CHAPTER 1

INTRODUCTION

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 1.1 INTRODUCTION

Finance is the life blood of trade, industry and commerce. Now-a-days, bank money acts as the
backbone of modern business. Development of any country mainly depends upon the banking
system.

Banking in India, in the modern sense, originated in the last decades of the 18th century.
Among the first banks were the Bank of Hindustan, which was established in 1770 and liquidated
in 1829–32; and the General Bank of India, established in 1786 but failed in 1791.

The largest bank, and the oldest still in existence, is the State Bank of India (S.B.I). It originated
as the Bank of Calcutta in June 1806. In 1809, it was renamed as the Bank of Bengal. This was
one of the three banks funded by a presidency government, the other two were the Bank of
Bombay in 1840 and the Bank of Madras in 1843. The three banks were merged in 1921 to form
the Imperial Bank of India, which upon India's independence, became the State Bank of India in
1955. For many years the presidency banks had acted as quasi-central banks, as did their
successors, until the Reserve Bank of India was established in 1935, under the Reserve Bank of
India Act, 1934.

In 1960, the State Banks of India was given control of eight state-associated banks under the
State Bank of India (Subsidiary Banks) Act, 1959. These were called its associate banks and are
now merged with SBI. In 1969 the Indian government nationalised 14 major private banks, one
of the big bank was Bank of India. In 1980, 6 more private banks were nationalised. These
nationalised banks are the majority of lenders in the Indian economy. They dominate the banking
sector because of their large size and widespread networks.

The banks are classified into different categories, such as:

 Central Bank : Guides and regulates the banking system of a country and does not deal with
the general public. For eg: RBI in India

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 Commercial Banks : Commercial banks are profit making institutions that hold the deposits
of the individuals and then uses these funds to make loans. It is of three types; Public Sector
Banks, Private Sector Banks and Foreign Banks

 Developmental Banks : These are developed for the development of certain areas of interest
by providing finance to them. For eg: NABARD, SIDBI, EXIM etc.

 Co-operative Banks : co-operative societies are formed for serving common interests of
individuals. These are of three types; Primary Co-operative Societies, State Co-operative
Societies and Central Co-operative Societies.

The Indian banking sector is broadly classified into scheduled banks and non-scheduled banks.
The scheduled banks are those included under the 2nd Schedule of the Reserve Bank of India
Act, 1934. The scheduled banks are further classified into: nationalised banks; State Bank of
India; Regional Rural Banks (RRBs); foreign banks; and other Indian private sector banks.[7] The
term commercial banks refers to both scheduled and non-scheduled commercial banks regulated
under the Banking Regulation Act, 1949.

Commercial banks are the primary contributor to the economy of a country. So we can say
commercial banks are profit making institutions that hold the deposits of the individuals &
business in current & saving accounts and then uses these funds to make loans. As banks are
profit earning concerns; they collect deposit at the lowest possible cost and provide loans and
advances at a higher cost. The differences between the two are profit for the bank. Banking
sector is expanding its hand in different events every day. At the same time the banking process
is becoming faster, easier, and the banking area becoming wider. As the demand for better
service increases day by day, they are coming with different innovative ideas and products; like
internet banking, debit and credit cards, NEFT, RTGS, online transfer and payment of funds,
cashless shopping etc. In order to survive in the competitive field of the banking sector, all
banking organizations are looking for better service opportunity to provide their fellow clients.
As a result, it has become essential for every person to have some idea on the bank and banking
procedure.

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 1.2 HISTORY OF BANK OF INDIA AND
PRESENT SCENARIO

Bank of India was founded on 7th September, 1906 by a group of eminent businessmen from
Mumbai. The Bank was under private ownership and control till July 1969 when it was
nationalized along with 13 other banks. Beginning with one office in Mumbai, with a paid-up
capital of Rs.50 lakh and 50 employees, the Bank has made a rapid growth over the years and
blossomed into a mighty institution with a strong national presence and sizable international
operations. In business volume, the Bank occupies a premier position among the nationalized
banks. It has completed more than 100 years of successful banking services to its customers.

The Bank has around 5122 branches in India spread over all states and union territories including
specialized branches. These branches are controlled through 54 Zonal Offices and 8 NBG
Offices. Various zones are made to control and monitor the working of different branches all
over India. Three zones come under the Northwestern area, that are Ludhiana zone, Chandigarh
zone and Amritsar zone. BOI also deals in FOREX. It has 96 branches in Ludhiana out of which
only two, Clock Tower Branch (Main Branch) and Model Town Branch; are permitted to deal
with FOREX. There are more than 50,000 employees associated with BOI.

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While firmly adhering to a policy of prudence and caution, the Bank has been in the forefront of
introducing various innovative services and systems. Business has been conducted with the
successful blend of traditional values and ethics and the most modern infrastructure. The Bank
has been the FIRST among the nationalised banks to establish a fully computerised branch and
ATM facility at the Mahalaxmi Branch at Mumbai way back in 1989. The Bank is also a
Founder Member of SWIFT (Society for Worldwide Interbank Financial Telecommunication)`
in India.

Presently Bank has overseas presence in 22 foreign countries spread over 5 continents – with 60
offices including 5 Subsidiaries, 5 Representative Offices and 1 Joint Venture, at key banking
and financial centers viz., Tokyo, Singapore, Hong Kong, London, Jersey, Paris and New York.

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 1.3 COMPANY PROFILE

Date of Incorporation 07-Sep-1906

Date of Listing 07-May-1997

Management
DESIGNATION NAME
Managing Director And Chief Executive Shri Dinabandhu Mohapatra
Officer (CEO)
Non-Executive Chairman Shri G. Padmanabhan

Chief Vigilance Officer (CVO) Shri Devendra Sharma

Executive Directors Shri RA Sankara Narayanan

Shri Neelam Damodharan
Shri Atanu Kumar Das
Govt. Nominee Director Shri Girish Chandra Murmu

Rbi Nominee Director Smt. R. Sebastian

Part-Time Non-Official Director Ms. Veni Thapar

Shareholder Directors Shri Neeraj Bhatia

Shri Sanjeev Kumar Arora

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 1.4 VISION, MISSION AND QUALITY
POLICY OF BANK OF INDIA

Our Vision
"To Become The Bank Of Choice For Corporates, Medium Business And Up Market Retail
Customers And Developmental Banking For Small Business, Mass Market And Rural Markets."

Our Mission
"To provide superior, proactive banking service to niche markets globally, while providing cost
effective, respective, responsive service to others in our role as a development bank, and in doing
so, meet the requirements of our stakeholders."

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 1.5 LOANS AND ADVANCES

Do you need to borrow money to buy a car or maybe a house? If so, you might be thinking about
getting a bank loan. A bank loan is a debt that a person, better known as the borrower, owes to
a bank. It's basically an agreement between the borrower and the bank about a certain amount of
money that the borrower will borrow and then pay back in specific increments at a specific
interest rate. Interest is basically a fee you pay to borrow the money. Lending money is one of
the two major activities of any bank. Banks accept deposits from public for safe-keeping and pay
interest to them. They then lend this money to earn interest on this money. In a way, the banks
act as intermediaries between the people who have the money to lend and those who have the
need for money to carry out business transactions. The difference between the rate at which the
interest is paid on deposits and is charged on loans, is called the “spread”. Banks lend money in
various forms and they lend for practically every activity.

So let's say you need to buy a car. You go down to your bank and ask them for a loan. The loan
officer will look at your overall financial situation - how much income you have, how much debt
you have, and your credit score, so they can determine if you're a good risk to loan money to.
These things all influence the interest rate you'll be charged, as well.

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 1.5(a) METHODS OF ADVANCING
LOANS

METHODS OF ADVANCING LOANS

DEMAND LOAN TERM LOAN

CASH CREDIT DISCOUNTING OF

OVERDRAFT
BILLS

I. DEMAND LOANS

Demand Loans are secured loans repayable on demand by the bank. In other words, it is
repayable at short-notice. Demand loans can be gradually liquidated over a period generally in
monthly, quarterly, half yearly installments or lump-sum payment at one shot. Such loans are
normally granted by banks against security. The security may include materials or goods in
stock, shares of companies or any other asset. Demand loans are raised normally for working
capital purposes, like purchase of raw materials, making payment of short-term liabilities etc.

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 II. TERM LOANS

Medium and long term loans are called term loans. Term loans are granted for more than a year
and repayment of such loans is spread over a longer period. The repayment is generally made in
suitable instalments of a fixed amount. Maximum maturity for a term loan is normally 10 years
and in exceptional cases 15 years. Term loan is required for the purpose of starting a new
business activity, renovation, modernization, expansion/ extension of existing units, purchase of
plant and machinery, purchase of land for setting up of a factory, construction of factory building
or purchase of other immovable assets. These loans are generally secured against the mortgage
of land, plant and machinery, building, the assets purchased from bank’s finance and the like.

III. CASH CREDIT

Cash credit account is a running account where debit balance in the account upto a sanctioned
limit or drawing power based on stock holding whichever is less is permitted. It is normally
sanctioned for a period of one year. The limits are renewed or enhanced/reduced based on
assessment of customer’s actual requirement on the basis of working of the unit. Customer has to
submit periodic Stock Statements depending on Operating Cycle, Turnover and Cash Budget or
Projected Balance Sheet. Cash credit vis offered normally against pledge or hypothecation of
prime security such as, book debts, stocks of raw material, semi finished goods and finished
goods. The interest is calculated and charged to the customer’s account. Cash credit, is one of the
types of bank lending against security by way of pledge or /hypothetication of goods.

IV. OVERDRAFT

Overdraft facility is more or less similar to ‘cash credit’ facility. Overdraft facility is the result of
an agreement with the bank by which a current account holder is allowed to draw over and above
the credit balance in his/her account. It is a short-period facility. This facility is made available to
current account holders who operate their account through cheques. The customer is permitted to
withdraw the amount of overdraft allowed as and when he/she needs it and to repay it through

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deposits in the account as and when it is convenient to him/her. Overdraft facility is generally
granted by a bank on the basis of a written request by the customer. Sometimes the bank also
insists on either a promissory note from the borrower or personal security of the borrower to
ensure safety of amount withdrawn by the customer. The interest rate on overdraft is higher than
is charged on loan.

V. DISCOUNTING OF BILLS

Apart from sanctioning loans and advances, discounting of bills of exchange by bank is another
way of making funds available to the customers. Bills of exchange are negotiable instruments
which enable debtors to discharge their obligations to the creditors. Such Bills of exchange arise
out of commercial transactions both in inland trade and foreign trade. When the seller of goods
has to realize his dues from the buyer at a distant place immediately or after the lapse of the
agreed period of time, the bill of exchange facilitates this task with the help of the banking
institution. Banks invest a good percentage of their funds in discounting bills of exchange. These
bills may be payable on demand or after a stated period. In discounting a bill, the bank pays the
amount to the customer in advance, i.e. before the due date. For this purpose, the bank charges
discount on the bill at a specified rate. The bill so discounted, is retained by the bank till its due
date and is presented to the drawee on the date of maturity. In case the bill is dishonoured on due
date the amount due on bill together with interest and other charges is debited by the bank to the
customer’s account.

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 1.5(b) NATURE AND SECURITY OF
LOANS
From the view point of security of loans, we can divide the loans into two categories:
 Secured
 Unsecured

Unsecured loans are those loans which are not covered by the security of tangible assets.
Such loans are granted to firms/institutions against the personal security of the owner, manager
or director.

