PROJECT ON CREDIT APPRAISAL AT THE DEOGIRI NAGARI CO-OPRATIVE BANK AURANGABAD, JALGAON Submitted in the partial fulfillment of the

requirement Of Bachelor of business administration Financial Management T.Y.B.B.A Submitted By Mr. Lakhan G. Tiwari PRN no: 8S812439J Mobile no: 91-7709578954 E-mail: lakhantiwari95@gmail.com

Website: www.mjcollege.kces.in K.C.E Societys Moolji Jaitha College (100001), Jalgaon UGC honoured college with potential for excellence Academic year (2012-13) Guided By Prof. Pradip M. Joshi E-mail: pmj21575@gmail.com Mobile no: 09422282632

INDEX

SR. No.
1.

TOPIC Introduction Research Methodology Company Profile Theoretical framework Data Analysis & Interpretation Conclusions Reference

PAGE NO.
03

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INTRODUCTION

WHAT IS CREDIT APPRAISAL IN BANK ?

Credit Appraisal means an investigation/assessment done by the banks before providing any Loans & advances/project finance & also checks the commercial, financial & technical viability of the project proposed, its funding pattern & further checks the primary & collateral security cover available for recovery of such funds.

Credit Appraisal is a process to ascertain the risks associated with the extension of the credit facility. It is generally carried by the financial institutions, which are involved in providing financial funding to its customers. Credit risk is a risk related to non-repayment of the credit obtained by the customer of a bank. Thus it is necessary to appraise the credibility of the customer in order to mitigate the credit risk. Proper evaluation of the customer is performed this measures the financial condition and the ability of the customer to repay back the Loan in future. Generally the credits facilities are extended against the security know as collateral. But even though the Loans are backed by the collateral, banks are normally interested in the actual Loan amount to be repaid along with the interest. Thus, the customer's cash flows are ascertained to ensure the timely payment of principal and the interest.

It is the process of appraising the credit worthiness of a Loan applicant. Factors like age, income, number of dependents, nature of employment, continuity of employment, repayment capacity, previous Loans, credit cards, etc. are taken into account while appraising the credit worthiness of a person. Every bank or lending institution has its own panel of officials for this purpose

In such cases due diligence on the inability of the projects are well defined andassessed. State government guarantee may not be taken as a substitute for satisfactorycredit appraisal.The important thing to remember is not to be overwhelmed by marketing or profit centrereasons to book a loan but to take a balanced view when booking a loan, taking into accountthe risk reward aspects. Generally everyone becomes optimistic during the upswing of the business cycle, but tend to forget to see how the borrower will be during the downturn,which is a short-sighted approach. Furthermore greater emphasis is given on financials,which are usually outdated; this is further exacerbated by the fact that a descriptive approachis usually taken, rather than an analytical approach, to the credit. Thus a forward lookingapproach should also be adopted, since the loan will be repaid primarily from future cashflows, not historic performance; however both can be used as good repayment indicators

A project on credit appraisal means a proposal to bank or financial institute for a loan for specific purpose or business purpose. A person or customer of bank making a proposal for loan and fulfillment of terms and condition required by bank. Then bank and there counselors decide the amount of loan on the basis of mortgage valuation and bank also check the terms fulfillment by the costumer (proposal maker)

WHAT CAN PROJECT APPRAISAL DELIVER?

Project appraisal helps project initiators and designers to;

Be consistent and objective in choosing projects Make sure their program benefits all sections of the community, including those from ethnic groups who have been left out in the past Provide documentation to meet financial and audit requirements and to explain decisions to local people.

Basic Types of Credit

There are four basic types of credit. By understanding how each works, you will be able to get the most for your money and avoid paying unnecessary charges.

Service credit is monthly payments for utilities such as telephone, gas, electricity, and water. You often have to pay a deposit, and you may pay a late charge if your payment is not on time.

Loans let you borrow cash. Loans can be for small or large amounts and for a few days or several years. Money can be repaid in one lump sum or in several regular payments until the amount you borrowed and the finance charges are paid in full. Loans can be secured or unsecured.

Installment credit may be described as buying on time, financing through the store or the easy payment plan. The borrower takes the goods home in exchange for a promise to pay later. Cars, major appliances, and furniture are often purchased this way. You usually sign a contract, make a down payment, and agree to pay the balance with a specified number of equal payments called installments. The finance charges are included in the payments. The item you purchase may be used as security for the Loan.

