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PROJECT REPORT ON A STUDY OF CREDIT APPRAISAL SYSTEM FOR WORKING CAPITAL FINANCING TO COMMERCIAL & AGRICULTURE SECTOR With special reference to Head office, Mahesh Urban Co-operative Bank, Ahmedpur SUBMITTED TO UNIVERSITY OF PUNE SUBMITTED BY MR. MAJEED C. MUJAWAR Master in Business Administration (Finance) GUIDED BY PROF. SHEENAM GOGIA

INSTITUTE OF PROFESSIONAL STUDIES, Pune. YEAR 2011 13

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DECLARATION

I, Mr. Majeed C. Mujawar , MBA II (2011 13) at the IPS, Pune hereby solemnly declare that the project on A Study of Credit Appraisal System was completed at Head office, Mahesh Urban Co-operative Bank, Ahmedpur as a result of my research work.

The project was undertaken as a part of academic curriculum, according to the university rules & with no commercial interest & motives. It is my original work and not submitted elsewhere for any other purpose earlier.

The project report does not contain any fake information and the data collected is included in the project with the prior permission of Manager at Mahesh Urban Co-operative Bank.

Place : Pune. 2012

Date :

ACKNOWLEDGEMENT

A study of Credit Appraisal System has been a successful project because of the efforts of some very special people.

First of all, I express my sincere & profound sense of gratitude to Dr. G.B.Patil, the Director of IPS, for providing me the opportunity to do a Project Work. I thank him as well as the professors of IPS for their encouragement & endless support in project work.

I am deeply grateful to all the people working at Regional Head Office of Mahesh Co-operative Bank, Ahmedpur for their efforts in keeping this project on schedule.

I am thankful to Chief Loan Manager at Regional Head Office of Mahesh Cooperative Bank, Ahmedpur, for allowing me to carry out the project work in his organization.

I deeply value the guidance given by Mr. P U Ugile, the Sr. Manager at Regional Head Office of Mahesh Co-operative Bank, Ahmedpur. I express my special thanks to them for solving my queries time to time & making valuable suggestions.

Date : / / 2012 (Majeed Mujawar)

INDEX
SR. NO. Chapter 1 1.1 1.2 1.3 1.4 1.5 Chapter 2 Chapter 3 3.1 3.2 3.3 3.4 Chapter 4 Chapter 5 Chapter 6 7.1 7.2 Chapter 7 Chapter 8 Chapter 9 CONTENTS INTRODUCTION Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . Selection of the Topic . . . . . . . . . . . . . . . . . . . . . . . . Objectives of the Study . . . . . . . . . . . . . . . . . . . . . . . Scope of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . Limitations of the Study . . . . . . . . . . . . . . . . . . . . . . INDUSTRY PROFILE COMPANY PROFILE History & Development of Co-operative Banks . . . . Mission & Vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Organization Chart . . . . . . . . . . . . . . . . . . . . . . . Product & Services of Bank LITERATURE RESEARCH METHODOLOGY DATA ANALYSIS & INTERPRETATION TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GRAPHS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OBSERVATIONS & FINDING CONCLUSION OF THE STUDY SUGGESTIONS & RECOMMENDATIONS PAGE NO.

INTRODUCTION

Executive Summary

The Banking industry has changed rapidly in the changing and challenging economic environment throughout the world. In this competitive and liberalized environment everyone is trying to do better than others and consequently survival of the fittest has come into effect. Taking all these things into consideration I would like to present my project Credit Appraisal System. The Project flashes light on various loan schemes provided by the bank to people for their growth and making a sound financial position in society The main focus of this project is to analyze various schemes and what is the criteria of receiving those scheme The project also highlights different schemes and who can be the beneficiary of those schemes. This project is very important to all common people, below poverty line people and women also. In India about 40% people are live under below poverty line as per the criteria of (BPL) from this project people can know which loan scheme they can receive

SELECTION OF THE TOPIC

Since 1992-93 the economy banking sector and insurance sector have been opened for foreign equity, participation and management. Therefore the competition in the industrial sector in general and banking sector in particular has been increasing and the profitability of the banks is under pressure. As I am student of financial management, I taken keen interest in areas concerned with the banking. As mentioned earlier banks play a vital role in economic development, credit creation and overall up liftmen of common people. Further the bank financing to various needs of individuals, families has become very popular, I thought it would fit to select a subject having focus attention of many banks operating in our country. In my project, I will try focusing light on the extent what are the procedure of financial assistance sanctioned by the Ahmedpur branch and what are the status of the Loan Appraisal of Loans. This will help in analyzing the role of Mahesh Urban Co-Operative Bank Ltd. Ahmedpur branch and over development of Ahmedpur.

OBJECTIVE OF THE STUDY

1. 2. 3. 4. 5. 6.

