A

Report on
“CREDIT MANAGEMENT”

In Partial Fulfilments of The Requirement for The Award

of Degree of Bachelor of Commerce in Accounting and
Finance.

By

Shaikh Sana

Roll no.41

Reena Mehta College of Commerce

Plot no. 574/5, 150 Feet Road, Opp. Maxus Mall, Bhayandar West,
Mira Bhayandar, Maharashtra 401101.
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 DECLARATION

I, Shaikh Sana riyaz hereby declare that this project entitled _“CREDIT
MANAGEMENT” has been prepared by me under the valuable guidance
and supervision ofSupriya Singh, Faculty Member, Reena Mehta
college, Thane, in partial fulfilment of the requirements for the award of
the Graduatebachelorin accounting and finance in the academic year 2018-
2019

I also declare that this project report has not been submitted to any
other university for the award of any other degree, fellowship, or any
other similar title.

Shaikh Sana Riyaz

Roll no. 41

Reena Mehta College of Commerce.

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 Plot no. 574/5, 150 Feet Road, Opp. Maxus Mall, Bhayandar West, Mira Bhayandar,
Maharashtra 401101

CERTIFICATE

This is to certify that Miss.Shaikh Sana Riyaz Roll no: 41of Third
Year B.A.F., Semester VI (2018- 2019) has successfully completed
the project on CREDIT MANAGEMENTunder the guidance of
Supriya Singh.

Course Coordinator Principal

Project Guide/ Internal Examiner

External Examiner

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 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous
and the depth is so enormous.

I would like to acknowledge the following as being idealistic channels and

fresh dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me

chance to do this project.

I would like to thank my Principal, Satinder Kaur Gujral, for providing the
necessary facilities required for completion of this project.

I take this opportunity to thank our CoordinatorSupriya Singh, for her

moral support and guidance.

I want to express my gratitude towards my college Reena Mehta College

of Commerce and Management Studies.

I would like to thank my College Library, for having provided various

reference books and magazines related to my project.
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 Lastly, I would like to thank each and every
person who directly or indirectly helped me in the
completion of the project especially myParents and
Peers who supported me throughout my project.

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 INDEX
1. Introduction to Banking.
2. Introduction to Co-operative Banking.

3. Introduction to Credit Management

4. Credit Management Department.

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 INTRODUCTION TO BANKING

As there is a origin for everything for instance an ancient mused about early of life
philosophy was born. The first roman decided to build a road instead cutting a path through the
jungle. Engineering came in to existence one day is primitive times, A human being lend to
another then passed for money and his original investment plus a little more banking has started.

Banks has business organization selling bank services bank continuously asses and
reassess how a customer view a bank services. What are new and emerging for customer
aspiration and these can be satisfied.

Which nationalization of major bank is 1969, in such serving the socio economic
objective has assume as much importance for the bank as these role of traditional commercial
banker the role and responsibility assume by the banks today are distinctly different from those
of other industries.

Owning to social commitment banks execute service to a large number of customers

without looking in to commercial viability, involvement of banks in social fulfillment, poverty
alleviation programmed, and rural development. Priority sector lending, extending banking to un
banked areas and providing a plethora of services to all segments of the population etc. has thus
largely been successful in meeting the objective of nationalization and natural.

Banks are back bone of society. A bank must meet the financial needs of a customer by
acting as a custodian of his asset. Providing credit facilities and assisting him to speedily out
through financial transaction of one type or another. Banking when you come to think of it. Are
people it is not figure files and ledger.

Bank services need considerable improvement on an emergent basis. And the time has
come for bank to look inward to find out what is the nature and quality of the product they sell,
what is the product is been demanded by the customer.

Banks have a social purpose. Banks have been interested with a worthy cause.

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 Banks belongs to the nation only through people, banks future prosperity and the extent
for its participation in the country‟s economic advancement rest ultimate in customer hands.

A banker is a dealer in money and credit.

The business of banking consist of borrowing and lending. Banks acts as an financial
intermediary between saver(lender) and investor(borrower) by accepting deposits of money from
a large number of customers and key factor will always remain customer. It would be unrealistic
today to believe that banks are mere financial institutions. Working for profit, banks essentially
are now social organization, rendering financial services to sub serving the social economic
objective of the society.

Services to the society means servile to customers present and future from the point of
view, the prime functions of banks of view, the prime functions of banks can be defined as the
creation and delivery of customers needed services in satisfying manner. Therefore a bankers
bank is to identify this customer and these needs.

Lending a major portion of a accumulated “pool” of money to those who wish to barrow.

The Indian companies act defines the term banking as “ accepting for the sake of lending
or investment of deposits of money from the public, repayable on demand or otherwise withdraw
and able by cheque draft or otherwise”.

FUNCTIONS OF BANKING

The main functions under section 5 and 6 act are:

1. Borrowing of money in the form ofdeposits

2. Lending or advancing of money in the form of different types ofloan.
3. The drawing making accepting discounting buying and selling collecting and dealing in
bills of exchange promissory notes coupons drafts bill of lading railway receiptswarrens
debentures certificates securities both negotiable and nonnegotiable.
4. The granting and issuing of credit traveler‟schequeetc.
5. The acquiring holding issuing on commission underwriting. Dealing in stock fundsshares
debentures bonds securities .

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 IMPORTANCE OF BANKING

The economic importance of banking is as follows

• Banks mobilized the small scattered and idle savings of the people make themavailable
for productivepurposes.
• By accepting the savings of the people banks provide safety and security tosurplus
money fordepositors
• By offering attractive interest on savings of the people with the banks, banks promotethe
habit of thrift and saving among thepeople.
• Banks influence the rate of interest in the money market; through the supply of money
banks exert a powerful influence on the interestrate.
• Banks provide a convenient and economical means of payment, the cheque, debitcard
and credit card system introduced by bank is of great help for makingpayments.
• Banks provide a convenient and economical means of transfer of funds from one placeto
another, banks drafts and demand draft are commonly used for remittance of funds; mail
transfer and telegraphic transfer are also used for transfer offunds.

