A SUMMER INTERNSHIP PROJECT REPORT ON INDEPTH STUDY OF VARIOUS LOAN AND ADVANCES SCHEMES WAYS OF LENDING MONEY IN RATNAKAR

BANK BY Mr .ABHIJIT PATIL UNDER THE GUIDANCE OF Mr. LAXMAN RENAPURE SUBMITED TO UNIVERSITY OF MUMBAI
In partial fulfillment of the requirements for the award of the degree of Master Of Management Studies (MMS) FINANCE

Through

MANDAR EDUCATION SOCIETIES RAJARAM SHINDE COLLEGE OF MBA PEDHAMBE, CHIPLUN 2011-2012

A SUMMER INTERNSHIP PROJECT REPORT ON INDEPTH STUDY OF VARIOUS LOAN AND ADVANCES SCHEMES WAYS OF LENDING MONEY IN RATNAKAR BANK BY Mr .ABHIJIT PATIL UNDER THE GUIDANCE OF Mr. LAXMAN RENAPURE SUBMITED TO UNIVERSITY OF MUMBAI
In partial fulfillment of the requirements for the award of the degree of Master Of Management Studies (MMS) FINANCE

Through

MANDAR EDUCATION SOCIETIES RAJARAM SHINDE COLLEGE OF MBA PEDHAMBE, CHIPLUN 2011-2012

DECLARATION

I ABHIJIT PATIL OF THE RAJARAM SHINDE COLLEGE OF M.B.A, HEREBY DECLERE THAT I HAVE COMPLITED THE PROJECT ENTITLED INDEPTH

STUDY OF VARIOUS LOAN AND WAYS OF LENDING MONEY IN

IN PARTIAL FULFILLMENT COURSE OF FOR THE THE

ADVANCES SCHEMES RATNAKAR

BUSINESS

BANK

REQUIREMENT FOR THE SECOND YEAR OF THE MASTER OF ADMINISTRATION (MBA/MMS) ACADEMIC YEAR 2010-2011.

I FURTHER DECLARE THAT INFORMATION SUBMITED BY ME IS TRUE AND ORIGINAL TO THE BEST OF MY KNOWLEDGE.

DATED:

ABHIJT PATIL

ACKNOWLEDGEMENT I take this opportunity to sincerely thanks and express my gratitude to my project guide Mr. Laxman Renapure for guiding me throughout my entire

project. The experience and the knowledge acquired over the interactions with the guide have been invaluable to say the least and will help me a great deal in my future education and career. My project was complete in a very supportive and interactive environment and has been great learning experiences. Last but not the least i would like to thanks friends for all the support they have provide me.

Abhijit R. Patil

INDEX
Sr. no. 1 Chapter Name Bank profile Introduction, Management, Page no. 6

Research Methodology objective the Project Balance-Sheet, Profit and Loss A\c, Risk Management Theoretical background Meaning of Loans and Advances: Various Loan Scheme List of Common Documentation Procedure Of Loan Sanctioning Data Analysis & Interpretation

12

20

44

Findings and Suggestion

51

Conclusion

54

Bibliography

56

Hypotheses

60

CHAPTER I BANK PROFILE

INTRODUCTION OF ORGANISATION:
Inspired by the clarion call for self reliance given by National leaders in the pre-independence era, a group of patriotic, eminent personalities from various walks of life came together to launch a crusade for economic independence. On the then scenario of industrialist owned banks catering to the needs of the rich and realizing the limitations of co-operative societies and co-operative banks, it was decided to establish a commercial bank with the avowed objective of meeting the needs of the low and middle income segment of the society engaged in trade and commerce. Motivated by the driving force of Shri. Babgonda Bhujgonda Patil, a distinguished Advocate of Sangli and Shri. Gangaram Siddhappa Chougule, a renowned merchant of Kolhapur, THE RATNAKAR BANK LTD., was born on 6th, august 1943. Ratnakar means an ocean, a treasure house of jewels.

In a short span of just 16 years, The Reserve Bank of India conferred the status of SCHEDULE BANK on THE RATNAKAR BANK LTD., in 1959. The Bank, by its conscious decision of serving, basically, Kolhapur and Sangli districts, has in the past preferred to grow into an institution of immense internal strength in preference to size. Now, in keeping with the present day challenges the bank has embarked on a modernization and expansion programme with the objective of consolidation its strengths by achieving recognition for its development in size, as well.

MANAGEMENT:
The Board of Directors comprises of progressive agriculturists, reputed traders, merchants, professionals like Chartered Accountants, Business Management etc. The Board of the bank is headed by Chairman Shri. Subhash G. Kutte. The counsel emanating from the rich and varied fields of exposure is reinforced by Shri Vishwavir Ahuja as Managing Director and Chief Executive Officer, a dynamic professional banker of clear vision, who enjoys facing new challenges and has a constant sharp focus on qualitative business growth.