Secured loans are those which are granted against the security of tangible assets, like stock in
trade and immovable property. Thus, while granting loan against the security of some assets, a
charge is created over the assets of the borrower in favors of the bank. This enables the bank to
recover the dues from the customer out of the sale proceeds of the assets in case the borrower
fails to repay the loan. There are various types of securities which may be offered against loans
granted, but all of those are not acceptable to the banks. The types of securities generally
accepted by the bank are the following:

 Tangible assets such as plant and machinery, motor-van, etc.

 Documents of title to goods, like Railway Receipt (R/R), Bills of exchange, etc.
 Financial Securities like Shares and Debentures
 Life-Insurance Policy
 Real estate’s such as Land, building, etc.
 Fixed Deposit Receipt (FDR)
 Gold ornaments, Jewelers etc.

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 1.5(c) PRINCIPLES OF ADVANCING
LOANS

PRINCIPLES OF ADVANCING LOANS

PRINCIPLE OF
PRINCIPLE OF SAFETY
LIQUIDITY

DIVERSIFICATION IN
FINANCIAL POSITION
LOANS

1. PRINCIPLE OF SAFETY

It is the basic principle of the use of the bank’s fund. There should be full security and safety of
the return of the money advanced. For this purpose, bank asks for different kinds of guarantees
and securities to cover the risk of advances. In case of loss, the amount advanced is covered by
selling the securities offered for loans.

2. PRINCIPLE OF LIQUIDITY

It is in the interest of the bank to keep his money in a liquid form, convertible easily into cash, as
and when desired by the bank. So bank invest his money in the short term advances and avoids
in any long term financing like land, buildings and purchase of machinery.

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3. DIVERSIFICATION IN LOANS

At the time of advancing loans, bank should satisfy himself about the purpose and use for which
loan is advanced. For non-productive or illegal business no advance should be granted.

4. FINANCIAL POSITION

Banker before advancing any loan should satisfy himself about the character, financial position
and mode of repayment of the loan. Loan should be granted in accordance with the financial
position of the firm or industry. Beyond the capacity, no loan should be granted, because there
will be a great risk in the repayment of the loan.

5. PURPOSE

A banker would not throw away money for any purpose for which the borrower wants. The
purpose should be productive so that the money not only remains safe but also provides a
definite source repayment.

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 1.5(d) PROCEDURE OF
GRANTING LOANS

I. KYC DOCUMENTS AND ONLINE VERIFICATION

Know your Customer (KYC) is the most important aspect in terms of legislative requirements. It
refers to as front–loading our relationship with customer and it is helpful in avoiding many
problems which may come across at later date. Knowing a Customer is not just simply obtaining
a copy of Officially Valid Document (OVD), it is about understanding the normal life and
business practice of the Customer. By developing or having this knowledge about the Customer
we shall be able to recognize the clues or signals which will make us aware of any suspicious
activity that may be occurring. Kindly note importantly that:
 Copies of KYC documents to be obtained duly signed by the Applicant and verified from
the Original
 Wherever the proof given has Both the identity as well as current address in a single
document, branch may obtain only that single document as Identity and address proof

As a proof of identity and address proof, Recent Photograph (Passport Size) and at least one
of the following Officially Valid Documents (OVD) is obtained for verification along with a
copy in respect of Individual, Proprietor, each Joint Account Holder, each Partner, each Director,
each Trustee, each member of HUF; if any:
 Passport (Within Validity Period);
 PAN Card;
 Voter’s Identity Card;
 Driving License (Within Validity Period);
 Job Card issued by NREGA duly signed by an officer of the State Govt.;
 Aadhar Card

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 This is necessary to verify the genuineness of various documents we obtain from our customers
during the course of our business. Listed below are some site addresses for verification of
various documents:

DOCUMENT INTERNET SITE

PAN NUMBER https://www.incometaxindiaefiling.gov.in/

AADHAR https://resident.uidai.net.in/aadhaarverification

VOTER ID http://electoralsearch.in

VAHAN(SPACE) VEHICLE NUMBER

VAHAN
Mobile Number: 7738299899

DRIVING https://sarthi.nic.in
LICENSE

II. CIBIL REPORT

Credit Information Bureau India Limited or CIBIL is a credit information company founded
in august 2000. CIBIL collects and maintains records of an individual’s payments pertaining
to loans and credit cards. These records are submitted to CIBIL by banks and other lenders,
on a monthly basis. This information is then used to create Credit Information Reports (CIR),
which are provided to lenders in order to help evaluate and approve loan applications.

 It is India’s first credit information bureau, Repository of information, contains credit

history of commercial and consumer borrowers, provides this information to its
members in the form of credit information reports.

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  Its major stakeholders are Trans Union International (27.5%), SBI (10.00%), ICICI
Bank ltd. (10.00%), Bank of India (5.00%) and 9 other banks and financial
institutions, having 5.00% each.

Category covered by CIBIL:

Individuals/Consumer Corporates, Partnership firms, Proprietory Concerns, Private and Public

ltd. Companies etc.

Who can access CIBIL Credit Reports:

CIBIL members which include leading banks and financial institutions, can access information
from CIBIL on the principle of reciprocity i.e. only those members who have provided all their
data to CIBIL are permitted to access CIBIL Credit Reports.

What is CIBIL Credit Report:

CIBIL Credit Report is a factual record of credit payment history compiled from information
received from different credit grantors.

III. PRE SANCTION INSPECTION

The bank officials go to the borrower’s place to verify the address mentioned in the KYC
Documents and to know the worth of the borrower. The officials must include the Branch
Manager and the Credit Incharge. They will go without intimating the borrower about their
visit so that the information obtained must be true and cannot be forged in any case. They
will gather general information from neighbours, family members and from the borrower
himself about tne no. of family members, since what time they are living over there, see their
equation with their neighbours etc. The main purpose to go is to check the worthiness of the
borrower and to verify the proofs given by him.

IV. DUE DILIGENCE

After doing the Pre Sanction Inspection a Due Diligence is to be conducted. An outside is
appointed by bank for this purpose. They are provided with all the KYC Documents of the

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 customer for verification. Due Diligence is only done in case of a new customer, about whom
the bank is not fully aware and do not want to take any kind of risk. The agency makes
independent verification of all the documents provided by the customer, ID Proofs,
Residential Proofs and prepares a report on it. The report is then handed over to the bank for
further processings.

V. FILLING OF LOAN APPLICATION ALONG WITH CVD23

FORM
Loan application entails a detailed questionnaire where from borrower’s answers, the bank is
provided with some basic information. It contains all the required information such as the
name of borrower, his occupation, need of advance, the security mortgaged or pledged for it,
the guarantor provided by him, his monthly income or turnover etc.

There are different types of applications for different types of loans that are given by the
bank to the borrower to be filled by him. Some of them are as follows:
 For Agricultural Advances : AG 101
 For SME’s : SME 1 (for loan upto Rs. 25 lakh)
: SME 2 (for loans above Rs. 25 lakh)
 Retail Application for different retail loans etc.

CVD 23 FORM: AN ASSET LIABILITY STATEMENT

Loan application contains only basic information about the borrower and the loan he wants to
take from the bank. CVD 23 is an Asset Liability Statement of the borrower. It is a form
provided by the bank to be filled by the customer. It contains the declaration of all the assets that
the customer has, may be joint or individual, the declaration of loans that he has taken from other
banks i.e. his liabilities. It will help the bank to know the worthiness of the customer. The
information furnished must be verified from the CIBIL reports before making any conclusions
and proceeding to processing of loans.

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VI. SECURITY TO BE OBTAINED
The borrower will provide some security to the bank while taking advance from it. The
security taken by bank is almost one and a half or double the loan amount to cover the future
risk of non payments. The bank will provide loan only after getting fully secured. The
security provided will then be valued and verified by bank. The verification will be done in
two steps:
a) The approved advocates of bank will verify the property, its registry deed, whether
any loan is taken against it or not, time period for which the property is registered in
the name of that person etc. and make a search report. The report is then submitted
to the bank.
b) Now a valuation report is to be prepared by the approved valuers of the bank. They
will value the property mortgaged. Valuation will include valuing the area in which
the property is made, the market value of the property, the government value, the
value of the land, value of construction on it, total value of the property etc. This
report is then handed over to the bank.

Now the property mortgage papers will be prepared and get duly signed by the borrower. These
papers will include all the information regarding the amount of loan taken, the rate of interest to
be paid, time period for which the loan is taken, against which property the loan is taken, no. of
installments made along with amount of interest etc. It involves in having consent of the person
mortgaging his property regarding the mortgage.

VII. GUARANTOR
Most probably the guarantor provided should be the customer of the bank. In case the
guarantor is not the customer of bank then he will be asked to bring his KYC Documents,
then these documents are verified. His CIBIL Report will also be taken out for verification.
He is then asked to fill the CVD 23 form. After the bank gets fully satisfied with that person
only then it will accept him as a guarantor.

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VIII. PROPOSAL PROCESSING
The next step is to make a proposal of the customer’s request. The person who is appointed
to make the proposal will do it. Processing of proposal will include:
 The general information of the customer such as the name, occupation, salary, profits,
assets, liabilities, i.e. the information obtained earlier through the application form
and CVD 23 form.
 The purpose for which he is taking the loan
 The calculation of maximum quantum of finance that can be lend under that
particular scheme, which the borrower wants to obtain.
 The calculation of maximum amount of loan for which the borrower is eligible
according to his income or profit.
 The margins that are to be deducted while providing advances
 The type of loan; whether term loan or demand loan
 The rate of interest to be charged by the bank for advancing funds
 Calculation of the repayment period and the amount to be repaid monthly or annually.

The proposal is then signed by the person who made it and it will be send to the sanctioning
authority. The sanctioning authority will check the proposal and if everything is fine, he will sign
the proposal and pass it.

IX. DISBURSEMENT OF LOAN

Once the proposal is passed, the loan is granted to the person. The loan may be disbursed at
once or is paid as and when needed.

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 1.5(e) NON PERFORMING ASSETS

The assets of the banks which don’t perform i.e. don’t bring any return are called Non
Performing Assets (NPA) or bad loans. Bank’s assets are the loans and advances given to
customers. If customers don’t pay either interest or part of principal or both, the loan turns into
bad loan. According to RBI, terms loans on which interest or installment of principal remain
overdue for a period of more than 90 days from the end of a particular quarter is called a Non-
performing Asset.
However, in terms of Agriculture / Farm Loans; the NPA is defined as under:
 For short duration crop agriculture loans such as paddy, Jowar, Bajra etc. if the loan
(installment / interest) is not paid for 2 crop seasons, it would be termed as a NPA.
 For Long Duration Crops, the above would be 1 Crop season from the due date.

PROVISIONING COVERAGE RATIO

For every loan given out, the banks to keep aside some extra funds to cover up losses if
something goes wrong with those loans. This is called provisioning. Provisioning Coverage
Ratio (PCR) refers to the funds to be set aside by the banks as fraction to the loans.

STANDARD ASSET
If the borrower regularly pays his dues regularly and on time; bank will call such loan as its
“Standard Asset”. As per the norms, banks have to make a general provision of 0.40% for all
loans and advances except that given towards agriculture and small and medium enterprise
(SME) sector. However, if things go wrong and loans turn into bad loans, the PCR would
increase depending up the classification of the NPA as discussed in next section.