HISTORY OF MODERN BANKING IN INDIA

Pre-nationalization period: the history of modern banking in India dates back to the last quarter
of 18thcentury. During this period the English agency house of Bombay and Calcutta started
banking business in India. The set up the bank of Hindustan around 1770 followed by set up of
quasi government banking institution like presidency bank of Bombay is 1840. In 1921 and early
20thcentury, the Swedish movement inspired starts banks to India. The India banks were
established during this period in 1935 the reserve bank of India was established as central bank

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for regulating and controlling the banking business in the country. Soon after independencethe
reserve bank was nationalized in September1948.

Post nationalization period: On account of top sided growth of the banking system and tobridge
the gap between a few industrial houses and banks the scheme of social control was imposed on
banks with effect from Feb.1.1969 it resulted setting up of national credit council for more
equitable distributors of banks more broad based. As a result the government resorted to more
radical measures by nationalizing 14 major banks on July 1969, later on April 1980, six more
banks were nationalized to achieve theobjectives.

Present scenario of banking industry: The Indian banking can be broadly categorized into
nationalized (government oriented) private banks and specialized banking institution.

The RBI acts as a centralized body monitoring any discrepancies and short coming is the
system. Since the nationalization of the banks in 1969 the public sector bank have acquired a
place of prominence and has then seen tremendous progress.

The need to become highly customer focused the slow moving public sector banks to
adopt a fast track approach.

NEW GENERATION BANKING:

The liberalized policy of government of India permitted entry of private sector in

banking, the industry has witnessed the entry of new generation private banks. The major
parameter that distinguishes these banks from all the other banks in Indian banking is level of
services that is offered to the customer, verifying the focus has always being centered the
customer understanding his needs and delighting him with various configurations of benefits and
a wide portfolio of production and services. The population of these banks can be gauged by the
fact that is a short span of time these banks gained considerable customer confidence.

INTRODUCTION TO CO-OPERATIVE BANKING

The co-operative credit system was introduced in India in1904, when the co-operative
credit society act was passed. The institutional source of credit for agriculture and relate

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activities was very inadequate . The co-operative banks were expected to substitute such
unorganized money market agencies and provide short and long term credit at reason rates of
interest. It was expected that they would co-ordinate the activities of unorganized segments of
India money market.

Subsequent to the adoption of economic planning in 1951, co-operative banks were

expected to play a crucial role in achieving agriculture and rural development. Before the
nationalization of commercial banks the co-operative banks were only the substitute for money
lender and other informal sector lenders but after nationalization and creation of regional rural
banks and NABARD their relatives share declined.

Co-operative banks in India,(with their networks spread over remote rural areas and a
large number of smaller towns) have historically played a major role in mobilization of domestic
savings for economic development of country.

They have provided the farmers and non-farmers entrepreneurs with needed credit
support. These institution have also contributed significantly to private formation is agriculture
and accelerated the pace of distribution of farm inspect(NABARD2002)

Co-operative banks are promoted to meet the banking requirements of consumer 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 to the urban areas they are started to provide finance to buy a
consumer goods they provide short and medium term loans. They provide loan at a lower rate
comparatively. They are formed a co-operative society principles as such are more services
oriented than profit oriented.

DEFINATION AND MEANING OF CO-OPERATIVE BANKS:

In the words of “ Henry wolf co-operative banking is an agency which is a position to

deal with the small means on his own terms accepting the security he has and without drawing in
the protection of the rich”.

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 DEVINE “defines a mutual society formed compared and governed by working people
themselves for encouraging regular savings and generating miniature loans on easy term andof
interest and repayment”.

STRUCTURE OF CO-OPERATIVE BANKING IN INDIA:

The co-operative banking is federal in character with three tie linkage between state,
district and village level institutions. At that state level we have development banks (SLDBS). At
district level the central co-operative banks (CCBS) or the district central co-operative
bank(CLDBS) then at the village level the primary agricultural credit societies (PACS) the
primary and development banks(PLDB) and the branches of SLBs.

The lower tiers are the members and the share holders of the immediate higher ties
besides, there are urban co-operative banks which are outside the federal structure.

Though federal is its nature the system is integrated vertically on the basis of functional
responsibilities of various components of the system. The SCBs, CCBs, and PAC from the short
term and medium term credit structure and it is the same in all states. The LDBs at various levels
make the long term credit structure which is not uniform in all states.

The state level co-operative banks are said to be the apex institution in their federal
structure, however the apex institution from the point of view of promotions, supply and
supervision are controlled by the government NABARD and national co-operative bank ofIndia,
SCBs and SLDBs are in the immediate position between the institution just mentioned on the
one hand and the co-operative banks on theother.

Te SCBs co-ordinates and regulate the working of CCBs. They act as custodian of
surplus funds of the CCBs and supplement them by attracting deposits and by obtaining loans
from the RBI.

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 STRUCTURE OF CO-OPERATIVE BANKING IN INDIA

RBI

CCBS

VCBS

PACS

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 FEATURES OF CO-OPERATIVE BANKS

➢ They are organized and managed on the principle of co-operative self help and mutual
help. They function with rule of “ one member one vote”
➢ Co-operative banks perform all the main banking function of deposit mobilization supply
of credit and provision for remittancefacilities.
➢ Co-operative banks belong to the market as well as the capitalmarkets
➢ Co-operative bank accept current savings fixed and other types of time deposit from
individuals and institutions includingbanks.

Co-operative banks are the banks which are registered under the Karnataka co-
operative societies act 1959, co-operative banks are a part of the vast and powerful super
structure of co-operative institution which is engaged in the task of production marketing
distribution, servicing, and banking in India.

INTRODUCTION TO FINANCIAL MANAGEMENT

Meaning: financial management is a specialized function directly associated with the

top management in the line but also the capacity of staff is the overall administration of
company.

“financial management is the operation activity of a business that is responsible for

obtaining and effectively utilizing the funds necessary for efficient operation”.

As of financial management:

Anticipating financial needs: the financial manager has to forecast expected events in
business and note their financial implications he anticipates financial needs by consulting an
array of documents such as cash budget, the performa statement of source and uses of funds and
etc. the total funds requirements can be prepared by collecting the information from all the heads
of the department about their needs, this is planning for subsequent steps for financial
management.

