand. However, unless a decision is taken to recall the advance and subject to the stipulation of periodic (generally annual) review/renewal, the limits are of continuing nature. No repayment is generally stipulated for such limits. In certain cases, however, the seasonal limits (higher limits during the peak period of the activity/credit requirement of the borrower and lower limits during the slack season) are stipulated. There are also cases when a phased reduction in limits is prescribed.
PROCEDURE
DEVELOPMENT OF CREDIT BUSINESS
Identifying Prospective Constituents
Business development is a process of marketing bank services to the existing and potential customers. With lending, it involves identifying new credit customers, understanding and even anticipating their current and future needs, soliciting their banking business, maintaining relationships with existing and new customers and cross-selling other services.
ELIGIBILITY
Following documents should be ready for the sanctioning of the cash credit limit:
ANALYSIS OF BALANCE SHEET AND PROFIT & LOSS ACCOUNT
The main objective of analysis of Balance Sheet and Profit & Loss Account is to clearly find out the present solvency and probability of continuing solvency and trend of fortunes of the business enterprise. Study of Balance Sheet and Profit & Loss Account over a period of a few years gives approximate idea of the financial position of the enterprise.
It is, therefore, necessary to make a comparative and comprehensive study of these statements for at least 2-3 years immediately preceding the date on which an application for an advance is made. The Balance Sheet and Profit & Loss Account statements can be sourced from the borrower. However, to enable the Bank to carry out a meaningful analysis, it is necessary that the entire items be classified properly.
FUNDS FLOW STATEMENT
Funds are the cash and non-cash economic resources, which are listed in the Balance Sheet as Assets and Liabilities. During the operations of the business these Assets & Liabilities keep changing from time to time. These changes either generate additional funds (sources) or lead to out flow of funds (uses).
EQUITABLE MORTGAGE OF PROPERTY
Equitable mortgage is created when a borrower deposits in a specified town the title deeds of his immovable property with the Bank and gives his assent in terms of a Memorandum of Deposit of Title Deeds, which establishes his intent to create a security thereon.
ADVANCES AGAINST GOODS
Advances against goods are generally given either by way of Pledge or Hypothecation.
The goods offered as security are the goods in which the borrower normally deals are
ensured. If a borrower offers security of other goods, reason for such request is
ascertained.
1 Pledge of Goods
2 Hypothecation of Goods
3 Registration of Power of Attorney
4 Letter of Undertaking
5 Invoice and other Documents
6 Guarantee by a Partnership Firm & Limited Company
PREPARATION OF PROPOSAL
The credit requests, which on initial scrutiny are found to be in order, are processed further. Preparation of a proposal in the appropriate format is a must for considering the requests for a fresh advance or review of the existing advance/facility. In cases involving sanction at Corporate Office, obtain “In Principle” sanction before preparing a detailed proposal by submitting a note giving main highlights of the request in the standard format of the Bank.
APPRAISAL OF TERM LOAN REQUIREMENTS
These requirements are necessary for the preparation of the appraisal: -
1 Details of the Project
2 Technical Feasibility
3 Cost of the Project and Means of Finance
4 Infrastructure
5 Project Implementation Schedule
6 Project Profitability
7 Repayment Program
8 DSCR Computation
9 Sensitivity Analysis
10 Security / Asset Cover
SANCTION AND NOTING
The proposal and appraisal the request for credit facilities from all the angles is studied. The safety of the bank’s funds should be the foremost consideration. Sanction the advance including over-limit business and casual facilities, one time transactions as per the discretionary powers delegated. Exercise the power very judiciously, with due care and in good faith having regard to the responsibilities that go with the exercise of such powers. Keep acquainted with the up-to-date guidelines/instructions in this regard and abide by them.
The terms, conditions and covenants stipulated by sanctioning authority over and above those mentioned in the proposal form an integral part of the sanction.
Noting (Reporting) the Proposal
The main objective is to ensure that sanctioning authority has taken its decision in the normal course of business within the delegated authority in keeping with the Bank’s credit policy and without compromising on the basic lending discipline.
DOCUMENTATION
Necessary care and precaution is taken while obtaining security documents in advance accounts and scrupulously adhere to the instructions/guidelines laid down in this regard as for the enforcement of security, the Bank has to mainly depend on them. Remedying any defects or irregularities in the security documents at the time of filing a suit would be difficult, as the borrowers and guarantors may not co-operate in such a situation.
