A Study On Credit Management at Ssbps

A STUDY ON CREDIT MANAGEMENT AT SSBPS
INTRODUCTION
In earlier times, before money was introduced, artisans and agriculturists

exchanged their goods directly. This system was called “Barter System” with increase
in trade and production the barter system become inconvenient as it suffered from
following limitations.
 Absence of double co-incidence of wants i.e. two parties to the exchange

should be in need of each other goods. Such double co-incidence did not
exist always.
 This was no common measure under the barter system and it was difficult to
determine the rate at which the goods were t exchanged.
 Not all commodities used in exchange could be dividend.
E.g.: - Diamond, Animal etc…..
 Difficulties are storing wealth for future commodities which were perishable
as they lose their value over time.
 In order to overcome these limitations a medium of exchange called money
was introduced initially commodities like precious stones, shells, ivory,
skins etc were used as money. Subsequently valuable metals like gold,
silver, copper were used. Later on coins and paper money were introduced
which served as a medium of exchange, a store of value of money man lent
and got back his original investment plus a little more thus banking had
started.
RR College of management studies and computer application. Bangalore Page 1

Cooperative banking is retail and commercial banking organized on a cooperative

basis. Cooperative banking institutions take deposits and lend money in most parts of
the world.
Credit unions have the purpose of promoting thrift, providing credit at reasonable
rates, and providing other financial services to its members.[1] Its members are usually
required to share a common bond, such as locality, employer, religion or profession,
and credit unions are usually funded entirely by member deposits, and avoid outside
borrowing. They are typically (though not exclusively) the smaller form of cooperative
banking institution. In some countries, they are restricted to providing only unsecured
personal loans, whereas in others, they can provide business loans to farmers, and
mortgages.

The Co-operative banks have a history of almost 100 years. The Co-operative banks
are an important constituent of the Indian Financial System, judging by the role
assigned to them, the expectations they are supposed to fulfill, their number, and the
number of offices they operate. The co-operative movement originated in the West, but
the importance that such banks have assumed in India is rarely paralleled anywhere else
in the world. Their role in rural financing continues to be important even today, and
their business in the urban areas also has increased phenomenally in recent years
mainly due to the sharp increase in the number of primary co-operative banks.
While the co-operative banks in rural areas mainly finance agricultural based
activities including farming, cattle, milk, hatchery, personal finance etc. along with
some small scale industries and self-employment driven activities, the co-operative
banks in urban areas mainly finance various categories of people for self-employment,
industries, small scale units, home finance, consumer finance, personal finance, etc
Some of the co-operative banks are quite forward looking and have developed
sufficient core competencies to challenge state and private sector banks.
According to NAFCUB the total deposits & landings of Co-operative Banks is

much more than Old Private Sector Banks & also the New Private Sector Banks. This
exponential growth of Co-operative Banks is attributed mainly to their much better
local reach, personal interaction with customers, and their ability to catch the nerve of
the local clientele.
Though registered under the Co-operative Societies Act of the Respective States
(where formed originally) the banking related activities of the co-operative banks are
also regulated by the Reserve Bank of India. They are governed by the Banking
Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965.

Cooperative banks
Larger institutions are often called cooperative banks. Some are tightly integrated
federations of credit unions, though those member credit unions may not subscribe to
all nine of the strict principles of the World Council of Credit Unions (WOCCU).
Like credit unions, cooperative banks are owned by their customers and follow the
cooperative principle of one person, one vote. Unlike credit unions, however,
cooperative banks are often regulated under both banking and cooperative legislation.
They provide services such as savings and loans to non-members as well as to members
and some participate in the wholesale markets for bonds, money and even equities.
Many cooperative banks are traded on public stock markets, with the result that they are
partly owned by non-members. Member control is diluted by these outside stakes, so
they may be regarded as semi-cooperative.
Cooperative banking systems are also usually more integrated than credit union
systems. Local branches of cooperative banks elect their own boards of directors and
manage their own operations, but most strategic decisions require approval from a
central office. Credit unions usually retain strategic decision-making at a local level,
though they share back-office functions, such as access to the global payments system,
by federating.
Some cooperative banks are criticized for diluting their cooperative principles. A
cooperative bank that raises capital on public stock markets creates a compete with the
members for control. In some circumstances, the members may lose control. This
effectively means that the bank ceases to be a cooperative. Accepting deposits from
non-members may also lead to a dilution of member control.

INTRODUCTION TO CREDIT MANAGEMENT
While business firms would like to sell on cash, the pressure of competition
and the force to custom persuade then to sell on credit. Firmness grants to facilities
sales. It is valuable to the customer as it augments their resources. It is particularly
appealing to that customer who cannot borrow from other sources or find it very
expensive or inconvenience to do so.
“Credit allows the customer to buy now pay later”. So also credit constitutes
the major business activity of the banks i.e. lending loans and advances. Of all the
functions of modern banking, with or without security is by far the most important
function. Advances comprise a very large portion of total bank assets and form the
backbone of every bank structure. The strength of the bank is thus primarily judge by
the soundness of its advances. A wise and prudent policy is regarded to advances is
considered and important factor inspiring confidence in the depositors and the
prospective customer of a bank.
The credit planning is emerged as a major instrument for planned allocation of

credit among the various sectors and project that have been considered necessary for
the allocation of scare resources in accordance with planned priorities. Advance not
play an important role in gross earnings of banks, but also promote the economic
development of the country. All type of business activity including trade, industry and
agriculture depend on bank finance in one form or other. Bank by channelizing
accumulated savings of the nations into productive uses help both depositors and
borrowers. Bank assists in creating more avenues of employment and thus helps in
raising the standards of living of the people.

Creditability of a bank is one of the most important criteria in establishing the credit
worthiness of a bank. Loans and advances constitute lending. Loans from the major
business activity of a bank and they need to be liquid and easily realizable as the bank
is obligated to repay the depositors as and when they are due for payment. Major part of
the banks income is earned from interest on the advances. So there is a need for the
proper managed of loans and advances.
MEANING OF CREDIT MANAGENT
Credit management can be defined as ‘management of loans and advances in

banks’ In other words credit management means ‘successfully managing the credit by
paying the debt obligations on time for the amount required’.

FUNDS FOR LENDING
If we examine the Balances sheet in a bank, we would observe that the main
sources of fund available for lending and investment are as follows:
 Deposits of all types –fixed, current saving and recurring

 Borrowing from other banks mostly form
 Undistributed profit
 Paid up capital
 General reserves and other resources.
FORMS OF BANK LENDING /CLASSIFICATION OF CREDIT
Banks offer different kinds of borrowing facilities to customers for various

purposes according to security, maturity method of payment which is highlighted
below.
 Loans
 Overdraft
 Cash credit
 Bills discounted
 Bills purchased
 Terms loan
LENDING PRINCIPLES
 Safety
 Liquidity
 Profitability
 Purpose

THE FIVE C’S OF CREDIT
1. Character
2. Capital
3. Capacity
4. Collateral
5. Conditions
LENDING POLICY
The principle of loan policy is to arrive at tradeoff between return and risk with
the broader framework of the strategy plan of the bank. In fact, loan policy should be
such as to maximize returns while minimizing risk. In order to ensure capital growth
the bank has to encourage substantially non funded business.
 Portfolio consideration
 Marketing of funds
 Terms and conditions
 Funds position
 Use of fund by the borrower and security available
RISK AND BANKING
Risk was till recently a concept alien to Indian banks. Risk management was
never their domain because returns have never been their major concern. Accounting
policies did the job for them. But the situation has now transformed beyond
recognition. Prudential accounting standards, capital adequacy, income recognition and
assets classification norms, provisioning requirement on bad debts and depreciation
caused by making a part of securities investment portfolio to market value created
awareness to manage credit effectively through various measures.
Bank now encounter a whole array of risks, prominent among these being credit
risk, market risk, liquidity risk, currency risk and interest risk are relatively new for the
Indian banks.
Though risk in business cannot be avoided be banker is doing his business of

banking is expected to take minimum calculated risk.
RISK ASSESSMENT AND MANAGEMENT
Risk is inherent in banking and for that matter in every matter in every
business. The task of asset and liability management though cannot be avoided, it
should be as low as possible and manage it and keep different types of risks with an
acceptable level. The bank is exposing to different risks.
 Credit Risk
 Liquidity Risk
 Interest Rate Risk
 Currency Risk
Credit management in co-operative banks
A system of trading in money which involved safeguarding deposits and making

funds available for borrowers, banking developed in the middle Ages in response to the
growing need for credit in commerce. Engaging in the business of keeping money for
savings and checking accounts or for exchange or for issuing loans and credit etc.
Banking has been characterized, largely because of technological innovation, by an
increasingly sophisticated provision of banking services and an expansion of consumer
credit. The business of safeguarding and lending money is often arranged through
machine-readable cards and continuous access by internet.

Definition
Banking is one of the key drivers of the Indian economy. As it provides the
liquidity needed for families and businesses to invest for the future. Bank loans and
credit means families don't have to save up before going to college or buying a house,
and companies can start hiring immediately to build for future demand and expansion.
1. Dealing in Money
Bank is a financial institution which deals with other people's money i.e. money
given by depositors.
2. Individual / Firm / Company
A bank may be a person, firm or a company. A banking company means a company

which is in the business of banking.
3. Acceptance of Deposit
A bank accepts money from the people in the form of deposits which are
usually repayable on demand or after the expiry of a fixed period. It gives safety to the
deposits of its customers. It also acts as a custodian of funds of its customers.
4. Giving Advances
A bank lends out money in the form of loans to those who require it for
different purposes.
5. Payment and Withdrawal
A bank provides easy payment and withdrawal facility to its customers in the
form of cheques and drafts; It also brings bank money in circulation. This money is in
the form of cheques, drafts, etc.

6. Agency and Utility Services
A bank provides various banking facilities to its customers. They include

general utility services and agency services.
7. Profit and Service Orientation
A bank is a profit seeking institution having service oriented approach.
8. Ever increasing Functions
Banking is an evolutionary concept. There is continuous expansion and

diversification as regards the functions, services and activities of a bank.
9. Connecting Link
A bank acts as a connecting link between borrowers and lenders of money.

Banks collect money from those who have surplus money and give the same to those
who are in need of money.
10. Banking Business
A bank's main activity should be to do business of banking which should not be

subsidiary to any other business.