BOARD OF DIRECTORS:
1 2 3 4 5 Name Mr. S. G. Kutte Mr. Vishwavir Ahuja Mr. B. D. Arwade Mr. S. N. Minache Mr. R. S. Naik Chairman M.D. & C.E.O. Director Director Director

6 7 8 9 10

Mr. K. J. Patil Mr. G. V. Godbole Mr. Narayan Ramachandran Mr. Murli Radhakrishnan Mr. T. B. Satyanarayan

Director Director Director Additional Director Additional Director

MANAGEMENT COMMITTEE

Chairman Mr. S. G. Kutte

M.D. & C.E.O. Mr. Vishwavir Ahuja

Director Mr. N. Ramachandran

Director Mr. K. J. Patil

Director Mr. S. N. Minache

ADMINISTRATIVE SET UP:

With the inevitable focus on customer satisfaction through prompt service and decision conveyance, the bank has adopted a two tier system. However to meet business challenges in Mumbai, a Zonal Office has recently been set. The chain of command is kept to the minimum, with customer interests in mind.

BUSINESS:
The Bank is honoured by the patronage and confidence reposed in it by over 4,00,000 clients. The Working Funds of the Bank (as on 31.03.2011) are around Rs. 4854 Crores (Deposits Rs.2042 Crores plus Advances Rs. 1920 Crores plus Investment Rs. 892 Crores). This business has been secured through 100 branches spread over Maharashtra, Karnataka, Goa, Gujarat, Delhi and Silvassa (U.T.). All the branches are providing core banking services.

SERVICES:
The Bank offers a wide range of deposits schemes custom made to meet the requirements of all patterns of savings, surplus funds available for differing time spans. Competitive rates are offered with special incentives to senior citizens and for deposits over Rs. 15 lakhs and Rs. 1 Crore for certain maturity periods. Safe Deposits Locker facilities can be availed from 37 branches. Same day credit remittances are routinely arranged. The Bank has launched a variety of loan schemes such as Sanjivani Mortgage Loan Scheme, I.P.O. Financing, Ratna-Trade, Super Secured

Loans, Personal Loans, Educational Loans, Ratnakar Kisan Credit Cards etc. designed to meet expectations of financial assistance from the entire cross section of society. The Bank provides financial assistance to all types of commercially viable enterprises, be it for agriculture, dairy, industry, professionals like doctors, lawyers, chartered accountants, traders (wholesale and retail) small borrowers etc. Wherever eligible, refinance is availed from IDBI, SIDBI and NABARD. This provides source for further financing by the Bank. In its efforts to be an institution offering comprehensive financial services the bank has extended its activities into all spheres of financial intermediation. The major areas are given below.

FUTURE PLANS: BRANCH EXPANSION:

10

The Bank has plan to open 45 more branches.

ATM:
The Bank has installed ATM at its various branches. These ATMs are under National Financial Switch. As in the past, the Bank would enhance the spectrum of services in keeping pace with the changing environment and market expectations. There are about 704 strong contingent of dedicated employees who are eager to fulfill the motto of THE RATNAKAR BANK LTD., which is:-

HELPFUL TO NEEDFUL

CHAPTER II RESEARCH METHODOLOGY

11

SCOPE OF THE STUDY:

The Ratnakar Bank is large established bank in commercial sector is a part of vast network of branches situated all over Maharashtra and outside of Maharashtra. At present the Bank concentrates on business loans apart from loans like a Ratnakar Professional, Sanjivani Mortgage etc. Hence, are the scope of study includes various types of loans, loan procedures and

12

requirement conduction for eligibility and are same. The study also covers advances of business from 2004-05 to 2008-09.

OBJECTIVES OF THE STUDY:

Enlist the utility of granting loans and advances by commercial banks. Differentiate borrowing rates from lending rates. Enumerate the ways of lending money. Distinguish between long-term and short-term loans. Point out the nature of security provided for loans. Outline the procedure for grant of cash credit, overdraft and discounting of bills of exchange.

RESEARCH METHODOLOGY: COLLECTION OF DATA:

Data collection for the project will done by both primary and secondary data collection.

Primary data collection:

From discussion with assistant manager of credit department of organization. From the questions asked to credit department staff (clerk). By talking with the organisations other department staff.

Secondary data collection:

13

 Organizations report (credit policy report) and portfolio statement. Organization website. From the annual report and magazine, journals published by company. Data which is collected by primary and secondary sources will be used to analysis overall process of lending loans and advances and to understand position of loans and advances of organization.

LIMITATIONS OF STUDY:

It was difficult to have discussion with the concerned credit officers because
of their busy schedule. Some information is very important for bank and customer. Thats why they can not give information about such thing because of security. Time is one of the most important factors limiting the study. There are various departments such as accounts department, legal department, risk management department, credit department, special mention accounts department, inspection departments, personnel department. It is not possible to study each and every section in short span of time. This project is related only with credit department.

14

Risk management:
The Bank has adopted committee approach to Risk Management. Risk Management Organization Structure of the Bank is as follows.