Insurance
Cover fully the goods or property pledged, hypothecated or mortgaged to the Bank by appropriate fire, strike and riot insurance, Also consider having goods or property insured against the risk of theft and burglary where the type of goods and their place of storage is such that they are subject to these kinds of hazards. In the case of certain industries like those dealing in hazardous materials, cover damage caused by explosion.
Refinance
The primary objective of the Refinance facility is to induce the flow of funds at a concessional rate of interest so as to augment the resources of the lending institutions in order to ensure that the benefits of the concessional rates of interest are passed on to the ultimate borrowers.
DISBURSEMENT
Ensure proper execution of documents and their verification and also the compliance with all the terms of sanction before disbursal of any advance. Carry out disbursement in the accounts after complying with all the terms and conditions of sanction subject to certain exceptions as discussed above. Make the disbursement as per the guidelines in this regard and subject to stipulation, if any, made in the sanction. Ensure end use of the funds and contribution of appropriate margin by the borrower.
Monitoring Conduct of Accounts
Supervision and follow-up is the next important step after sanction and disbursement of credit facilities. A sound monitoring system serves as a back up mechanism for testing the various assumptions made at the time of assessment of credit needs of the borrowers. It also enables the bank to evaluate the performance of the assisted unit and its financial health, to anticipate and foresee problems and prospects and to identify danger signals with a view to initiating timely and appropriate corrective measures.
i) Periodic Inspection
ii) Scrutiny of Financial Statements/Returns and other Information
iii) Monitoring Operations in the Account
iv) Compliance with Terms of Sanction
INSPECTION
1 Stock Inspection
2 Inspection of Book Debts
3 Inspection of Immovable Property
RENEWAL / REVIEW
All credit facilities, other than term loans and ad-hoc guarantees/letters of credit, are required to be reviewed annually. Such facilities are granted with a stipulation “Term Demand - Annual Review.
RECOVERY
It is the primary responsibility of the branch to monitor an advance account. Ensure that it is conducted as per the terms of sanction and the interest and instalments (wherever applicable) are received/ recovered promptly.
COMPARATIVE ANALYSIS
HOME
LOANS
VEHICLE LOANS PERSONAL LOANS
Loan Amount
75% of the property 75% of invoice Max. 1lac
Repayment Max. 15years Max. 36 months Max. 3 years
Margin 25% 25% 25%
Eligibility Borrower should be women Govt. Employee/ Salaried, IT returns more than 3 years in service
Borrower should be women Govt. Employee/ Salaried, IT returns more than 3 years in service
As per government security given
Pre-sanction Assessment
Bank statement (6 months), PAN card, Property papers, ITR
Bank statement (6 months), PAN card, ITR or Form no. 16D
Bank statement (6 months), PAN card, ITR or Form no. 16D
Guarantors Two guarantor one should be female, person having good worth
Two guarantor one should be female, a person having good worth
One guarantor
Security Post Dated Cheques (PDC’s) having favour of bank
PDC’s having favour of bank
PDC’s having favour of bank
Rate of interest Fluctuating Fluctuating Fluctuating
Processing charges As per amount sanctioned
As per amount sanctioned
Nil
GUARANTEES
Providing guarantees/counter guarantees in favour of third parties on behalf of
customers is a major non-fund based activity/business of banks. Guarantees executed by
the banks are mostly for performance of contracts. Do not issue Guarantees in respect of
inter-company deposits or loans, i.e. guarantees covering deposits or loans accepted by
one non-banking company from another non-banking company or trust or association or
any other financial institutions. Also do not extend guarantees by way of co-acceptance
of bills drawn by non- banking companies on their customers.
In considering guarantee business, take all precautions which are usually taken while
granting borrowing facilities, including that of obtaining a satisfactory status report on
the customer. Consider limits for guarantee facilities with due circumspection and care,
taking into account, in particular, how best any situation on receipt of claim there under
can be tackled. Type of the guarantee which is sought, the track record of the customer in
similar transactions earlier, etc., to serve as guiding factors in deciding upon the
quantum/quality of security/margin, to be stipulated.
Guarantees involving excise and/or disputed tax payments etc. normally to be
granted with 100% cash margin. Where a reduced margin is desired, obtain prior
sanction of the Corporate Office.