Credit cards are issued by individual retail stores, banks, or businesses. Using a credit card can be the equivalent of an interest-free Loan- end of each month.-if you pay for the use of it in full at the

Loan Administration Pre- Sanction Process

Preliminary appraisal Sound credit appraisal involves analysis of the viability of operations of a business and the capacity of the promoters to run it profitably and repay the bank the dues as and when they fall

Towards this end the preliminary appraisal will examine the following aspects of a proposal.

Bank's lending policy and other relevant guidelines/RBI guidelines,

Prudential Exposure norms, Industry Exposure restrictions,Group Exposure restrictions, Industry related risk factors, Credit risk rating, Profile of the promoters/senior management personnel of the project, List of defaulters, Caution lists, Acceptability of the promoters, Compliance regarding transfer of borrower accounts from one bank to another, if applicable; Government regulations/legislation impacting on the industry; e.g., ban on financing of industries producing/ consuming Ozone depleting substances; Applicant's status vis--vis other units in the industry, Financial status in broad Terms and whether it is acceptable The Company's Memorandum and Articles of Association should be scrutinized carefully to ensure (i) that there are no clauses prejudicial to the Bank's interests, (ii) no limitations have been placed on the Company's borrowing powers and operations and (iii) the scope of activity of the company.

Further, if the proposal is to finance a project, the following aspects have to be examined:

Whether project cost is prima facie acceptable Debt/equity gearing proposed and whether acceptable Promoters' ability to access capital market for debt/equity support Whether critical aspects of project - demand, cost of production, profitability, etc. are prima facie in order

TYPES OF LOANS
INTERMEDIATE-TERM LOANS:
Usually running less than three years, these loans are generallyrepaid in monthly instalments (sometimes with balloon payments) from a business's cashflow. According to the American Bankers Association, repayment is often tied directly tothe useful life of the asset being financed.

LONG-TERM LOANS:
These loans are commonly set for more than three years. Most are between three and 10 years, and some run for as long as 20 years. Long-term loans arecollateralized by a business's assets and typically require quarterly or monthly paymentsderived from profits or cash flow. These loans usually carry wording that limits theamount of additional financial commitments the business may take on (including other debts but also dividends or principals' salaries), and they sometimes require that a certainamount of profit be set-aside to repay the loan.

I.BANK GUARANTEEA bank guarantee is a written contract given by a bank on the behalf of a customer. Byissuing this guarantee, a bank takes responsibility for payment of a sum of money in case, if it is not paid by the customer on whose behalf the guarantee has been issued. In return, a bank gets some commission for issuing the guarantee.Any one can apply for a bank guarantee, if his or her company has obligations towards athird party for which funds need to be blocked in order to guarantee that his or her companyfulfils its obligations (for example carrying out certain works, payment of a debt, etc.).In case of any changes or cancellation during the transaction process, a bank guaranteeremains valid until the customer dully releases the bank from its liability.In the situations, where a customer fails to pay the money, the bank must pay the amountwithin three working days. This payment can also be refused by the bank, if the claim isfound to be unlawful.

2. RESEARCH METHODOLOGY 1 Research methodology

Research methodology is a collective term for the structured process of conducting research. There are many different methodologies used in various types of research. Typically it involves research conducted using questionnaires, interviews, observation and/or experiments.

1. Data collection:
Collecting data is the first step in completing any research study or paper. Data comes in two forms: primary and secondary. Primary data is obtained from studies, interviews and experiments conducted by the researchers personally. Secondary data is collected from published sources and research conducted by other people. Primary data is harder to obtain, but is tailored specifically to your study and therefore more important as a source than secondary data. Data collection is any process of preparing and collecting data, for example, as part of a process improvement or similar project. The purpose of data collection is to obtain information to keep on record, to make decisions about important issues, or to pass information on to others. Data are primarily collected to provide information regarding a specific topic.

Data collection usually takes place early on in an improvement project, and is often formalized through a data collection plan which often contains the following activity. Prior to any data collection, pre-collection activity is one of the most crucial steps in the process. It is often discovered too late that the value of their interview information is discounted as a consequence of poor sampling of both questions and informants and poor elicitation techniques. After precollection activity is fully completed, data collection in the field, whether by interviewing or other methods, can be carried out in a structured, systematic and scientific way.

2. Methods of data collection:

A. Primary data:
Primary data--Information that researchers gather first hand Primary data refers to the information obtained first hand by researcher on the variables of interest for the specific purpose of study. The primary data is those, data which are collected afresh and for the first time, and therefore it happens to be original in character. Data that has been collected from first-hand-experience is known as primary data. Primary data has not been published yet and is more reliable, authentic and objective. Primary data has not been changed or altered by human beings, therefore its validity is greater than secondary data. Primary data is facts and information collected specifically for the purpose of the investigation at hand.