CREDIT MANAGEMENT IN Co-Operative Banks Of INDIA
CREDIT PLANNING
Credit planning has emerged as a major instrument for planned allocation of

credit among the various sectors and projects that have been considered necessary for
the allocation of scare resources in accordance with planned priorities.
The basic objective of credit planning is to guide investment and output along
the lines postulated in the development planning by RBI. The macro level national
credit plan is linked with micro level credit budgets of banks. For the implementation of
national level credit plan formulated at the macro level, it becomes necessary to
disaggregate in terms of its various components like deposit mobilization, credit
expansion, priority sector lending. So that individual banks should know how exactly
each bank fits into the national credit plan.
CREDIT POLICY
According to the preamble of RBI Act if 1934, the main functions of RBI are
to regulate the issue of bank notes and keeping of reserves with a view to secure
monetary stability and generally to operate the currency and credit system of the
country to its advantage. Credit policy can be looked upon as a short term policy
instrument to make connection in the economy as it progresses.

It is customary for the Reserve Bank to announce the credit policy for the first
half of the fiscal year. The credit policy for the first half of the fiscal year indicates the
current economic scenario while at the same time indicates the areas where credit
policy’s is required. It also specifies the various policy measures to be indicated by the
Reserve Bank over the next six months.
Individual’s banks must also prepare their own credit policy in conformation with
the guidelines issued by RBI. A bank’s credit policy may be:
1. Tight or Restrictive
2. Liberal or Non-restrictive
The credit policy decisions of firm have two broad dimensions
1. Credit standards
2. Credit Analysis
CREDIT STANDARDS
If credit standards are relaxed it means more credit will be extended while if
standards are tightened less credit will be extended. The written policy states the type of
loans the bank considered desirable. Desirable loans routinely include the granting of
short term loans to business customers in the trade area to extent that resources and
opportunities permit. The type of loans to be avoided should be mentioned. It should
indicate both desirable and unacceptable type of collateral.
It should further indicate circumstances in which unsecured lending is

prohibited. The loan policy should establish lending limits for all loan officers and loan
committees.

The term credit standards represent the basic criteria for the extension of credit to
customers. The implications of the four factors are elaborated below:
 Collection cost
 Average collection period/credit period
 Bad debt expenses
CREDIT ANALYSIS AND CREDIT INVESTIGATION
Besides establishing credit standards a bank should develop procedure for

evaluating credit applicants. The basic aspects of credit policies are credit analysis and
credit investigation.
CREDIT ANALYSIS
Credit analysis is the process of assessing the risk offending to a business or

an individual. So called credit risk must be evaluated against the benefit the bank
expects to derive from making a loan. Credit risk is primarily related to the quality of
the bank’s loan portfolio the bank’s delivery mechanism. A bank risk exposure is
determined by its portfolio and the bank’s delivery mechanism. A bank risk exposures
is determined by portfolio of its assets, liabilities and capital. Credit risk is the risk that
the counter party will to perform on an obligation to the bank credit risk constitutes the
critical portfolio which has to be managed well by the banks.
Credit risk management has both quantitative and qualitative dimensions, the
qualitative dimension of risk are generally more difficult to assess. The two basic steps
involved in this process are:
1. Obtaining credit information
2. Analysis of credit information.

OBTAINING CREDIT INFORMATION
The first step in credit analysis is obtaining credit information which forms a
basis t evaluate the credit worthiness of a customer. The sources of information may be:
1. Internal
2. External
INTERNAL
Banks usually require their customers to fill various forms and documents
giving details of its financial operations. They are also requiring furnishing trade
reference with which banks can have contacts to judge the credit worthiness of the
customer. Another source of credit information is decided from the records of the banks
constellating on the extension of credit. It is likely that a particular customer may have
enjoyed credit facility in the past in the case the banks would have information on the
behavior of the customer in terms of the historical payments pattern. But this type of
information may not is sufficient and may therefore have to be supplemented by
information from other sources.
EXTERNAL
The second source of information is external. The availability of information

from this source to institutional facilities and industry practices. In India the external
sources of information is not developed as much as industrially developed countries of
the world.
Depending upon the availability the following source may be employed:
 Financial statement
 Bank reference
 Trade reference
 Credit bureau report

ANALYSIS OF CREDIT INFORMATION
Once the credit information has been collected from different sources it
should be analyzed to determine the credit worthiness of the applicant. Although these
are not established procedure to analyze the information the form should cover two
aspects:
a. Quantitative
b. Qualitative
QUANTITATIVE
The assessment of the quantitative aspects is based on the factual

information available for the financial statement the past records of the firm. The first
step involved in this type of assessment is to prepare ageing scheduled of the accounts
payable of the applicant as well as calculate average age of the accounts payable. The
exercise will give an insight into the past records of the customer.
QUALITITIVE
The quantitative assessment should be supplemented by a qualitative

interpretation of the applicant credit worthiness. The subjective judgment covers
aspects relating to the quality management. Here the reference from other suppliers,
bank reference and specialist bureau report would form the basis for the conclusion to
be drawn. In the ultimate analysis the decision whether grant credit to the applicant and
what amount to extend will depend upon the subjective interpretation of his credit
standing.

After obtaining and analyzing the credit information the firm will get an idea about the
type of the customer, whether new or existing, the customer’s business line,
background and related trade risk and these data should be promptly gathered.
It finally helps to classify the customer into several credit categories
 Completely reliable
 Slightly reliable customer
 Doubtful customer.
CREDIT INVESTIGATION
After having obtained the credit information the firm will set an idea regarding
the matter which should be further investigated. The factors that affect the extent and
nature of credit investigation are:
 The type of customers, whether new or existing.

 The customer’s business line, background and related trade risk.
 The nature of the product perishable or seasonal.
 Size of customers order and expected further volumes of business with him.
 Company’s credit policy.

A comprehensive and meaningful of investigation can be carried out only when

adequate data are available. The data should be promptly gathered. Unnecessary delay
in responding to the customer request can prove to be deter mental. The customer can
be directly approached to provide information about him. Another way to investigate
the credit worthiness of the customer can be to examine his financial statement of last
four-five years.

CREDIT TERMS
After the credit standards have been established and the credit worthiness of
the customer has assessed, the management of a firm must determine the term and
conditions on which trade credit is to be made available. The stipulations under which
the goods are sold on credit are referred to as credit term. These credit terms have three
components:
 Credit period
 Cash discount
 Cash discount period
CREDIT EVALUATION
Proper assessment of credit is an important element of credit management. It

helps in establishing credit limits in assessing credit risks. Two types of errors may
occur as under.
TYPE 1 ERROR: A good customer is misclassified as a poor credit risks.
TYPE 2 ERROR: A bad customer is classified as a good credit risk. Both the errors
are costly. Type1 error leads to loss and profit on sales whereas good customers who
may be denied credit. Type2 error results in bad debts and loss on credit sales made to
risky customers, while misclassification error cannot be eliminated wholly a firm can
mitigate this occurrence by doing proper credit evaluation.

CREDIT RATING
The ICICI, the UTI and a number of commercial banks and financial institution
have promoted the credit rating information service of India ltd. (CRISIL). THE
principal is to provide a quality of rating in respect of prospective of corporate
borrower. The financial institution and banks are likely to use CRISIL rating as one of
prime inputs in making their credit decision. The borrowing corporation would also use
and utilize the CRISIL rating in their public issue as well as use it as basis for
evaluating their request for the long term credit by financial institution and banks. The
basic function of credit extension is to place purchasing power in the hands of those
who can use it most productively.
Credit Management Principles
 Establishing an appropriate credit risk environment

The board of directors should be responsible for approving and reviewing the bank’s
credit risk strategy and major policies. The strategy should reflect the banks risk
tolerance and the level of profitability it expects to achieve for incurring credit risk.
Senior management should be responsible for implementing the credit risk strategy and
developing policies and procedures for identifying, measuring, monitoring and
controlling credit risk at individual credit and portfolio level. Banks should identify and
manage the credit risk inherent in all products and activities and ensure new products
and activities are subject to adequate risk management procedures.
 Operating under a should credit granting process

Banks must have sound, well defined credit granting criteria, which clearly indicate
their target market, the purpose and structure of the credit and its source of repayment,
and a thorough understanding of the borrower or counterparty .Overall credit limits
should be established by individual borrower or counterparty and by groups of
connected counterparties that aggregate different types of exposures, both in the
banking and trading book and on and off the balance sheet.

 Maintaining an appropriate credit administration, measurement and monitoring process

Bank should have a system for ongoing administration of their credit bearing portfolio
and for monitoring individual credits, including determining the adequacy of provisions
and reserves. They should also develop an internal risk rating system consistent with
the nature, size and complexity of the bank’s activities. Information systems (providing
information on the composition of the credit portfolio and identifying any risk
concentrations) and analytical techniques that enable management to measure the credit
risk inherent in all on and off balance sheet activities are necessary. Banks must also
have a system for monitoring the overall composition and quality of the credit portfolio
and should consider potential changes in economic conditions when assessing their
credit risk, including assessing exposures under stressful conditions.
 Ensuring adequate controls over credit risk

Banks must establish a system of independent, ongoing assessment of credit risk
management processes and the result of reviews should be communicated to the board
of directors and senior management. The bank must ensure credit granting is properly
managed and that credit exposures are consistent with prudential standards and internal
limits. Internal controls should be established to ensure that exceptions to policies,
procedures and limits are swiftly reported to management for action. Banks must have a
system for early remedial action on deteriorating credit and managing problem credits.

FOLLOW-UP, SUPERVISION AND CONTROL OF BANK CREDIT
No doubt, credits disbursals are made by banks after careful evaluation and
appraise of loan proposal to determine their ‘bankability’. On the basis of principles of
bank of the lending banker is to follow-up and supervise the use of bank credit to
verify first whether the assumption on which lending decisions was taken continue to
hold good both in regard to business operations and environmental and second the end
use is according to the purpose for which it was given.
When money has been lent, the bank can reduce the risk of not getting repaid by
checking up on how the money has been used and what the customer is doing about
repayment. Any diversions of funds and deviation by the borrowers from terms and
conditions stipulated by banks have to be noticed and timely action has to be taken. As
such, the banker has to be cautious and guard against any misuse of credit facilities.
Loans made successfully should be repaid according to their and conditions.
It has said that a bank “never” makes a bad loan- a loan goes bad after it has
been made. So it is very necessary to take necessary precaution before accepting the
proposal for credit and at the same time it is also necessary to supervise and control
after loan is disbursed to the customer.

ADVANCES TO BE PROPERLY CONSTITUTED
The manager is responsible to see the all advances are properly constituted i.e. to
say, they must see that:
a) The account holder is legally competent to borrow
b) All necessary document have been correctly executed and other formalities, if any duly
complied with;
c) A proper authority, covering operation and conforming power to overdraw is held in

respect of accounts operated upon by person other than the borrower themselves.
SECURITY
The branch manager should ensure that the security is properly valued, is easily
saleable, the margin is properly maintained, there is a quick turnover of stock and
insurance has been taken.
FINANCIAL POSITION
The financial position of borrower guarantors must be received from time to

time, at least once in a year. Companies must send copies of audited balance sheets.
These documents should be carefully studied and trends to be watched.
PURPOSE
The amount of the advances should be applied to the purpose for which it is
taken. In practice it may be difficult for the banker to supervise effectively that this is
done. Experience in this regards is the best guide. It should be borne in mind that the
‘purpose’ playing an important role in modern banking.