To study the various function performed by a bank. To study the concept of loan appraisal process in a co-operative bank. To study the policy of a bank regarding various types of loan. To study the document required for loans sanctioning procedure. To study the current loan sanctioning as well as recovery procedure followed of a bank. To study the various problems faced by borrower as well as banker regarding loan.

Scope Of The Work

The scope of the study is as follows: The Present study, Study of loan appraisal of the Mahesh Urban Co-Operative Bank Ltd helps us to know the overall procedure of loan sanctioning as well as recovery and there conditions. The study of topic also helps to understand what are the problems faced by borrower while taking the loan and what are the problems of bank related to borrower? This project is helpful to understand documents required for loan sanctioning process. We understand the rules as per type of loan.Because there are different rules for different type of loan. Study also contains the various suggestion to overcome the problems and helps bank growth in Future.

INDUSTRY PROFILE

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Industry Profile

Indian banking
The Indian banks can be broadly categorized into

Indian Banking System

Nationalized Banks

Private Banks

Co-operative Banks

Banking Institutions

Figure 1

1. Nationalized (government owned) 2. Private Banks 3. Specialized banking institutions 4. Co-operative banks. Over the years the nationalized banks have acquired a place of prominence and have seen tremendous progress. The need to become highly customer focused has forced these slow-moving banks to adopt a fast track approach.
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On the other hand private banks have been fast on the uptake and are reorienting their strategies using the internet as a medium.

Co-operative banks are nimble footed in approach and armed with efficient branch networks which focus primarily on the retail segments. These banks which focus on areas of agriculture, rural development etc. has lower overheads. This enables them to give a marginally higher percentage on savings deposits.

History of urban co-operative banks in India:The term Urban Co-operative Banks, though not formally defined refers to primary Cooperative banks located in urban and semi-urban areas. These banks, till 1996 were allowed to lend money only for non-agricultural purposes. This distinction does not hold today. These banks were traditionally centred on communities, localities work place groups. They essentially lent to small borrowers and businesses. Today, their scope of operations has widened considerably. The origin of urban co-operative banking movement in india can be traced to the close of 19th century when , inspired by the success of experiments related to the Co-operative movement in Britain and the co-operative credit movement in Germany such societies were set up in India. Co-operative societies are based on the principle of Co-operation, mutual help, democratic decision making and open membership. Co-operatives represented a new and alternative approach to organisation as against proprietary firms, partnership firms and joint stock companies which represent the dominant form of commercial organization.

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The Beginnings The first known mutual aid society in india was probably the Anyonya sahakari Mandali organised in the erstwhile princely state of baroda in 1889 under the guidance of Vithhal Laxman also known as Bhausaheb Kavthekar. Urban co-operative credit societies, in their formative phase came to be organised as a community to meet the consumption oriented credit needs of their members. Salary earners societies inculcating habits of thrift and self help played a significant role in popularising the movement especially amongst the middle class as well as organized labour. From its origins then today, the thrust of UCBs historically, has been to mobilise savings from the middle and low income urban groups and purvey credit to their members many of which belonged to weaker section. The enactment of Co-operative credit societies Act 1904 however gave the real impetus to the movement. The first Urban Co-operative credit society was registered in Kanjivaram in erstwhile Madras province in October 1904. The Co-operative Credit Societies Act 1904 was amended in 1912, with a view to broad basing it to enable organisation of non-credit societies. The Maclagan committee of 1915 was appointed to review their performance and measures for strengthening them. The committee observed that Co-operative Credit Societies are fulfilling the needs of the lower and middle income strata of society and would inculcate the principles of banking among the middle classes. The committee also felt that it was more viable than agriculture credit societies. Under state purview The govt. of Bombay passed the first state co-operative societies Act in 1925. Urban banks have an important role in economic construction. The Indian Central Banking Enquiry Committee (1931)felt that urban banks have a duty to help the small business and middle class people. The Mehta-Bhansali committee(1939) . the first study of Urban Co-operative Banks was taken up by RBI in 1958-59. Such banks were organised at all urban centres with population of 1 lakh or more and not by any single community or caste. Banking related functions were to be governed by RBI and registration management , audit and liquidation governed by state governments.
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Recent Developments Over the years, primary (urban) co-operative banks have registered a significant growth in number, size and volume of business handled. about 79% of these are located in five states Andhra Pradesh, Gujarat, Karnataka, Maharashtra and Tamilnadu.