B. Secondary data:
Secondary data refers to second hand information gathered from the existing sources. The secondary data are these which have already collected by someone else and which have already been passed through the statistical process. If the time or hassle of collecting your own data is too much, or the data collection has already been done, secondary data may be more appropriate for your research. This type of data typically comes from other studies done by other institutions or organizations.

BANK PROFILE
DEOGIRI NAGARI CO-OPERATIVE BANK LTD. JALGOAN
The Deogiri nagari co-operative bank ltd. Auragabad; Aurangabad Arth Complex , Kesarsing pura , Adalatpur Road, Aurangabad 431001 Contact - [ 0240] 2334121 , 2240200 , Fax - 2347000

Web site: WWW.deogiribank.com Email: admin@deogiribank.com Deogiri nagari co-operative bank ltd. Aurangabad has been established Jalgoan branch on 24th jan 1984 And make registretion of this branch on 18th may 1984 Registretion no & Date of Bank: AGD/BNK/215/84, Date :- 24th jan 1984 Reserve Bank Lincense no & Date : UBD/BNK/392/P, Date : 18th may 1984 Working field - All Maharashtra

The deogiri nagari co-operative bank ltd Aurangabad has many branches and also Include there no. of members which has been follows .

And that also including the received share capital and other reserve funds of the bank this statement also shown in following TABLE.

PARTICULARS 1) Main office 2) Total branches 3) No. of members 4) Received Share Cap. 5)reserves & other funds

AMOUNT 1 20 34,246 1551.69 (lack) 11109.74 (lack)

The bank included total 21 branches and 1 training center at kranti chauk Aurangabad .

That all branches and there ADDRESS, contact no . , and there working time

that all information is given in the following table . that bank not only work in Aurangabad but that bank also work in all Maharashtra

ALL BRANCHES OF BANK

Address
1)Main Office 2) Kranti Chauck Branch 3) Jawahar Colony Branch 4)Sidko Branch Arth Complex, Kesarsingpura, Adalat Road, Aurangabad Municipal Complex,Near Ranilaxmibai Gardan,Kranti Chauck, Aurangabad S.S.N.15855/2/9 Near Vedant Gurukul New Sreynagar Aurangabad N-7, Shopping Complex, Opposite Wokhard Company, Aurangabad Plot No,-8 S.N.14,Pandharpur, Po. Valadgoan, Aurangabad Near Railway station, Deshvidesh Market, station Road, Aurangabad Plot No.10, Mayanagar N-2 Sidko, Aurangabad

Contact no.
2334121, 2240200 Fax- 2347000 2334172, 2240201 2332285, 2240202 2488237, 2240203 2555122, 2240204 2340241, 2240205 2483943, 2240206

Working Time
10 AM. to 2PM., 4PM. to 7PM Sunday Close 9:30am to 12:30pm 3:30pm to 6:30 Sunday close 9:30am to 12:30pm 3:30pm to 6:30 Sunday close 9:30am to 12:30pm 3:30pm to 6:30 Sunday close 10am to 2pm 3pm to 5pm Sunday Close 9:30am to 12:30pm 3:30pm to 6:30 Sunday close 9:30am to 12:30pm 3:30pm to 6:30 Sunday close

5) Valuj Branch

6) Railway Station Beanch 7) Mukundwadi

Branch

8) Gulmandi Branch 9) T.V. Centre Branch

Shri Balkrishna Mandir, Near Z. P. Office, Aurangpura, Aurangabad Plot No-2, 12/1, Ward No-2 Jadhavwadi, Jalgoan Road, Aurangabad Main road,Lasur Station, Tal. Gangapur Dist. Aurangabad

2324900, 2240207

11am to2pm 3:30pm to 6:30pm Sunday Close 9:30am to 12:30pm 3:30pm to 6:30 Sunday close 10am to 4pm, Saterday-10am to 1:30pm Sunday Close 11am to 2pm 3pm to 6pm Sunday Close 9:30am to 12:30pm 3:30pm to 6:30 Sunday close 9:30am to 12:30pm 3:30pm to 6:30 Sunday close 11am to 2pm 2:30pm to 5:30pm Sunday Close 9:30am to 12:30pm 3:30pm to 6:30 Sunday close 10am to 1pm 3:30pm to 6:30pm Sunday close 10:30am to 2:30pm 4:00pm to 6:00pm Sunday close 10:30am to 2:30pm 4:00pm to 6:00pm Sunday close 10:30am to 2:30pm 4:00pm to 6:00pm Sunday close