Acquiring financial resources:

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 The implies knowing when, where and how to obtain the funds which a business needs
funds should be acquired well before the need for them is actually felt. The finance manager
should known how to tap the different sources of funds, careful selection of the source is another
important aspect of financial management.

Allocating funds in business:

Allocation of finance here refers to investment of financial or finance on assets. It may

be fixed or current asset or both. Scientific allocation is very essential because each source of
fund is directly associated with the cost it is the basic goal of financial manager to recover the
cost of funds and offer fair percentage of returns to equity shareholders.

Administrating the allocation of funds:

Once the funds are allocated on various investment opportunities it is the basic
responsibility of the finance manager to watch the performance of each rupee that has been
invested. He has to adopt close relationship and marketing of flow of funds. This will ensure
continuous flow of funds as per the requirements of the organization. This helps the management
to increase efficiency by reducing the cost of operations and earn fair amount of profit out of
investments.

Analyzing the performance of finance:

Once the funds are administered it is very comfortable tor the finance manager to take
decisions. Through the budgeting, he will be able to compare the actual with standards. The
returns on investments must be continues and consistent, the cost of each financial decision and
returns if each investment must be analyzed. Where ever the deviations are found, necessary step
of strategies are to be adopted to overcome such events. This helps in achieving liquidity of a
business unit.

Accounting and reporting to management:

The departmental of finance has gained substantial recognition. He not only acts as line
executive but also as staff, he has to advice and supply information about the performance of
finance to top management, he is also responsible for marinating up to date records of the

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performance of finance decisions, the financial manager will have to keep its assets intact which
enable a firm to conduct its business.

Asset management has assumed an importance role in financial management, although

a business failure may not always be the result of financial failure “financial failure does
positively lead to business lead to business failures”.

Hence accounting and reporting of the performance of finance is an importance aspect

of financial management.

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FUNCTIONAL AREAS OF FINANCIAL MANAGEMENT

ESTIMATIONOFTHEFINANCIALMANAGEMENT

SELECTION OF RIGHT SOURCE OF FUNDS

F
U ALLOCATION OF FUNDS

N ANALYSIS AND INTERPRETATION

C ANALYSIS OF COST-VOLUME-PROFIT

T CAPITAL BUDGETING

I WORKING CAPITALMANAGEMENT

PROFIT PLANNIG AND CONTROL

O
FAIR RETURNS TO THE INVESTOR
N
MAINTAININGLIQUIDITYANDWEALTHMAXMIZE
S

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 1. Estimation of the financial requirements: The requirements of finance to a business
concern in continuous, it is needed in all the stages of business cycle namely, initial
growth saturation and declining stages funds account needed to establish the industry
both for meeting capital expenditure and reserveexpenditure.
2. Selection of the right sources of funds: After estimating the total funds of business
concern, it is the second important step of the finance manager to select the right type of
source of funds at the right time at right cost. Each financial instrument is associated with
different types ofcosts.
3. Allocation of funds: After mobilizing the total funds of a firm, it is the responsibilityof
finance manager to distribute the funds to capital expenditure and reserveexpenditure.
4. Analysis and interpretation of financial performance: It is another important task of
finance manager. He is expected to watch the performance of each portfolio that canbe
measured in terms of profitability and returns on theinvestments.
5. Analysis of cost volume profit: It is another important tool of financial management that
helps the management to evaluate different proposal of investment make or buydecision.
6. Capital budgeting: It is a technique through which a finance manager evaluates the
investment proposals. In how many years the original investment can be recovered at
whatpercentage.
7. Working capital management: It is rightly an adjust of fixed capital investment it is a
financial lubricant which keeps business operation going. It is the life blood of afirm.
8. Profit planning and control: It is another important function of financial management.
Profit planning guide the management in attaining the corporategoals.

INTRODUCTION TO CREDIT MANAGEMENT”

While business firms would like to sell on cash, the pressure of competitions and the
force to custom persuade them to sell on credit. Firms grant credit to facilitate sales. It is
valuable to the customers as it arguments their resources.

It is particularly appealing to these customers who cannot borrow from other sources or
find it very expensive or inconvenience to do so.

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 “Credit allows the customer to buy now pay later” so also credit constitutes the major
business activity of the bank i.e., lending loans and advances of all the function of modern
banking, with or without security is by far the most important function.

Advances comprise a very large portion of total bank asset and form the bank is thus
primarily judged by the soundness of its advances. A wise and prudent policy is regard to
advance is considered an important factor inspiring confidence is the depositor and the
prospective customer of bank.

“MEANING OF 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.

FUNDS FOR LENDING

A study of balance sheet reveals that main sources of funds available for lending and investment
are:

▪ Paid upcapital
▪ Reserve
▪ Deposit and otheraccounts
▪ Borrowing from theRBI
▪ Undistributedprofits
▪ Participation certificates
▪ Re-finance loan the industrial development bank, agricultural re-finance and
development etc.
▪ Other financial institution.

Classification of credit: bank credit is classified according to security, maturity and method of re-
payment, origin and purpose. The bank advances in country are classified into:

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 ➢ Secured andUnsecured
➢ Loans
➢ Overdraft
➢ Cashcredit
➢ Billsdiscounted
➢ Billspurchased
➢ Termloans

The brief explanation of the above is as follow.

Secured and Unsecured: secured loans are those loans which are granted only with its security.

Unsecured loans are those loans which are granted without any security or which are
sanctioned or which are sanctioned against personal security of one or more members.

Loans : A loan account represent one way of lending money to a customer. In case of loan, the
banker advances a lump sum for a certain period at a agreed rate of interest. The entire amountis
paid either in cash or by credit to his current account, which he can draw at any time. The
interest is charged for the full amountsanctioned.

Overdraft: overdraft is an arrangement between a banker and his customer by which the latter is
allowed to withdraw over and above his credit balance in the current account up to an agreed
limit.