LIMITATION
Period of limitation in any account must be watched from time to time.
MISCELLANEOUS
It should be ensured that an advance does not contravene any provisions of law,
a directive of the Reserve Bank or the lending policy lay down by the central office.
CONTROL
 RETURNS AND STATEMENTS
All branches submit to the regional or central office reports on advances at

regular intervals. By means of these reports, the executives at the regional office and
central office are able to assess the course and safety of the bank’s advances.
 REVIEW OF ADVANCES
All advances are ordinarily reviewed once in during 12 months. A little before
the prescribed period, the agent prepares a comprehensive statement of the position of
the party and the operation on the account and makes recommendations to the
appropriate authority either for continuing with the same, reduced or increased the limit
or for canceling the facility.
 PERIODICAL INSPECTION
Branches are periodically inspected by internal and external auditors. During

each inspection, the inspector makes a comprehensive and detailed examination of all
advances including documents security, and turnover and whether the term and
conditions of the sanction have been complied with.

 CONTROL BY THE SUPERINTENDENT OF ADVANCES
The superintendent of advances exercises his control in a variety of ways.

Proposals, reports and day to day correspondence are placed in his hand for
consideration after scrutiny in his department. Routine reports on branch advances
throughout the year are passed on to him and action is taken on his authority. The
detailed inspection report by inspector is submitted to him before it passes to the
general manager.
 CONTROL BY CHAIRMAN AND GENERAL MANAGER
The chairman is the arbiter so far as the practical application of the board’s
policy is concerned. He is consulate on all matters involving policy and all large
advances are subjected to have scrutiny. Some of the function of the chairman is
delegated to the general manager who is given responsibility and power for scrutiny
and dealing with advances up to certain limits
 CONTROL BY BOARD OF DIRECTORS
The board of directors of a bank determines the general lending policy of the
bank, taking into account directions of the central government, public of the bank,
public interest, directives, surplus or paucity of funds with the bank and general
conditions of the money market. The board also periodically reviews the larger and the
more difficult advances to which its attention is drawn by the general manager or the
chairman.
In addition to the above unmentioned steps to supervise and control the bank
credit, there are the recommendations of the study group of frame guidelines for sallow
up of bank credit (Tendon committee). Which have been, by and large accepted by RBI
and the chore committee?
Recommendations, the banks have included the suggested procedure as a

regular part of their follow-up machinery. The step described essential if follow-up and
control of advances and barrower accounts is to be successful and safety of bank
advances is o be ensured without any undue emphasis on physical security.

FEATURES OF CO-OPERATIVE BANKS

 They are organized and managed on the principle of co-operation self-help and
mutual help. They function with the rule of “one member one vote”
.
 Co-operative banks perform all the main banking function of deposit mobilization,
supply of credit and provision for remittance facilities.
 Co-operative banks are perhaps the first government supported agency in India.
 Co-operative banks belong to the money market as well as the capital markets.
 Co-operative banks accept current, saving, fixed and other types of time deposits
from individuals and institutions including banks.
 Co-operative banks do banking business mainly in the agricultural and rural sector.
 Some co-operative banks are schedule co-operative banks while others are non-
schedule co-operative banks.

RESEARCH DESIGN
2.1 INTRODUCTION
The research design is the conceptual structure which research is conducted. It

constitutes the blue print for the collection, measurement and analysis of data. A
research design is a basic plan, which: which specifies the type of information to collect
the source of data collection procedure. Data was collected from secondary source.
2.2 REVIEW OF LITERATURE
Bank optimizes utilization of deposits by deploying funds for developmental

activities and productive Purposes through credit creation process. Deposit mobilization
& Credit deployment constitute the core of banking activities and substantial portion of
expenditure and income are associated with them. In the case of deposits, baring few
stray instances of operational risks linked to the system and human failure culminating
in fraud, forgeries & loss, there may not be anything very alarming. But credit portfolio
is the real dynamic activity that requires close monitoring and continuous management.
The need and criteria for lending have been extensively discussed in the literature
review:
U.B.S Dictionary of Banking and finance (1981) defined bank credit as the
ability to borrow money on the promise of future repayment. The prudential guidelines
(1990) succinctly convey a more comprehensive definition of credit, it defines credit
facility as the aggregate of all loans, advances, overdrafts, commercial papers, bankers
acceptances, bill discounted, leases, guarantees and other loss contingencies connected
with a bank´s credit risks. Also, the definition of credit proposed by the CBN Monetary
policy circular (1992) agrees with the view above. Generally, we could conclude that

credit includes all commitments by a bank that has risk exposure and that may result in
financial loss to the bank. Mandel (1974) described credit simply as the right of a
lender to receive money in the future in return for his obligation to transfer the use of
funds to another party in the interim. The facility is as old as man, though in the
primitive society it was known as “mutual aid”, because it was based on ancient
customer of ensuring substance of all members of the community. Credit therefore
arises out of the need to bridge the gap between the surplus and deficit economic units
such that the highest level of satisfactory function is performed by the financial
institutions notable among which are the Money-deposit banks.
In agreeing with this view, Corley (1970) and Adeniyi (1985) stated that credit
is a crucial factor in growth process of any economy and that by lending banks provide
valuable services to the community as they serve to channel money from those who
have idle fund to those who put the money in to constructive use.
Furthermore, Archer and O.Ambrose opined that Money-Deposit banks are in

business to make loans. They however, added that the loan should work out in such a
way that it will not seriously endanger the loan portfolio and solvency of the bank. In
This view that appreciates that though some dangers may arise, lending is, and should
be a major activity of Money-deposit banks. The techniques and complexities of
lending have been changing with growth in the society.
Perhaps that is why Mather (1955) describes banking as an art as well as a science.
He went further to say that in addition to the wealth of technical and legal knowledge; a
bank manager should develop the aptitudes to assess every request for an advance
according to innumerable factor pertaining to the political borrower. He then identified
three basic principles that should guide all bank lending viz, safety, profitability and
suitability. In addition to the principle enunciated by matter, other important guiding
factors include the character and integrity, management accounting and technical skill
of the borrower as well as his capacity for hard work and his experience in the
particular field for which the finance is required and the possibility of the proposed
investment generally sufficient profits. It is to ensure repayment of the advance.

The importance of these traditional cannons of lending notwithstanding, Pitcher

(1970) criticized undue radiance emphasis on them by the lending banker. He argued
that the character of the borrower must be a prime factor in any lending decision. He
also said that the integrity of the borrower must be undoubted especially where the
security is inadequate to cover the maximum amount to be advanced. He however,
wondered whether honesty is simply enough to ensure the success of an enterprise, in
these difficult demanding conditions of our time. The answer is obviously “No” for
instance all the integrity in the world will be little helpful to the managers of a company
that are rapidly sinking into oblivion perhaps, because they did not adopt their products
to meet the needs of a changing market or take appropriate corrective action to counter
a disproportionate risk in over head costs and fall in trade. Therefore we could not but
agree with pitcher when he advocated that the banker should also consider the capital
and capability of the customer and also enlist the aid of management accounting and
other newer technique of credit analysis to improve their lending decision.
For purpose of compassion, the audited figures are expressed as ratios computed
from audited figures of two consolidated years immediately preceding the request for
loan will help to determine the credit worthiness of the customer and his ability to repay
the loan. In short the ratio helps the banker to assess the degree of risk being taken-
emphasis being placed on earning capacity and operating efficiency.
Mather (1979) grouped financial ratios into five categories are as follows:-
 Liquidity ratio, which provide a measure of times ability to meet its short-term
obligation as they fall due.
 Leverage ratios, which are measures of the extent to which a firm’s operations are
financed with debt capacity.
 Efficiency ratios, which are used to measure the capabilities of the management to
utilize the firm’s assets.
 Profitably ratios, which indicate the overall profitability of the enterprise.
 Equity related ratios, which are of primary concern to common stockholders.

2.3 STATEMENT OF THE PROBLEM
Considering the importance of the “credit management and problems

faced by a bank in securing funds for day to day needs of the concern, so the co-
operative banks should be cautious in managing their credit to meet their day to day
commitments”.
The objective of bank is to ensure that credit is managed efficiently, the

manner in which the credit is repaid by the borrower within the stipulated period and
what are the measures that are taken by the bank to recover the loan from the borrower.
2.4 SCOPE OF THE STUDY
The credit management covers the wide area of lending’s of the bank.
Credit management covers the rules and regulation of lending to the borrower. The
banker has to follow the procedure when he lends the money to the borrower the
security he has to take from the borrower and verification of documents which the
banker keeps as security when he lends. Credit management also includes managing the
credit recovery of the loans bank had lent.
2.5 OBJECTIVE OF THE STUDY
 To Study the general policies, procedures and rules for sanctioning of loans and
advances.
 To study the manner in which funds are raised and utilized by the bank.
 To study the position of various loans and advances..
 To study and understand the follow-up, supervision, control and monitoring of
advances.

2.6 HYPOTHESIS
Hypothesis
 H0: There exists no relationship between ADVANCES and Deposits for last 5
years.
 H1: Their exist relationship between ADVANCES and Deposits for last 5 year.
Test of correlation
Correlation measures the relationship between two variables-advances and deposits in

my study. This study mainly attempts to analyze the relationship between advances
and deposits.
2.7 OPERATIONAL DEFINITION OF CONCEPT
CREDIT MANAGEMENT
Credit management can be defined as ‘management of loans and

advances in banks’ In other words credit management means ‘successfully managing
the credit by paying the debt obligations on time for the amount required’.
Banking
The term banking is defined as accepting, for the purpose of lending or

investment of deposits of money from the public, repayable on demand or otherwise,
and withdraw able by cheque, draft and order or otherwise.
Customer
A person who has a bank account in his name and for whom the bank
undertakes to provide the facilities as a banker is considered to be customer.
Loan
Under the loan system, credit is given for a definite purpose and for a
predetermined period.

Interest
Payments made by a borrower for the use of money, calculated as

percentages of the capital borrowed.
'Financial Institution - FI'

An establishment that focuses on dealing with financial transactions, such
as investments, loans and deposits. Conventionally, financial institutions are composed
of organizations such as banks, trust companies, insurance companies and investment
dealers.
Advance
Advance are granted on the were personal security of the borrower, therefore in
the event of the default of the borrower.
2.8 METHODOLOGY
Type of research
Descriptive research
Descriptive research, also known as statistical research in which the data

description is accurate and systematic.
Method of data collection
Secondary data: The data is collected through Annual reports of the bank,
text books and website.