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CLASSIFICATION OF THE NPA’s
Banks are required to classify nonperforming assets further into three main categories:
 Sub-standard
 Doubtful
 Loss
based on the period for which the asset has remained non performing. This is as per transition of
a loan from standard loan to loss asset as follows:

A. If the borrower does not pay dues for 90 days after end of a quarter; the loan becomes an
NPA and it is termed as “Special Mention Account”. If this loan remains SMA for a period
less than or equal to 12 months; it is termed as “Sub-standard Asset”. In this case, bank has
to make provisioning as follows:
 15% of outstanding amount in case of Secured loans
 25% of outstanding amount in case of Unsecured loans

B. If sub-standard asset remains so for a period of 12 more months; it would be termed as

“Doubtful asset”. This remains so till end of 3rd year. In this case, the bank need to make
provisioning as follows:
 Up to one year: 25% of outstanding amount in case of Secured loans
100% of outstanding amount in case of unsecured loans
 From 1-3 years: 40% of outstanding amount in case of Secured loans
100% of outstanding amount in case of unsecured loans
 More than 3 years: 100% of outstanding amount in case of Secured loans
100% of outstanding amount in case of unsecured loans

C. If the loan is not repaid even after it remains sub-standard asset for more than 3 years, it may
be identified as unrecoverable by internal / external audit and it would be called “loss asset”.
An NPA can be declared loss only if it has been identified to be so by internal or external
auditors.

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EXAMPLE OF NPA
We suppose that a party was disbursed a loan on January 1, 2010. Its due date is June 1, 2010.
But the party does not make a payment. So
 It will be an Standard Asset from January 1, 2010 till June 1, 2010 (Due Date)
 It will be a Special Mention Account From June 2, 2010 till August 29, 2010 (90 days)
 It will be Sub-standard from August 30, 2010 till August 29, 2011
 It will be doubtful from August 30, 2011 till August 29, 2012
It may remain doubtful Asset for a period of 3 years, beginning from 12 months of being an
NPA, but once the auditors identify it as a loss, it will be assigned a loss asset; however, the
period may be anything above 3 years.

IMPLICATIONS OF THE NPA’s ON BANKS

The most important implication of the NPA is that a bank can neither credit the income nor debit
to loss, unless either recovered or identified as loss. If a borrower has multiple accounts, all
accounts would be considered NPA if one account becomes NPA.

GROSS NPA AND NET NPA

The NPA may be Gross NPA or Net NPA. In simple words, Gross NPA is the amount which is
outstanding in the books, regardless of any interest recorded and debited. However, Net NPA is
Gross NPA less interest debited to borrowal account and not recovered or recognized as income.
RBI has prescribed a formula for deciding the Gross NPA and Net NPA.

NPA AND SARFAESI ACT

The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest
(SARFAESI) Act have provisions for the banks to take legal recourse to recover their dues. The
steps are as follows:
 When a borrower makes any default in repayment and his account is classified as NPA;
the secured creditor has to issue notice to the borrower giving him 60 days to pay his
dues. It is called SARFAESI notice.

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  If the dues are not paid, the bank can take “symbolic possession” of the property.
Symbolic possession means the bank will write a notice and put it outside the property
explaining that this property is mortgaged to the bank and the account is declared NPA. It
will continue for a period of 30 days.
 If this period passes the bank will take the “physical possession” of the property by by
getting the papers signed from the magistrate and can also give it on lease or sell it; as per
provisions of the SARFAESI Act.

RESELLING OF NPA’s
If a bad loan remains NPA for at least two years, the bank can also resale the same to the Asset
Reconstruction Companies such as Asset Reconstruction Company (India) (ARCIL). These
sales are only on Cash Basis and the purchasing bank/ company would have to keep the accounts
for at least 15 months before it sells to other bank. They purchase such loans on low amounts and
try to recover as much as possible from the defaulters. Their revenue is difference between the
purchased amount and recovered amount.
Instead of selling it to asset reconstruction companies bank can also auction the property. For
this a notice is to be published in the newspaper defining the date of auction, the minimum
amount from which the auction starts, eligibility of participating in it etc.
If the property is sold for more than the loan amount i.e. principal plus interest, then the excess
amount will be disbursed to the person concerned i.e. the borrower, after deducting all the
expenses of bank that come on selling the property.

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 1.6 AGRICULTURAL LOANS

KISAN CREDIT CARD

PARTICULARS TERMS
Eligibility All farmers –Individuals / Joint Borrowers who are owner cultivator,
tenant farmers, Share croppers, SHG( Self Help Group) of farmers, share
croppers from the operational area.
Purpose 1. Short Term Credit for crop production,
2. Post harvest activities,
3. Produce Marketing Loan,
4. Consumption Credit Requirement,
5. Working capital requirement for repairs and maintenance of farm
equipments and for allied activities and also for
6. Investment credit requirement for agriculture and allied activities.

For first five activities will form short term credit and for the last activity
will form long term credit requirement.

Quantum Of Finance FOR ALL FARMERS OTHER THAN MARGINAL FARMERS

Short Term Credit Needs:

 First year: Scale of finance X (multiplied by) Extent of Cultivated
area + 10 % for post harvest + 20 % for repairs and maintenance of
farm assets, insurance, etc.
Please note the first year limit is the base for next 4 years. Hence care
should be taken to work out the first year limit for all crops and for
all seasons i.e. amount as per scale finance multiplied by acres plus
another 30 % on it for post harvest and repairs of farm assets.

Page | 25
 For Second and next 3 subsequent years (upto 5 years): The
amount arrived in earlier year + 10 % for cost escalation for every
year. The 5th year limit will be cumulative limit arrived by adding
step wise every year limit.

Long term for capital Assets:

The farmer needs to Plan next 5 years investment (for land development,
minor irrigation, purchase of farm equipments and allied agricultural
activities). The total for the current year plus all the subsequent 4 years
for investment in capital assets will be taken as funds needed under Long
Term Credit Needs.
 Maximum Permissible Limit: The short term loan limit arrived for
the 5th year (cumulative for all the five years) plus the estimated long
term loan requirement for all the five years (minus repayment of TL
installments every year) will be the Maximum Permissible Limit
(MPL) and treated as KISAN CREDIT CARD LIMIT.
 Fixation of Sub-limits:
a) Short Term Cash Credit Limit (with another sub-limit within
the said sub-limit for Produce Marketing Loan) and
b) Long Term Loan Limit (reducible every year on account of
repayment in TL).

FOR MARGINAL FARMERS:

A flexible limit of Rs.10000/- to Rs.50000/- be provided based on the

land holding and crops grown including post harvest warehouse related
needs and other farm expenses, consumption needs, etc., plus small term
loan investments like purchase of farm equipments, establishing mini
diary/backyard poultry as per assessment of Br. Manager without relating
to the value of land. The composite KCC limit is to be fixed for a period

Page | 26
 of 5 yrs on the basis of calculation enumerated above for farmers other
than marginal farmers.

Disbursement and Repayment:

 The short term component of the KCC limit is in the nature of
revolving cash credit. There should be no restriction in number of
debits and credits. However each installment of the drawable limit
drawn in a particular year will have to be repaid within 12 months
without the need to bring the debit balance in the account to zero.
 The long term loan will be disbursed on the basis of already specified
plan as per the need of the borrower with half yearly or annual
repayment schedule (maximum repayment period of 9 yrs depending
upon the activity and investment as per the existing guidelines.
Margin For crop loan, there is no separate margin as margin is inbuilt in scale of
finance. However for other term loan –
a) Upto Rs.1 lakh- Nil.
b) Over Rs.1 lakh- 15 % to 25% on the merit of each case

Security  Upto Rs.1.00 lakh (where tie-up is not available) and Upto Rs.3.00
lakh (where tie-up arrangement is available). No collateral security.
 In all other cases, collateral security by way of mortgage /charge over
agricultural land to be obtained for aggregate loan amount.

Rate Of Interest a) Upto Rs. 3 lakh- 7%

b) Rs. 3 to 10 lakh- 10.90%
c) Above Rs. 10 lakh- 11.10%

Insurance Personal accident insurance policy: - Available in case of

death/permanent disablement upto Rs 5,00,000/-

Documents To Be  Land Ownership /Possession certificate from Govt. Dept.

Submitted By  Latest Land Revenue Receipt
Applicant
 Photograph of the applicant.

Page | 27
 KISAN ALL PURPOSE TERM LOAN

PARTICULARS TERMS
Objective To create a hassle free single term loan limit to farmers for all term loan
requirements like Farm Mechanization, Land Development, Minor
Irrigation, Water Conservation, Horticulture, Allied activities and other
agri related activities, etc. excluding orchards/plantation crops.
Eligibility Individual, JLG/SHG of Farmers-Owner cultivators.

Type of Loan  Term loan repayable within 9 yrs.

 The purposes for which the limit is granted shall not be a part of the
Kisan Credit Card limit.
 The farmer can have either Kisan Credit Card route or the loan under
this scheme.

Quantum of Loan To be based on the investment plan given by the farmer to be undertaken
in the next 2-3 yrs. Subject to 5 times of annual income (current pre
development stage) of the farmer including allied activities
or
50 % of the value of land mortgaged whichever is lower –MAX. RS.20
LAKH

Margin a) Upto Rs.1 lakh—NIL

b) Over Rs. 1 lakh—Small and Marginal Farmers: 5 %
For others 15 %

Security a) Upto Rs.1 lakh – Hypothecation of assets created out of the loans.
b) Above Rs. 1 lakh – Mortgage of land ( it shall be at least 200 % of
the limit sanctioned)
ROI a) Upto 10 lakh- 10.90%
b) Above 10 lakh- 11.10%

Page | 28
 Disbursement The farmer may be allowed to draw the amount at his convenience with a
simple letter of undertaking linked to the loan application/loan document
executed. The drawls to be permitted on the indicated limit for each of
the purposes specified at the time of sanction. The farmer should
undertake to create the asset/complete the project within 15/30 days of
availing the disbursement.
Loan Application AG 100

Documentation As per extant guidelines for investment credit (Principal document being
CHA 1 or CHA 2(in case of tractor/combined harvester which needs to
be registered with RTO along with other particulars i.e. Engine No.,
Chassis No. etc.

KISAN TATKAL LOAN SCHEME

PARTICULARS TERMS
Purpose An instant Credit for farming community to meet the emergency
requirements for Agriculture and Domestic purposes for tiding over
temporary difficulties.
For eg- Repairs to farm equipments (tractor, pump set, trolleys, etc.,)
Repairs/construction of cattle shed, farm produce store room, house etc.
Loan to be classified as Direct Agricultural Advance.

Eligibility Individual farmers/JLG (members not exceeding 4 farmers)

Type Of Loan Composite Term Loan repayable within 3 yrs.

Quantum Of Loan 50 % of KCC limit

or
25% of annual income which is ever is lower.
(Subject to Minimum Rs.1000/- Max. Rs.50000/-)

Page | 29
 Security  Only extension of existing security.
 No additional security even if the combined limit i.e., existing KCC
and proposed Kisan Tatkal Scheme exceeds Rs.1 lakh.

Repayment 3 to 5 yrs (HY/Annual). The loan is to be cleared in full if a

fresh/enhanced limit is sought in the subsequent year based on revised
KCC Limit in suitable installments coinciding with overall income
generation of the farmer.
Rate Of Interest To be decided as applicable to Agricultural Credit after combining all
limits enjoyed by the borrower.

Application AG 100

Documentation  D.P. Note

 L 515 (Misc. undertaking)
 L 516 (Composite document)
 Copy of land records with expected income if not already held on
records.