Cash Credit: A cash is an arrangement by which the customer is allowed to borrow money up to
a certain limit. The customer need not draw the sanctioned amount at once but draw the amount
as and when required and can save the interest by reducing the debit balance whenever he is a
portion to do so. They are granted personal security.

Bill Discounted: Bills maturing within 90 days are discounted by banks for approved parties. It
constitutes clear advances against two or more signature of independent parties, one that of
endorses and the other that of drawer bank rely on credit worthiness standing and means of the
customers.

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Bills Purchased: Bills clear or documentary are sometimes purchased from approved customer is
whose favor regular limits are sanctioned. In case of documentary bill, the drafts are
accompanied by documents of title to goods. Such as railway receipt or bill of lading.

Term loans: since some times, bankers have started lending large amount for fairly long period to
industries and agriculture on the security of fixed asset term loans basis. Such loans is repayable
by installment over a No of years ranging from 3-10 years and sometimes more.

Consumer credit:

The five C‟s of credit: Mutual confidence and clear understanding are the basis of good
lending knowing the borrower means, knowing him, vis-à-vis his business are very important,
man behind the advances needs to be the guiding principle to the lending banker.

1. Character
2. Capacity
3. Capital
4. Conditions
5. Collateral

The explanation of the five C‟s are as follows:

1. Character: Banks want to put their money with their clients who have the bestcredentials
and references. The way you treat your employees and customers, the way you take
responsibility, your timeless is fulfilling obligation that‟scharacter.
2. Capacity: What is your companies borrowing history and track record ofrepayments.
sssHow much debt can your company handle these are numerous financial bench
marks such as debt and liquidity ratio that banks use before advancingfunds.
3. Capital: How well capitalized is your company? How money have your invested inthe
business? Banks want to see that you have a financial commitment, that you have put
yourself at risk in thecompany.
4. Conditions: What are the current economic conditions and how does your company fitis
it? If your business is sensitive to economic downturns. That bank wants to know that
you are good at managing productivity andexpenses.

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 5. Collateral: while cash flow will early always be the primary source of repayment of a
loan, bankers look at what they call a secondary source of repayment. Collateral
represents assets that the company pledges as an alternate repayment source for theloan.
Hand assets, most collateral is in the form of real estate and office or manufacturing
equipment, your accounts receivable and inventory can also be pledged collateral.
Lendingprinciples:
Safety
Liquidity
Profitability
Purpose
Safety: Safety is another important principle of lending. Safety of advance means that
borrower is in a portion to repay the loan with interest according to the terms of lending.
The repayment depends on these capacity and willingness to repay. If the borrower
invest, the money in an speculative venture or the borrower himself is dishonest; the
advance would be in jeopardy.
Purpose: Advances can be safe and required only when it is granted for productive
purpose and used only for the purpose for its borrowed. Advances permitted for
speculative purpose; even if the borrower is prepared to pay higher rate of interest is
against the principle of bank lending.
Liquidity: It is not just sufficient of advances are safe. Money should come back on
demand or in accordance with the repayment that has been programmed. This is possible
only when the borrower has used the funds for the purpose for which he has borrowed.
Profitability: Banks must deploy the funds in a profitable way and should maximize
returns through profitability is very important for the sake of higher profitability the
banker should not grant advances to an unsound party, though they are ready to pay
higher rate of interest.
Lending policy: The principle of a loan policy is to arrive at tradeoff between returns and
risk with the broader frame work of the strategy plan of the bank in fact, loan policy
should by such as to maximize returns while minimizing risk and substantially non-
funded business.
❖ Portfolioconsideration

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 ❖ Marketing offunds
❖ Terms andcondition
❖ Fundsposition

Portfolio consideration: Aggregate development of funds has to be done is such a manner that
the sudden change in environment should not after the funds adversity. The object of any bank is
to maximize safety of funds and yield these on and in the process reach acceptable standard for
the deployment of funds keeping the long range view.

Marketing of funds: any approach to lending has to be done from the point of view of achieving
desirable ends, lending should be done after deciding on new activities, areas an types of
borrowers.

Terms and conditions: The terms and conditions should create a confidence between the
borrower and the holder. The terms and conditions have to be acceptable and advantages,
encompassing the duties of the lender and the obligation of the borrower, and also must disclose,
financial information of borrower, and the information must be directed towards the end use of
funds that is utilization of borrowed funds for purpose which it is obtained.

Fund position: The lending policy of a bank depends on the market conditions which reflect on
the funds deployment opportunities available to the bank besides lending over a period of time
and deposits mobilization possibilities during the period.

Use of funds by the borrower and security available: Mostly lending is done against the security
of some sort of the other in the form of tangible assets provided by the borrower.

Risk and banking: Risk was still in recently a concept alien to Indian bank. 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 classifications
norms, provisioning requirement on bad debt and depreciation caused by marketing a part of
securities investment portfolio to market value created awareness to manage credit risk
effectively through various measures.

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Risk Assessment and Management: Risk is inherent in banking and for every market is every
business. The task of assets and liability management through cannot be as low as possible and
manage it and keep different types of risks with an acceptable level banks are exposed to
different risks. Though risk in business cannot be avoided the banker his doing his business of
banking is expected to take minimum calculated risk.

• Creditrisk
• Liquidrisk
• Currencyrisk
• Interestrisk

Credit risk: Credit risk refers to the risk of default on loans and advances granted by the banks
while timely repayments principle and interest or both is threatened due to in ability or un
willingness of the borrower.

Liquidity risk: Liquidity risk refers to the risk of meeting the maturity liabilities and not finding
enough maturing assed to meet these liabilities. This risk arises because bank mobilizes deposits
for different maturities in the form of demand and time deposits, and locks them up by lending at
different maturities. Liquidity gap also arises due to up unpredictability of deposits withdrawals.

Currency risk: This risk is resulted of foreign currency exposure and changes in the rate of
exchange of a given in terms of or a given currency in term of both the domestic and foreign
currencies. A bank engaged in international operation to such risks.

Interest rate risk: Refers to the risk of changes in interest rates subsequent to creation of the
assets and liability at fixed rates freedom is given to co-operative banks to fix up rate of interest
on advance. Regional rural banks and commercial banks, which they need to, do depending on
cost of their deposit.