2382111, 2240208

10)Lasur Branch

(02433) 241727, (02433) 241717

11) Jalana Branch

M. G. Road, Mahavir chauck, Jalana

(02482) 238835, (02482) 240935

12) Shivajinagar Branch 13) Mayur Park Branch 14) Selu Branch

Disha Square, Oposite Cotton Mill, Garkheda Area, Aurangabad Mayur Park, Jalgoan Road, Aurangabad Nutanroad, Selu . dist- Parbhani

2452401

2240210 (02451) 223266, (02451) 223050

15) Satara Branch

Near Mhaske Petrol Pump, Patil Plaza, Beed Road, Satara Area, Aurangabad 8,9,10,Ronak Centre, Pipeline Road Bhistbag Chauck ,Savedi,Ahemadnagar 52, Navi Peth, Bank Street, Jalgoan 82, Navipeth, Bank Street, Jalgoan. Ajintha Road, Market Yard, Jalgoan

2376061

16) Ahemad Nagar Branch 17) Navi Peth Jalgoan

(0241) 2429331

(0257) 2234640, (0257) 2234641

18) Bank Street Branch

(0257) 2222749

19)Market Yard Branch

(0257) 2270923

20) Hadapsar Branch

Serve No.225/5, Pune-Solapur Road, Gadital Hadapsar, Pune-411028 Shop No.13, 14, 15, 16. Damodar Villa, Kotharud Pune-411028

(020) 26992010, (020) 26993010

9:30am to 12:30pm 3:30pm to 6:30pm Sunday close

21) Kotharud Branch

_ _ _ _ 2240209

_ _ _ _ 10:00am to 6:00pm Sunday Close

22) Training Branch Maharastra Rajya Krishi Va Gramin Vikas Bank, Kranti Chauck, Aurangabad

The deogiri nagari co-operative bank has also PROVIDED various types of deposits schemes to their customers. That are Follows THAT table also included their annual amount of depositories in the following statement.

DEPOSITORIES
Types of deposits 1) Saving deposits 2) Madhusanchay deposits 3) Current deposits 4) Fix deposits TOTAL AMOUNT Amount 13041.71 135.73 2208.39 37448.34 52834.17

The Bank also given various types of loans like organizational loan and also provide various types . the amount of total loan given by bank is shown in following table

LOANS
Types of loans 1) Secured loan 2) Unsecured loan 3) % of top leading loans of sectors (Minimum 40%) 4) % of weak sectors (Minimum 15%) Amount 34668.68 1198.85 15743.91 5539.55 35867.53 43.89% 15.44% Total Amount

The bank also making investment of their fund in other nationalize bank and j. d. c. c. & m. r. s. bank , merchants bank and also making other sectors investments this also included in following table

INVESTEMENTS
Types of investments 1) J. D. C. C. & M. R. S. bank 2) Nationalize & other merchants banks 3) Other investments * Bad debts Amount 1042.71 8611.10 14466.64 11.85% 24120.45 4218.49 Amount

The bank also include two new deposits schemes for their customers which has given in table. that schemes for girls and farmers

OTHER DEPOSITORIES
No New deposits schemes

1) 2)

mazi beti dhanachi peti fix deposit Baliraje For farmers

Deogiri nagari co-operative bank Aurangabad has established 3(three) new branches at Jalgoan which shown in following table

JALGOAN BRANCHES
NO BRANCH NAME ADDRESS 52, Navi peth, bank street, Jalgoan. (0257) 2234640, 2234641 82, Navi peth, bank street, Jalgoan. (0257) 2222749 WORK TIME 10:30am to 2:30 pm & 4:00pm to 6:00 pm Sat 10:00 to 1:30 pm 10:30am to 2:30 pm & 4:00pm to 6:00 pm Sat 10:00 to 1:30 pm 10:30am to 2:30 pm & 4:00pm to 6:00 pm Sat 10:00 to 1:30 pm

1)

Navi peth Jalgoan

2)

Bank street Jalgoan

Ajintha Road , market yard , Jalgoan. 3) Market yard (0257) 2270923

The bank also provided various types of loans advances that all types included in that table

SCHEAMES OF LOANS
No:1) 2) 3) 4) 5) 6) 7) 8) 9) Types of loans Motor cycle loan Gold loan Loan for vehicle ( car loan ) Farm and agriculture loan Education loan House purchasing loan Business loan Factory and organizational loan Home loan

The bank also provide various types of other services which is beneficial for customers and making attraction of customers for bank

Bank also provide locker, core banking, s m s service, A T M service to customers