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 1.7 RETAIL CREDIT

STAR VEHICLE LOAN SCHEME

PARTICULARS TERMS
Eligibility Residents: All individuals including farmers, retired employees of bank
(except dismissed/compulsory retired employees)
Non resident Indians: Advance to be granted jointly with resident
Indians (close relatives)
Companies: proprietorship/partnership firms, corporate entities etc.
(except HUF)

Age Age of individual not to exceed 65 years at the time of availing loan.

Type Of Advance  Demand Loan / Term Loan

 For second hand vehicles only demand loan
Purpose Of Advance  For purchase of new Two / Four Wheeler vehicles (including jeeps &
vans not requiring Heavy Duty License)
 Second Hand two / four wheeler vehicles (upto 3 years old – only if
comprehensive insurance is available).
 In case of electronic/battery operated vehicles these must be
registered with RTO. Where registration with RTO is not required
subject to specified curtailed limit and collateral security to be
obtained.

Reimbursement of cost of four wheeler vehicle purchased from own

sources subject to:
 Purchase of new four wheeler vehicle by cheque\electronic mode
only.
 Vehicle should not be 3 months old and no accident case during this
period.
 Obtention of original receipts, invoice, vehicle details, original RC
may be returned after due verification.

Page | 31
  Valuation of vehicle to be undertaken from approved valuer.
 Reimbursement to be made only after Bank’s charge with RTO

Quantum Of MAX. LIMIT FOR FINANCE

Advance a) Individuals (Resident in India):
 Indian Vehicle : Rs.50 lakhs
 Imported Vehicles : Rs.100 lakhs
 For companies & corporate entities Rs. 200 lakhs (can be a
fleet of vehicles)
b) For NRI Individuals : Rs. 50 lakhs
c) For non-conventional energy vehicles
2 wheelers: Rs.50,000
4 wheelers: Rs.4 lakhs
Note: more than one vehicle can be considered within the above
limits, provided the 1st a/c is in order, charge registered with RTO &
repayments are regular.

Calculation Of  Individuals/Pensioners - 24 times of Monthly Gross emoluments or

Quantum 2 times of Gross avg. Annual Income as per last 3 Income Tax
Returns (ITRs).
 Others - Two times of avg. annual cash accruals as per last 3 audited
B/S & P&L A/c of firm/company.
 Farmers - Depending upon his Repayment capacity as is applicable
in agricultural loans.
Note: Sanctioning Authority can consider advance to two individuals
jointly by combining their entitlement provided they are close relatives
and vehicle is registered in the name of one of the co-borrowers.

Net Take Home Pay  Gross Monthly Income up to Rs 1.00lakh- 40% of NTHP
 GMI Above Rs 1.00 lakh to Rs 5.00 lakh- 30% of NTHP
 GMI Above Rs 5.00 lakh 25%of NTHP

Page | 32
 Margin Individuals (including NRIs)
New Vehicles:
 Upto Rs.10 lakh:- No margin on Ex-showroom price excl.
comprehensive insurance/taxes/registration charges.
 >10 lakh upto Rs. 25 lakh:- 15% On Road price including
comprehensive insurance/taxes/registration charges
 >25 lakh:- 25% On Road price including comprehensive
insurance/taxes/registration charges
For corporate/firms etc.:
25% irrespective of amount
2nd hand vehicles :
30% of depreciated Value/value assessed by Govt. approved Valuer/sale
consideration- whichever is lower.

Rate Of Interest 4 Wheeler and 2 Wheeler

1 year MCLR + 0.85% i.e. 9.25% as on 07.06.2017

Repayment  New vehicles: Individuals-

4 wheelers- Max. 7 yrs.
2 wheelers- Max.5 yrs.
 Corporate/ firms- Max. 5 years.
 For second hand vehicles- Max. 3 years.

Security 1. Hypothecation of the Vehicle, Charge to be registered with R.T.O.,

2. Comprehensive insurance of the vehicle with bank clause.
3. Collateral Sec. is desirable for loans to individuals >25 lacs.
Collateral security in respect of loans for vehicles run on non-
conventional energy & not requiring registration with RTO for limits
> Rs.1.00 lakh.

Page | 33
 Guarantee  Required for loans > Rs.25 lakh & in respect of loans for vehicles not
registered with RTO.
 Guarantee of Resident Indian in respect of loans to NRIs. In other
cases tangible collateral security of acceptable value can be obtained
in lieu of guarantee.

Documents Required Photograph; Proof of Income; Proof of Address; Third Party Guarantee;
From Customers Performa Invoice.

Documents To Be 1. Application-cum-proposal.
Obtained :- 2. OD-194 (Guarantee Deed)
3. L-512, hypothecation agreement for charge on asset financed by bank
4. L-516 (composite agreement)
5. L-515 (guarantee deed)
6. Comprehensive Insurance Policy with bank clause
7. Letter addressed to Insurance Company for remitting claim directly
to Bank in case of damages
8. Blank Transfer Forms in Blank in duplicate (Form No. 29 & 30)
9. Registration of Bank’s Charge on the vehicle with Regional
Transport Authority.
10. Valuation Certificate for second hand vehicle from approved valuer.
11. Registration of charge with ROC in case of finance to companies.
12. Sanction Letter.

Page | 34
 STAR EDUCATIONAL LOAN SCHEME

PARTICULARS TERMS
Eligible Courses: Graduation courses : BA, B.Com., B.Sc., etc. (Degrees awarded by
Studies In India Universities)
Post Graduation courses / Masters & Ph.D: (awarded by Universities)
Professional courses:
 Approved by any University approved by UGC/State Govt., Ministry
of HRD, Govt. of India) : Engineering, Medical, Agriculture,
Veterinary, Law, Dental, Management, Computer, etc.
 Courses like ICWA, CA, CFA etc. (only exam fees to the respective
Institutes.
 Courses conducted by National Institutes, like IIMs, IITs and other
Institutes set up by Central/State Governments.
 Courses offered in India by reputed foreign universities with prior
approval.
 Evening/Part-time courses of approved institutes.
 Regular Degree/Diploma courses like Aeronautical, Pilot training,
shipping, degree/diploma in nursing or any other discipline approved
by Director General of Civil Aviation/Shipping/Indian Nursing
Council or any other regulatory body as the case may be, if the
course is pursued in India.

Institutes/Universities upto world ranking of 3000 provided in website

Studies Abroad
www.webometrics.info/about.html only to be covered.
 Graduation: For job oriented professional/technical courses offered
by reputed/State funded universities.
 Post Graduation: MCA, MBA, MS, etc. from State funded
Universities.
 Courses conducted by CIMA – London, CPA in USA, etc.

Page | 35
  Degree/Diploma courses like Aeronautical, Pilot training/shipping
etc. provided they are recognized by competent regulatory bodies in
India/abroad for the purpose of employment.

Students  No Income Criteria

Eligibility  Secured admission through entrance/ merit basis
 Cut off marks
General Category -60%
ST/ SC/ OBC -50%

NRI Students  Student should hold Indian passport & meet eligibility requirement.
 Tangible Collateral security of 100% enforceable in India.

Parties To The Who can be joint borrowers:

Loan  Joint borrower should normally be
Parents/Guardians/spouse/other acceptable person as joint-
borrower.
 In case of married student, spouse or parents/parents in law.
However, in case of adverse credit history of the above mentioned Jt.
Borrowers, Other person acceptable to the bank can be taken as Jt.
Borrower (after taking precaution) & such person should be relative of
student & genuinely concerned about his well being/education.

Loan Documents  Should be executed by both the student (if major) and the
parent/guardian as joint-borrowers.
 In case of minor student, security documents are to be executed by
parent/guardian and upon student attaining majority, fresh set of
documents to be executed by both - parent/guardian and student
jointly. An undertaking to be taken from the parent/guardian to that
effect.

Page | 36
 Expenses  Fee payable to college/school/hostel.
Considered For  Examination/Library/Laboratory fee.
Loan  Caution deposit/building fund/refundable deposit supported by
Institution bills/receipts. *1
 Purchase of books/equipments/instruments/uniforms. *2
 Travel expenses/passage money for studies abroad. *2
 Purchase of computers/Laptops – essential for completion of the
course. *2
 Any other exp. required to complete the course, like study tours,
project work, thesis, etc. *2

*1 These expenses could be considered subject to the condition that the

amount does not exceed 10% of total tuition fees for the entire course.
*2 Maximum expenses permitted under items mentioned above – is 20%
of the total tuition fees payable for completion of the course.

Reimbursement Reimbursement of fees paid in advance or at the time of

Of Expenses selection/admission or for earlier years before applying for loan is
permitted. The sanctioning authority to satisfy about the expenses
already incurred preferably by verifying bills/receipts.

Quantum Of FOR STUDIES:

Finance In India -Maximum Rs.10.00 lakh
Abroad -Maximum Rs.20.00 lakh

Margin Loan Upto Rs.4 lakh : Nil for both study in India & abroad.
Above Rs.4 lakh : Studies in India: 5%.
Studies Abroad: 15%.
Scholarship/assistantship to be included in margin & margin needs to be
brought-in on each disbursement.

Page | 37
Repayment Period  Repayment Moratorium: Course period +1 yr
 Repayment period maximum 15 years after commencement of
repayment.
 No pre-payment penalty will be levied for pre-payment of loan any
time during the repayment period.
 If the student is not able to complete the course within the scheduled
time, extension of time for completion of course may be permitted
for a maximum period of 2 years.

Rate Of Interest  Upto Rs. 7.50 lakh

1 year MCLR + 1.75% i.e. 10.15%
 > Rs. 7.50 lakh
1 year MCLR + 2.50%

Concessions:
a) 0.50% for all students pursuing professional courses likes
Medical/Eng./Management etc.
b) 0.50% for female students for limits upto Rs. 50,000.00 and
1.00% above Rs.50,000.00.

Security  Upto Rs. 4 lakh :No Security

 Rs. 4 lakh to 7.50 lakh :Only Guarantee
 Above 7.50 lakh :Guarantee plus Security

Bank Charges  No Processing Fee for study in India and for studies abroad
Rs.1,000.00 (which is refundable once actual loan is
availed/disbursed).
 One time charges for any deviation from the scheme norms incl.
approval of courses outside the scheme (per deviation) :
Upto Rs.4.00 lakh : Rs.500.00
Over Rs.4.00 lakh and upto Rs.7.50 lakh : Rs.1,500.00
Over Rs.7.50 lakh : Rs, 3,000.00

Page | 38
 STAR HOME LOAN SCHEME

PARTICULARS TERMS
Eligibility  Salaried
 Businessman
 Self employed
 Professional and Others

Purpose  To Purchase/Construct House/Flat on ownership basis.

 To Repair / Renovate / Extend existing house/flat.
 Composite loan for purchase of plot and construction of house
thereon within a max. period 18 months (in exceptional cases 24
months to be permitted by ZM). No loan only for the purchase of
plot of land.
 Take over of Housing Loans extended by other Banks/
Institutions/NBFCs as per extant guidelines.

Maximum Limit For construction / Purchase of House/ Flat

Minimum:
only in Metro & Urban : Rs.1 lakh
Maximum:
 At Mumbai, Delhi, Kolkata, Chennai- 500.00 lakh
 At other places- 300.00 lakh
 For Repairs/ Renovation/ Extension/addition of house/flat-50.00 lakh
 For Purchase of Plot under Composite loan- 100.00 lakh

Page | 39
Eligible Quantum  Salaried individuals
72 times of Gross Monthly Salary OR 6 times of gross annual income
based on ITRs.
 Self employed/ professionals/ individuals engaged in
trade/commerce/business
6 times of Gross Annual Income based on ITRs.