“Credit management in India”

How is credit managed in India?

These broad areas are:

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 • Credit policy
• Creditanalysis
• Control of accountreceivable

Credit policy: Very few banks have attempted a systematic articulation and formulations of these
credit policies. Generally credit policies have ensured as unstated conventions.

The credit policy measures may include some or all of the following measures depending upon
the prevailing situations.

o Reserve banks expectation of deposit growth and to achieve the targeted growthrate.
o Measures to control liquidity in the banking system which may include CRR, SLRand
curtailment of re-finance facilities.
o Measures to promote agricultural growth and ruraldevelopment.
o Change in re-financing and bills are discountingfacilities.

Credit analysis and credit investigation:

Credit analysis: It is the process of assessing the risk of lending to a business or an individual.
The so called credit risk must be evaluated against the benefits the bank expects to derive from
making a loan a bank risk exposure is determined by its 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 quantities and qualitative dimensions, the qualitative
dimension of risk are generally more difficult to assets. The two basis steps involved in this
process are.

1) Obtaining creditinformation
2) Analysis of credit information

Obtaining credit information: The first step is credit analysis is obtaining credit information
which forms a basis to evaluate the credit worthiness of customer. The sources of information
may be:

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 a) Internal
b) External
❖ INTERNAL: Banks usually require their customers to fill various forms and
documents giving details of its financial operations. They are also requiring
functioning trade references with which banks can have contact to judge the credit
worthiness of the customer. Another source of credit information is derived fromthe
records of the banks contemplations on the extension ofcredit.
❖ EXTERNAL: The second source of information is external. The availability of
information from this source to assess the credit worthiness of customer dependson
the develop of institutional facilities and industry practices depending upon the
availability the following sources may beemployed.
a) Financialstatement
b) Bankreference
c) Tradereference
d) Credit bureaureport

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 firm should
cover two aspect.

a) Quantitative
b) Qualitative

Quantitative : The assessment of the quantitative aspect is based on the factual information
available from the financial statement the past records of the firm. The first step involved in this
type of assessment is to prepare agency schedule of the accounts payable of the applicant as well
as calculate average age of the account payable.

Qualitative: The qualitative assessment should be supplemented by a qualitative interpretation of

the applicant credit worthiness. The subjective judgments cover aspects relating to the quality
management.

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Control of receivable: maintaining and controlling of account receivable is neither throughnot
systematic, do very few firms have well defined system of monitoring and controlling account
receivables.

Its finally helps to classify the customer in to several credit categories:

1) Completely reliablecustomer
2) High reliablecustomer
3) Slightly reliablecustomer
4) Doubtfulcustomer

Creditinvestigation:

After having obtained the credit information the firm will set on idea regarding the matter which
should further investigated the factors that affect the extend and notice credit investigation are :

1) The type of customer, whether new orexisting

2) The customers business lines back found and related traderisk
3) Size of customer order and inspected further volume business withhim.
4) Company creditpolicy

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 terms and conditions on
which trade credit to be made available. The stipulations under which the goods are sold on
credit are referred to as credit terms.

These credit terms have three components:

1) Creditperiod
2) Cashdiscount
3) Cash discountperiod

Follow up supervision and control of bank credit: No doubt, credit disbursals are made by after
careful evaluation and appraisal of loan proposals to determine their bank ability. On the basis of
principles of bank of the lending banker is to follow up supervise the use of bank credit to verify
credit to verify first whether the assumptions on which lending decision was taken continue to

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hold good both in regard to business operations and environment and second the end 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 diversion of funds and deviation by the borrowers from terms and condition stipulated by
bank has to be noticed and timely action has to be taken.

Control at the branch level: Branch manager are expected to examine common sense and proper
case in handling advances whether sanctioned by them or any appropriate authority.

Security: The branch manager should ensure that security is properly valued, is easily salable, the
margin is properly maintained.

Financial position: The financial position of borrower and guarantor must be received from time
to time, at least once in a year. Companies must send copies of audited balance sheet.

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 affecting that is done. Experience inthis
regard is the bestguide.

Limitation: The period of limitation in any accounts must be watched from time to time.

Miscellaneous: It should be ensured that an advance does not contravene any provision of law, a
directive of the Reserve Bank on lending policy laid down by the central office.

Control at regional or central office:

Returns and statement: All branches submit to the regional or central office reports onadvances
at regular interval by means of these reports. The executive at regional office and central office
are able to assess the cause and safety of the banksadvances.

Review of advances: All advances are ordinarily required once in 12 months.

Periodical inspections: Braches are periodically inspected by internal and external auditor.

CONTROL BY THE SUPERINTENDENT OF ADVANCES:

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The superintendent of advances exercises his control is a variety of ways. Proposals, reports and
day to day correspondence are placed in his hands for consideration after security in his
department routine reposts on branch advances throughout the year are padded on to him and
action is taken on his authority.

CONTROL BY CHAIRMAN AND GENERAL MANAGER:

Thechairmanisthearbitersofarasthepracticalapplicationoftheboard‟spolicyisconcerned. He
consulted on all matters involving policy and all large advances are subjected to hisscrutiny. Some
of the functions of the chairman are delegated to the generalmanager.

CONTROL BY BOARD OF DIRECTORS:

The board of directors of bank determines the general lending policy of the bank taking
into account directors of the central governments, public interest, directors, surplus or paucity of
funds with the bank and general condition of the money market. The board also periodically
reviews the larger and the more difficult advances to which its alternation is drawn by the
general manager or the chairman.

In addition to the above mentioned steps to supervise and control the bank credit. There
are the recommendations of the study group of frame guidelines for follow up of bank credit
(Tendon committee). Which have been, by large the suggested procedure as a regular part of
their follow up machinery. The steps described essential of follow up and control of advances
and borrower accounts is to be successful and the safety of bank advances is to be ensured
without any under emphasis on physical security.

In summary the appraisal-cum-follow-up procedure as laid down by the Tendon committee will
be as under.