Margin
Take margin to adequately protect the Bank against the liability undertaken. The
extent of margin to depend on the worth and status of the customer, the amount of
guarantee and other relevant considerations. Only in exceptional cases the Bank
executes guarantees without obtaining a cover. Normally take a full deposit for
the margin. Keep it as a term deposit in the customer’s name for a period
covering the guarantee and the notice period. Mark a hold on the account using
option AAH in Equity as in case of Advance against Term Deposits.
Alternatively, mark a hold on the amount against a current account balance or the
drawing limit in an advance account or obtain an express lien on securities in safe
custody.
Casual Guarantees and Guarantee Limit
When there is no regular sanctioned limit for issuing a guarantee on behalf of a
customer, the guarantee may be given on a casual basis.When a customer is
required to give from time to time guarantees to various Government
Departments, Public Authorities and other persons, Companies or Corporations,
the Manager to consider granting a “Guarantee Limit” instead of issuing
guarantees on casual basis. Guarantees given must be for a definite period, for a
definite amount and for a definite purpose. If any guarantee is required to be
given for unduly long maturity or for indefinite period, cover it by 100% cash
margin. Where lower margin is desired, obtain the approval of the Corporate
Office.
Examine the contract of guarantee before signing the guarantee to ascertain (a) the
type of guarantee and (b) the obligations incurred by the Bank there under. Obtain
an exact copy of the guarantee to be executed by the Bank. Do not attest the
signatures on the letter of guarantee executed in India and requiring to be stamped
under the Indian Stamp Act. As attestation will attract 'Ad-velorum' (as per the
amount of the guarantee) stamp duty.
In every case, take a counter guarantee and indemnity in the prescribed forms for
a specific guarantee issued on casual basis or for several guarantees issued within
a specified guarantee limit or in renewal or extension or modification of all or any
of such guarantees. Stamp the forms of counter guarantee and indemnity as an
agreement at the rate of stamp duty applicable in the State where they are
executed or fist executed. The forms should not be attested. Make necessary
alteration in the forms, depending upon whether the executant is an individual or a
partnership firm or a limited company. The counter guarantee and indemnity
given by a partnership firm must be signed by all partners on behalf of the firm as
well as in their personal capacities. Keep a copy of the original contract of the
guarantee certified as true over the signature of the customer concerned and
attached to the counter guarantee signed by the customer.
Where a guarantee limit is sanctioned against the stipulation of earmarking the
drawing limit in the cash credit account of the borrower, extend the security over
the assets charged in cash credit account to the guarantee limit also. For this
purpose, obtain a suitable Supplemental Deed of Hypothecation / Pledge. In case
the guarantee is to be covered against equitable mortgage, obtain Memorandum of
Deposit for extension of the mortgage.
Release of Guarantees
In every case, obtain confirmation from the beneficiaries of release of guarantee
unless the original guarantees are received back duly cancelled from the
beneficiaries.
It is often possible that inspite of repeated reminders, the beneficiaries for
guarantee (including Government Departments) neither return the original
guarantees for cancellation nor advise the Bank to cancel the expired guarantees.
In such cases, where the original guarantee or an advice to cancel it is not
received from the beneficiaries, adopt the following procedure :
i) Soon after the expiry of the claim period stipulated in the guarantee, send a
“Registered Acknowledgment Due” letter to the beneficiary requesting him
to return the original guarantee for cancellation or to confirm to the Bank that
the guarantee stands cancelled at his end. Within a month. send a copy of
such letter to the concerned customer on whose behalf the guarantee was
issued, advising him to follow up the matter with the beneficiary for early
return of the original guarantee for cancellation or for confirmation that the
guarantee stands cancelled.
ii) If the expired guarantee, or the confirmation to the effect that the guarantee
stands cancelled at his end, or an advice to cancel it is not received from the
beneficiary within three months from the date of the “Registered
Acknowledgment Due” letter, cancel the guarantee and reverse the liability
entries without insisting on execution of an indemnity by the customer.
iii) Keep the relative correspondence and the acknowledgment of the registered
letter on record.
Invocation of Bank Guarantees
Whenever the beneficiaries strictly in accordance with the terms and conditions of
the guarantee deed invoke bank guarantees, settle the amount claimed thereunder
without delay or demur, unless there is a court order restraining the Bank in this
regard.