Board of Directors

Risk Management Committee (Boards subcommittee)

Chief Risk officer

Investment & Credit Risk Management

Operational Risk Management

committee

committee 15

Assets Liability Management

committee

BALANCE SHEET
Particulars CAPITAL & LIABILITIES Capital Reserve & Surplus Deposits Borrowings Other Liabilities & Provisions TOTAL ASSETS Cash and Balance with Reserve Bank of India Balance with Bank and Money at Call and Short Notice Investments Advances Fixed Assets Other Assets TOTAL Contingent liabilities Bills of collections Significant Accounting Policies Notes To Accounts 180,31,78 175,76,17 507,21,76 1170,44,37 21,71,96 30,29,27 31-3-2010

(Rs. in 000s) 31-3-2009 31-3-2008

104,72,01 104,72,01 248,26,14 236,52,04 1585,03,67 1307,04,7 7 3,83,09 11,83 143,90,40 60,83,14 2085,75,31 1709,23,7 9

104,72,01 218,28,89 1101,07,18 31,26 50,24,06 1474,63,40

93,37,39 367,04,57 406,77,34 801,11,40 18,39,14 22,53,95

129,46,02 353,71,99 361,31,91 585,79,42 16,40,99 27,93,07 1474,63,40 36,55,46 8,49,87

2085,75,31 1709,23,7 9 86,98,64 3,74,30 60,49,95 5,05,14

16

PROFIT AND LOSS ACCOUNT

Particulers INCOME Interest Earned Other Income TOTAL EXPENDITURE 144,16,58 13,21,99 157,38,57 31-3-2010

(Rs. in 000s)
31-3-2009 31-3-2008

137,87,19 15,66,03 153,53,22

107,27,88 8,72,75 116,00,63

17

Interest expended Operating expenses Provisions and Contingencies TOTAL PROFIT/LOSS Net Profit Profit Brought forward TOTAL APPROPRIATIONS Transfer to statutory reserve Transfer to Capital Reserve Transfer to Other Reserve Proposed Dividend Tax on Dividend Balance carried over to balance sheet Transfer to Investment Reserve TOTAL Earnings Per Share (EPS) (Rs.) Notes To Account

85,24,71 38,70,37 14,32,69 138,27,77 19,10,80 33,58 19,44,38

74,43,78 33,25,33 15,31,56 123,00,67 30,52,55 58,17 31,10,71

52,37,865 29,75,09 16,86,65 98,99,60 17,01,03 49,42 17,50,45

4,80,00 61,12 6,00,00 6,28.32 1,04,36 22,06 48,52 19,44,38 1.82

7,75,00 5,26,97 5,50,00 10,47,20 1,77,97 33,58 31,10,72 2.91

4,50,00 46,40 6,00,00 5,09,32 86,56 58,17 17,50,45 1.68

Performance of decade:

18

Particulars Capital Reserve & surplus Owned fund C.R.A.R. Deposits Advances (net) Investment (net) Gross NPA Net NPA

2005-06 2847.97 2571.13 5419.10 10.77% 87417.74 49083.48 27664.13 3928.94 1279.04

2006-07 11656.01 8267.81 19923.82 34.34% 87639.02 53051.75 31583.38 3805.22 1020.22 6.81% 1.92% 301.19 254.41 553 8.09 246.92 0.31%

2007-08 10472.01 21828.89 32300.90 49.15% 110107.18 58579.42 36131.91 3708.90 580.93 6.01% 0.99% 1701.03 5.00% 310.09 544 16.85 319.93 1.31%

2008-09 10472.01 23652.04 34124.05 44.87% 130704.77 80111.40 40448.31 1727.69 545.20 2.13% 0.68% 3052.55 10.00% 373.13 565 2.91 32.47 1.96%

2009-10 10472.01 24826.14 35298.15 36.01% 158503.67 117044.37 50721.76 2763.87 1153.45 2.33% 0.97% 1910.80 6.00% 391.40 704 1.82 33.59 1.05%

Gross NPA to gross 7.59% advances Net NPA to net advance 2.61% Net profit Dividend rate Per employee business No. of employees E.P.S.Rs Book value per share Rs. Return on asset 59.08 250.92 544 1.98 181.45 0.07%

CHAPTER III THEORETICAL BACKGROUND

19

Meaning of Loans and Advances:

The term loan refers to the amount borrowed by one person from another. The amount is in the nature of loan and refers to the sum paid to the borrower. Thus. from the view point of borrower, it is borrowing and from the view point of bank, it is lending. Loan may be regarded as credit granted where the money is disbursed and its recovery is made on a later date. It is a debt for the borrower. While granting loans, credit is

20

given for a definite purpose and for a predetermined period. Interest is charged on the loan at agreed rate and intervals of payment. Advance on the other hand, is a credit facility granted by the bank. Banks grant advances largely for short-term purposes, such as purchase of goods traded in and meeting other short-term trading liabilities. There is a sense of debt in loan, whereas an advance is a facility being availed of by the borrower. However, like loans, advances are also to be repaid. Thus a credit facility- repayable in instalments over a period is termed as loan while a credit facility repayable within one year may be known as advances. However, in the present lesson these two terms are used interchangeably.