Tools used for data collection
The tools and technique is used for the analyzing the data, which includes
Balance Sheet has been used for the purpose of analysis and presentation. For data
analysis a subsequent interpretation as been interpreted.
Tools and technique used for Analysis
Correlation and simple percentage technique is used
PLAN OF ACTION
The data collected from annual report of the company and an analysis,
interpretation has been done. So, has to avoid wrong interpretation.
 Planning the study.

 Collection of data from primary and secondary sources.
 Execution of collected data.
 Making the tables and charts.
 Analyzing the data and Interpretation.
PERIOD OF STUDY
The study was done during the year 2011 from February to April, for a period
of 6 weeks. The Analysis has been done by considering the data of the year2006-2007,
2007-2008, 2008-2009, 2009-2010 and 2010-2011 annual reports of the company.
2.9 LIMITATIONS OF THE STUDY
 The study is limited only to SSBPS Karatagi.
The study is limited to information provided by the bank and restricted to Karnataka
only.

2.10 Chapter Scheme
CHAPTER 1: INTRODUCTION
This chapter discusses the subject background and also gives an introduction to
the banking systems carried out in India.
CHAPTER 2: RESEARCH METHODOLOGY
It contains the design of study including review of literature, statement of

problem, scope of the study and objectives of the study, and, limitation of study, and
overview of chapter scheme.
CHAPTER 3: PROFILE OF SSBPS.
This chapter consists of the complete information about SSBPS.
CHAPTER 4: ANALYSIS AND INTERPRETATION OF DATA.
The data collected through the various records available with the bank were
compiled, tabulated, compared, and analyzed in order to draw inferences.
CHAPTER 5: SUMMARY OF FINDINGS, SUGGESTION AND

CONCLUSIONS
This chapter provides a summary of findings, conclusions drawn from the

analysis conducted and suitable recommendations given.

3.1INDUSTRY PROFILEs
The Co–operative credit system was introduced in India in 1904, when

the co-operative credit society Act was passed. The institutional source of credit for
agriculture and related activities was very inadequate source of credit for agriculture
and related activities was very inadequate at that time. The money lenders would
provide some credit at very high rates of interest. The co-operative banks were
expected to substitute such unorganized money market agencies and provide short and
long term credit at reasonable rates of interest. It was expected that they would co-
ordinate the activities of unorganized and organized segments of Indian money market.
Subsequent to the adoption of economic planning in 1951, co operative banks

were expected to play a crucial role in achieving agricultural and rural development.
Before the nationalization of commercial banks the co-operative banks were the only
substitute for money lenders. But after nationalization and creation of Regional Rural
Bank and NABARD their relatives share declined.
Co-operative Banks in India have historically played a major role in

mobilization of domestic savings for economic development of the country. They have
provided the farmers and nonfarm entrepreneurs with the needed credit support. These
institutions have also contributed significantly to private capital formation in
agriculture and accelerated the pace of distribution of farm inputs (NABARD 2002)
Co-operative banks are promoted to meet the banking requirements of

consumers. They are established not only in the urban areas but also in the rural areas.
In rural areas these banks supply finance to agriculture, while in the urban areas they
are started to provide finance to buy consumer goods. They provided short and medium
term loans. They provide loans at a lower rate comparatively. They are formed on the
co-operative society principles as such are more service oriented than profit oriented.

The Indian banking can be broadly categorized into nationalized

(government owned), private banks and specialized banking institutions. The Reserve
Bank of India acts a centralized body monitoring any discrepancies and shortcoming in
the system. Since the nationalization of banks in 1969, the public sector banks or the
nationalized banks have acquired a place of prominence and has since then seen
tremendous progress. The Indian banking has finally worked up to the competitive
dynamics of the ‘new’ Indian market and is addressing the relevant issues to take on the
multifarious challenges of globalization. The Indian banking has come from a long way
from being a sleepy business institution to a highly proactive and dynamic entity. This
transformation has been largely brought about by the large dose of liberalization and
economic reforms that allowed banks to explore new businesses.
The Reserve Bank of India acts as a centralized body monitoring any

discrepancies and shortcoming in the system. It is the foremost monitoring body in the
Indian financial sector. The nationalized banks (i.e. government-owned banks)
continue to dominate the Indian banking arena. Industry estimates indicate that out of
274 commercial banks operating in India, 223 banks are in the public sector and 51 are
in the private sector. The private sector bank grid also includes 24 foreign banks that
have started their operations here. Under the ambit of the nationalized banks come the
specialized banking institutions. These co-operatives, rural banks focus on areas of
agriculture, rural development etc. Unlike commercial banks these co-operative banks
do not lend on the basis of a prime lending rate.
Credit Management Process

Credit risk management process should cover the entire credit cycle starting
from the origination of the credit in a financial institution’s books to the point the credit
is extinguished from the books. It should provide for sound practices in.
 Credit processing/appraisal
 Credit approval/ sanction
 Credit documentation
 Credit administration
 Disbursement

 Monitoring and control of individual credits

 Monitoring the overall credit portfolio (stress testing)
 Credit classification and
 Managing problem credits/recovery
Credit Processing/Appraisal
Credit processing is the stage where all required information on credit is
gathered and applications are screened. Credit application forms should be sufficiently
to permit gathering of all information needed for credit assessment at the outset. In this
connection, financial institutions should have a checklist to ensure that all required
information is, in fact, collected.
Financial institutions should set out pre-qualification screening criteria, which

act as a guide for their officers to determine the types of credit that are acceptable. For
instance, the criteria may include rejecting application from blacklisted customers.
These criteria would help institutions avoid processing and screening application s that
would be later rejected.
Moreover, all credits should be for legitimate purposes and adequate processes
should be established to ensure that financial institutions are not used for fraudulent
activities that are prohibited by law or are of such nature that if permitted would
contravene the provisions of law. Institutions must not expose themselves to
reputational risk associated with granting credit to customers of questionable repute and
integrity.
The next stage to credit screening is credit appraisal where the financial
institution assesses the customer’s ability to meet his obligation. Institutions should
establish will designed credit appraisal criteria to ensure that facilities are granted only
to creditworthy customers who can make repayment from reasonably determinable
source of cash flow on a timely basis.

Financial institution usually requires collateral or guarantees in support of a

credit in order to mitigate risk. It must be recognized that collateral and guarantees are
merely instruments of risk mitigation. They are by no means, substitutes for a
customer’s ability to generate sufficient cash flows to no nor his contractual repayment
obligations.
Collateral and guarantees cannot obviate or minimize the need for a

comprehensive assessment of the customer’s ability to observe repayment schedule not
should they e allowed to compensate for insufficient information from the customer.
Care should be taken that working capital financing is not base entirely on the
existence of collateral d or guarantees. Such financing must be supported by of
projected levels of sales and cost of sales, and cost of sales, prudential working capital
ratio, past expense of working capital financing, and contributions to such capital by the
borrower itself.
Financial institutions must have a policy for valuing collateral, taking into
account the requirements of the bank guidelines dealing with the matter. Such policy
shall, among other
Things provide for acceptability of various forms of collateral their periodic

valuation. Press for ensuing their continuing legal enforceability and realization value.
needless to say that in the event of credit deterioration, credit enforcement of
foreclosure actions may yield proceeds much less than initially foreseen and the valor
of collaterals should accordingly be very conservatively determined as a set- off against
default risk.
In the case of loan syndication, a participating a financial institution should

have a policy to ensure that it does not place undue reliance on the credit risk analysis
carried out by the lead underwriter. The institution must carry out its own due
diligence, including credit risk analyses, and assessment of the terms and conditions of
the syndication. The appraisal criteria will of necessity vary between corporate credit
applicants and personal credit customers. Corporate credit applicants must provide
audited financial statements in support of their applications. As a general rule, the
appraisal criteria will focus on:

 Amount and purpose of facilities and sources of repayment

 Integrity and reputation of the applicant as well as his legal capacity to assume the
credit obligation;
 Risk profile of the borrower and the sensitivity of the applicable industry sector to
economic fluctuations;
 Performance of the borrowers in and credit previously ranted by the financial institution
and other institutions, and other institutions, in which case a credit report should be
sought form them;
 the borrower’s capacity to the repay based on his business plan, if relevant, and
projected cash flows using different scenarios;
 Cumulative exposure of the borrower to different institutions;
 physical inspection of the borrowers business premises as well as the facility that is the
subject of the proposed financing;
 Borrowers business expertise;
 Adequacy and enforceability of collateral or guarantees, taking into account the
existence of any previous charges of other institutions on the collateral;
 Current and forecast operating environment of the borrower
 Background information on shareholders. Directors and beneficial owners for corporate
customers
 Management capacity of corporate customers.
Credit Approval/Sanction
A financial institution must have in place written guidelines on the credit approval
process and the approval authorities of individuals or committees as well as the basis of
those decisions. Approval authorities should be sanctioned by the board of directors.
Approval authorities will cover new credit approvals, renewals of existing credits and
charges in terms and conditions of previously approved credits, particularly credit
restructuring, all of which should be fully documented and recorded. Prudent credit
practice requires that persons empowered with the credit approval authority should not
also have the customer relationship responsibility.

Approval authorities of individuals should be commensurate to their positions

within management ranks as well as their expertise. Depending on the nature and size
of credit, it would be prudent to require approval of two officers on a credit application,
in accordance with the Board’s policy. The approval process should be based on a
system of checks and balanced. Some approval authorities will be reserved for the
credit committee in view of the size and complexity of the credit transaction. Local
banks operating through branches in Bangalore should consider centralizing their credit
approval process at the head office. Depending on the size of the financial institution,
it should develop a corps of credit risk specialists who have high level expertise and
experience and demonstrated judgment in assessing, approving and managing credit
risk
All credit approvals should be at an arm’s length. Based on established criteria.

Credit to related parties should be closely analyzed and monitored so that no senior
individual in the institution is able to override the established credit granting process.
Related party transactions should be reviewed by the board of directors under due
processes of good governance.
Credit Documentation
Documentation is an essential part of the credit process and is required for each
phase of the credit cycle, including credit application, credit analysis credit approval,
credit monitoring, and collateral valuation, and impairment recognition, foreclosure of
impaired loan and realization of security. The format of credit files must be
standardized and follow-up. The bank will pay particular attention to the quality of files
and the systems in place for their maintenance.
Documentation establishes the relationship between the financial institution and the
borrower and forms the basis for any legal action in a court of law. Institution must
ensure that contractual agreements with their borrowers are vetted by their legal
advisers. Credit applications must be documented regardless of their approval or
rejection. All documentation should be available for examination by the bank.