Take approval of Corporate Office to postpone payment or refuse claim received
under a guarantee. If any claim received under the guarantee is not settled within
3 days from receipt of invocation, submit forthwith a full report to Corporate
Office, with the facts of the case, interalia, bringing out reasons,justification for
choosing not to honour the claim, together with copies of relevant papers, such as
the guarantee, invocation advice, etc.
Make the payment of guarantee claim by debiting margin account or other
account of the customer (by giving notice, wherever necessary). Debit the balance
amount, if any, to the G/L Account Defaulted Guarantees. In case of debit to the
G/L account, take immediate steps to recover the amount alongwith interest from
the borrowers.
Commission
Collect appropriate commission/charges upfront as per the rates communicated by
Corporate Office from time to time for the actual period of the guarantee PLUS
the additional period, if any, during which claims can be made on the Bank under
the guarantee.
Where a guarantee is tendered for cancellation before the date of expiry,
commission amount computed at half the original rate for the unexpired period of
guarantee less three months may be refund.
Extension of Guarantee
In cases where the borrower requests for extension of guarantee period, obtain a
letter to the effect from him alongwith, wherever possible, a copy of the letter of
beneficiary to the effect.
Where the guarantee falls within the overall guarantee limits sanctioned to the
borrower, no further approval is required except renewal/ review of the limit as
stipulated in sanction. In case the guarantee issued was casual, ascertain that the
financial position and the business performance of the borrower continues to be
good, and seek extension of the guarantee from the sanctioning authority by a
simple memorandum. In the other cases submit a regular proposal.
Record sanction for extension when received in the Register of Guarantees Issued
and convey the extension of guarantee to the beneficiary under advice to the
borrower. Collect appropriate commission for the extended period from the
borrower upfront.
RESEARCH METHODOLOGY
Research methodology
This talks about data collection of the project work.
“All progress is born out of enquiry Doubt is often better than over confidence for it leads
to inquiry and inquiry leads to invention.”
The saying well states about the significance of research. Research in common parlance
refers to a search for knowledge. It can also be defined as a scientific and systematic
search for pertinent information on a specific topic.
STEPS OF RESEARCH PROCESS
1 Formulating the Research Problem
In this the problem is stated in a general way and then the ambiguities i.e.
understanding the problem thoroughly and rephrasing the same into meaningful terms
from an analytical point of view.
At PNB Bank my guide provided me with the topic on credit facilities and then I was
asked to conduct a survey on it and find the potential of these in Jaipur
2 Preparing the Research Design
A research design is the arrangement of conditions for collection and analysis of data
in a manner that aims to combine relevance to research process.
1. Type of research method
2. Formulating objectives of study
3. Designing the methods of data collection
4. Selecting the sample
5. Collecting the data
RESEARCH DESIGN
1. Sampling Design
2. Observational Design
3. Operational Design
4. Formulating the Sampling Design
Consider the following points:
1. Type of universe
2. Sampling Unit
3. Source list
4. Size of Sample
5. Sampling Procedure
During my research work I went for “Stratified Random Sampling”
The data collection as such is divided into
i. Primary data collection- Data collected through questionnaire survey, brain
storming, opinion poll, discussion etc.
ii. Secondary data collection- Data collected through literature survey, journals,
Internet search, company records/bulletin, company reports, CD-ROM search etc.
i. Sampling Method:
Method of collecting primary Data: Observation method & Questionnaire
method.
Methods of Collecting Secondary Data: Journals of trade commerce,
economics, engineering, magazines, book etc.
Through Schedules also
ii. Value Chain Analysis: to gain a deeper insight into buyer needs. The
value chain breaks down the firm into its strategically relevant activities in
order to understand the behavior of costs & the existing or potential
sources of differentiation.
One important conclusion that emerges from using the value chain to
analyze generic strategies is that different strategies (e.g. innovative
differentiation, cost leadership) require different skills and resources.
iii. The force field analysis: to identify pushing and resisting forces.
The present situation is described in the form of a line that is subject to
pushing and resisting forces.
The idea here is that there are things helping us to reach the vision (pushing forces) &
ranged against them are forces preventing us moving in the right direction (resisting
forces) Now, if the pushing forces are stronger than the resisting forces we are already
moving in the right direction. If they are not, then this suggest the amount of change
required to reach the vision is considerable.