Utility of Loans and Advances:

Loans and advances granted by commercial banks are highly beneficial to individuals, firms, companies and industrial concerns. The growth and diversification of business activities are effected to a large extent through bank financing. Loans and advances granted by banks help in meeting short-term and long term financial needs of business enterprises. We can discuss the role played by banks in the business world by way of loans and advances as follows :(a) Loans and advances can be arranged from banks in keeping with the flexibility in business operations. Traders, may borrow money for day to day financial needs availing of the facility of cash credit, bank overdraft and discounting of bills. The amount raised as loan may be repaid within a short period to suit the

21

convenience of the borrower. Thus business may be run efficiently with borrowed funds from banks for financing its working capital requirements. (b) Loans and advances are utilized for making payment of current liabilities, wage and salaries of employees, and also the tax liability of business. (c) Loans and advances from banks are found to be economical for traders and businessmen, because banks charge a reasonable rate of interest on such loans/advances. For loans from money lenders, the rate of interest charged is very high. The interest charged by commercial banks is regulated by the Reserve Bank of India. (d) Banks generally do not interfere with the use, management and Control of the borrowed money. But it takes care to ensure that the money lent is used only for business purposes. (e) Bank loans and advances are found to be convenient as far as its repayment is concerned. This facilitates planning for future and timely repayment of loans. Otherwise business activities would have come to a halt. (f) Loans and advances by banks generally carry element of secrecy with it. Banks are duty-bound to maintain secrecy of their transactions with the customers. This enhances peoples faith in the banking system.

Advances:
Advances means all kinds of credit facilities including cash credit, overdraft, term loans, bill discounted/purchased, factored receivables etc. and investments other than that in the nature of equity. The term Loans and Advances will not include loans or advances againstGovernment securities. Life insurance policies. Fixed or other deposits. Stocks and shares.

22

 Temporary overdraft for small amounts up to Rs. 25000. Casual purchase of cheques up to Rs. 5000 at a time. Housing loan, Car advance etc. granted to an employee of the bank under any scheme applicable generally to employees.

Credit Sectors:
With a view to ensure socially equitable distribution credit to all segments of the society and particularly to the preferred sector for overall economic development credit deployment credit deployment is classified into Priority and Non priority Sectors.

A] Priority Sector:

based on the report submitted by Informal study Group the description of priority sector was first formalized in 1972. These sectors broadly include, Agriculture (direct and indirect) Small scale industries Industrial estate Exports Road and water transport operators Retail trade and small business Professional and self employed persons Education Housing Advances to weaker sections Pure consumption loans under consumption credit scheme Loans to self-help groups(SHGS)/NGOS/Micro-credit Food and agro-based processing sector Software industry Venture capital

23

B] Non priority sector:

credit, which does not fall under the priority sector, is non priority sector. Mainly, credit flow should be need-based for productive purposes and business requirements. Banks may also deploy such credit towards meeting personal loans, consumer durable loans, housing loans etc.

List of Common Documentation:

1)

Certificate of incorporation.

24

2) 3) 4) 5) 6) 7) 8) 9)

Memorandum and articles of association. Company board resolution/power of attorney. List of authorised signatories. Accepted sanctioned letter. Loan agreement and standard covenants. Demand promissory note. Demand promissory note delivery letter. Letter of waiver. 10)Letter of continuity. 11)Letter of lien and set off. 12)Deed of hypothecation. 13)Deed of mortgage/agreement to create mortgage. 14)Pledge deed. 15)Title deeds/deeds of conveyance. 16)Security delivery letter. 17)Certificate of registration of charge. 18)Personal guarantee agreement. 19)Corporate guarantee. 20)Letter of comfort. 21)Insurance policy-stocks/fixed assets. 22)Assignment of life insurance policy. 23)Endorsement time deposit receipts.

PROCEDURE OF LOAN SANCTIONING:

Rules for advance:
Bank frame suitable rules as per its loans and advances of different types. The rules with respect to purpose, type of security, margin, maximum limit, period, term of the payment, rates of interest etc.

Prospective borrower:

25

The prospective borrower is evaluated with respect to three aspects by capacity, character and capital. If the bank is satisfied with above three aspects, it can proceed further for the consideration of the proposal.

Application form:

The bank device loan application form for advance. The application form contains necessary details about the borrower, his assets, purpose of the loan, viability of the projects etc., particulars like annual turnover of the business, annual production, sales, profits are covered in the form.

Valuation:

Valuation of the property of the prospective borrower is made, which he is giving for securities.

Sanction for loans and advances:

After the preparation of the C.M.A. report, it is sent to Kolhapur head office, where sanctioning authority is situated. The sanctioning authorities analyze the C.M.A. and after discussion the loan is sanction.

Interest rates of advances:

Prime lending rate/base Housing loan upto Rs 30 lakhs 8% 9.5%

26

Housing loan above Rs. 30 lakhs Education loan upto Rs. 4 lakhs Education loan above Rs. 4 lakhs Vehicle loan for 3 years Vehicle loan for 3 to 5 years Ratnatya professional scheme Sanjeevani mortgage scheme Ratna trade scheme Self help group Crop loan upto Rs. 3 lakhs Crop loan above Rs. 3 lakhs

11.5% 13% 14% 10.5% 11% 11% 13.75% 12.5% 12% 8% 9%

VARIOUS LOAN SCHEMES OF THE BANK:

HOUSING LOAN:
Maximum 15 years 25% To purchase flat or for construction of home. Employees of Govt. / Semi Govt., reputed companies / businessman, traders/professionals and self employed persons/farmers. Other Norms : (A) For employees of Govt. /Semi Govt. Reputed Companies. 1) Applicant must be permanent employee 2) Should submit salary certificate, undertaking letter of employer to deduct & send the monthly installment. 3) I.T. returns copy. 4) Maximum take loan salary should be 50% after deducting housing loan installment. (B) For businessman or traders or professionals . and self-employed. Income proof for last 3 years i.e. audited Repayment Period: Margin : Purpose : Eligibility :

27

balance sheet or I.T. return. (C) For farmers. Income proof for last 3 years. (D) One acceptable guarantor.