Net Take Home Monthly Income

Pay/Income  Upto 1 lakh, 40% NTHP is required
 1 lakh to 5 lakh. 30% NTHP
 Above 5 lakh, 25% NTHP

Margin Margin for first house

 Upto 30 lakh :10%
 30 lakh to 75 lakh :20%
 Above 75 lakh :25%
Margin for second/ subsequent house
 Upto 20 lakh :20%
 20 lakh to 75 lakh :20%
 Above 75 lakh :25%
Margin to be calculated on the pure cost price of flat/ house excluding
stamp duty, registration charges etc.

Rate Of Interest  1 year MCLR + 20% i.e. 8.60%

 1 year MCLR is 8.40%

Repayment Max. Repayment period as under

 For New construction/ New purchase –Max 30 years
 Repair/ Renovation/ Addition/ Alteration –Max 20 years

Page | 40
 Security  Equitable Mortgage or Legal mortgage (approval ZLCC) of the
house/flat proposed to be financed.
 Third Party Guarantee not to be insisted upon where valid &
enforceable Mortgage is available immediately before or at the time
of disbursement.
 Also Third party guarantee is not required where property to be
financed is funded & mortgaged with our Bank under project finance
to the Builder & financing Branch’s charge is duly noted with the
branch which has financed the project or seller is proposed as
guarantor.

Documents Required  Loan Application along with CBD-23 of Borrowers & Guarantors
From Customer  Photo of Borrower/Guarantor
 Title Deeds of Plot/Flat/House
 Estimate of construction cost
 Sale Agreement with Builders/Seller
 Approved Map
 Location Map
 Status Report along with Statement of operative bank a/c for last 6
months duly authenticated by the bank (in case of new customer-
borrower)
 Income Tax Returns
 Salary Slips

Home Loan For 2nd Can be considered even when existing Home loan account is continuing
House if the proponent is eligible for proposed Home loan, the existing Home
loan account is of standard category & the proponent has adequate
repayment capacity to meet repayment obligations for both the loans.
Home loan for 2nd house can be considered by normal delegated
authority provided no Home loan is existing on the date of sanction
of loan for 2nd house.

Page | 41
Home Loan For 3rd Can be considered to eligible applicants, singly or jointly by ZLCC
& Subsequent & Above. However, applicants should not have more than 2 Home
House/Flat
loan accounts (singly or jointly) at the time of sanction & both the
accounts should be of standard category.
The above condition is not applicable where the name of a person is
added as joint borrower for family reasons but his income is not
reckoned for calculation of eligible quantum of loan or repayment is not
paid out of his income.
The details of KYC/Due Diligence/RBI and Bank’s guidelines for 2nd
and subsequent house/inclusion of rental income, adding back of
Depreciation, CIBIL, mode of disbursement, penalty for non-receipt of
original registered title deeds, penal interest, acceptance of alternate
security in the absence of principal security, CERSAI Charge and its
charges, charges for valuation, search
restructuring/rescheduling/review/reporting etc.

STAR LOAN AGAINST PROPERTY

PARTICULARS TERMS
Objective  To meet the credit needs of trade, commercial activity, other general
business/ profession, as also for their bona fide requirements;
educational expenses of family members including near relatives;
repairs/renovation/extension to the residential/commercial property;
purchase / construct residential house / flat, purchase of a Plot of land
for construction of house/premises for business/commercial use;
Repayment of existing loans availed from other Banks / FI’s.
 Suitable declaration should be obtained from the applicant regarding
the purpose

Page | 42
  The facility should not be extended for speculative purposes
including investing in equities & to the builders / developers /
promoters / real estate agents for real estate activities such as
purchase of land / construction with an intent to sell or holding real
estate stock for sale / re-sale purposes;
 Advance to be based on mortgage of another property already owned
by the proponent.

Target Customers Salaried, Business man, Self employed, Professional and Others (Firm
and Company)

Max Age Of a) For Salaried Persons- Max. 60 years

Proponent b) For Non Salaried/Self Employed- sanctioning authority may relax
by 10 years till 70 years.

Type Of Advance  Demand loan

 Term loan
 OD (Reducible)
 OD (Non-Reducible)

Max. Quantum Of a) Demand Loan/Term Loan- Max –Rs. 500 lakh

Loan /Limit b) OD Reducible- For individuals –Rs. 200 lakh
For others –Rs. 500 lakh
c) OD Non Reducible- Company/Firm –Rs. 500 lakh

Margin On Value  100% of circle rate/registration value of same or similar property as

Of Property on date of valuation
 40% of market value
 50% of distress value,
Whichever is lower, can be considered for loan amount.

Repayment Maximum 12 years for Salaried upto 60 years/Others upto 70 years,

whichever is lower.

Page | 43
Rate Of Interest a) Demand/Term Loan/OD Reducible- 2.00% above 1 year MCLR
(ROI) b) OD Non Reducible- 2.50% above 1 year MCLR

Security  Legal mortgage charge over the property. Mortgage charge to be

registered in states where it is applicable
 Registration of charge with CERSAI before disbursement.

Guarantee Third Party personal guarantee is left at the discretion of sanctioning

authority.

With introduction of this scheme, old Star Mortgage Loan Scheme stands discontinued. No fresh
financing to be done under old Star Mortgage Loan Scheme. Existing accounts shall continue.

STAR PERSONAL LOAN

PARTICULARS TERMS
Eligibility Salaried Employees, Professionals, Individuals with High Net Worth.

Type Of Advance  Demand Loan

 Term Loan
 OD (Reducible)
 OD (Non-Reducible) [max. upto Rs.1.00 lakh to confirmed
permanent employees of Central/State Govt’s./Reputed
corporate/PSUs subject to stipulated conditions]
Clean/Unsecured Loan
For Marriage/ Medical/ Educational Expenses/ Any Expenses of
Bonafide nature as approved by Bank.
Secured Loan
For Repairs/Renovation of House Property/Repayment of Existing
Housing Loan For Education of Self/Spouse/Children for Purchase of
Consumer Durables/ Computers/ Professional Equipments.

Page | 44
 Age  Salaried employees – Not to exceed retirement age (at the end of
repayment period).
 Professionals & Others – Not to exceed 65 years ((at the end of
repayment period).

Quantum Unsecured/Clean
For salaried employees-10 times of monthly net emoluments, i.e. take
home salary Max. Rs.5,00,000/-
For Professionals – 50% of gross annual income as per latest ITR (Max.
Rs.5 00,000/-) (Min. Rs.10,000/- in Metro/Urban)

Secured Loans
For salaried employees -20 times of monthly gross emoluments (Max.
Rs.10,00,000/)
For Professionals – 100% of gross average annual income as per last 3
ITRs (Max. Rs.10,00,000)
Net take home income: should not be less than 40% of gross income.

Margin  Secured Loans – Suitable Margin.

 Unsecured Loans – No Specific Margin. However, loan amount not
to exceed proposed expenditure/ requirement

Guarantee
Depending Upon
The Merits Of In Case of Staff Guarantee by PF/Gratuity, Nominee is mandatory.
Case
Rate of a) Unsecured/Clean-1 year MCLR + 6.00% i.e. 14.40%
Interest b) Secured Loans- 1 year MCLR + 4.50% i.e. 12.90%
Any loan considered for staff members shall be treated as secured loan
and the interest to be applied accordingly provided there is sufficient
unencumbered balance in Terminal Benefit payable to the staff.
Notes: Interest concession in respect of advances to woman beneficiary
under 0.50% p.a. continues.

Page | 45
 Repayment  Clean/Unsecured Loans– 36 months
 Secured Loans – 60 months
 In any case, A/c should be closed before retirement of
employee/cessation from service i.e. upto 60 years

Security a) Clean Loan - NIL

b) Secured Loan – as per discretion of Sanctioning Authority

Documents In addition to KYC documents, photo, Salary Certificate, I.T. Returns,

Required From Guarantor’s (all documents) if stipulated, Performa Invoice/estimate in
Customer case of secured loans.

Security 1. Application-cum- Proposal Form & CBD-23 - (for Guarantors)

Documents 2. CHA-1/D.P.Note (additionally in case of D/ L)
3. Bearer Letter
4. Installment Letter (L–440, in case of Demand Loan) as per nature of
advance
5. Deed of Guarantee (OD 194) for Singular/ Joint & several Guarantee,
if stipulated.
6. L-516
7. L-515
8A. Irrevocable auth. letter addressed to Employer for deduction of
install./ interest from the salary OR
8B. ECS mandate duly authorized by borrower’s bank in case borrower
doesn't have a/c with us.
9. Letter from customer authorizing bank to debit the account with
admissible service charges/interest etc.
10. Equitable/Legal Mortgage of the property, wherever stipulated. For
Legal Mortgage CHA – 4.
NOTE: (Borrower may avail two loans, i.e. one for secured & another
for clean/unsecured under star personal loan scheme subject to merit of
the case, his repayment capacity & compliance with the scheme
norms/terms of sanction.)

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 STAR PENSIONER LOAN
PARTICULARS TERMS
Target Customers 1.Regular Pensioner
(Eligibility) 2.Family Pensioners drawing regular monthly pension through the
branch
3.Retired employees (other than dismissed/compulsorily retired) of our
Bank drawing pension from the Bank.
4.Pensioners who are getting pension through treasury/Defence Pension
Disbursing Office (DPDO) directly to the credit of their Savings Bank
Account with our branches are also

Type Of Advance Advance can be by way of D/L; T/L; O/D (Reducible)

Purpose Clean/Unsecured Loan –

 For Marriage Expenses of son /daughter or near relatives dependent
on the applicant.
 For Medical Expenses of son /daughter or near relatives dependent
on the applicant
 For Education of Self/ Spouse/ Children/near relatives
 Repairs/renovation/extension of existing house/ flat (where EQ.
Mortgage can not be created of same property and no finance
against this property from any Bank/F.I)
 Any other personal expenses of bonafide nature as approved by the
Bank.
Secured Loan-
For Repayment of existing housing loan from other Banks/FIs etc.
For Purchase of Consumer Durables/ Computers/ Professional
Equipments.

Page | 47
 Quantum  Regular Pensioner/Family Pensioner where PPO is held at the
Branch Rs.5,00,000.00
 Pensioners who are getting pension through Treasury/Defence
Pension Disbursing Office (DPDO) directly to the credit of their
Savings Bank Account with our Branch Rs.3, 00,000.00
 Family Pensioners who are getting Pension through
Treasury/Defense Pension Disbursing Office (DPDO) Rs.1,50,000.

Age For Loan over Rs.1 lakh age at the end of repayment period not to
exceed 75 years.

Margin a) Secured Loans– Suitable Margin;

b) Clean/Unsecured Loans – No Specific Margin norms

Overdraft Facility Overdraft facility upto 3 months ‘Net Pension’ Maximum Rs.50,000.00
can be granted (Net Pension means amount being credit to Pension
Account less EMI for any loans granted at the Branch/other
Branches/Banks).
This facility is available to all pensioners maintaining Pension Payment
Account with the Branch (i.e. Pensioner should be drawing pension
from the branch i.e. branch should be holding PPO).