Financial institution must establish policies on information to be documented at

each stage of the credit cycle. The depth and detail of information from a customer will
depend on the nature of the facility and his prior performance with the institution. A
separate credit file should be maintained for each customer. If a subsidiary file is
created, it be should be properly cross-indexed to the main credit file.
For security reasons, financial institutions should consider keeping only the copies
of critical documents (i.e., those of legal value, facility letters, and signed loan
agreements) in credit files while retaining the originals in more secure custody. Credit
files should also be stored in fire-proof cabinets and should not be removed from the
institution’s premises.
Financial institution should maintain a checklist that can show that all their policies
and procedures ranging from receiving the credit application to the disbursement of
funds have been complied with. The checklist should also include the identity of
individual (s) and/or committee(s) involved in the decision making process.
Credit Administration
Financial institutions must ensure that their credit portfolio is properly
administered, that is, loan agreement are duty prepared, renewal notices are sent
systematically and credit files are regularly updated.
An institution may allocate its credit administration function to a separate department

of to designated individuals in credit operations, depending on the size and complexity
of its credit portfolio.
 A financial institution’s credit administration function should, as a minimum, ensure
that:
 Credit files are neatly organized, cross indexed, and their removal from the premises is
not permitted:
 The borrower has registered the required insurance policy in favor of the bank and is
regularly paying the premiums:
 The borrower is making timely repayments of lease rents in respect of charged
leasehold properties;

 Credit facilities are disbursed only artier all the contractual terms and conditions have
been met and all the required document have been received;
 Collateral value is regularly monitored;
 The borrower is making timely repayment on interest, principal and any agreed to fees
and commissions;
 Information provided to management is both accurate and timely;
 Responsibilities within the financial institution are adequately segregated;
 Funds disbursed under the credit agreement are, in fact , used for the purpose for the
which they were granted;
 “back office” operations are properly controlled;
 The established policies and procedures as well as relevant laws and regulations are
complied with;
 On-site inspection visits of the borrower’s business are regularly conducted and
assessment documented.
Disbursement
Once the credit is approved, the customer should be advised of the terms and
conditions of the credit by way of a letter of offer. The duplicate of this letter should be
duly signed and returned to the institution by the customer. The facility disbursement
process should start only upon receipt of this letter and should involve, inter alia, the
completion of formalities regarding documentation. The registration of collateral
insurance cover in the institution favor and the vetting of document a legal expert.
Under no circumstances shall funds be release prior to compliance with pre-
disbursement conditions and approval by the relevant authorities in the financial
institution.

DEFINITIONS AND MEANING OF CO-OPERATIVE BANKS
In the words of HENERY WOLFF “Co-operative banking an agency

which is in a position deal with the small means on his own terms. Accepting the
security he has and without drawing in the protection of the rich”.
DEVINE defines “ A mutual society formed composed and governed by

working people themselves for encouraging regular savings and generation miniature
loans on easy terms of interest and repayments”.
The largest single segment of the cooperative industry is credit unions. The
roughly 11,500 credit unions in the India have more than $140 billion in assets and
almost 35 million members. Building on their base of member savings and consumer
loans and home mortgages, credit unions now offer additional services to their
members including credit cards, automated teller machines, tax-deferred retirement
accounts and certificates of deposit.
FEATURES OF CO- OPERATIVE BANKS
 They are organized and managed in the principal of co-operation self help and mutual
help. They function with the rule of “one member one vote’.
 Co-operative banks perform all the main banking function of deposit mobilization,
supply of credit and provision for remittance of deposit mobilization, supply of credit
and provision for remittance facilities.
 Co- operative banks belong to the money market as well as the capital market.
 Co-operative banks accept current, savings, fixed and other types of time deposit from
individuals and intuitions including banks.
 Co-operative banks do banking business mainly in agriculture and rural sector.
 Co-operative banks also required complying with requirement of statutory liquidity
ratio and cash reserve ratio liquidity requirement as other scheduled and non scheduled
banks.

Co-operative banks are the banks which are registered under the Karnataka co-
operative act 1959. Co-operative banks are a part of the vast and powerful super
structure of co-operative institutions, which are engaged in the task of production,
marketing, and distribution, servicing and banking in India.
While neither the first nor most successful early cooperative, the SSBPS Society
developed an active outreach program, encouraging and assisting others to form
cooperatives. It also prepared a written list of practices and policies that seemed
consistent with success of such efforts. This list became one of the first sets of
cooperative principles, characteristics that distinguish cooperatives from no cooperative
businesses.
 One member, one vote

 Cash trading
 Membership education
 Political and religious neutrality
 No unusual risk assumption
 Limitation on the number of shares owned
 Limited interest on stock
 Goods sold at regular retail prices
 Net margins distributed according to patronage
The Indian banks have to become global competitive
1) There is a need to develop a long standing and beneficial relationship between co-
operative units and banks. The bank should also adopt a customer friendly approach
based on the understanding go the specific nature of requirements of the corporate
units.
2) Lending decisions should be more flexible and quick to meet the genuine demands.

3) Deliver of credit has to be instantaneous and properly packaged as far as possible,

within the specified time norms for disposal of applications.
4) Adequate efforts should be made by the banks to improve their operational efficiency,
so that fund can be made available to corporate units at competitive rates of interest,
which is the prime dictating term.
5) Quick of service has to improve justifying the scale of charges levied by the bank.
6) Specialized needs of the client have to be responded by specializes branched manned

by suitable qualified and adequately experienced personnel in typical business centers.
TYPES OF CO-OPERATIVE
There are two main categories of the co-operative banks.
(a) Short term lending oriented co-operative Banks - within this category there are three
sub categories of banks viz state co-operative banks, District co-operative banks and
Primary Agricultural co-operative societies.
(b) Long term lending oriented co-operative Banks - within the second category there
are state co-operatives and rural development banks.
The co-operative banking structure in India is divided into following

main 5 categories
Primary Urban Co-op Banks
Primary Agricultural Credit Societies:

The Primary Co-operative Credit Society

Is an association of borrowers and non-borrowers residing in a particular
locality? The funds of the society are derived from the share capital and deposits of
members and loans from central co-operative banks.
The borrowing powers of the members as well as of the society are fixed. The loans
are given to members for the purchase of cattle, fodder, fertilizers, pesticides,
implements, etc.
District Central Co-op Banks
These are the federations of primary credit societies in a district and are of two types
those having a membership of primary societies only and those having a membership of
societies as well as individuals.
The funds of the bank consist of share capital, deposits, loans and overdrafts from state
co-operative banks and joint stocks. These banks finance member societies within the
limits of the borrowing capacity of societies. They also conduct all the business of a
joint stock bank.
State Co-operative Banks
The state co-operative bank is a federation of central co-operative bank and acts as a
watchdog of the co-operative banking structure in the state. Its funds are obtained from
share capital, deposits, loans and overdrafts from the Reserve Bank of India.
The state co-operative banks lend money to central co-operative banks and primary
societies and not directly to farmers.

Land Development Banks
The land development banks are organized in 3 tiers namely; state, central and
primary level and they meet the long term credit requirements of the farmers for
developmental purposes. The state land development bank overseas the primary land
development banks situated in the districts and tonsils in the state.
They are governed both by the state government and Reserve Bank of India.
Recently, the supervision of land development banks has been assumed by National
Bank for Agriculture and Rural Development (NABARD). The sources of funds for
these banks are the debentures subscribed by both central and state government. These
banks do not accept deposits from the general public.
Banking sector in India
Banking in India has its origin as early as the Vedic period. Its believed that the
transaction from money lending to banking must have occurred even before Manu, the
great Hindu jurist, who has devoted a sector of his work to deposit and advance and laid
down rules relating to rats of interest.
Today the commercial banking system in India may be distinguished

into:
 Public sector banks

 Private sector banks co-operative sector banks
 Co-operative banks
 Development bank

Public sector banks
a) State banks of India and its associate banks called the state bank group
b) 20 nationalized banks
c) Regional rural bank mainly sponsored by public sector bank
Private sector bank
a) Old generation private banks

b) New generation private banks
c) Foreign banks in India
d) Schedule co-operative banks
e) Non schedule banks
Co-operative sector
The co-operative banking sector has been developed in the country to the supplement
the village money lender. The co-operative banking sector in India is divided into four
points.
a) State co-operative banks

b) Central co-operatives banks
c) Primary agriculture credit societies
d) Land development banks
e) Urban co-operatives banks
f) Primary agriculture development banks
g) Primary land development banks
h) State land development banks

Development banks
a) Industrial finance corporation of India (IFCI)

b) Industrial development bank of India (IDBI)
c) Industrial credit and investment corporation of India (ICICI)
d) Industrial investment bank of India (IIBI)
e) Small industries development bank of India (SIDBI)
f) National housing bank
g) Export and import bank of India.

3.2COMPANY PROFILE
The Karnataka state co-operative apex bank Ltd., established in the year
1995 is extending its continued service for the last 17years to its members and
customers. The bank which had a humble beginning in the year 1995 grew over the
years and achieved a noticeable development in the co-operative banking sector and has
been functioning as a pioneer co-operative bank. The bank is known for its
commitment for the development of its members and customer. The primary objective
of the bank is to provide short and medium term loans to its members and public as
whole and also accepting deposits from the public landed it to the need borrowers and
invest to earn and an interest.
Co-operative field has a long history of nearly more than 100 years field came
into being to prevent the exploitation of poor public and also need borrower to provided
suitable assistance to the eligible members.
A co-operative sector in the co-operative field has acquired a special

importance.
History of Karnataka state co-operative SSBPS Bank
The Bank was registered on 17th November 1994 under the KCS act and ruler
and obtaining from reserve bank of India on 26/6/1995.Than the bank was started its
function of its banking business under the style of SSBPS Bank. As on 4/12/1995 as a
chief promoter Sri B.G.Areli and first president of the bank Sri V.B.Chinnval along
with 13 members as a board of directors.

NATURE OF BUSINESS
The main object is carry is out banking business under the KCS act and rulers and
also as per RBI license, directives instructions as applicable to co-operative societies
act.
Its main not is to accept deposits from the public and lending to fund
for various purpose and also investments for the profit making to provided services to
the members and also general public.
The SSBPS approaches to risk management offers at more complete, end-to-end

solution that includes data aggregation, analytics and reporting within a transparent
framework. With SSBPS, you get:
 An open, extensible environment with complete capabilities for retail credit scoring,
corporate credit rating and credit portfolio risk management.
 A robust risk engine that offers in-depth modeling and the analytical capabilities
necessary for developing a propriety and market-differentiating economic capital
model.
 The flexibility to anticipate future modeling methodologies and regulatory changes.
 Complete transparency and audit ability, which facilitates supervisory review –
internally, by rating agencies and by regulators regulations.
 Award-winning predictive analytics that can help you analyze and determine the best
course of action for "toxic" (illiquid) assets.
 An integrated risk management environment that provides a firm wide view of all
types of risks (credit, market, counterparty and liquidity) to help you maintain the
profitability and health of the firm.