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COMPANY PROFILE

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3.COMPANY PROFILE

Mahesh Urban Co-Operative Bank Ltd. is one of the leading banks in overall Cooperative banks in Maharashtra state. The banks main aim is to provide finance to weaker section of the society. The bank carried out its activity for aim the capturing highest position in co-operative bank. A Strong and Confident Support to the common man has been the motto of Mahesh Urban Co-Operative Bank Ltd. from the beginning. Bank in spite of its growth in size has been able to offer to the customers the dual advantage of Ability of Big Banks and Agility of Small Banks Mahesh Urban Co-Operative Bank Ltd. have its branches in all areas of Maharashtra.As per the financial analysis of 31 March 2011 the CRAR is 16.8% and NPA 2.7% as per the regulations of RBI. The deposits of bank were 7580.31 lakhs last year it increased by 2088.82 lakhs and it is 9669.13 lakhs, the percentage increase was 27.56% now. Net profit of bank is 61.24 lakhs. The total no. of employees is 61. Total no. of members of bank is 8704. Total loan amount of the bank is 6434.55 lakh till now. Mahesh Urban Co-Operative Bank Ltd. have its 5 branches in Maharashtra. 1. Mahesh Urban Co-Operative Bank Ltd. Ahmedpur. 2. Mahesh Urban Co-Operative Bank Ltd. Jalkot. 3. Mahesh Urban Co-Operative Bank Ltd. Latur. 4. Mahesh Urban Co-Operative Bank Ltd. Nanded. 5. Mahesh Urban Co-Operative Bank Ltd. Aurangabad. Mahesh Urban Co-Operative Bank Ltd. attributes this success to its undying spirit to serve the common man and to the sharpening of its competitive edge by constantly upgrading technology to match Indian standards. The bank is fully computerised and offers convenient working hours.

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The Mahesh Urban Co-Operative Bank Ltd. has its bankers as follows 1. Maharashtra state Co-operative Bank Ltd. Mumbai. 2. District Central Co-operative Bank Ltd. Amedpur. 3. State Bank Of Hyderabad Ahmedpur. 4. State Bank Of Hyderabad Latur. 5. State Bank Of Hyderabad Nanded. 6. State Bank of India Latur. 7. IDBI Latur. 8. HDFC Bank Ltd. Pune. 9. Axis Bank Latur. 10. Axis Bank Nanded. 11. Bank of India Latur. 12. State Bank of Patiala Nanded. 13. ICICI Bank Ltd Nanded. 14. Development Credit Bank Aurangabad.

The main branch of Mahesh Urban Co-Operative Bank is huge compared to its other branches. Besides this it is one of the spacious banks in Ahmedpur.. Mahesh Urban Co-Operative Bank Ltd. has introduced a wide range of credit schemes at attractive interest rates which has become very popular, especially among the middle class in view of the easy repayment plans.

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HEAD OFFICE ADDRESS DATE OF REGISTRATION RBI REGISTRATION NO RBI LICENCE NO ITEM No. of Branches Membership Subscribed & Paid up Capital Total Reserves & Other Funds Deposits Total % of priority sector Total % of weaker section Borrowing Investment

: : : :

Ahmedpur Dist.Latur 10TH OCT 1994 L.T.R./B.N.K./O.B./131/94 U.B.D. MAHARASHTRA 1091 P. As On 31-03-2011 5 8117 587 4,01,53,250 10,13,29,109.10 21,51,44,748 5,96,64,119 72.35% 15.44% 37,87,60,640

Regular Nominal

Saving Current

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Mission and Vision

MISSION Mahesh Urban Co-Operative Bank Ltd. will provide its customers premiere financial services of great value. It provides positive work environment and opportunity for growth and achievement to its staff, superior financial returns to its share holders and economic growth to its community.

VISION Mahesh Urban Co-Operative Bank Ltd. will emerge as the most preferred bank of customers choice in its area of operation by its reputation and performance. It was on a mission to achieve a business level of 5 Crore by the year 2012. As on 31.03.2011 CRAR of bank is 16.18% and NPA is 2.72%.

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Products of Bank
Deposits Deposits are the prime source of funds for the banks. The enormity of deposits replicates the amount of profit that a bank can make. This is so because large chunk of deposits are given away as loans which renders higher interest rate than that given on deposits. So, it is customary to encourage large number of huge deposits. This can be done by providing different types of deposits according to the needs of varied customers. These deposits as offered by are explained below Current Savings Special savings Loan Compulsory Pigmy Fixed Recurring Locker

Loans Lending of money as loans is one of the most important way in which the bank earns its profit. It is a service given by bank in which it lends money to the customer and gets it back at some later stage with interest as a profit. Being a profitable service to offer, the banks always try to give away maximum number of loans at optimal risk. Moreover, to cover the needs of different customers the bank offers different types of loans, which are described below.

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 Short term loan 1. Cash Credit 2. Gold Loan 3. Pledge Loan 4. Loan against Ware House Receipt 5. Over Draft against FDR Medium Term Loan 1. Vehicle Hypothecation Loan 2. Salary Loan 3. Machinery Loan 4. Loan for Small scale industries 5. Loan against Govt. Securities Long Term Loan 1. Housing Loan 2. Personal Loan

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Current interest rates

Deposits Time period 31 days to 90 days 91 days to 180 days 181 days to 364 days 1 year to 2 year More than 2 year Citizen of India 6% 7.50% 8% 10% 10.50% Senior citizen of India 6.50% 8% 8.50% 10.50% 11%

There is also insurance security on Deposit & 0.50% extra interest for senior citizen of India

Interest rate on loan Interest rate on loans is 10% to 20% for all types of loans. Interest rate is not fixed. It is fluctuating with time to time.