TWO WHEELER LOAN:

Repayment Period: Margin : Purpose : Eligibility : Maximum 5 years 25% To purchase flat or for construction of home. Employees of Govt. / Semi Govt., Reputed Companies/Businessmen, Traders/Professionals & Self-employed persons/farmers.

: (A) For employees of govt. / semi govt. reputed companies. 1) Applicant must be permanent employee 2) Should submit salary certificate, undertaking letter of employer to deduct & send the monthly installment. 3) I.T. returns copy. 4) Maximum take loan salary should be 50% after deducting housing loan installment. (B) For businessman or traders or professionals and self-employed. 1. Income proof for last 3 years i.e. audited balance sheet or I.T. return. (C) For farmers Income proof for last 3 years. (D) One acceptable guarantor.

Other Norms

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CONSUMER LOAN :
Repayment Period: Maximum 5 years Margin : 25% Purpose : To purchase TV/VCR/Refrigerator/ Furniture / Equipment etc. Eligibility : Employees of govt. / semi govt., reputed companies / businessmen, traders / professionals & self-employed persons / farmers. : (A) For employees of govt. /semi govt. reputed companies. 1) Applicant must be permanent employee 2) Should submit salary certificate, undertaking letter of employer to deduct & send the monthly installment. 3) I.T. returns copy. 4) Maximum take loan salary should be 50% after deducting housing loan installment. (B) For businessman or traders or professionals and self-employed. 1) Income proof for last 3 years i.e. audited balance sheet or I.T. return. (C) For farmers Income proof for last 3 years. (D) One acceptable guarantor. Other Norm

AGRICULTURE LOAN:

29

1. 2. 3. 4. 5.

Form mechanizations & other transportations vehicle schemes. Tractor Trailer & agriculture implements. Power tillers/Threshers machines. 4 wheelers for agriculture purpose. E.g. Jeep Two wheelers for agriculture purpose Trucks& other vehicles for agri. Goods /products transportation purpose. For tractor trailer & agri. implements.

1. Minimum requirements- one tractor, one trailer and implements. 2. Minimum land holding -6-8 acres irrigated land (individual farmers or group of farmers). For all other types of vehicles considering irrigated land annual agriculture and other income. (1) Margin 20% (2) Period 3 to 5 years. (3) Requirements of papers a) Quotation b) 8A/ 7/12 Extracts c) No dues certificate from societies / Local banks / NOC. From concerned bank. d) Guarantor and his worth papers. e) Information regarding annual income from agriculture and other sources.

SUPER SECURED LOAN SCHEME:

Purpose : To meet urgent personal needs such as investment In NSC, PPF etc. for income tax rebate, educational expenses, marriage, etc. personal expenses against the security of exiting NSC/LIC policies at the PLR. : 25% of present value of NSC/LIC/IVP/KVP.

Limit

30

Repayment period: Maximum 5 years Margin : 25% Eligibility : Employees of govt. / semi govt., reputed companies / businessmen, traders/professionals & self employed persons/farmers.

RATNA TRADE SCHEME:

1) Target group Individual/Proprietorship/Partnership/ Company engaged in Wholesale and Retail trade, Distributors/Commission agent/C&F agents/Professionals/Small business/Civil/Government contractors etc. 2) Facility Secured Cash Credit 3) Purpose to meet working capital requirement. 4) Quantum of loan maximum Rs. 10 lakhs or 50% of value of property to be mortgaged (whichever is less) 5) Assessment of loan under turnover method. Maximum 20% of turnover

31

a) For existing units business should be growing i.e. sales, profit should show increasing trend over last few years. Projection should be reasonable and in keeping with past trend/ potential. b) For existing/new units projection should be comparable with present performance should be achievable. Abnormal projection should not be accepted. Normally, 15% to 20% rise in business may be considered. c) Own contribution in the form of networking capital should be minimum 5% of turnover or more. 1) Period of facility one year (if operations/performance is satisfactory renewable on annual basis). 2) Security equitable mortgage/ registered mortgage of property in name and possession of the borrower. Property in the name of spouse may be accepted as security by making the owner and either co-borrower/guarantor (Agriculture land, Non N-A land should not be accepted). 3) Margin minimum 50% of value of property. 4) Guarantor one acceptable guarantor (other than co-borrower). 5) Interest rate at PLR. 6) Processing charges Rs.150/- per lakh or part thereof. 7) Papers requirement for assessment: 1. Application form 2. Declaration regarding relationship with directors/ executives of the bank. 3. Financial statement of last two years (for existing units) and estimate/projection for current/next year. 4. Details of property offered as security with its valuation and title report of approved valuator/advocate. 5. Copy of sale tax registration (if available) and copies of sale tax returns/assessment for last 4 quarters. 6. Copy of last income tax assessment orders/ returns filed. Of the borrower/co-borrower/guarantor. 7. Credit report of the borrower, co-borrower and guarantor. 8. Confidential report from existing banker in case of take over.