Co-Borrower In case of regular pensioners, nominee/legal heir entitled to family

pension and in case of loan to family pensioner, legal heir will be co-
borrower.

Guarantee  Nominee of PPO

 Legal heir
 Other pensioner as per discretion of Sanctioning Authority

Repayment  Clean Loans–36

 Secured Loans – 60
 In case of O/D limits, reducible as per payment schedule.

Page | 48
 Security a) Clean Loan – NIL
b) Secured – as per discretion of Sanctioning Authority

Documents  Application-cum- Proposal Form

 D.P. Note, Installment Letter etc.(as per nature of advance)
 Bearer Letter
 An undertaking from the pensioner that he/she will not shift pension
a/c to any other bank/branch during the currency of the loan without
NOC from bank. This letter should be obtained in duplicate and
original forwarded to the concerned treasury office/ employer for
registration/noting
 A NOC from legal heirs entitled for family pension for recovery of
loan installment/amount from their a/c in which family pension
amount is credited, if necessary. )
 L-516 &.L-515.
 Letter from customer authorizing bank to debit the account with
loan installment /amount.

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 1.8 SMALL AND MEDIUM
ENTERPRISES (SME)

Micro, Small & Medium Enterprises Development (MSMED) Act, 2006

The Government of India has enacted the Micro, Small and Medium Enterprises Development
(MSMED) Act, 2006 on June 16, 2006 which has modified the definition of micro, small and
medium enterprises engaged in manufacturing or production and providing or rendering of
services as under.

I. Definition of Micro, Small and Medium Enterprises

(a) Enterprises engaged in the manufacture or production, processing or preservation of goods as
specified below:
 A micro enterprise is an enterprise where investment in plant and machinery does not
exceed Rs.25 lakh;
 A small enterprise is an enterprise where the investment in plant and machinery is
more than Rs. 25 lakh but does not exceed Rs. 5 crore; and
 A medium enterprise is an enterprise where the investment in plant and machinery is
more than Rs.5 crore but does not exceed Rs.10 crore.

(b) Enterprises engaged in providing or rendering of services and whose investment in

equipment (original cost excluding land and building and furniture, fittings and other items not
directly related to the service rendered are specified below.
 A micro enterprise is an enterprise where the investment in equipment does not exceed
Rs. 10 lakh;
 A small enterprise is an enterprise where the investment in equipment is more than Rs.10
lakh but does not exceed Rs. 2 crore; and
 A medium enterprise is an enterprise where the investment in equipment is more than Rs.
2 crore but does not exceed Rs. 5 crore.

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 II. Target for Micro, Small & Medium Enterprises Credit
The RBI has prescribed the following overall target for the Bank as a whole for Micro, Small
&Med Enterprises credit:

Micro, Small &  Advances to Micro (Mfg) , Small & Medium (Mfg) irrespective of

Medium Enterprise Limit

 Micro (Service) / Small (Service) Credit Limit up to Rs. 5 crore, Med
Advances
(services) upto Rs.10 crore (RBI
 The priority sector target of 40 per cent of ANBC (Adjusted Net Bank
Credit) or credit equivalent amount of Off -Balance Sheet Exposure,
whichever is higher.
Micro Enterprises
Advances Within  New budget under PS – 7.5% for micro enterprises by March 17
 60% of total lending to MSE sector should go to Micro enterprises
Small Enterprises
Sector
Export Incremental export credit over previous year upto 2% of ANBC or Cr

Credit OBE for Export credit subject to S/L of Rs.25 crore per borrower to units
with turnover upto 100 crore

III. Registration as MSME with District Industry Centre (DIC)

Medium Enterprises (Manufacturing) have to be mandatorily registered with DIC whereas
registration formalities with DIC is optional in case of Micro & Small Enterprise (Mfg. &
Services) and Medium Enterprise (Services). However, it is advisable for all such enterprises to
get the Registration formalities complied with in view of the available benefits at various points.
If unit is having Udyog Aadhar Number, then no need to register with DIC.

Page | 51
IV. Central Registration of Loan Application - Web based system put in place for
implementation
In terms of RBI directives, all banks are mandatorily required to maintain Centralised Loan
Application Register in respect of MSME borrowers with online tracking facility. A web based
system of Centralised Loan Application Register has been put in place by our HO-IT. The
system will generate running serial number for the bank as a whole and necessary
acknowledgement slip with details of application. The application received need to be disposed
of within the RBI prescribed time frame mentioned as under. Upon sanction, the date of Sanction
should be entered in the register. In case of rejections, approval shall have to be obtained from
the next higher authority, not below the level of ZM.

Limits Time Limit Not Exceeding

Upto Rs. 25000 4 Business Days

25,000/- and Upto Rs. 10 lakhs 8 Business Days

10 lakhs and Upto Rs. 5 Crores 12 Business Days
5 Crores 20 Business Days

V. Collateral Security
Collateral security is waived for credit limits:-
 Upto Rs.10 lakh and 25 lakh with good track record account with approval of Zonal
Manager
 Limits up to Rs.100 Lakh, provided CGTMSE cover is available.
 No third party guarantee is required for CGTMSE covered accounts.
 Waiver of CGTMSE coverage in eligible accounts to be approved by General
Manager, NBG, quoting valid reasons.

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VI. Different application forms
MSE-1- For all Micro and Small Enterprises for all borrowers any limit.
VII. Different Formats of proposals
 MSME-1 For Small Road Transport Operators irrespective of the Limit
 MSME-2 for all Micro and Small Enterprises (Manufacturing and Services for limits up
to Rs.25 Lakhs)
 MSME-3 For all activities under Micro and Small Enterprises (Manufacturing and
Services) for limits above Rs.25 lakhs upto Rs.200 lakhs.

PRADHAN MANTRI MUDRA YOJNA

PM on 8th April, 2015 declared launching of PMMY loans along with Micro Units Development
and Refinance Agency Ltd (MUDRA).

DESCRIPTION SHISHU KISHORE TARUN

Scheme Code Free Code-3 - 300 Free Code-3 - 369 Free Code-3 - 370

Objective To fund the unfunded who are unable to sustain to grow due to lack of
finance.

Target Client  Non—Corporate Small Business Segment of proprietorship /

partnership firms running as small manufacturing units, service
sector units, shopkeepers, fruits / vegetable vendors, truck operators,
food-service units, repair shops, machine operators, small industries,
artisans, food processors, and others in rural and urban areas.
 With effect from 01.04.216, additionally activities allied to
agriculture e.g. pisciculture, beekeeping, poultry, livestock, rearing,
grading, sorting, aggregation agro industries, diary, fishery,
agriclinics and agribusiness centers, food & agro processing etc
(excluding crop loans, land improvement such as canals, irrigation,

Page | 53
 wells ) and services supporting these, which promote livelihood or
are income generating shall be eligible for coverage under PMMY .
 Weaver and artisans can also be covered under PMMY
 Government schemes like NULM, NRLM, PMEGP etc complying
to conditions of PMMY.

Purpose For setting up of new/upgrading existing Micro business enterprises in

the manufacturing, processing, trading, service sector and activities
allied to agriculture as mentioned above, financing to weavers and
artisans. (income generating activity).

Nature Of Facility Term Loan and/or Working Capital up to maximum Rs.10 lakh

Repayment  Maximum - 36 months for Demand Loan

84 months for term loan including moratorium.
 Interest to be serviced as and when charged.

Extent Of a) SHISHU -- up to Rs.50,000

Finance b) KISHORE -- above Rs.50,000 up to Rs.5.00 lakh
c) TARUN -- above Rs.5.00 lakh up to Rs.10.00 lakh

Margin a) SHISHU -- NIL

b) KISHORE & TARUN -- 15%

Security a) Primary Security

(i) Hypothecation of all assets acquired out of bank finance.
(ii) Personal guarantee of promoters/directors.
b) Collateral Security — NIL
All eligible activity would be covered under the guarantee cover of
'Credit Guarantee Fund for Micro Units'. [No collateral security/third
party guarantee to be obtained].

Rate Of MCLR + CRP (as per scheme)

Interest MCLR- Marginal Cost Lending Rate
CRP- Credit Risk Premium

Page | 54
 Benefit To SHISHU -- <50,000 NIL
Women KISHORE & TARUN -- Under Priyadarshani Yojana 1% concession
Beneficiaries in ROI
Insurance All assets charged to bank to secure the advance to be adequately
insured.

Due Due diligence as per extent guidelines to be undertaken.

Diligence KYC documents to be obtained and verified

Monitoring &  Pre/post sanction/disbursement Inspection and periodical

Follow Up inspection to be carried out regularly.
 Account to be reviewed annually.

STAND UP INDIA

PARTICULARS TERMS
Objective/Purpose To facilitate bank loans between Rs. 10.00 lakh and 100 Lacs to at least
one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at least
one woman borrower for setting up a Greenfield enterprise. This
enterprise may be in manufacturing, services or the trading sector.

Eligibility Criteria  SC/ST and/or woman entrepreneurs, above18 years of age.

 Loans under the scheme are available for only green field project.
Green field signifies, in this context, the first time venture of the
beneficiary in the manufacturing or services or trading sector.
 In case of non-individual enterprises, 51% of the shareholding and
controlling stake should be held by either SC/ST and/or Women
Entrepreneur.
 Borrower should not be in default to any bank/financial institution

Page | 55
Nature Of Loan Composite loan (inclusive of term loan and working capital) between
Rs.10 lakh and up-to Rs. 100 lakh

Size Of Loan Composite loan of 75% of the project cost inclusive of term loan and
working capital. The stipulation of the loan being expected to cover 75%
of the project cost would not apply if the borrower's contribution along
with convergence support from any other schemes exceeds 25% of the
project cost.

Security Besides primary security, the loan may be secured by collateral security
or guarantee of Credit Guarantee Fund Scheme for Stand-Up India Loans

Repayment Repayable in 84 months with maximum moratorium period of 18

months.

Credit Rating SBS rating model for limits Rs.10 lakhs to Rs.100 lakhs.

Rate Of Interest MCLR + CRP (as per scheme)

MCLR- Marginal Cost Lending Rate
CRP- Credit Risk Premium

Working Capital  Working capital up-to Rs.10 lakh, the same may be sanctioned by
way of overdraft
 Above Rs. 10 lakh to be sanctioned by way of Cash Credit limit.
 Rupay debit card to be issued for convenience of the borrower.

Margin Money 25% margin money which can be provided in convergence with eligible
Central / State schemes. While such schemes can be drawn upon for
availing admissible subsidies or for meeting margin money requirements.
In all cases, the borrower shall be required to bring in minimum of 10%
of the project cost as own contribution.

Due Diligence  Due diligence as per extant guidelines to be undertaken.

 CIBIL/RBI defaulters' list/ECGC SAL to be verified.
 KYC documents to be obtained and verified

Page | 56
 Monitoring  Pre/post sanction/disbursement Inspection and periodical inspection
to be carried out regularly.
 Account to be reviewed annually

Authorized Branches Process loans within the time frame as :

Responsibilities  Application for loan upto 5 lakh within 2 weeks,
 Applications between 5 — 25 lakh in 3 weeks,
 Applications above 25 lakh in 6 weeks,
from the date of receipt of application provided the application is
complete in all respects and is accompanied by documents required.
 In case of rejection, reason to be made known to borrower.
 Redressal at the bank level should be done in 15 days at the bank
level.
Portal (www.standupmitra.in) provides information to a potential borrower.