Functions of SSBPS banks
 Promoter and organize co-operative and for this purpose frame model bye-
laws and issue guidelines for framing various policies for co-operatives in
accordance with co –operative principles;
 Provide co-operative training, education, and information and proper gate
co-operative principles;
 Undertake research and evaluation and assist in the preparation of
perspective development plans for the member co-operatives;
 Promote harmonious relations between member co-operatives;
 Consideration of an appeal of a director of co-operative who has been
disqualified or removed;
 Provide management development services to member co-operatives
including participation in board meeting when required;
 Evolve code of conduct for, member co-operatives.
 Evolve viability norms for member co-operatives.
 Promote new forms of co-operatives enterprises.
 Serves as data bank of co-operatives.
 Represent the interest of member co-operatives.
The path of the SSBPS Bank
The global financial crisis altered the very nature and structure of the global capital
markets business, and identifying strategies for surviving and thriving in this changed
market is paramount. To meet these challenges, investment banks, asset management
firms, diversified financial firms.
With economic uncertainty continuing around the world, a sustained focus on capital
optimization, liquidity management, efficiency and opportunities arising from ever-
lower latency will demand sustained focus. Moving from risk management silos to a
firm wide view of risk management will become a board-level requirement. A

heightened regulatory climate will necessitate new levels of transparency and

compliance. And for wealth management and brokerage firms, staying close to clients
who are concerned about volatile markets will be crucial.
OBJECTIVE S OF THE BANK
The main aims and objectives of the Bank defined its bye loss or given
below:
 To raise funds by way of deposits, loans, grants, donations, subscriptions, subsidies
etc. for financing the members by way of loans, cash credits, over-drafts and
advances
 To develop, assist and co-ordinate the member and its essentials customers.
 To serve Co-operative field registered under the KCS act.
 It also lends need agricultural formers financial assistance like gold and jewelers,
fishery pledging and agricultural commodity etc.
BOARD OF DIRECTORS
1) Sri lingappa sunkhad president

2) Sri giriyappa budi
3) Sri B.G aril directors
4) N.B saloni
5) G nagaradappa
6) N mohan rao
7) Rudrappa timmapur
8) Sri girjamma salgundi

Credit Risk Management Cycle
The credit risk management cycle has five steps and they are:
1 Credit origination
2 Credit measurement
3 portfolio management
4 Risk Transfer Decision
5 Risk Transfer Channel selection

The Credit Risk management cycle
Credit
Origination
Risk Transfer
Credit
Channel
mesurement
Selection
Risk Transfer Portfolio

Decision Management
Figure: The Credit Risk management cycle

STRUCTURE OF THE SSBPS Bank
PRESIDENT
VICE PRESIDENT
BOARD OF DIRECTOR
dddddirDIRECTOR
MANAGER
ACCOUNTANT CASHER CLERCK CLERCK

Competitor’s information
1.Commercial banks
2.Land bank (development bank)
3.RDCC
4.PBSPS
5.SUCO
6.LVT
7.SRN
Types of loan
1) Secured loan
2) Unsecured loan

SECURED LOANS
Secured loans are those loans which are granted against the security of some
property. The securely arrangement may be hypothecation, pledge or mortgage. The
loans are sanctioned against the following securities:
 Gold loan
 Business loan
 Ware house loan
 Pigmy loan
 FD loan
 CC loan (cash credit)
 RD loan
 NSC/KVP/LIC policy loan
 Key loan
 Vehicle loan
 Mortgage loan

GOLD LOAN
The Bank provides Jewel Loan against pledge of gold ornaments to the
residents of Bangalore city.
Terms
 The loan applicant should be/become a nominal member of the Bank. Gold articles
should be delivered in person with Address proof or ID proof. In case, the applicant
is already not a member of the Bank, a person who is well known to bank should
introduce him to the bank.
 The Bank will engage a Gold Appraiser to value the gold articles. Based on the
valuation report, Rs. 1500/- per gram or 65% of the net weight, whichever is less, is
considered for quantum of loan.
 The maximum loan given is Rs. 1.00 lakh and the current rate of interest is 14%.
 The repayment period for the loan is 12 months and interest should be paid once
every three months. 2% penal interest will be collected on overdue amount.
 Service charges will be collected for each loan.
 The ornaments will be kept in a bag with tag and waxed seal and in the joint
custody of 14 banks
 The gold article will be delivered only to the borrower, after closing the account and
returning the gold loan receipt.
 For jewel loans the rate of interest will be 12%

BUSINESS LOANS
Rules of SSBPS bank for granting business loans are as follows:
1. The persons who can avail for business loans are traders, workshops, hotels, and other
business ventures.
2. The loan is taken also for business improvement either cash credit limit or overdraft
facility requirement.
3. To avail this loan the borrower should submit income proof that is 3 years financial
statements with income tax returns, license to pursue the related profession, VAT
registration etc.
4. Cash credit loans to traders are given up to 10lacs at 16% per annum
If everything is favorable they should provide securely and also projections should be
given. The securities are: Hypothecation of stock in trade
Margin-30%, Sanction -70%
 Immovable property:
Margin-50%, Sanction-50%
The repayment period is 48 monthly installments; the loan should be repaid within this
period.

WARE HOUSE LOAN
As per the bank loan rules the orientation for the following purpose.
 To the agricultural formers

 To the traders for commercial purpose.
Both types of loans section against the pledge of ware house
receipts at 70% of its value of commodities maximum of Rs 5lac at the rate of 16% for
the duration 6months only.
PIGMY LOAN/ FD LOAN/CC LOAN/ RD LOAN/ NCS/KVP/ LIC

LOAN
For the above types of various loan bank will grant 75% of its face value of the
said deposits over and above the 2% of its normal deposit rates paid to its deposits.
KEY LOAN
The above said loans are granetnded to its members and also customers is as
follows,
 Pledging of agricultural commodities.

 Rate of interest 16%.
 Duration of the loan 6 month.

VEHICLES LOANS
The Bank provides loans to salaried people within the Bangalore City, to purchase
two wheelers/four wheelers for personal use only.
 The bank will granted vehicle loan its customers, members for individual as well as
transporting industry purpose like 2 wheelers, 3 wheelers, 4 wheelers legibility, and
normally driving licenses photo copy.
 For transport operator’s truck driver, licenses and also services of reputed road
transport apportion with years experiences having a driving licenses.
 For wheelers driving licenses with couta.
 Rate of interest16% repayment period 18 to 48 months.
OD/ CC LOAN
Bank for granted to the regular members of the bank who is engaged in trade,
commerce and industries. Cash credit and overdraft may be allowed such period as may
be exceeding 1 year in any case. Cash credit /OD amount to be advance on the security
of the property/ pledge of started/ pledge termed deposits with the banks.
This account is liable to be close at the duration of the board of director

and steps to taken to recover. The dues a when the CC account is not operated up on
continuously for more than 3 months, maximum amount 5lac. Rate of interest 16%.
MORTGAGE LOANS
As per the bank loan ruler maximum amount under this head is 5 lac at
the rate of 16% for a period of maximum 5years. Amount to be section for the purpose
of business / Education/Marriages of the children and also extended to construction
purpose also extended to the commercial buildings up to a maximum of Rs5 lacs
repayable in 3months. Loans are also given for sit purchase and mortgage. The rate of
interest 16%based on the loan amount.

Rules of SSBPS bank for granting term loans are as follows:
1. This loan is granted to the persons in whose name the term deposits are held in the
bank.
2. Advances may not be permitted on the security of deposits receipts of the other banks
and similarly, advances shall not be granted against the deposits receipts in the name of
third party
3. Whenever advances are granted against recurring or daily, deposits, the borrower must
submit an undertaking in the prescribed form, along with the relative pass
book/card/deposits receipts duly discharged.
4. The deposits should not be renewed without adjusting and clearing the related loan dues
of the parties.
5. Soon after making advance, the bank’s lien should be prominently noted in the
respective deposits register/ledger and also on the face of deposit receipt or pass book.

RATE OF INTEREST FOR VARIOUS LOANS
Sl.
No Account Purpose of Loan Rate of
.No Interest
1. I Gold loan 14%
2. II Business loan 16%
3. III Vehicle loan 16%
4. IV Key loan 16%
5. V Ware house loan 16%
6. VI Consumption loan 16%
7. VII Montage loan 16%
8. VIII OD/CC loan 16%
9. IX Bills discount loan 18%
10. X Loan and deposit 2%
 FD loan
 Cash certificate
 Pigmy
 RD loan

UNSECURED LOANS
Unsecured loans are those loans which are granted without any security or which
are sanctioned against personal securely of one or more members.
Rule of Karnataka state co-operative bank for granting unsecured loan are as
follows.
1. This loan is availed by the petty trade, education, housing marriage and other
ceremonial purposes.
2. This loan is granted against personal surety of the borrower.
3. The maximum amount of loan granted is up to Rs 50000 by the bank to the borrower.
4. The repayment period is up to 36 months,
5. The borrower should submit income proof along with income tax returns and financial
statements ability of the borrower or surety.
6. Rate of interest is 13% charged by the bank to the borrower.
The unsecured loan includes the following:
 Consumer’s loans.
 Bill’s purchased loan.

CONSUMER LOAN
For the purpose of its members and customer bank will section an advance the
consumption loan for the following purposes. For purpose house holding articles like T
, computer, refrigerator etc maximum 25%.
BILL’S PURCHASED LOAN
As per bank loans bank provide bills loan under the head bill
purchased and discounted for a period of 60 days only against bills / checks discount to
its customer till the amount is realized maximum 3lac. Rate of interest 18%.

RESULTS ANALYSIS AND DISCUSSION
To analyze the data of the company. The source of information is taken from the annual
reports of the company, some tools has been used such as Tables and Graphs. The
performance of the company from the year 2006-2011.
SSBPS BANK PROGERSS CHART
Years 2006-07 2007-08 2008-09 2009-10 2010-2011
Free Reserves 58.79 671.4 75.89 84.88 94.68
Owned Funds 10.69 10.75 10.82 10.79 10760
Deposits 207.45 237.98 260.21 268.08 299.22
Borrowings - - 1.86 4.04 19.73
Investments 77.92 104.45 128.40 122.43 118.04
Advances 212.01 222.56 251.75 264.51 327.01
Working 292.67 334.11 367.87 388.15 459.02

capital
Profit before - 8.09 7.13 9.19 7.61

tax
Net profits 5.12 5.27 5.07 5.44 5.61

Table 4.1: Table showing the free reserves at SSBPS:
Years 2006-07 2007-08 2008-09 2009-10 2010-11
Free 58.79 671.4 75.89 84.88 94.68

Reserves(in
lakhs)
Chart 4.1: Chart showing the free reserves of the bank
FREE RESERVES
800
700 671.4
600
500
400
free reserves
300
200
75.89 84.88 94.68
100 58.79
0
2006-07 2007-08 2008-09 2009-10 2010-11

ANALYSIS
From the above table 4.1 it can be seen that the company’s free reserves was
Rs.58.79 lacs in the yr.2006-07, Rs.671.4 lacs in the yr2007-08 , Rs.75.89 in the yr
2008-09 ,Rs. 84.88 in the yr 2009-10 , Rs. 94.68 in the yr 2010-11.
DISCUSSION
As per the above analysis it can be observed that the free reserve has
increased from in 2006-07 58.79 to94.68 in 2010-11 because increase in profit every
year. The banks needs to maintain minimums 25% as statutory reserve and 5% cash
reserve ratio The total optimum reserve kept by the bank up to 35%. It indicates the
strong position of the bank in the banking sector. The bank as maintain proper reserves
for the future needs.