There are three ways in which this movement might be speeded up:
1. Strengthen existing pushing forces.
2. Weaken existing resisting forces.
3. Add new pushing forces.
5. Operational Design
Execution of every project is important step in research process. If execution of project
proceeds on correct line the data to be collected would be adequate and dependable.
A. SURVEY ON CREDIT FACILITIES
We prepared a Questionnaire consisting of 12 questions to be asked by the customers. A
sample of 50 customers was taken and the following result was obtained from our sample
survey.
This result may not be exact but gives an overview of what is being there the scenario of
Kota related to credit facilities.
OBJECTIVES OF THE SURVEY
1. Survey on potential of credit facilities
The objective behind this was to study and analyze the market potential for the
credit facilities. For this the income pattern, type of credit facilities range of
disbursement has to be studied in detail. In order to understand the range of
business that would be available to The Rajsamand urban Cooperative bank.
2. Create awareness amongst potential customers of Credit facilities for Bank.
3. Study of market share of various banks in credit facilities: gives knowledge about
major competitors of The Rajsamand urban Cooperative Bank.
4. To create a database of potential customers of credit facilities in for The Rajsamand
urban Cooperative Bank.
PROJECT ANALYSIS
“A Problem Well Defined is Half Solved”
Findings and Analysis
(Graphs 1-11)
Conclusion
ANALYSIS AND FINDINGS
1. Outcome of the survey done to know the percentage of people, of different
professions, avail credit facilities provided by the banks.
Findings:
1 21% of persons work in a business enterprise.
2 6% of persons are self-employed.
3 66% are salaried persons.
4 7% are professionals.
Interpretation:
After analysis one can interpret that out of a sample of 50 persons majority of them are
salaried working in private concerns i.e. they covered around 66% share in the sample.
The persons working in business enterprise occupied the next major share.
Such a survey was conducted in order to analyze the sector in which major proportion of
people are working.
The major proportion of people taking loan is salaried, as it has become a basic need for t
2.Outcome of the survey done for finding the proportion of the persons having
different income patterns.
Findings:
1 4% of the sample persons are having the income less than 6000.
2 36% of the total population has income between 6000-12000.
3 30% of the persons have income between 12000-18000.
4 Also, persons having income more than 18000 are 30%.
Interpretation:
From the above graph it is depicted that maximum no. of people applying for credit
facilities fall in income group 6000-12000 and around 4% are in income group less than
6000 and rest in other groups. These credit facilities are sanctioned against some security
or some guarantee. All these credit facilities can be given up to a certain limit and on the
basis of the repayment capacity of the borrower.
3. Outcome of the survey to know the proportion of the persons who are interested
in savings.
Findings:
1 86% of the population is doing some or the other savings.
2 14% of the population is not interested in savings.
Interpretation:
From the above graph it can be depicted that maximum no. of people in today’s world are
doing savings in various forms and only a small portion of people are not having any sort
of savings.
This survey shows that maximum people are concerned for their family future and want
to save more and more.
4. Outcome of the survey done to know that in what type of savings the people
prefer in today’s scenario.
Findings:
1 48% of the persons have a savings account.
2 20% of them save their income with the means of FD, RD, and PPF.
3 4% of the population likes to invest in NSC, KVP.
4 Only 12% of the persons have invested in Mutual Funds.
5 16% of people have also invested in various Insurance schemes.
Interpretation:
As from the above interpretation we came to know that max. Proportion of population are
interested in doing some sort of savings but this graph shows the type of savings done by
them. It can be estimated that about 48% persons are interested in opening savings
account, some portion are interested in FD, RD and PPF and still a little portion of people
are saving in LIC, NSC and Mutual Funds.
We also came on the conclusion that many persons are also having more than one type of
savings
5. Outcome of the survey to know the proportion of the persons who are taking any
of the credit facilities.
Findings:
1 42% of the sample population is not using the credit facilities
2 58% of the population is availing the credit facility.
Interpretation:
From the above pie chart it can be depicted that more than half of people in today’s world
are availing credit facilities in various forms and only a small portion of people are not
availing them.
This survey shows that people are aware about the credit facilities and using them more
and more.
6. Outcome of the survey done, that which of the credit facility is being availed by the people more.
Findings:
1 26% of the persons prefer to take a house loan.
2 38% of the people availing credit facilities have taken vehicle loan.
3 12% of them are taking personal loan.