• Detailed credit analysis at the time of sanction of the advances, with suitable termsand
condition.
• Monthly stock statement in the revisedform
• Periodically stockinspection
• Quarterly performance budgetinformation.
• Half yearly balance sheet and profit and loss account within 60days.

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 CREDIT MANAGEMENT

While business firms would like to sell on cash, the pressure of competitions and the
force to custom persuade them to sell on credit. Firms grant credit to facilitate sales. It is
valuable to the customers as it arguments their resources. It is particularly appealing to these
customers 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 bank i.e., lending loans and advances of all the function of modern
banking, with or without security is by far the most important function. Advances comprise a
very large portion of total bank asset and form the bank is thus primarily judged by the
soundness of its advances. A wise and prudent policy is regard to advance is considered an
important factor inspiring confidence is the depositor and the prospective customer of bank.

Advances not only 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 is one form or other. Banks by channelizing accumulated savings of the nation into
productive uses help both depositors and borrowers.

Bank assist in creating more avenues of employment and thus helps increasing the
standards of living of the people creditability of a bank is one of the most important criteria is
establishing the credit worthiness of a bank. Loans and advances constitute lending loan from the
major business activity of a bank and they need to be liquid and easily realizable as a bank is
obligated to repay the depositors as and then they are due for major payments paid of the bank
income is earned from the interest on the advances. So there is a need for proper management of
loans and advances of all functions of modern banking, lending with or without security is by far
the most important functions. Loan and advances constitute lending. Loans and advances from
the major activity of the bank. They need to be required and easily realizable as the bank is
obliged to repay the depositors as and when they are due to payment. And major part of bank
incomes is earned interest earned on advances. The proper management of loans and advances is
known as management of loans and advances in banks.

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 STATEMENT OF PROBLEM

Finance is the life blood of all business organization and even for banks also the credit
borrowers come to bank to avail financial assistance from the ban for their business requirement.

Lending is the most important function of bank because it forms sole earning power of
banking system. The strength of banking system primarily depends upon the soundness of its
credit system.

The bank has to look at the credit worthiness of the borrower before lending to ascertain
the risks or otherwise.

The progress and development of the bank depends on how the credit is imaged so a
study entitled at Amanath co-operative bank Bangalore has been proposed to observe the
problems is credit management problems.

Scope of the study:

The study covers operational territory of Amanath co-operative bank Bangalore. The
period of study 1 month

Objective of the study:

1. To understand the prevailing credit managementsystem.

2. To highlight the pros and cons of creditmanagement.
3. To find out reasons for weak credit management.
4. To give suggestions on the basis of findings of thestudy.

Research methodology:

Sources of data

• Primarydata
• Secondarydata

Primary data: The data will be extracted from the employees or the officers of the bank with the
help of interview schedule………………………….delete……………………….

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Secondary data: This data will be obtained from annual reports financial statement bank records
etc.

Plans to analysis:

The data collected from records of the bank and executive will be systematically and orderly
arranged to facilitate analysis. The analysis will be made with the help of statistical tools such as
ratio, percentage, average etc. the analyzed data is presented in the form of labels, charts, graph,
etc………………………..delete;;;;; irrelevant statistical tools and mention only what is
used????????????????????????????

Limitations:

1. Timeconstraints
2. The study is one side i.e., only annual record of the bank and the opinion of the bankis
taken.
3. The study does not predict the future performance of the bank based on the added
records.
4. The study does not claim completeness and accuracy in the findings because it is made
by referring the annualreports.

Over view of the chapter scheme

Chapter 1: INTRODUCTION

It contains the general introduction to banking introduction to co-operative bank and introduction
to finance and theoretical back ground of the study, which describes about the theory behind
credit analysis.

Chapter 2: Research Design

It contains the design of the study which gives information the data? Used for the study,
objective, scope, method of data collection statement of the problem plan analysis, limitation of
the study etc.

Chapter 3: profile ofbank

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It contains the profile of the Amanath co-operative bank. In this chapter we can understand all
the operations of services and performance of the bank achievement, schemes, code of conduct
etc.

Chapter 4: Analysis and interpretation

Analysis and interpretation which includes sources and application of bank fund position of
different loans and advances grated, status of NPAs recovery method etc.

Chapter 5: Findings, conclusions and suggestions:

It contains the summary of findings, suggestions and conclusions.

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 PROFILE OF AMANATH CO-OPERATIVE BANK LTD

On 13thJanuary 1977, Dr. Mumtaz Ahmed Han and janab K Rahman Khan founded the
Amanath Co-operative bank with in short span of 30 years; the bank has attained the status of
Karnataka‟sfirstscheduleurbanco-operativebankwithasmallcapitalof3lakhs,thebankhas grown to
be the largest urban co-operative bank in the state, with a deposit of Rs.505 cores and net
owned funds of Rs.29.53cores.

The bank that began with just 3000 members, now boasts of nearly 41474 members. The
depositors and account holders, who exceeds 2.34 lakhs is numbers, are serviced by the 15
branches in the state. Many more branches are scheduled to open shortly with the aim of
extending the areas of operation to the entire state.

Amanath co-operative bank ltd. Offers ATM facility at 8 of its branches. The bank has
stepped into the new millennium incorporating the latest development in banking and
information technology with a resolve to make banking with Amanath a pleasure.

The microcosm of its objective “MASS BANKING” right from its inception. Hence the
major thrust of the bank has to inculcate the banking habits among middle and lower strata of the
society, mostly in hitherto unbanked under banked areas.

Keeping this objective in view, Amanath Bank opened branches in such areas which are
predominantly resided by middle lower income group and the areas concentrated by minorities
and backward classes.

The bank has, therefore adopted a selective policy in the opening of branches by
identifying the centre where there is a good potential a for inculcating the habit savings amongst
the people and at the same time, proving much needed finance to these people not only to meet
their domestic needs but also for developing their business, and in the process helping them
become self sufficient.

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 Keeping this objective in view, bank has introduced a scheme called micro credit for the
benefits of poorest among poor by involving SHG, and NGO‟s who are working for the
economic upliftment of the poor.