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1) Documents to be obtained 1. Form No. 51-A-Waivers letter. 2. Form No. 51-Demand promissory note. 3. Form No. 55- Cash credit/Overdraft agreement of immovable property. 4. Continuing security letter. 5. Form of acknowledgement of Debt for an advance against E.M. 6. Memorandum of deposit of Title deed/registered mortgage deed. 7. Original title deed in case of equitable mortgage. 8. Legal opinion. 9. Valuation report. 10.Non-encumbrance certificate. 11.Latest assessment and municipal tax paid receipt. 12.Extract of property card with bank charge noted on it (within one month from disbursement). 13.Insurance cover for fire, riots, civil commotion and earthquake should be taken. 14.Classification advance as per activity. 15.Sanctioning authority as per power delegated. 16.Monitoring/precautions. a. For existing units banking with us, it should be ensured that the performance/ operations and future prospectus of the activity are good. b. For units proposed to be taken over from other banks, it should be ascertained from the statement of accounts that the account is satisfactory. Confidential report may be obtained prior to disbursement. c. For new units, the projections should be examined to ensure that they are achievable. d. Pre-sanction visit is essential. Report of the visit is to be appended with the application. e. Disbursement may be allowed only on completion of all formalities of mortgage. f. Submission of post disbursement certificate within 15 days should be ensured. g. Unit should be visited at least once in a quarter and report should be kept on record for verification by auditors/ inspecting officers. h. In case operations of the accounts are not found to be satisfactory/ as per projection correcting steps be initiated immediately. i. Branch should ensured that the party is not enjoying working capital limit elsewhere. j. Sanctioning authority should get the sanction noted from the immediately next higher authority.

33

FOR PROFESSIONALS/PURCHASE APPARATUS LOANS:

Repayment Period: Maximum 5 years Margin : 25% Other Norm

OF

MEDICAL

: (A) Income proof for last 3 years i.e. audited balance sheet or I.T. return. (B) One acceptable guarantor. Revised scheme : Effective from 01/12/2006. Name of scheme : Ratnatraya Professional scheme 1) Target group professional such as doctors, dentists, architects, chartered accountants, company secretary and engineers. 2) Eligibility and assessment of limit a. Minimum income Rs. 1,50,000 p.a.(Salary/profession income) as per income tax return filed. b. Maximum limit would be 3 times of annual income (average of last 2 years). c. Solely banking with us. 1) Facility cash credit/term loan. 2) Purpose to meet business/professional requirement 3) Quantum of loan minimum Rs. 2,50,000. Maximum Rs. 10,00,000. 4) Minimum qualification M.B.B.S./B.D.S./B.Arch./C.A./C.S./DME/B.E./M.E./B.Tech./ M.Tech./BAMS/BHMS 5) Period of facility minimum 1 year/ Maximum 5 years. 6) Repayment yearly renewal/ equated monthly instalment. 7) Security 100% of loan amount by way of movable/immovable assets or paper security such as LIC/NSC/KVP/Shares/Govt. Security/Bonds (market value/surrender value to be considered). 8) Margin NIL. 9) Guarantor one acceptable guarantor. 10)Interest rate PLR = 11.75% (rebate not applicable) 11)Processing charges Rs. 300/- per lakh or part theirof. 12)Papers requirement for assessment. a. Application form b. Guarantor form c. Declaration regarding relationship with directors/executives of the bank

34

d. e. f. g. 1) a. b. c. d. e. 1) 2)

Degree certificate (to be verified with original) Financial statement of last 2 years Worth papers Copy of last income tax assessment order/ return filed. Of the borrower/guarantor. Documents to be obtained. Form No. 51-A-Waivers letter. Form No. 51-Demand promissory note. Form No. 54/53 loan/Overdraft/Cash credit agreement. Form No.66 Letter of Guarantee On Rs. 100/- stamp paper. Legal report, Valuation report. Personal life cover insurance equal to limit sanctioned policy is taken(no profit) under tie up arrangement Classification of advance priority sector-professional. Sanctioning authority Branch manager up to Rs. 5 lakhs.

EDUCATIONAL LOAN SCHEME:

1) Name of the scheme: Educational loan scheme: 2) Purpose : To provide financial support on reasonable terms to students for pursuing higher/ professional/ technical education, in India and abroad and to poor and ready students to take basic education. 3) Eligibility : School education including plus 2 stages. i. Course eligible: Graduation courses(B.A./ B.Com./ B.Sc etc.) a) Studies in India Post graduation(masters & Ph.D) Professional courses(Engineering, medical, agriculture, veterinary, law, dental, management, computer etc.)

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 Computer certificate courses of reputed institutes. Other courses leading to diploma/ degree etc. conducted by colleges. University approved by UGC/ Govt./ AICTE/ AIBMS/ ICMR etc. courses offered by National institutes and other reputed private institutions. a) Studies abroad Graduation: for job oriented professional/ technical courses offered by reputed universities.

1) Quantum of finance :
Need base finance subject to repaying capacity of the parents/students with margin & the following ceilings. Studies in India: Maximum Rs.7.50 lack. Studies abroad : Maximum Rs.15.00 lack.