4 16% of the sample population gone for CC limits.
5 6% take the facility of overdraft.
6 Only 2% of the people are taking LC’s or BG’s.
Interpretation
As from the above interpretation we came to know about the persons who are availing
any sort of credit facilities. Maximum proportions of persons are availing vehicle loans,
as vehicles in today’s world are becoming a status symbol.
As home is the basic requirement of an individual some people are also affording home loans to live a comfortable life. Maximum no. of loans are taken by middle class families.
Other credit facilities like CC limit, overdraft, LC and BG are availed by a little portion
of the population. These are basically preferred by businessmen
7. Outcome of the survey done to know the reason why the rest of population is not
taking any of the credit facility, according to their views.
Findings:
1 42% of the people are not interested.
2 8% of them do not have a perfect knowledge about the credit facilities being
provided.
3 50% think that the service charges are on the higher end.
Interpretation:
As from our survey we came to know that still some proportion of persons are not taking any type of credit facilities. This graph shows the reason behind this. About 50% of the population thinks that the service charges are more and the remaining of the people that they can finance their requirements on their own so they are not interested in taking these facilities.
Still there is a little proportion of people who do not have full knowledge about these
facilities.
8. Outcome of the survey done to know what is the basic reason to take the loans by
a common man.
Findings:
1 12% of the people think that it is necessary to maintain their status.
2 28% of them take it to enhance their business turnover.
3 44% people feel that loans have become a basic need.
4 16% take it as the education has become costly.
Interpretation:
The above graph shows that the loans today have become a basic need especially in the
middle class families. Also, the education has become very costly so for that purpose
people take loans.
Higher-class families take a loan to maintain their status in the society and businessman are availing these to enhance their turnover. So loans are a basic need today.
9. Outcome of the survey done to know that what are the attributes that attract a
customer the most while taking a loan.
Findings:
1 60% of the population is attracted by the lower interest rate.
2 15% of them think less processing time as a major factor.
3 10% of the sample is influenced by prompt and effective service.
4 Only 10% take promotional efforts as a major factor influencing their choice.
5 Less documentation bags 5% of the other factors.
Interpretation:
Earlier in case of Public sector banks it may be difficult to avail any credit facility
because it took more processing time and enhanced paper work. But now after the
coming of Co-operative banks in this field these drawbacks are removed.
So earlier those people who were afraid of taking loans are now availing various type of
credit facilities. The major reason behind this is that these facilities are provided with
lower interest rates. The other powerful and weightiest reason behind it is less processing
charges, their prompt and effective service and less documentation.
10. Outcome of the survey done to know the preference of the people about various
sectors through which they are taking the credit facilities.
Findings:
1 Almost 55% of the population prefers Public sector banks for financing.
2 30% of them are relying on the Private sector banks.
3 11% of them are relying on the co-operative sector
4 Only 4% of them are going for Private financers and NBFC’s.
Interpretation:
In today’s scenario public sector banks have made appreciable development in every
service. From the above graph we depict that the major proportion of population still
prefers nationalized banks and the remaining ones are taking loans from Private Banks
and co-operative banks, very few go for NBFC’s.
11. Outcome of the survey done to know the proportion of the people that from
which bank they have taken the credit facility.
Findings:
1 10% of the population is going to HDFC and ICICI each.
2 20% of them are taking loans from INDUSIND BANK and SBI.
3 15% of the people on PNB for the loan facility.
4 5% of the people taking loan from UMUCo Bank
5 Other banks comprise the rest 20%.
Interpretation:
From the above pie chart we can conclude that as there is cut throat competition in the
banking industry. The co-operative bank really have to work a lot in order to survive.
CONCLUSION
Market place is no longer responsive to the strategies that worked in the
past. There are just too many products, too many companies and too much
marketing noise.
During the training process the reality, which unveiled itself was that, “the easy way
to get into customer’s mind is to be the best & cheaper” and UMUCo Bank
has grown up as a household name, as its capital services are working from so many
years i.e. step with step with its competitors. Credibility and reliability works as a bonus
point for UMUCo Bank while launching of any new product.
Credit facilities are not a new concept in banking in today’s scenario. Earlier people were
relying more on Private Financers and NBFC’s but now, the scene is being changing.
People are trusting on banks for this service. UMUCo is providing credit facilities at an
attractive rate of interest giving customer a good margin.