Table 4.2: Table showing the owned funds at SSBPS:
Years 2006-07 2007-08 2008-09 2009-10 2010-11
Owned Funds(in 10.69 10.75 10.82 10.79 10.76

lakhs)
Chart 4.2: Chart showing the owned funds of the bank:
10.82
10.82
10.79
10.8
10.78 10.76
10.75
10.76
Owned Funds
10.74
10.72
10.69
10.7
10.68
10.66
10.64
10.62
2006-07 2007-08 2008-09 2009-10 2010-11
Years

ANALYSIS
From the above table 4.2 it can be seen that the company’s owned funds was
Rs.10.69 lacs in the yr.2006-07 , Rs.10.75 lacs in the yr2007-08 , Rs.10.82 in the yr
DISCUSSION
As per the above analysis observed that owned funds have been
increased nearly 2.32% from 2006 to 2011. Because share capital and free reserves
increased 50.82 crores to 94.68 crores respectively from 2006 to 20011.the bank
monitoring proper reserves of funds for lending to various sectors11

Table 4.3 :Table showing the deposits at SSBPS
Years 2006-07 2007-08 2008-09 2009-10 2010-11
Deposits(in lakhs) 207.45 237.98 260.21 268.21 299.22
Chart 4.3: Chart showing the deposits of the bank
DEPOSITS
207.45
299.22
2006-07
2007-08
237.98 2008-09
2009-10
268.21 2010-11
260.21

ANALYSIS
From the above table 4.3 it can be seen that the company’s Deposits was
Rs.207.45 lacs in the yr.2006-07 , Rs.237.98 lacs in the yr 2007-08 , Rs.260.21 in the
yr 2008-09 ,Rs. 268.08 in the yr 2009-10 , Rs. 299.22 in the yr 2010-11.
DISCUSSION
As per the above analysis seen that the bank is attracting more and more
customers every year by offering attractive interest & also bank focus on all income
group peoples therefore the term deposits increased every year.

Table 4.4:Table showing the borrowings at SSBPS
Years 2006-07 2007-08 2008-09 2009-10 2010-11
Borrowings(in lakhs) - - 1.86 4.04 19.73
Chart 4.4 : Chart showing the borrowings of the bank
25
19.73
20
15
10
5 4.04
1.86
0 0
0
2006-07 2007-08 2008-09 2009-10 2010-11

ANALYSIS
From the above table 4.4 it can be seen that the company’s borrowings was
1.86 in the yr 2008-09 ,Rs. 4.04 in the yr 2009-10 , Rs. 19.73 in the yr 2010-11.
DISCUSSION
As per the above analysis observed that bank borrow money from DCC
Banks and which meant for development so the interest rate which the bank gets
through the funds burrowed from DCC Banks at low rates.

Table 4.5 : Table showing the investments at SSBPS
Years 2006-07 2007-08 2008-09 2009-10 2010-11
Investments(in lakhs) 77.92 104.45 128.40 122.43 118.04
Chart 4.5: Chart showing the investments of the bank
Investments(in lacs)
140 128.4 122.43 118.04
120 104.45
100
77.92
Axis Title
80
60
40
20
0
2006-07 2007-08 2008-09 2009-10 2010-11
2006-07 2007-08 2008-09 2009-10 2010-11

Investments(in lacs) 77.92 104.45 128.4 122.43 118.04

ANALYSIS
From the above table 4.5 it can be seen that the company’s investments was
Rs.77.92 lacs in the yr.2006-07 , Rs.104.45 lacs in the yr 2007-08 , Rs.128.40 in the yr
DISCUSSION
As per the above analysis observed that the bank investment are with canara bank
RDCC bank karatagi and gangavathi respective as been compartely increased year by
year.

Table 4.6: Table showing the advance at SSBPS
Years 2006-07 2007-08 2008-09 2009-10 2010-11
Advance(in lakhs) 212.01 222.56 251.75 264.51 327.01
Table 4.6: Table showing the advances at SSBPS
Advances(in lacs)
3500
3000
2500
2000
Amount
1500
1000
500
0
2006-07 2007-08 2008-09 2009-10 2010-11
year

ANALYSIS
From the above table 4.6 it can be seen that the company’s advance was
DISCUSSION
As per the above analysis it is observed in advances of the state bank

increased from 184.43 lacs to 327.01 because increased its financial position available
customers.

Table 4.7:Table showing the working capital at SSBPS
Years 2006-07 2007-08 2008-09 2009-10 2010-11
Working capital 292.67 334.11 367.87 388.15 459.02

(in lakhs)
Chart 4.7: Chart showing the working capital of the bank
Working capital (in lacs)

7000 459.02
6000
388.15
5000 367.87
334.11
AMOUNT
4000 292.67
3000
2000
1000
2006-07 2007-08 2008-09 2009-10 2010-11

YEARS

ANALYSIS
From the above table 4.7 it can be seen that the company’s working capital was
DISCUSSION
As per the above analysis I have seen that the woerking capital was increased
year by yrear because of incresed the deposits cash inflow reserves and surplus profit in
all the aspects.

Table 4.8:Table showing profit bfore tax at SSBPS
Years 2006-07 2007-08 2008-09 2009-10 2010-11
PROFIT BFORE - 8.09 7.13 9.19 7.61

TAX (in lakhs)
Chart 4.8: Chart showing the profit before tax
Profit Before Tax

10 9.19
9
8.09
8 7.61
7.13
7
Profit before tax
6
5
4
3
2
1
0
0
2006-07 2007-08 2008-09 2009-10 2010-11

ANALYSIS
From the above table 4.8 it can be seen that the company’s profit before tax was
8.09 in the yr 2007-08 ,Rs. 7.13 in the yr 2008-09 , Rs.90.19 in the yr 2009-10,
Rs7.61 in the yr 20010-11.
DISCUSSION
As per profit before tax year it is increased in the one year and is dercresed in
other year and it was not as expected.

Table 4.8: Table showing the net profit at SSBPS
Years 2006-07 2007-08 2008-09 2009-10 2010-11
Net profits(in 5.12 5.27 5.07 5.44 5.61

lacs)
Chart 4.8:Chart showing the net profit of the bank
5.61 5.12
2006-07
2007-08
2008-09
2009-10
5.27
5.44 2010-11
5.07

ANALYSIS
From the above table 4.8 it can be seen that the company’s net profit was
Rs.5.12 lacs in the yr.2006-07 , Rs.5.27 lacs in the yr 2007-08 , Rs.5.07 in the yr
DISCUSSION
As per the above analysis the net profit position of the above bank slowly increases
from 2006-11 because of government insist income tax to co-operative banks also from
2006-07 onwards.

Test of correlation
Correlation measures the relationship between two variables. In our study are advances
and deposits. This study mainly attempts to analyze the relationship between advances
and deposits.
Hypothesis
 H0: There exists no relationship between ADVANCES and Deposits for last 5
years
 H1: Their exist relationship between ADVANCES and Deposits for last 5 year
Table: Test of correlation
YEAR Advance Deposits XY X2 Y2

(Rs in (Rs in
lakhs) lakhs)
2007 2.12 2.07 4.38 4.49 4.28
2008 2.22 2.37 5.26 4.92 5.61
2009 2.51 2.60 6.52 6.30 6.76
2010 2.64 2.68 7.07 6.96 7.18
2011 3.27 2.99 9.77 10.69 8.94
TOTAL 12.76 12.71 33 30.36 32.77

R= 33-162.17/1730.2
129.19/1730.2
R= 0.074
We use the symbol r to stand for the correlation. Through the magic of
mathematics it turns out that r will always be between -1.0 and +1.0. If the correlation
is negative, we have a negative relationship; if it's positive, the relationship is positive.
Conclusion
Calculated value r=0.074, which is positive. It means advance and deposits made by
SSBPS is positive and hence we accept the hypothesis.

5.1 FINDINGS
1. The company’s free reserve has been increased toRs50.82-94.68 in lakhs because of
increase in profit in every year, which company needs to maintain minimum of 25% as
statutory reserve and cash reserve ratio of 5%. The total optimum reserve kept by the
bank is up to 35%.
2. The bank has the strong position on the banking sector. The bank maintains proper
reserves for the future needs.
3. The owned funds have been increased nearly 2.32% from 2006 to 2011. Because share
capital and free reserves increased from 50.82 lakhs to 94.68 lakhs respectively from
2006 to 2011.
4. The deposits increased from the bank is attracting more and more customers every
year by offering attractive interest & also bank focus on all income group peoples
therefore the term deposits increased every year.
5. The bank borrows money from DCC Banks and the interest rate from which the bank
gets through the funds barrowed from DCC Banks at low rates. Rs. 19.73 in lakhs the
yr 2006-11.
6. The advances of the SSBP bank increased from Rs184.43 lacs to 327.01lakhs because
of increase in financial position available to customers.
7. The working capital increased Rs. 459.06 in lakhs the yr 2006-11.

5.2 CONCLUSION
The credit plays a very important role in economic development in the country. The
credit has gained much importance in the business field. The credit system of providing
agricultural loan and non agricultural loan under co-operative sector to improve the
condition of the country. The existences and development of any bank depends upon
proper mobilization and deployment of funds.
Advances play an important part in the gross earnings and net profit of banks. The basic
function of banks it is a commercial bank or any other credit institution, is to enable
individuals and business enterprises to purchase good and or services. Consumers
demand credit to acquire goods for which they pay in future. Demand for credit by
businessman arises because of time consuming nature of the productive and distribution
process. Of all the function of modern banking, lending with or without security, is by
far the most important function. Loan and advances constitute lending. Loan and
advances from the major business activity of the bank, they pay the depositor as and
when they are due for payment. And major part of bank’s income is earned from
interest earned on advances. The proper management of loans and advance is known as
credit management. Therefore credit management can be defined as “management of
loans and advances in bank”.
The Karnataka state co-operative SSBPS 17 years of long and remarkable growing
from strength to strength each year and acquired a sound financial position, it is model
institution in its functional style as compared to all other co-operative institutions.