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ORGANIZATION CHART
Following is the organizational chart which shows the organizational structure as per management level. Every organization has 3 level i.e. top level, middle level, and lower level.

Manager

supervisor

Cashier

manager(loan)

Clerk

sepoy

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Pre-requisites for taking a loan

From the customers point of view, there are some formalities and prerequisites that are to be complied with before taking a loan. Among these prerequisites, some are more or less general which can apply to almost all types of loans mentioned above. However, there are some 38 other prerequisites which are specific to particular loans. These general and specific prerequisites are mentioned below General Prerequisites

1. Letter of Continuing Security ( Rs. 50 stamp)

2. Demand promissory note: In this note it is stated that the customer is seeking loan from the bank and promises to payback the same in due time.

3. Receipt showing the receiving of loan amount by the customer: It is similar to the demand promissory note. 4. Acceptance of Loan amount: It shows the amount, the interest rate r, the penal interest rate, sign of customer and his guarantors. It also shows the guarantors making a promise of payback in case customer defaults.

5. Letter of guarantors: It shows that the name of the people who are agreeing to be guarantors and making a promise of payback in case the customer defaults.

6. It is a rule of RBI that any customer who wants to take loan form a co-operative bank has to necessarily is the shareholder of the bank. It was decided by RBI that for secured* loans the loan taker should possess 2.5% and for unsecured *loans he should possess 5% of the sanctioned loan amount.

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7. 1.5% of the sanctioned amount is to be given as document charge to the bank.

These documents involve all the above letters.

*Secured loans are loans on which enough properties for mortgaging is provided to cover the loan amount whereas unsecured loans are loans on which there are not enough properties for mortgaging to cover the loan amount.

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LITERATURE

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LITERATURE OF THE PROJECT

Bank is much important and reliable source of finance. Bank help to Common man by providing loan and acceptation deposits by mobilization its saving capacity. The present study contains overall process of loan sanctioning as well as recovery. It also shown what are the problems faced by borrower at the time of application of loan and bank at the time of recovery of loan. Here it will take into consider that only adequate Finance is not important but it should be reached at right time and place. CONCEPTUAL RELEATED TO BORROWING OF LOAN
Following are mentioned various concept which are generally used in banking industry, These concepts are with different type loan.

a)

Loan :-

There is no any standard definition of loan but general sense loan means A banker paid a certain sum of money to its borrower on demand at certain period and at certain rate of interest.The loan classified into 3 types viz.term loan\, cash credit overdraft and its duration depends upon the type of loan i.e. Short term, and long term.

1)

Short term Loan :

The Duration of repay the loan depend upon the type of loan. Loan should be less than three years are entered into the short term. Generally cash credit is entered into short term type of loan. Generally it is profitable to the businessman.

2)

Medium Term Loan :

The duration of the loan is more than 3 years but less than 7 years are entered into medium. Medium term loan is useful vehicle loan borrower.

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3)

Long Term loan :

The duration of long term loan is up to 7 to 10 year are entered into long term loan. Housing loan, machinery loan, loan are entered into long term loan. Above mentioned are various types of loan discuss it on text points simultaneously.

b) Cash credit :
A cash credit is an arrangement where customer is allowed to borrow money up to certain limit. It is permanent arrangement. Here customer cannot withdraw whole sanctioned amount at once, but draw the amount as and when required. Interest only charged on whatever amount withdrawn. Businessman are mostly preferred such type of loan and they required more amount for day to day transaction.

c)

Overdraft :

Overdraft is an arrangement between bankers and customer by which the letter is allowed to withdraw over and above his credit balance. Like current account up to an agreed.

CONTAINS OF LOAN PROCEDURE

a)

Instalments :

Instalments means total amount divided into various equal amounts and each part should pay on equal monthly or quarterly period. Bank fixes its instalment on monthly or quarterly basis. Instalment includes principle interest amount.

b) Guarantor :

It is a person who assures that borrower will pay the instalments regularly. It also insures to the bank that if in a case borrower is unable to pay the instalments regularly that time he individually responsible to pay the instalments.

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c)

Margin money:

Margin means the difference between actual granting amount and demanding amount. We know that the bank cannot sanction 100% amount to the but keep margin like 70% to 80%

d) Defaulter

It is a person who is willingly and unwillingly fails to pay the instalments at regular time. Each bank tries to minimize its defaulter and must take necessary precautions to control the no. Of defaulter.

e)

Mortgage

At time of granting loan bank demanded some things from borrower as security agent loan called mortgage. Generally immovable property such as land, building treated as mortgage.

f)

Line

Line means legal possession of mortgaged asset. Bank charge line on asset of borrower. Borrower should not purchase or sell property on which bank lines are charged. When borrower pays the entire instalments then only the line cancelled.