OTHER SERVICES
NO 1) 2) 3) 4) 5) 6) A T M service Core banking R. T. G. S. service available N. E. F. T. service available SMS service on money transactions Locker service available Types of services

4. Theoretical Framework
Theoretical Framework

Bank Performance in the Banking Sector

Concepts evolve through time and over time they assume different meanings. The concept of competition is no exception. This paper discusses the evolution of the concept of competition in general with a view to derive a theoretical framework for analyzing competition in banking industry. Starting from the classical notions of competition it proceeds to some of the latest approaches (Northcott (2004), Neuberger (1998), Toolsema (2003), Bolt and Tieman (2001)). The ordinary Structure-ConductPerformance approach does not involve any analysis of market dynamics. Our approach introduces various aspects of industry dynamics and growth. It provides a methodology to arrive at the market form in banking industry through an analysis of all the aspects of basic conditions, structure, conduct and performance. It is argued that sustained growth and dynamics of the industry is not price led. Growth arises out of changing basic conditions and dynamics arises out of sharing the new market created by basic conditions. Hence the prime mover of competition is rivalry among firms to control market share and to internalize externalities rather than adjustments brought about by the price mechanism.

Most research is founded on a question. The researcher or writer of the report not only questions, but ponders and develops thoughts or theories on what the possible answers could be. These thoughts and theories are then grouped together into themes that frame the subject. This is what is known as a theoretical framework. It's a process of identifying a core set of connectors within a topic and showing how they fit together or are related in some way to the subject.

Function

The theoretical framework is a foundation for the parameters, or boundaries, of a study. Once these themes are established, researchers can seek answers to the topical questions they have developed on broad subjects. With a framework, they can resist getting off track by digging into information that has nothing to do with their topic. Often researchers are curious about broad subjects, but with a theoretical framework they can stay tightly within the theme or topic.

PURPOSE

Studies are sometimes structured by time and money, and often very little of each. Therefore, to get good results from research or data, a researcher needs to stay on point. A theoretical framework structures the sections of the study that need to be covered. If a researcher finds information on a topic she didn't include in the framework, she can revisit it and add that section in. A theoretical framework is mostly made up of general ideas of what the researcher thinks she will need to cover. Sometimes a framework will show that, within the topic, an area of interest may not be useful enough to pursue and can be eliminated, saving the researcher or writer time.

5. Analysis & Interpretation

ANALYSIS OF DATA:

The bank analyses the income sources of customer, the fixed assets of the customer. The status of the previous loans taken by the individual from any bank. The counselors prepare the estimate of the mortgage. They analyze the capacity of the individual to fulfill the requirements and terms of bank.

Required Documents for Process of Loan Application for requirement of loan Copy of Memorandum & Article of Association Copy of incorporation of business Copy of commencement of business Copy of resolution regarding the requirement of credit facilities Brief history of company, its customers & supplies, previous track records, orders In hand. Also provide some information about the directors of the company Financial statements of last 3 years including the provisional financial statement for the year 2007-08

 Copy of PAN/TAN number of company Copy of last Electricity bill of company Copy of GST/CST number Copy of Excise number Photo I.D. of all the directors Address proof of all the directors Copies related to the property such as 7/12 & 8A utara, lease/ sales deed, 2R Permission, Allotment letter, Possession Bio-data form of all the directors duly filled & notarized Financial statements of associate concern for the last 3 years

6. CONCLUSION
Conclusion Project APPRAISAL Credit appraisal means an investigation/assessment done by the bank prior before providing any loans & advances/project finance & also checks the commercial, financial & technical viability of the project proposed. Proper evaluation of the customer is preferred which measures the financial condition & ability to repay back the loan in future Credit appraisal is the process of appraising the credit worthiness of the loan applicant Term loans are the basic vanilla commercial loan. They typically carry fixed interest rates, and monthly or quarterly repayment schedules and include a set maturity date.

Credit is the core activity of the banks & important source of their earnings which go to pay interest to depositors, salaries to employees & dividend to shareholders Credit & risk go hand in hand Banks main function is to lend funds/ provide finance but it appears that norms are taken as guidelines not as a decision making A bankers task is to identify/assess the risk factors/parameters & manage/mitigate them on continuous basis

7. REFRENCE
www.techshristi.com MBA/BBA Finance Projects. www.scribd.com/doc/.../Union-Bank-credit-appraisal-project-report www.seminarsonly.com/...Projects/.../Credit-Appraisal-Process-at-A www.bms.co.in/steps-in-credit-appraisal/ Books: 1. Project appraisal & Banking. 2 financial planning