However, customers are relying more on Nationalized Banks, Private Banks for such
facilities but UMUCo Bank has made its different position in the field by satisfying its
customers by giving prompt and effective service, less processing charges and most
important less rate of interest
Although there are significant competitors of UMUCo but they are not providing the
same gamut of services as those of UMUCo. But “in this over communicated jungle
out there the only hope to score big is to be selective and to concentrate on narrow
but deep targets and messages to be over simplified”
It wont be an easy task for UMUCo Bank and if it wants it’s efforts to be fruitful, then
need is not only to create some new and different marketing strategies, but to manipulate
what’s already up there in the mind, to retie the connections that already exist i.e. to
touch base with reality which is in prospects mind. Thus if UMUCo has to bridge this
chasm between the chunk of opportunities which lie untapped in this market segment, it
has to move with right competitive strategies on right time.
RECOMMENDATIONS
1. In this over communicated market the only hope to score big is to concentrate
on narrow but deep targets i.e. UMUCo bank should not only focus its efforts
on assessing the credit facilities of Private Banks but it can also go for the
Nationalized Banks as still for the credit facilities the customers rely more on
them.
2. As there is a lot of misconception about the interest factor of such products
offered by these can be foregone by organizing various presentations and seminars.
3.The market holds a good potential so a team should be formulated whose main focus
is on credit facilities.
4 . UMUCo can go for promotion of its products and services by arranging for:
1 Canopies outside organization
2 Pamphlet distribution
3 Displays through attractive hoardings and boards especially outside
organization providing market for this segment.
4 Giving advertisement in various newspapers and magazines.
5 The bank must keep not only its employees upto date with the information
regarding any new scheme but it should also reach to the customer.
7.The processing and prepayment charges should be minimum so that these do
not put any extra burden on the customer.
8.There should be no hidden charges, as it will increase the faith of the customer
in bank.
9.Loans have become a basic need and support in today’s scenario so they
should be disbursed as soon as possible i.e. less processing time.
10.There should be polite dealing with the customers in this area.
11.The credit policy should be more flexible and simplified so that it requires
minimum paper work.
12.No financial investigation is required in the case of salaried persons as
documents itself is a strong proof.
13.If the customer is regular and growing then the Bank should cooperate with
him and have faith in him.
14.The documentation and finishing of details every month and quarter end should
be done precisely.
15. More transparency is required in terms of work done through agencies.
16.The bank should offer greater number of Cclimits.
Apart from this Bank should go for network expansion. It should open
more branches in different cities as per co-operative rules, and should
emphasis on technical part(ATM,E-BANKING, MOBILE
BANKING,CORE BANKING).Which will improve the position of the
Bank in the market. Try to attract the customer by giving them more
services and good scheme for saving,loans,insurance.
BIBLIOGRAPHY
1. UMUCo Bank Annual reports
2. Data collected at the time of training
3. Marketing Research Book by C.R. Kothari
4. Brochures of UMUCo Bank
5.Web site www.goggle.com
QUESTIONNAIRE
1. Your Occupation
o Business enterprise
o Self-employed
o Salaried persons
o Professionals
2. Your Income
o Less than 6000
o 6000-12000
o 12000-18000
o more than 18000
3. Are you interested in doing savings
o Yes
o No
4. What type of saving you prefer most
o Saving ac
o FD,RD,PF
o NSC,KVP
o Mutual fund
o Insurance
5. Are you taking any of the credit facilities?
o Yes
o No
6. If yes then which of the credit facility is being availed more
o Home loan
o Vehicle loan
o Personal loan
o CC limits
o Overdraft
o LC\BG
7. why according to you rest of the population do not take any of the credit facility?
o Not interested
o Do not have a perfect knowledge
o More service charges
8. Why you are taking the credit facilities.
o To maintain status
o Enhance business turnover
o Basic need
o Costly education
9. Which attribute attracts you the most while taking a loan?
o Lower interest rate
o Less processing time
o Prompt and effective service
o Promotional efforts
o Less documentation
10. Which sector do you prefer while taking the credit facilities.
o Public sector
o Private sector
o Co-operative
o NBFCss
11. From which Bank you have taken the credit facilities.
o ICICI Bank
o HDFC
o SBI
o PNB
o RAJASTHAN Bank
o UMUCo Bank
o Others