Above mentioned terms are generally used in Mahesh bank at the time of loan sanction. And as each bank has its own policy Mahesh bank also follows its own policy.

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RESEARCH METHODOLOGY

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RESEARCH METHODOLOGY

Research Methodology is a systematic way to solve any research problem. It may be understood as a science of studying how research is done scientifically.

METHODOLOGY OF STUDY This study was aimed by systematic design. Collection analysis, reporting of data and finding relevant to credit appraisal system at Mahesh urban co-operative bank ltd. A descriptive study was done to obtain an accurate description. DATA SOURCE This study is purely based on secondary data given by the Bank and the reports generated by the system. TYPE OF RESEARCH: Descriptive/Experimental research

SECONDARY DATA These data have been collected from various files, management information reports and balance sheet of the bank and other related books. Sales Figures and other relevant data were collected from the companies book is and records of various reports.

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LIMITATIONS

i.

The Project study is mainly based on information gathered from secondary data, mainly figures directly given to me and system generated reports.

ii.

The whole study is based on observations in the past, which can only be related to laws and policies that operated in the past, as there is no evidence that the laws and policies will continue to operate in future also.

TOOL USED FOR THE DATA ANALYSIS

In order to analyses the problem of receivable management, a tool of financial management, basic formulas, Ratio Analysis and bar graph and line graph is used to give clear picture of the data. What is Research? Research is any organized enquiry carried out to provide information for solving problems. Research is a systematic enquiry that provides information to guide decisions. More specifically, it is a process of determining, acquiring, analyzing and synthesizing, and disseminating relevant data, information and insights to decision makers in ways that mobilize the organization to take appropriate actions that, in turn, maximize business performance. Research Design Research Design involves the descriptive study. It analyzes the financial resources and financial position of the Bank, wherein the past project data and financial statements are being used to know the working capital position of the company. Scope of the Study The scope of study will include the analysis of the working capital management of the company and to analyze the working capital needs. Moreover, the study also includes the Ratio Analysis that will help in studying the working capital position for the current years and the preceding years. Funds Flow Analysis is an effective management tool to study changes in the financial position of a business enterprise between beginning and ending financial statements dates. 32

Sources of Data for Data Collection The study that is conducted being descriptive one the research source of data used is of two types: Primary Data Secondary Data Primary Data- The data collected at first hand either by the researcher or by someone else especially for the purpose for the study. Since it is a descriptive research design the primary information is collected through discussion with the managers of the bank, staff members, etc. The information needed for conducting this study is collected through Personal Interviewing. This method is best for the descriptive research design. Moreover, it helps to clarify the doubts immediately by conducting discussion with the experts, company authorities and staff members.

Secondary Data- For conducting the detailed study of this topic it is necessary to have some of the secondary information which is collected from: o o o o Balance Sheet of the bank. Profit and Loss Account. Journals Annual Reports, 2007, 2008, 2009, 2010, 2011 of Bank. Websites.

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DATA ANALYSIS & INTERPRETATION

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Data analysis & interpretation

One of the primary functions of Co-operative bank and object is making profit. Although these are governed status; it can be consider as one of the business organization they cannot keep deposit collected with the primary object of lending and making a profit out of the interest received and paid. This banks object is to provide finance to the people who need them and the deposits are collected in two forms. 1. Primary deposits 2. Derivatives deposits These deposits have to be employed profitability, but banker is not having his free channel in employing his funds. He has to do the job lending well within the frame bank of states government policy & guidelines issued by the monetary authorities of the country(RBI IN INDIA) in the process he may not make good profit. Where there is a high degree of bad debit e.g. the banks which have to serve the segment where economic condition is very poor. Particularly in case of nationalized banks it is policy of government to lend to priority sectors like agriculture and self employment schemes. In the segment of bank operation the bank cannot make profit. To increase profits they have to employ funds in business and industrial sector. So they have to make a balance. As employment of funds is not an easy task, they have to strike a balance between profitability and accepted social objectives of the country. The basic object of nationalizing the co-operative banks was to provide funds to neglected sector like agricultural tiny industries and other weaker sections of the society. Nearly 40% of total co-operative bank advances is in priority sector. The major source of bank funds is the public deposit and they agree to interest paid on their money deposited.

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LOANS There are two types of loans 1) Secured loan 2) Unsecured loan

Table showing types of loan.