2) Margin

: Up to Rs.4.00 lack-nil. Above Rs.4.00 lack Studies in India: 5% Studies abroad : 15% Scholarship/assistantship to be included in margin. Margin may be brought in on year to year basis as & when disbursement is to be made on pro-rata basis. : Up to Rs.4.00 lacks - no security. Above Rs.4.00 lacks -collateral security equal to 100% of amount or suitable value or co-obligation of parents/guarantors/third party along with the assignment of future income of the student for payment of instalments may be obtained. The documents should be executed by both the student & parents/guardians. The security can be in the form of land/building/government securities/public sector bonds/units of UTI/NSC/KVP/LIC policies/gold/shares/debentures/bank deposits on the name of student/parents/guardian or any other third party with suitable margin. Whenever the land/building is already mortgaged, the unencumbered portion can be taken as security on 2nd charge basis provided it covers the required loan amount. In case the loan is given for the purchase of computers the same is to be hypothecated to the bank. : Up to Rs.4.00 lacks - PLR.

3) Security

4) Rate of interest

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Above Rs.4.00 lack - PLR +1%. The interest to be debited monthly/quarterly/half yearly on simple basis during moratorium period. Penal interest @2% is charged for above Rs.4.00 lack for overdue amount and overdue period.

5) Processing charges:

No processing/ upfront charges. 6) Papers required for assessment: a) Loan application mentioning purpose and name of co-debtor, parents, guardians, name of guarantor offered along with worth papers. b) Mark list, passing certificates, merit certificate of last examination passed. c) Selection letter of particular course/ education from concern institution. d) Recent financial statements/ income statements of co-debtors/ guardian for last 2 years. e) Financial and other supporting documents. f) Repayment plan of instalment and interest by the applicant along with cash flow statement. g) Projected income statement of candidate, estimates of expenses etc. 7) Sanction/ Disbursement: The loan to be sanctioned by the head office as per delegation of powers. The loan to be disbursed in stages as per the requirement/demand, directly to the institutions/vendors of books/ equipments/ instalments.

8) Repayment (repayment, holiday/ moratorium):

Course period+1 year or half year after getting job, whichever is earlier. The loan to be repaid in 5-7 years after commencement of repayment. If the student is not able to complete the course within the scheduled time extension of the time to completion of course will be permitted for a maximum period of 2 years. If student is not able to complete course for reasons beyond his control the extension will be considered as may be deemed necessary. The accrued interest during the repayment holiday period to be added to the principal and repayment in equated monthly instalments (EMI) fixed. 1-2% interest concession may be provided for loans if interest is serviced during the study period. 9) Follow up: Branch to contact college/ university authorities to send the progress report at regular intervals in respect of students who have availed loans.

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10)Capability certificate: Branch can also issue capability certificate for students going abroad for higher studies after confirmation of head office. For this, financial and other supporting documents may be obtained from applicant (Same of foreign universities require the students to submit a certificate from their bankers about solvency/ financial capability for ensure that the students going abroad for higher studies are capable of meeting expenses till completion studies.) 11)Other conditions: No dues certificate need not be insisted upon as a pre-condition for considering educational loan. However branch may obtain a declaration/ an affidavit confirming that no loans are availed from other banks. Loan applications have to be disposed of within a period of 15 days to 1 month but not exceeding the time norms stipulated for disposing of loan applications under priority sector lending.

12)Documents to be taken:
Form no.51 A - Waiver letter. Form no.51 - Demand promissory note. Form no.5 - Clean term loan agreement (With appropriate stamp) Form no.66 - Letter of guarantee (With appropriate stamp)

CHAPTER IV

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DATA ANALYSIS & INTERPRETATION

Total loan distributed under priority sector

(Amount in lakhs)

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YEAR AGRICULT- SMALL URE SCALE AMT. INDUSTRY AMT. 2006- 5982.65 7026.3 07 200708 200809 200910 201011 7614.53 6916.88 8979.09 23459.70 7094.99 5784.01 9193.22 19887.77

OTHER PRIORITY SECTOR AMT. 6892.83 10609.54 11943.78 12884.26 8365.20

WEAKER TOTAL FACTOR AMT. 1030 0.3 0 2447.18 10905.20 20931.7 8 25319.6 7 24644.6 7 33503.7 5 51715.8 8

INTERPRETATION-

In above table, Loan disbursement of following priority sector Agriculture, Small scale industry, Other priority sector and Weaker factor
In Agriculture: In Agriculture loan disbursement in year 2006-07 to 2010-2011 in between the every year loan demand growing 30% to 292% every year.& only 2008-2009 this year government change his banking regulatory system for agricultural sector that year 10% demand less in this year with effect of demanding the loan and repayment of principle amount.

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Small scale industry :

In small scale industry loan disbursement in year 2006-07 to 2010-2011 in between the every year loan demand growing 19% to 183% every year.& only 2007-2008 this year bulk storage of raw material 8.8 % in 808 observation cases and spare parts. Government change rules and regulation. In this year 18.48% demand less as compare to last year. In above observation samll scale industry demand is less last year because

Other priority sector In Other priority sector means Educational loan , Housing loan, Vehicle loan & other disbursement in year 2006-07 to 2010-2011 in
between these year loan demand growing 12.58% to 21.36% every year.& only 2010-2011 last year 35.07% demand very less market down fall in total five year observation cases.