PRADHAN MANTERI KAUSHAL RIN YOJANA

(SKILL LOAN SCHEME)

PARTICULARS TERMS
Objective Skill Loan Scheme aims at providing a loan facility to individuals who
intend to take up skill development courses as per the Skilling Loan
Eligibility Criteria.
Eligibility Criteria  The student should be an Indian National.
 Any individual who has secured admission in a course run by
Industrial Training Institutes (ITIs), Polytechnics or in a school
recognized by central or State education Boards or in a college
affiliated to recognized university, training partners affiliated to

Page | 57
 National Skill Development Corporation (NSDC)/Sector Skill Councils,
State Skill Mission, State Skill Corporation, preferably leading to a
certificate / diploma / degree issued by such organization as per National
Skill Qualification Framework (NSQF) is eligible for a Skilling Loan.
The Government of India / State Governments may, from time to time,
notify institutes/organizations for the purpose. .

Minimum Age There is no specific restriction with regard to the age of the student to be
eligible for skilling loan. However, if the student is a minor, while the
parent executes documents for the loan, the bank will obtain a letter of
acceptance/ratification from him / her upon attaining majority.

Minimum Duration There is no minimum course duration.

Minimum
Qualification As required by the enrolling institutions/organizations as per NSQF.

Quantum Of Finance Need based finance to meet expenses will be considered subject to
minimum Rs. 5,000/- and maximum Rs. 150,000/-.

Expenses Considered  Tuition / course fee

For Loan  Examination / Library / Laboratory fee
 Caution deposit
 Purchase of books, equipment's and instruments
 Any other reasonable expenditure found necessary for completion of
the course. (As such courses are localized boarding, lodging may not
be necessary. However, wherever it has been found necessary, the
same could be considered on merits).

Margin NIL
Rate Of Interest MCLR + CRP (as per scheme)
MCLR- Marginal Cost Lending Rate
CRP- Credit Risk Premium

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 NOTE:
 Simple Interest will be charged during the study period and up to
commencement of repayment.
 Servicing of interest during study period and the moratorium period
till commencement of repayment is optional for students.
 1% interest concession to be provided if interest is serviced during
the study period and subsequent moratorium period prior to
commencement of repayment.
Processing Charges NIL
Security No collateral or third party guarantee. However, the parent to execute
loan document along with the student borrower as joint borrower.
Obtention of Credit Guarantee coverage under Credit Guarantee Fund
Scheme for Skill Development (CGFSSD) by National Credit Guarantee
Trustee Company (NCGTC) for all loans is mandatory.

Moratorium Period Upon completion of the course, repayment will start after a moratorium
period as indicated below:
 Courses of duration upto 1 year: upto 6 months from the completion
of the course
 Courses of duration above 1 year : 12 months from the completion
of the course
 Loan Up to Rs. 50,000/- Up to 3 years
 Loans above Rs. 1.00 lakh- Up to 7 years
 Loans between Rs. 50,000/- to Rs. 1.00 lakh- Up to 5 years Scheme
for Skill Development (CGFSSD)

Repayment The loan will be repaid after the moratorium period.

Page | 59
 CHAPTER 2
REVIEW OF LITERATURE

Page | 60
 REVIEW OF LITERATURE
Many studies have been conducted about financing of loans in the country. In the earlier studies,
the learned researchers have tried to reveal some of the hitherto unrevealed aspects of the
subject. It is but natural that their findings have paved the way for further studies and research.
Every researcher is, therefore, deeply indebted to his/her predecessors in the field. An attempt
has been made in this chapter to provide an overview of various aspects and issues of this study
through the review of existing literature. Some of the main studies selected for review have been
discussed below:

 SURYAWANSI (1999) in his paper ‘Credit Requirements Availability and its Gaps’
observed that big farmers received a larger share of loan advanced by different financial
agencies and the share of co-operatives was the maximum. It was also observed that
private money lenders were, still playing an important role in supplying rural credit and
the proportion of borrowings from this source was higher in case of small farmers.

 MARKAND (1999) in his book titled, “Social Priority Index of Public Sector Banks”
evaluated the performance of public sector banks. With the help of performance index
consisting six quantitative indicators, such as branch expansion, priority sector credit and
wage cost, he concluded that the priority sector financing was essential. For better
performance in this sector, he suggested that lending power should be delegated to the
branch managers.

 MUHAMMAD AND SHAH (2000) in their study, ‘Agricultural Production Credit

Requirements in D.I. Khan District’ concluded that the system of disbursement of loans
of credit institution was not based on the actual needs of the farmers. He further stated
that the structure of the society was such that resourceful farmers succeeded in securing
loans more than their requirements while non-influential farmers failed to fulfill even
their requirements.

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.
 KURULKAR (2006) in his published work on the topic of ‘Agricultural Finance in
Backward Region’ reported glaring defects in the set-up of credit system. He pointed that
out of the ten sample owners who obtained long- term credit from the co-operative banks,
30% could not secure short- term credit. Lack of short- term or production credit to the
farmers who availed long-term credit resulted in lower output per acre, thereby resulting
in over dues.

 REDDY (2006) in his study titled, “Over dues Appraisal and Management in Banking”
analyzed the relationship between the lending and recovery of an apex bank. His findings
suggested that the lending and recovery of the apex bank had not been proportionate, i.e.,
either the apex bank could not meet the entire credit needs of the primary banks or the
latter could not borrow the funds from the apex bank. The primary banks were
constituted by people not for co-operative services but for their vested interests. With the
help of coefficient of variation technique, he proved that there was a wide dispersion in
lending followed by recovery. He finally concluded that the association between lending
and recovery was not satisfactory.

 MOHIUDDIN (2000) in his review report titled, ‘Credit Worthiness of Poor

Women’ Compassion of Some Minimalist Credit Programs in Asia’ examined the
recognition of credit as a powerful instrument for the alleviation of poverty in developing
countries. He analyzed the factors affecting the loan repayment of both borrowers and
institutions. The results showed that no independent variables were significant in
explaining variations in the default rate.

 KHAN (1999) in his report titled ‘Survey Report on Farm Credit Recovery of
Problems and Possible Solution’ found that rural credit is very important for the society
and Federal Bank for Cooperatives and other Commercial Banks have been meeting this
need effectively. He concluded that banks need to be highly vigilant in screening of
applicants before the disbursement of credit in order to reduce the non-payment and need

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 to have strong pressures and checks after the disbursement in order to ensure the timely
recovery.

 SINGH AND VISHWAJIT (1999) conducted a study, titled, “A Study of

Overdues of Loans in Agriculture”, to examine the repayment performance of defaulters
in three blocks of Agra district in Uttar Pradesh. They found that well-to-do agriculture
families accounted for a large share of over dues. They accounted for 37 per cent of total
defaulters and 57 per cent of total overdues. Total amount of over dues and its relative
share also increased during the period of study. Lack of proper supervision over the end
use of loan was identified as a major reason for mis-utilization of credit which leads to
increase in overdues.

 MISRA (1999) in his book ‘Commercial Banks and Agricultural Development’

analyzed the role played by commercial banks in promoting agricultural development in
hilly and drought-prone areas of Orissa. He made an attempt to find answers to the
questions like adequacy of present cropping pattern, desired changes in the cropping
pattern to bring development of agriculture in such hitherto neglected area, sufficiency of
banking services to meet the demand for credit by farmers, utilization of credit by the
farmers for which it has been taken by the farmers from the banks, repayment of loans by
the farmers on time or not, the bottlenecks that affect the role of banks and the
performance by the farmers handling agricultural credit and the special measures that are
needed to improve the involvement of banks in the hitherto neglected hilly and drought-
prone areas. He found that farmer borrowers also generated certain amount of savings but
they lagged behind the amount of savings generated by non borrower farmers. He also
observed that the farmer borrowers have a number of difficulties in respect of inadequate
supply of inputs, lack of marketing facilities, lack of irrigation facilities and the problem
of storage.

 LODHA (2002) in his study titled “Social Lending – Its Relevance in Deregulated
Economy” studied how far the two extremities, viz. profit maximization and social

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 lending will co-exist in the deregulated market, particularly in a developing economy like
India. He concluded that-
(1) Social lending should continue despite reforms
(2) Economic reforms should continue
(3) Target lending should be abolished
(4) Social lending should be confined to weaker sections only
(5) Time bound lending with least formalities should be ensured
(6) Lending decision should be based on cost benefit analysis
(7) Subsidy in social lending should be scrapped
(8) Loss making rural branches should be converted into satellite offices
(9) Self- help groups should be encouraged
(10) Business hours and days should be changed to face competition.

 PRASAD AND SHANDILYA (2006) in their book ‘Agricultural Credit and

NABARD’ studied the importance of agriculture finance, the different credit agencies,
functions, organizational set-up and refinance operations of NABARD. They found that
though there are several credit institutions providing credit facilities to the agricultural
sector but most of them are acting as credit shops disbursing credit and getting it back
while the basic concept of development oriented financing is that credit is to be
consciously used as a lever of development. However, NABARD was set-up on the
recommendations of the Committee to review arrangements for institutional credit for
agriculture and rural development (CRAFICARD) and it undertakes the functions of apex
refinance for the promotion of agriculture and allied activities.

 BHATIA (2011) revealed that per farm borrowing was higher on the large farms but
per hectare borrowing was higher in small farms. Borrowed fund accounted for 46.6% of
the total investment on the small farms and 20.9 percent in large farms. Overall, the
investment per hectare of operated land was higher on large farms. Co-operative societies
were active and provided 40 percent of the credit to both types of farms. However, the
commercial banks concentrated on large farms only.

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 GHAR AND GANGWAR (2000) have made a study in two blocks (Gurgaon and
palad) of Gurgaon district of Haryana. They found that on an average, in the two blocks
under study, 54.31 percent of the short-term credit was used for unproductive purposes
whereas it worked out to 20.37 percent in respect of medium and long-term credit. Thus
short-term credit was more misutilised then medium and long-term credit by the small
farmers.

 SWIDHA AND CHAND (2009) analyzing the pattern of credit distribution and
overdues, have founded that there was inverse relationship between the overdues and
credit advanced to different farm categories. They have further found that most of the
small farmers were non-wilful defaulters whereas most of the medium and large farmers
were willful defaulters. They have suggested that in order to reduce the overdue of small
farmers, their income should be increased through additional investment by way of
adoption of improved method of cultivation while the overdue of large farm could be
reduced by taking strict action against them.

 MISHRA AND PANDEY (2000) have assessed the repayment performance of the
beneficiaries under daily finance scheme in Basti Tehsil of Basti district. They had
observed that the daily finance scheme was helpful in raising the income level of
beneficiaries. But they found that the repayment performance was quite unsatisfactory.
Only 5.15 percent of the total beneficiaries were regular in repaying the loans and 87.12
percent loan was overdue during the period under study. Among the different categories
of farmers, small farmers and agricultural labourers were unable to repay the loan amount
due to lower net return which was caused by poor quality breed of buffaloes provided to
them.

 KITTUR (1990) was of the opinion that marginal and small farmers tended to use
diverted funds to meet the basic necessities of life, whereas large and well to do farmers
used the funds towards useful and conspicuous consumption whenever the loans were
made in cash, the chances of misuse were higher as compared to loans made in kind.

Page | 65
 DEBABRATA DAS (2000) focused to analyze the pattern of advances of the bank
and to examine the trends of branch expansion and deposit mobilization of the bank. The
study covered a period of nineteen years from 1978-79 to 1996-97. He observed that the
bank’s performance in deposit mobilization was good. To improve the business, it could
undertake Government payments like salary, pension etc. Further, proper supervision for
the utilization of loans should be done at different stages frequently. Proper utilization of
loan also would improve the recovery position of the bank.