Secured loans
The loans which have full backing of some security, loan considered good in respect of which the bank is fully secured loan on mortgage , loan against deposit etc. Secured loan granted against the securities which are equal to or more than the amount advanced. So any secured loan should be equal to the advances made by the banker till such time it is cleared, because the banker do not consider the full value of the security at the time of advance and they keep some margin for interest and other changes. The security may be primary or collateral one. Primary security is one offered by borrower himself where collateral security is deposited by a third party to secure the advance made to the customer. Security may be tangible or personal. Tangible security is visible and can be sold or transferrable e.g. goods, documents of real estate etc. where personal securities refer to the promise of the borrowed money. in this case the promissory note is known respectable person who stands as a coobligant. Sec 5(7) of the banking regulation act 1994 defines a secured loan advance as a loan or advancement on the security of the assets of the market value of which is not than the amount of such loan or advance. The bank always refers to make secure advance while considering the security for advances. The banker follows certain guidelines, regarding the acceptance of security as advance. They are as follows
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1. Ready conversion 2. No encumbrance 3. Stable price 4. Safety 5. Yield on return 6. Margin 7. Valuation 8. Other aspects such as perishable goods which can be considered for only short term advances. The banker should also get proper documentation of the little deeds in his favours.

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1. HOUSING FINANCE SCHEME

This loan is available for buy a already built house or construct a house or buy one under construction. This loan also helps to build an extension to your existing house. It is also available for repairs and up gradation.

Criteria for eligibility 1. You are a major individual resident or non-resident having a regular source of income. 2. Your age on the maturity of the loan is less than retirement age if you are a salaried employee & below 65 years of age. 3. The total deductions do not exceed 60% of your gross income, including the loan instalment of the proposed. 4. Co-applicants income can be clubbed for enhanced eligibility.

Particular Loan Amount Margin Rate of interest

Condition Up to Rs. 30 lakh 15% 14%

1. Intrest charged on daily reducing balance. 2. No prepayment charges. 3. Purchase of house up to 25 years old allowed.

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 Repayment : 1. Up to 15 years for the purchase of a new flat / house /construction / extention. 2. Up to 8 years for repairs, renovation and up gradation. Security : Simple equitable mortage of the house / flat / apartment on which the loan is available. Process Fees : 0.25% of the sanctioned loan amount.

2. Auto Finance Scheme

Take the smooth road to own your Dream Machine. Get on the right track with Auto loan and drive home your home machine. You are eligible if : 1.You have a gross income of more than Rs. 75,000 p.a. for a wheeler and a gross income of more than Rs.1.50 lakh p.a. for a car.

Particular Loan Amount Margin Rate of interest

Condition Up to Rs. 50,000/- for purpose of a new two wheeler. Up to Rs.4 lakhs for purchase of a new car. 25% 13%

1. Intrest charged on daily reducing balance. 2. No prepayment charges.

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 Security : Hypothecation of the vehicle purchased. Mode of Disburesement : Loan disbursed directly to the authorised dealer. Process Fees : 1. Two wheeler RS.250/2. Four wheelers Rs.500/-

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4. Mortgage Loan Scheme

Make your idle property work for you if you have free holdup-encumbered, non-agricultural property, residential or co-operative you can fulfill all your needs with Mortgage Loan. Be it to finance a marriage, higher education, a foreign trip or medical treatment.

You are eligible if: 1. You are 21 years of age. 2. You are a salaried individual, professional, self-employed, agriculturist. 3. You are an income tax assess for at least 2 years. 4. Your net monthly income is at least Rs. 10,000 /- Income of spouse (Co-applicant). Particular Loan Amount Margin Rate of interest Condition Minimum Rs. 1 Lakhs. Up to Rs. 50 Lakhs. 50% 15%

Interest charged on daily reducing balance. Security: Equitable mortgage of the property. Process Fees: 0.25% of the sanctioned loan amount. Repayment: Up to 80 EMIs

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5. Crop loans
To meet cultivation expenses for various crops as short term loan. You are eligible if: All types of farmers small or marginal other. Rate of interest: 11% Processing fees: 25000 200000 Rs 200 200000 above Rs 200 Security: Crop & land. Where there is an existing change on lands or mortgage the proposed loan may also be covered by the same. Selection method: Service area approach. Loan records to ascertain cultivation rights. Surety: Two guarantors acceptable to bank. Repayment: 12 months

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Unsecured loan
1. Mahesh Educational Loan
The Topper for your childrens Higher Education. Ensure a bright future for your children. Provide them with the best of higher education in India.. You are eligible if: You are an Indian national and have secured admission to a professional or technical

course in an Indian university. Simply walk in with the mark sheet of the qualifying exam. And proof of admission.

Course Eligibility: Study in India:

Technical courses, Graduation courses, Post-Graduation courses, Masters& PhD, Professional courses. Particular Loan Amount Margin Rate of interest Loan takes care of:

Condition Up to- Rs.2 lakh for studies in India. NIL 12%

Fee payable to colleges/ schools/ hostels. Examination/ Library/ Laboratory fees. Purchase of books, equipment, instruments and uniforms. Purchase of computers needed to complete the course. Any other expense to complete the course like study tours, project work, thesis etc. 1% Interest concession if interest serviced during the study period. Simple interest charged during moratorium period.

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Process Fees: Nil. Repayment Moratorium- Course period + 1 year or 6 months after getting a job, whichever is earlier. Repayment period- 5-7 years after start of repayment.