Weaker factor

The weaker sections mainly include small and marginal farmers, landless laborers, tenant farmers, artisans, scheduled castes and scheduled tribes and self-help groups they are demand the loan in priority basis in year 2008-09 they are not demanding the loan as compare 2006-2007 to 2010-11 These primary Three year demand for low .01% and government change in the weaker section priority2009-10, 140% hick & next year 800% stable in boom position

Total loan distributed under retail loan and advance

YEA R HOUSING LOAN FOR AUTO LOAN CONSUMER LOAN (Amount in lakhs) PERSONAL TOTAL LOAN

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200607 200708 200809 200910 201011

1793 2265.97 2370.88 3957.14 4379.15

DURABLE 70.62 283.31 83.19 120.95 55.82

1524.19 1518.2 1452.15 3132.84 2526.72

1024.32 619.18 206.8 293.95 56.27

4412.13 4686.66 4113.02 7504.88 7017.96

INTERPRETATION-

In above table Loan disbursement of following Housing loan, Loan for Consumer Durable , Auto loan and Personal Loan.
HOUSING LOANIn Housing loan disbursement in year 2006-07 to 2010-2011 in between the every year loan demand growing 26.37% to 144.22% every year LOAN FOR CONSUMER DURABLEIn loan for consumer durable disbursement in year 2006-07 to 2010-2011 in between the not every year loan demand growing but 2007-08 to increase the 301%. & after 2007-2008 loan decrease in every year.

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AUTO LOAN In auto loan disbursement in year 2006-07 to 2010-2011 in between the every year loan demand growing 0.40% to 65.77% every year.& only 2008-2009 this year loan decrease in 4.35% demand less PERSONAL LOAN In Personal loan disbursement in year 2006-07 to 2010-2011 in between the every year loan demand low in every year.

CHAPTER-V FINDINGS & SUGGESTIONS

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FINDINGS:
1) Bank has very carefully designed credit appraisal system for correct and authentic appraisal of the loan proposal. 2) Bank has different rating forms according to the type and amount of loan. A proposal is carefully rated with the help of these forms.

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3) The loan approval decision of The Ratnakar Bank Ltd. is totally in the hands of Kolhapur Head Office (administration office), Market Yard, Kolhapur. 4) Sanjeevani Mortgage and Ratna Trade loan scheme margin is highest i.e. 50% is not profitable to the customer. 5) Bank takes optimum of security from the borrowers.

SUGGESTIONS:
To increase the business and reducing the risk involved in the sanctioning the loan following measures are suggested 1) In personal loan scheme very large amount of loans to a single person should be avoided as far as possible. 2) Bank can start giving loan to hotel business, construction and travel and tourism business because at present these businesses are in boom. 3) The sanctioning power of the branch manager should be enhanced to increased the overall operational efficiency.

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4) The procedure of sanctioning or period of sanctioning should be fast. 5] Also bank should provide internet loan application system to customer.

CHAPTER VI CONCLUSION

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Banking in India is form long time back..But that time banking and todays banking has a huge difference. Because there are many development in banking sector. Internet banking, core banking these are new face of todays banking system. Only keeping money safe in the bank is not the business, a bank expands their business time to time with the era of technology. Bank has very carefully designed credit appraisal system for correct and authentic appraisal of the loan proposal. & implementing different rating forms according to the type and amount of loan.

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And banks Mortgage and Ratna Trade loan scheme margin is highest. Preferable for banks point of view & takes optimum of security from the borrowers. In this project we conclude that measures of sanctioning the loan In personal loan scheme very large amount & a single person should be avoided as far as possible. Bank can start giving loan to hotel business, construction and travel and tourism business because at present these businesses are in boom. 3) The sanctioning power of the branch manager should be enhanced to increased the overall operational efficiency. 4) The procedure of sanctioning or period of sanctioning should be fast. 5] Also bank should provide internet loan application system to customer.

CHAPTER VII BIBLIOGRAPHY

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A)Reference books: 1. Banking

(Theory, Law and Practice) (page no.160 to 167)

Twentieth Revised edition Prof. E. Gordan and Prof. Dr. K.Nataranjan Himalaya Publishing House (1992)

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2. Financial Management (Theory and Practice)

Prof. Prasanna Chandra (7th edition) Tata Mcgraw Hill Publishing Co.Ltd New Delhi

3.

Financial Management (Text, Problem, cases) Prof. M.Y.Khan Prof. P.K Jain (5th edition) Tata Mcgraw Hill Publishing Co.Ltd New Delhi

4. .Security Analysis And Portfolio Management

(7th edition) Prof. Donald E. Fischer Prof. Ronald J. Jordam Prantice, Hall of india pvt.ltd New Delhi

5.Investment Analysis And Portfolio Management

Prof. Prasanna Chandra (3th edition) Tata Mcgraw Hill Publishing Co.Ltd New Delhi

6. Credit Appraisal, Risk Analysis and Decision Making Prof. D. D. Mukherjee 7. Credit Management in Banks Prof. K. M. Chitnis.

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b) Web sites: 1. www.theratnakarbank.com 2. www.rbi.org 3. business.mapsofindia.com c) Others: 1. Manual of instructions of credit department. 2. Annual reports 3. Credit policy report.

CHAPTER VII Hypothesis

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The utility of granting loans and advances by commercial banks. Differentiate borrowing rates from lending rates. Enumerate the ways of lending money. Distinguish between long-term and short-term loans. Point out the nature of security provided for loans. Outline the procedure for grant of cash credit, overdraft and discounting of bills of exchange.

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