 LAKSHMANAN,C AND DHARMENDHRAN,A (2007) studied the impact of

Non-performing Assets (NPAs) on performance variable in Chennai Central Co-
operative Bank. They examined performance variables namely, net profit, investment,
legal expenses and spread. They observed that the results of NPAs on all the above
performance variables were negative and insignificant at 5 percent level in all the
equation.

 THOMAS VICTOR RAJA AND CHANDRAMOHAN (2011) in their study

titled “Financing of Women Entrepreneurs by District central co-operative Banks in
Tamil Nadu”, They examined study finding revealed that the women entrepreneurs
considered for the study are deserving enough capacity to avail the loans, the borrowing
and the repayment of loan did not make any hindrance. The borrowings of the select
DCCBs were mainly focusing more on urban women empowerment.

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 CHAPTER 3
RESEARCH
METODOLOGY AND
OBJECTIVES

Page | 67
 RESEARCH METHODOLOGY

3.1 WHAT IS RESEARCH

Research is the systematic investigation into and study of materials and sources in order to
establish facts and reach new conclusions. Research is a method of finding solutions to problems.
Research simply means a search for knowledge. Research is an original contribution to the
existing stock of knowledge making for its advancement. It aims at discovering the truth.
Research is a process of systematic and in-depth study or search of any particular topic, subject
or area of investigation backed by collection, computation, presentation and interpretation of
relevant data.

3.2 METHODOLOGY OF THE STUDY

Methodology is the way to systematically solve the research problem. This job had been
completed by following systematic and sequential steps. Firstly, the research problem was
formulated. Secondly, an extensive survey had been taken place to gather relevant and required
literature. Thirdly, a research design had been determined. In the fourth stage as sampling
technique had been chosen which is called non probability judgment sampling. Sixthly,
secondary data was collected. At the final stage, collected data were analyzed and arranged as
per the study demands.

In short the process used to collect information and data for the purpose of making business
decisions. The methodology may include publication research, interviews, surveys and other
research techniques, and could include both present and historical information.

3.3 DATA COLLECTION

It is the process of gathering and measuring information on variables of interest, in an established

systematic fashion that enables one to answer stated research questions, test hypotheses, and
evaluate outcomes. The data collection component of research is common to all fields of study

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including physical and social sciences, humanities, business, etc. While methods vary by
discipline, the emphasis on ensuring accurate and honest collection remains the same.

The importance of ensuring accurate and appropriate data collection

Regardless of the field of study or preference for defining data (quantitative, qualitative),
accurate data collection is essential to maintaining the integrity of research. Both the selection of
appropriate data collection instruments (existing, modified, or newly developed) and clearly
delineated instructions for their correct use reduce the likelihood of errors occurring.
Consequences from improperly collected data include:

 inability to answer research questions accurately

 inability to repeat and validate the study
 distorted findings resulting in wasted resources
 misleading other researchers to pursue fruitless avenues of investigation
 compromising decisions for public policy
 causing harm to human participants and animal subjects

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 3.4 METHODS OF DATA COLLECTION

Primary data- Raw data or primary data is a term for data collected at source. This type of
information is obtained directly from first hand sources by means of surveys, observations and
experimentation and not subjected to any processing or manipulation and also called primary
data.
Secondary data- It refers to the data collected by someone other than the user i.e. the data is
already available and analyzed by someone else. Common sources of secondary data include
various published or unpublished data, books, magazines, newspaper, trade journals etc.

HERE, IN THIS PROJECT REPORT, I HAVE USED ONLY SECONDARY DATA.

MERITS OF SECONDARY DATA

(i) Use of secondary data is very convenient.
(ii) It saves time and finance.
(iii) In some enquiries primary data cannot be collected.
(iv) Reliable secondary data are generally available for many investigations.

DEMERITS OF SECONDARY DATA

(i) It is very difficult to find sufficiently accurate secondary data.
(ii) It is very difficult to find secondary data which exactly fulfils the need of present
investigation.
(iii) Extra caution is required to use secondary data.
(iv) These are not available for all types of enquiries.

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 3.5 OBJECTIVES OF STUDY

1. To study the overall loan procedure of Bank of India.

2. To study NPA’s and their provisioning and disposal.
3. To study the various loan schemes of the bank.
4. To compare the rate of interests on advances of different banks.
5. To have a view of total advances of the bank during last few financial years.

3.6 SCOPE OF STUDY

This report covered the overall advance system of Bank of India. It includes the general loan
procedure for all types of loans, the terms of declaring an account an NPA, a detailed study of
various loan schemes of Bank of India along with its relationship with the customers. The
comparison of interest rates of different banks and the analysis of loans’ figures is also
mentioned.

3.7 LIMITATIONS OF THE STUDY

The study is conducted with an objective to make a thorough study of loan/advance management
procedures. The limitations are as follows:

 Limitation of time during internship period.

 The information acquired for the study was not adequate.

 Confidential documents or objects to the firm were not available to access.

 As the internship is the first practical experience, it is not possible to know everything about
the bank.

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 CHAPTER 4
DATA ANALYSIS AND
INTERPRETATION

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 DATA ANALYSIS AND
INTERPRETATION

4.1 COMPARISON OF LOAN FIGURES FOR THE LAST

THREE FINANCIAL YEARS

PARTICULARS AMOUNT (IN LAKH)

as on as on as on
31.03.2015 31.03.2016 31.03.2017

Agriculture Advances 397 509 563

Other Priority Sector Advances 228 202 272
Small and Micro Enterprises 544 529 550
TOTAL PRIORITY SECTOR 1169 1240 1385
ADVANCES
Retail Loans 652 693 794
Staff Loans 50 48 71
Other Loans and Advances 163 153 179
TOTAL OF RETAIL SECTOR 865 894 1044
TOTAL ADVANCES OF 2034 2134 2429
FINANCIAL YEAR

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 800

700

600

500

400 as on 31.03.2015
as on 31.03.2016
300
as on 31.03.2017
200

100

0
Agriculture Other Small and Retail Staff Loans Other
Advances Priority Micro Loans Loans and
Sector Enterprises Advances
Advances

Interpretation:
 The agricultural advances are continuously rising since the last three years. The priority
sector advances are given much importance by the bank.
 The advances to small and medium enterprises are also rising.
 The overall growth of priority sector lending is very good.
 The retail sector advances are also rising continuously.
 Advances to staff are not consistent as it decreased in 2016 and then hike very much in
the year 2017.
 Overall the bank’s performance is good in advancing the loans and they are also properly
monitored by the bank to avoid the loss of non-payment. The loans are given after proper
investigation only.

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 4.2 COMPARISON OF RATES OF INTEREST OF
DIFFERENT BANKS ON ADVANCES

BANK PUNJAB STATE

BANK OF CANARA
OF NATIONAL BANK OF
PARTICULARS INDIA BANK
BARODA BANK INDIA

AGRICULTURAL 12.90% 11.35 % 12.70 % 7.00 % 7.00 %

to to to to to
LOAN 13.90 % 16.35 % 13.70 % 11.60 % 9.95 %

10.15 % 9.05 % 10.65 % 11.60 % 10.00 %

EDUCATION LOAN to to to to to
10.90 % 11.40 % 11.35 % 13.60 % 10.75%

9.75 % 9.00 % 9.21 % 9.60 %

VEHICLE LOAN 9.35 % to to to to
10.45 % 9.20 9.95 % 9.65 %

HOME LOAN 8.7 % 8.85 % 8.70 % 8.70 % 8.55 %

12.90 % 11.60 % 12.70 % 12.25 % 11.90 %

PERSONAL LOAN to to to to to
14.40 % 16.60 % 13.70 % 15.60 % 14.75 %

12.91 % 11.35 % 12.70 % 12.10 % 12.55 %

PENSIONER LOAN to to to to to
13.90 % 16.35 % 13.70 % 12.30 % 17.65 %

SMALL SECTOR 10.20 % 11.00 % 12.35 % 9.60 % 11.20 %

to to to to to
LOANS
12.95 % 15.40 % 16.35 % 11.85 % 16.30 %

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Interpretation:
 The interest rates of all the banks are almost same.
 The rates vary according to the amount of loan.
 The rates of PNB and Canara Bank are slightly higher than others.
 There cannot be much difference in the interest rates of different banks
otherwise your customers can shift to another bank resulting in loss to your
bank.
 The rates of BOI are reasonable and the customer services are also good that
is the reason for the continuous increase of advances of the branch.

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 CHAPTER 5
FINDINGS AND
CONCLUSION

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 FINDINGS

 The staff of the branch is very kind and polite. They are very friendly with

their customers as well as with their trainees.

 The bank deals with the customers without taking much time and are very

sincere about their work.

 The cash is available any time the customer needs it. There is no shortage of

cash in the branch.

 The deposits of the bank are continuously rising under all schemes whether

it is saving or current deposits or fixed or recurring deposits.

 The branch is fulfilling all its targets on time such as, selling gold bonds,

opening zero balance accounts etc.

 The loans of the branch are also continuously rising due to customer friendly

approach and environment of branch.

 The disbursement of loans are done as soon as possible after taking due

information from the customers.

 Overall the branch is performing very good as it received “THIRD PRIZE

IN CASA IN LUDHIANA ZONE” as on 31.03.2017.

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 CONCLUSION

The popularity of banks is increasing day by day which leads to increase in

competition as well. All the commercial banks are offering almost same products
& services and same operation system. But the way they provide the services are
different from each other. And people prefer the bank, of which service is easily
accessible and understandable.

Bank of India is a commercial bank founded in 1906. It has been government

owned since nationalization in 1969. It tries to innovate new products & services to
attract more customers. In short, Bank of India is such a commercial bank which is
rendering all commercial banking services to the customers in addition to make
available investment policies. They believe in developing strong interpersonal
relationship with every customer. As such they are morally bound to provide high
quality banking services with the latest technology and making all efforts to
introduce their innovative products to their existing and prospective customers.

From the above study regarding deposit schemes, it is concluded that bank is
providing various schemes for term as well as demand deposits for every type of
customer. Also, the deposits of the branch have been consistently rising from past
few years.

Therefore, bank of India is contributing a lot towards the economic development of

country.

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 BIBLIOGRAPHY

 “SANDIPANI” as on 31.03.2017 by Bank of India. (yearly magazine of bank)

 Various circulars of bank regarding various loan schemes.
 https://www.gktoday.in/content/brief-history-of-banking-in-india/
 www.bankofindia.co.in/english/history3.aspx
 https://bankerguide.wordpress.com/loans-and-advance/
 https://www.slideshare.net/mobile/dheerajprabhakar/loans-and-advances-18239526
 www.businessstudynotes.com/others/banking-finance/methods-advancing-loans-banks/
 www.yourarticlelibrary.com/banking/5-important-principles-followed-by-the-banks-for-
lending-money/11007/
 https://www.google.co.in/amp/s/www.gktoday.in/non-performing-assets-npa/amp/
 https://www.google.co.in/shodhganga.inflibnet.ac.in/bitstream/
 https://www.google.co.in/amp/www.bbamantra.com/methods-of-data-collection-primary-
and-secondary-data/amp/
 www.preservearticles.com/201107189287/what-are-the-merits-and-demerits-of-secondary-
sources-of-data.html

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