2. Personal Loan
It is the ideal way to fulfill personal needs of your family. Be it to finance a marriage or family function. To travel or celebrates a festival. For medical treatment or educational purposes or simply a vacation even an unforeseen event. Personal Loan is always there for all your needs. You are eligible if: You are a permanent employee between 24 to 55 years having worked for at least 2 years in a Govt. or PSU/ reputed organization. You have a gross monthly income of at least Rs. 5,000/-. Income of any other earning member (co-applicants) can be clubbed for enhanced eligibility. You can have a salary disbursement arrangement with us or provide an undertaking form your employer. Particular Loan Amount Margin Rate of interest Condition Minimum- Rs. 15,000/Up to- Rs. 1 lakh or 9 times NIL 14%

Interest charged on daily reducing balance. No prepayment charges.

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Process Fees: 1% of loan amount

Repayment: Up to 36 EMIs Mode of disbursement: By credit to your Savings Bank account

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PROCEDURE FOR SANCTIONING LOAN

In loan account the entire amount sanctioned is debited to the borrowers account Interest is also debited to the account. It is the credit repayment made on installment basis. Following procedure is adopted for sanctioning of loans.

1. PRE SANCTION SURVEY AND INSPECTION

Loan facility is available on the basis of security offered or on the basis of period of which it is required. Security offered by the customers may be fixed asset, plant and machinery, equipment, house etc. Depending upon the purpose of loan, the banker conducts a pre-sanction survey and inspection. During this survey bankers inspect the security offered by seeing the location of factory, business premises, inspect documents and letter of goods etc. such survey helps the bank to know about the customers.

2. PREPARATION OF LOAN APPLICATION

The loan application has to be prepared and handed over to the banker by the borrower. In a loan application the following details are to be furnished 1. Name of the borrower 2. Occupation 3. Purpose of loan 4. Period of loan 5. How borrower proposes to repay the loan 6. Projection of cash generations over the loan period 7. P&L A/c, B/S, for the period of loan in the form of projection 8. Details of security offered.
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3. APPRAISAL

Loan applications have to evaluated and appraised to decide whether they can be sanctioned of rejected. The loan department in the bank does this work. During appraisal the loan department concerned applies various methods of scrutiny to find out the details given in the application are true and the projections hold good. Thus market information, sales forecast, etc. would be independently assessed.

4. SANCTIONING

The loan department scrutinizes the loan application and decides whether the loan is to be sanctioned or not. Norms for sanctioning the proposal are indicated by RBI

5. PREPARATION OF SANCTION LETTER

Sanction letter contains the following points1. Name of the borrower 2. Limits sanctioned 3. Period of loan 4. Security offered buy the borrower 5. Terms of repayment 6. Margin to be maintained 7. Rate of interest 8. Stock statements to be submitted at periodical intervals the borrower is informed about these aspects and a copy of the letter is sent to be borrower.

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6. ACCEPTANCE OF TERMS AND CONDITIONS BY THE BORROWER

Normally the borrower is in continuous touch with the bank though be has banded over the proposal to the bank. They accept terms lay down by the bank. They are not requested to inform the bank in writing of having accepted the terms.

7. PREPARATION OF LOAN DOCUMENTS

a. Demand promissory note

It is an important document and a common document for the bank. The borrower accepts his liability regarding the funds lend by the banker through this document. It contains data of execution, place of execution, name of the payee, the loan amount, rate of interest, address of the borrower etc.

b. Loan agreement

These are standard printed documents running into a No. of pages. They contain all legal aspects regarding the rights of both the parties and liabilities of the borrower.

8. DISBURSEMENT OF LOAN

When the loan is sanctioned at the time of disbursement of loan of loan a/c is opened in the name of the borrower. The loan a/c opened is debited and savings a/c is credited for equivalent sum.

9. PERIODICAL INSPECTION AND SUPERVISION

After the loan is disbursed borrower utilizes the loan amount to generate the funds and profits so that he can repay the loan. Therefore bank inspects the keep supervision whether the loan amount is been utilized in a productive way or not.
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OBSERVATIONS & FINDING

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5.0

Observations & findings

The present chapter contains a major finding & observation of study. My study focus on the loan procedure implemented by Mahesh urban co-operative bank Ltd. And the problems faced by borrower regarding application of loan and the problems faced by bank regarding sanctioning of loan and recovery of loan? What is the recovery procedure implemented by bank?

Finding of the study

1) The amount sanctioned by branch is rising year to year

2)

The amount of profit was

3)

Borrower response towards business loan and Agricultural loan is more as compare to

other types of loan.

4)

People prefer banks reputation as most important criteria before applying for loan.

5)

The percentage of secured was increased from 77.67% to 92.29%.

6)

The credit department thoroughly analyses the credit requirement of the company and the

capacity to service the debt

7)

The credit appraisal passes through various stages evaluations before it is appraised.

8)

For application of loan borrower faced the problem of guarantor and document mostly.