The bank has 419 employees on its roll, including 74 officers, human resources being the
most important asset of the bank; all out efforts are made to enhance the motivational level and
efficiency of the employees in house capabilities for impaling adequate training to the employees
continued to be a major strength of the bank.

Training is being provided to make them more competitive and customer oriented.

The bank has established a training college of its own on august 22.1988 here the banks
is first among the UVB in Karnataka to have established a staff training college of its own.

These achievement have extending credit to small trader, foot path vendors, fruit and
vegetable vendors, hawkers fall under priority sector.

The bank has made advances to a large number of three wheelers, self employed owners
and thus has extended self. Employment opportunities to a large number of people with small
means.

Thebankhasbaggedthe„Besturbanco-operativebank‟awardforthesecondsuccessive year
from the Karnataka state co-operative federation and Karnataka state urban banks federation.

The Reserve bank of India conferred the “scheduled status” on Amanath bank effective
from 29thJanuary 2000 and has included the name of the bank in the second schedule to the
reserve bank of India act,1934. The bank became the first urban co-operative bank in Karnataka
to be awarded this prestigious status. The conferment of “ scheduled status” will enable it

The bank has also excelled in the field of sports by winning both the “inter-bank cricket
tournament” organized by the canara bank and the “inter co-operative bank cricket tournament”
in 2000.

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OBJECTIVE OF THE BANK:

➢ The main objective is “MASS BANKING” right from itsinception.

➢ The major thrust of bank has been inculcating the banking habits and savings among
middle class and lower class section of thesociety.
➢ Establishing bank‟s presence in all the district ofKarnataka.
➢ Sustained growth, services and profitability to sustain futuredevelopment.
➢ To professionalize the work force and to meet the challengesahead.

FUTURE PLANS ANDPROSPECTS:

1) Installation of ATM for better customerservices.

2) Installation of more added services such as home banking, telebanking
networkservicesandE=-banking.
3) Expansion of credit for medium scale industries.
4) Foreign exchangebusiness.
5) Reduction in cost of funds and yield assets to march the industry leveltrend.
6) Opening of currency chart and small coindeposit.
7) Innovation of schemes and for financing prioritysectors.
8) Expansion of credit with proper professional appraisal will be adopted to reducethe
incidences of loan falling in NPAcategory.
9) Extension of area of operation of the bank to entire state ofKarnataka.
10) Opening of “ ladies branches “ in minorities concentrated residentialareas.

NEW PRODUCTS AND SERVICES OFFERED BY THE BANK:

1. Amanath co-operative bank ltd., (ACBL) flexideposits

2. Loan linkeddeposits
3. Limit linkeddeposits
4. Cumulative fixeddeposit
5. Yearly planningdeposit
6. Giftcheques
7. Depositservices

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 8. Creditcards
9. Foreignexchange
10. Internetbanking
11. Networking ofATM‟s
12. Any wherebanking
13. ACBL has entered into an agreement on referral basis, with M/s. kotakinsuranceto
provide life insurance policies to theircustomer.

SCHEMES OFFERED BY THE BANK:

1. ATM‟s facility round the clock banking service to thecustomers

2. Attractive rate ofinterest
3. payment if interest on term deposit at the choice of the depositors that ismonthly,
quarterlyetc.
4. facility for immediate with drawal before maturity in case ofneeds.
5. On spot loan facility at a margin of 15% ofdeposits.
6. Lucrative schemes suited to clientele like RozanaBachath, recurring depositsterm
deposits, cash certificate etc.
7. Nomination facility for all depositaccounts.

CUSTOMER SERVICE:

The bank is known for its customer friendly approach. The bank is taking a number of
measures to improve the quality of customer service. The branches customers contract
programmers are conducted. Customer compliant is redressed without delay.

POLICIES OF BANK:

➢ To deliver the quality of services to thecustomer

➢ To frequently supply RBI with essentialdata.
➢ Employees may not accept gifts, entertainment from any one seeking acontact.
➢ To have a diverse creditportfolio
➢ To provide middle and lower class people with cheaperfinance.

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 ➢ To keep in view the national policy attached to housing sector and liberalize thefinance
for construction. Renovation, acquisition of residential houses based on the repaying
capacity of theborrower.
➢ Committed to the compliance of law and regulation formed by thegovernment.

TECHNOLOGY UPGRADATION:

The bank created a departure of information technology at its corporate office. Earlier it
was called the computer department the primary objective of this department is to promote
computer literacy among the employees to upgrade communication and information technology
and to develop electronic banking capabilities all the branches are computerized from late 1890s.

HUMAN RESOURSE DEVELOPMENT:

The branches have an enlightened HRM policy a great deal of emphasis is given on
training. The total strength of bank is 440 employees. Women employees are more than 55% of
total strength. Periodical discussion is held with the representative of trade union of workers and
officers contributing healthy industrial relatives in the bank also with the concern department.

WORKING RESULTS:

The banking gas an embarked upon several measures to bring about improvement in the
profitability. the bank indicated several action to set up deposits mobilization credit expansions
recovery of NPA effectively supervision control over advances improving funds management
etc.

LOANS AND ADVANCES OFFERED BY THE BANK:

Business loans:

To traders, workshops hotels and other business venture.

Industrial loan:

To start small scale and medium scale industries.

Vehicle loans:

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 15% loan against the cost of vehicle (two three and four wheeler) with repayment as per
repayment capacity.

Personal loans:

For petty trade, education, housing, marriage, and other ceremonial purposes.

Housing loans:

For construction/acquisition of homes repairs renovation etc;

Consumer loan:

For purchase of household articles like T.V. fridge, furniture, computer etc.

Education loan:

For student pursuing higher education like MBA, MCA, MBBS, ENGINEERING etc.

Professional loan:

For doctors chartered accountants to set up their officers.

Other loans:

Against tangible securities gold ornaments , NSC, LIC, KVP,IVP, etc.

FUNCTIONAL DEPARTMENTS OF THE BANK:

The bank has a total of 11 functional departments which are as follows:

1. Accountsdepartment
2. Credit managementdepartment
3. General administrativedepartment
4. Human resourcedepartment
5. Inspectiondepartment
6. Investment and treasurydepartment
7. Funds managementdepartment
8. Information technologydepartment

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 9. Legaldepartment
10. Recoverydepartment
11. Planning and developmentdepartment
12. Central clearingdepartment.