5.3 RECOMMENDATION
1) The company’s Profit has to be increased at faster rate along with statutory reserves and
Cash Reserves.
2) The bank should give importance for giving advances to the priority sector as well as
women.
3) The bank should increase its profitability position.
4) The bank should also try to increase its business income like commission, brokerage,
donation etc.
5) Bank should offer provide incentives schemes for staff who have achieved better
recovery performances.
6) Proper follow up and supervision is a must to ensure asset creation, assets utilization of
loan and advances.
7) The bank should also start playing the role of a friend, philosopher and guide by
counseling the borrower.

BIBLIOGRAPHY
Books:
Financial Institutions Management: Credit Management Approach by

Anthony Saunders and Marcia Cornett, Irwin--‐McGraw-Hill, 5e, 2005.Good
over view of credit management.
Measuring and Managing Credit Risk by Arnaud de Servigny and Olivier

Renault, McGraw Hill, 2007.The S&P guide to credit management.
Financial Risk Management by Steven Allen, Wiley, 2003.
Websites:
http://www.investorwords.com/
http://www.thefreedictionary.com/

ANNEXURES
Balance Sheet As or 31/03/2010:
Assets Amount (RS) Liabilities Amount (Rs)

SHARE CAPITAL: CASH
Paid up share capital 1,063,725.00 Cash in Hand 388,641.00
Loan additional share 15,000.00 BANK

RDCC Bank ltd CA 18,059.00
20 HO Raichur
Canara Bank CA 822,241.85

RESERVE FUND: 217 KARTAGI
Reserve fund 3,495,336.11 TGB CA 217 3,643.66

KARTAGI
Bad and doubtful RDCC Bank ltd 369,407.60

debts reserves 544,413.47 CA21 sindhanur
Charity fund 469,528.39 State Bank of 50,100.41

Mysore CA 103
KATAGIRI
Silver jubilee fund 624,507.00 AXIS Bank ltd -13,628.42
HUBALI
Building fund 1,616,770.00 ICICI Bank Ltd 11,380.23

Gangavathi
Co op welfare fund 287,247.32 CBSPS Bank ltd CA 2,383.15

130 Gangavathi
Staff welfare fund 423,307.00 KSC APEX Bank ltd 9,436.00

C/A HO Bangalore

Members death fund 469,528.39 CANARA Bank -404,457.00

OD/CC A/C 352
KARTAGI
Staff welfare fund to 60,029.92
pay off EXGR.
Dividend equalization INVESTMENT

fund 496,850.99
Current Account 640,247.89 Reserve Fund 3,495,336.11

Investments in
RDCC GV
Savings Bank account 10,252,253.94 Investment in RDCC 2,500,000.00
Bank ltd Gangavathi
Fixed deposit account 3,496,635.00 RDCC Bank ltd HO 6,000.00

Raichur Shares
Staff security deposit 78,276.00 Tele Phone Deposit 1,000.00
PIGMY deposit 2,743,449.00 Building Fund 1,616,770.00

Investments in
CANARA
Recurring deposit 496,303.00 Silver Jubilee Fund 624,507.00
account invest in CANARA
Staff Welfare Fund 423,307.00

Invests in CANARA
OTHERS: LOANS AND

ADVANCES:
Dividend payable 899,508.00

Interest Payable 206,645.00 Business Loan 8,471,304.00

Account
Credit balance in OD 4,693.00 Ware House Receipt 111,681.00

CCL Loan
LIC Premium payable 4,192.00 Surity Loan Account 100,407.00
Provident fund 8,185.00 Pigmy Loan 87,800.00
payable
Professional Tax 150.00 Fixed Deposit Loan 148,578.00
Payable
Audit fee payable 77,800.00 Cash Certificate 663,293.00
NPA Payable 2,300,000.00 Key Loan 2,321,521.00
General Provision on 600,000.00 Hypothetication of 776,824.00

standard ASEE Vehicle Loan
INCOME TAX 375,000.00 Recurring Deposit 43,228.00

PAYABLE 2010-2011 Loan
Consumption Loans 2,277,847.00
Mortgage Loans 7,000,831.00
OD/CC Loans 2,246,380.00
Bills Purchased and 1,150,000.00

Discounted
DEBIT Balance in 71,953.00

Deposits
Furniture And 96,300.00

Fixtures
Computers A/C 178,940.00
PROFIT 41,672,301.08 PROFIT 41,672,301.08

Balance Sheet As or 31/03/2011:
Assets Amount (RS) Liabilities Amount (Rs)

SHARE CASH
CAPITAL:
Paid up share 1,061,225.00 Cash in Hand 863,807.00
capital
Loan additional 51,000.00 BANK
share
RDCC Bank ltd CA 1,034,729.24
20 HO Raichur
RESERVE Canara Bank CA 822,241.85
FUND: 217 KARTAGI
Reserve fund 3,974,614.27 TGB CA 217 5,406.66
KARTAGI
Bad and 582,428.47 RDCC Bank ltd 71,273.60
doubtful debts CA21 sindhanur
reserves
Charity fund 507,543.39 State Bank of 40,839.41
Mysore CA 103
KATAGIRI
Silver jubilee 704,115.00 AXIS Bank ltd 37,899.87
fund HUBALI
Building fund 1,781,471.00 ICICI Bank Ltd 11,380.23
Gangavathi
Co op welfare 307,225.32 CBSPS Bank ltd CA 2,383.15
fund 130 Gangavathi
Staff welfare 489,515.00 KSC APEX Bank 9,293.00
fund ltd C/A HO
Bangalore
Members death 507,543.39 CANARA Bank -1,972,623.50
fund OD/CC A/C 352

KARTAGI
Staff welfare 79,036.92
fund to pay off
EXGR.
Dividend 534,865.89 INVESTMENT
equalization fund
Current Account 423,854.89 Reserve Fund 3,974,614.27
Investments in
RDCC GV
Savings Bank 9,864,438.0 Investment in 4,847,468.00
account RDCC Bank ltd
Gangavathi
Fixed deposit 5,046,062.00 RDCC Bank ltd HO 6,000.00
account Raichur Shares
Staff security 87,085.00 Tele Phone Deposit 1,000.00
deposit
PIGMY deposit 2,677,219.00 Building Fund 1,781,471.00
Investments in
CANARA
Recurring deposit 963.081.50 Silver Jubilee Fund 704,115.00
account invest in CANARA
Staff Welfare Fund 489,515.00
Invests in CANARA
OTHERS: LOANS AND
ADVANCES:
Dividend payable 963,081.50
Interest Payable 236,369.00 Business Loan 1,153,078.00
Account
Credit balance in 33,893.00 Ware House Receipt 111,681.00
OD CCL Loan
LIC Premium 5,250.00 Surity Loan 94,297.00
payable Account

Provident fund 13,821.00 Pigmy Loan 156,151.00

payable
Professional Tax 450.00 Fixed Deposit Loan 120,238.00
Payable
Audit fee payable 75,000.00 Cash Certificate 625,390.00
NPA Payable 2,500,000.00 Key Loan 1,498,1666.00
General 650,000.00 Hypothetication of 472,614.00
Provision on Vehicle Loan
standard ASEE
INCOME TAX 200,000.00 Recurring Deposit 36,000.00
PAYABLE Loan
2010-2011
Consumption Loans 2,157,551.00
Mortgage Loans 7,500,830.00
OD/CC Loans 5,158,484.00
Bills Purchased and 1,150,000.00

Discounted
DEBIT Balance in
Deposits
Furniture And 86,670.00

Fixtures
Computers A/C 119,300.00
PROFIT 45,705,894.38 PROFIT 45,705,894.38

A Study On Credit Management at Ssbps

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A STUDY ON CREDIT MANAGEMENT AT SSBPS

In earlier times, before money was introduced, artisans and agriculturists

 Absence of double co-incidence of wants i.e. two parties to the exchange

RR College of management studies and computer application. Bangalore Page 1

Cooperative banking is retail and commercial banking organized on a cooperative

RR College of management studies and computer application. Bangalore Page 2

According to NAFCUB the total deposits & landings of Co-operative Banks is

RR College of management studies and computer application. Bangalore Page 3

RR College of management studies and computer application. Bangalore Page 4

INTRODUCTION TO CREDIT MANAGEMENT

The credit planning is emerged as a major instrument for planned allocation of

RR College of management studies and computer application. Bangalore Page 5

MEANING OF CREDIT MANAGENT

Credit management can be defined as ‘management of loans and advances in

RR College of management studies and computer application. Bangalore Page 6

FUNDS FOR LENDING

 Deposits of all types –fixed, current saving and recurring

FORMS OF BANK LENDING /CLASSIFICATION OF CREDIT

Banks offer different kinds of borrowing facilities to customers for various

RR College of management studies and computer application. Bangalore Page 7

THE FIVE C’S OF CREDIT

RISK AND BANKING

Though risk in business cannot be avoided be banker is doing his business of

RISK ASSESSMENT AND MANAGEMENT

Credit management in co-operative banks

A system of trading in money which involved safeguarding deposits and making

RR College of management studies and computer application. Bangalore Page 9

2. Individual / Firm / Company

A bank may be a person, firm or a company. A banking company means a company

5. Payment and Withdrawal

RR College of management studies and computer application. Bangalore Page 10

6. Agency and Utility Services

A bank provides various banking facilities to its customers. They include

7. Profit and Service Orientation

A bank is a profit seeking institution having service oriented approach.

8. Ever increasing Functions

Banking is an evolutionary concept. There is continuous expansion and

A bank acts as a connecting link between borrowers and lenders of money.

10. Banking Business

A bank's main activity should be to do business of banking which should not be

RR College of management studies and computer application. Bangalore Page 11

CREDIT MANAGEMENT IN Co-Operative Banks Of INDIA

Credit planning has emerged as a major instrument for planned allocation of

RR College of management studies and computer application. Bangalore Page 12

The credit policy decisions of firm have two broad dimensions

It should further indicate circumstances in which unsecured lending is

RR College of management studies and computer application. Bangalore Page 13

CREDIT ANALYSIS AND CREDIT INVESTIGATION

Besides establishing credit standards a bank should develop procedure for

Credit analysis is the process of assessing the risk offending to a business or

1. Obtaining credit information

2. Analysis of credit information.

RR College of management studies and computer application. Bangalore Page 14

OBTAINING CREDIT INFORMATION

The second source of information is external. The availability of information

Depending upon the availability the following source may be employed:

RR College of management studies and computer application. Bangalore Page 15

ANALYSIS OF CREDIT INFORMATION

The assessment of the quantitative aspects is based on the factual

The quantitative assessment should be supplemented by a qualitative

RR College of management studies and computer application. Bangalore Page 16

It finally helps to classify the customer into several credit categories

 The type of customers, whether new or existing.