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Graphs

1. Graph of share capital

Share Capital
450 400 350 300 250 200 352.59 150 100 50 0 2008 2009 2010 2011 257.86 301.28 401.53 (In lakhs)

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2. Graph of loans and advances

Loans And Advances

7000 6000 5000 4000 3000 2000 1000 0 2008 2009 2010 2011 4548.96 3771.96 6434.55 5608.53 Loans And Advances

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3. Graph of profit

Profits (in lakhs)

140 120 100 80 60 40 63.85 20 0 2008 2009 2010 2011 91.31 115.14 115.44 Profits (in lakhs)

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CONCLUSION OF THE STUDY

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Conclusion
The study of the project reveals that the Mahesh Urban Co-operative Bank were in the analysis and interpretation of the project states that the bank provides various types of loan to the society. As compare to the private financial organization the Mahesh Urban Co-operative bank had made efficient and valuable changes in the facilities which are to be provided to the common people with less of charges. I recommended some solution which will helpful for bank to solve the various problem faced by borrower and bank for its recovery of loan. These solution also help to fill the loopholes in loan procedure. My suggestion for bank helps to create smoothness in working of loan their procedures. Different types of loans like personal loan, Consumers loan, car loan, house loan, educational loan etc. are made available by the bank. In the same manner crop loan for the farmers are provided as per NABARD and RBI norms. The overall study reveals that the customer connected to the Mahesh Urban Cooperative are made over satisfied with the bank. The Mahesh Urban Co-operative bank play very important role in the development of rural area by lending funds.

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SUGGESTIONS & RECOMMENDATIONS

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Suggestions
They should be target marginal customers instead of their regular customer. The documentation formalities should be made easy. Board meetings, Seminar, personal visits, programs should be made frequently. Proposal requiring sanction from controlling authority is unduly delayed. Sanction of loan Should be faster and timely. Minimum documents to be asked for sanction. Positive attitude should be developed by the operation staff to attract more customers. Lack of professionalism in banking system. Behavior of staff should be improved. They should be co-operative and soft spoken. Frequent training to the staff should be imparted to update the knowledge. Branch front line staff should be directed for actively involvement in branch and output of branch marketing and ensuring excellent customers relation all spheres of banking transaction. Nationalized banks are working in very traditional manner. So they should take some steps towards professionalism. Staff shortage is the main hurdle in efficient performance so that overload of work can be avoided. In case of transfer of any employee from one branch to another branch it should be ascertained that another employee is appointed on the former employees place. Terms and conditions should be explained properly to the customers to avoid misunderstandings between customer and bank. Bank should convey in writing the main reason for rejection of loan application within to other banks. Demand draft commission should be decrease so that customer cannot be shifted to other banks. Nationalize bank lacking in conducting awareness campaign so they should take necessary steps regarding this.

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1. The credit appraising process should be made faster without revealing to the risk 2. More people should be trained to handle credit appraisal process. 3. More authority should be given to the bank manager for sanctioning process. 4. Banks should focus more on retail customers.

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ANNEXURE Questionnaire
A) FOR SATISFACTION OF BORROWER
Name of the borrower:Contact no:Address:Occupation:-

Borrowers satisfaction to the various criteria Satisfaction Level i. ii. iii. iv. v. Fully satisfied Satisfied Average satisfied Dissatisfied More dissatisfied 1) Are you satisfied with bank employees behavior? i. ii. iii. iv. v. Fully satisfied Satisfied Average satisfied Dissatisfied More dissatisfied
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2) Are you satisfied with interest rate of the bank? i. ii. iii. iv. v. Fully satisfied Satisfied Average satisfied Dissatisfied More dissatisfied 3) Are you satisfied with reputation of the bank? i. ii. iii. iv. v. Fully satisfied Satisfied Average satisfied Dissatisfied More dissatisfied 4) Are you satisfied with Transparency? i. ii. iii. iv. v. Fully satisfied Satisfied Average satisfied Dissatisfied More dissatisfied

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5) Are you satisfied with Quickness in service? i. ii. iii. iv. v. Fully satisfied Satisfied Average satisfied Dissatisfied More dissatisfied

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B) FOR PROBLEM FACED BY COSTOMER

Name of the borrower:Contact no:Address:Occupation:Problem faced by borrower while taking loan. Parameters: i. ii. iii. iv. v. Very high High Medium Low Very low

1) Are you facing problem in document while taking the loan? i. ii. iii. iv. v. Very high High Medium Low Very low

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2) Are you facing problem in guarantor while taking the loan? i. ii. iii. iv. v. Very high High Medium Low Very low

3) Are you facing problem in mortgage items while taking the loan? i. ii. iii. iv. v. Very high High Medium Low Very low

4) Are you facing problem in mortgage item while taking the loan? i. ii. iii. iv. v. Very high High Medium Low Very low

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5) Are you facing problem in Interest rate while taking the loan? i. ii. iii. iv. v. Very high High Medium Low Very low

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