ACCOUNTS DEPARTMENT:

1) The accounts are maintained with software installed in all the branches whichhas
been purchased from Infosys indialtd..
2) Consolidated accounts like preparation of balance sheet, final accountsare
maintained by central office and double entry system isfollowed.
3) The daily recording of transactions in the branches are to be submitted to thecentral
office.
4) Every Friday a weekly trail balance, p/L accounts are submitted by the branchesof
the central office an on the last Friday form No.9 (i.e, assets and liabilities) is
submitted to RBI registrar of co-operativesocieties.
5) The CRR and SLR are maintained by this department on daily basis. Thisdepartment
controls the deposit and advances in all the branches and the surplus amount of cash
and funds are submitted to the centraloffice.
6) All the assets of the braches and central office are insured by the central officewith
oriental india insurance and the premium is debited to thebranches.
7) Internal audit is done by the employees of the bank is consolidation with theauditors.
Statutory audit is conducted yearly for the financial yearending.

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 CREDIT MANAGEMENT DEPARTMENT

MANAGER

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,--------------------…………………..

1. Credit management is based on the paid up capital. Reserve, deposits,

advancesandworkingcapital.
2. The main reason for accepting deposit is to provideloans.
3. The criteria s for loan are exposure norm, deposit position, quantumbasis.

STANDARDS OF CONDUCT:
Amanath co-operative bank ltd, follows certain standard of conduct or ethical
principles that will be enforced equitably at all organizational levels.
They are:
TOWARDS CUSTOMERS
1. Qualityservice
2. Error reconciliation

TOWARDSEMPLOYEE

1. Equal employmentopportunities

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 2. Good work placeenvironment
3. Employeeprivacy
4. Opencommunication
5. Employeedevelopment
6. Compensation and benefit

TOWARDS SHAREHOLDERS

1. Good return oninvestment

2. Protection ofassets
3. Intellectual property
4. Accuracy ofrecords
5. Share holder communication

SIGNIFICANT FACTORS OFSUCCESS:

1. Quality ofservices
2. Low rate ofinterest
3. Opening banks is unbanked under bankedareas
4. Various form of deposits and loans offered to suit the needs of differentpeople
5. Customer friendly atmosphere maintained in thebank
6. Providing ATM‟s and other advanced technologyservices
7. Efficient and well qualifiedemployees.

THE TREND SETTER:

The following are first to its credit.

1. The first urban co-operative bank in Bangalore to admitted as a direct memberof

Bangalore bankers clearinghouse.
2. The first urban co-operative banks in Karnataka to computerized all its operationand
introduced wide area network(WAN).
3. The first urban co-operative bank in Karnataka to establish its own staff trainingcollege.
4. The first urban co-operative bank in Karnataka to install ATM facility for itscustomer.

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Amanath co-operative bank ltd. Is now the first co-operative bank in Karnataka to get schedule
status.

BRANCHES

The bank has head office at Shivajinagarit‟s main branch is at N.R.ROAD other than the main
branch it has 10 branches in Bangalore.

The location of branches in Bangalore are:

1. Shivajinagar
2. Siddaiahroad
3. Tanneryroad
4. Ganganhalli
5. B.V.K iyengarroad
6. Brigaderoad
7. R.Vroad
8. J.J.Rnagar
9. Ilyasnagar
10. Austin town

The outstation branches:

1. Belgaum
2. Mysore
3. Mangalore
4. Gulbarga

This are the branches of Amanath co-operative bank

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 ANALYSIS AND INTERPRETATION

4.1 Table showing total deposits of thebank

YEAR AMOUNT(Rs In PERCENTAGE INCREMENTAL

Crore) % GROWTH

2008 33213 100 -

2009 34898 105.07 5.07%
2010 33049 99.50 (-)5.57%
2011 33163 99.84 (-)0.34%

Formula:

CalCULATION OF THE INCREMENTAL GROWTH:

…….CURRENT YEAR / BASE YEAR X100

ANALYSIS: From the above table we can see that there is increase in percentage of deposits in
the year 2009 it has increaseD to 5.07% as compare to previous year and in the year 2010
decreased by 5.57% and in the year 2011 there was increase of 0.34 compared to previous year
2010.

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Graph 1 showing total deposit of the bank

Inference:

The reason………………………change…………. for the details in total deposits are:

The interest-…………………correcxt----capital levied by RBI

The high cost deposits bearing interest rate from 11% to 16.5% by the bank were prematurely
withdrawn to increase the profitability.

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Table showing total fixed deposits of the bank

YEAR AMOUNT(Rs In Crore) PERCENTAGE INCREMENTAL

% GROWTH

2008 20128 100 -

2009 18813 93.46 (-) 6.54
2010 16655 82.74 (-)10.74
2011 15608 77.54 (-)5.2

ANALYSIS:

From the above table it is observed that there is a decrease in the percentage of fixed
deposits in year 2009 it is reduced to 6.54 % as compared to previous year in the year 2010
further reduced by 10.74% compared to previous year , in year 2011 there was of 5.2% compare
to 2010.--------------bring out the impact…. On the overall reduction in the rates of interest.

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Graph 2 showing total fixed deposits of the bank:

Inference:

From the above table it is inferred the total fixed deposit of the bank decreases year by year

This is due to lack of customers and the customers have lost faith in the maintenance of the bank
because of the recent fraud of Rs. 300crore.

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Table No:03

Table showing total saving of bank deposits.

YEAR AMOUNT(Rs In Crore) PERCENTAGE INCREMENTAL

% GROWTH

2008 10072 100 -

2009 11679 115.95 15.95
2010 12102 120.15 4.2
2011 13215 131.20 11.05

Analysis:

From the above table it is observed that there is a increase in the percentage of total savings bank
deposits in the year 2009 there was increase of 15.95% as compared to previous year and in the
year 2010 increase of 4.2% and again in the year 2011 increase of 11.05 % compared to previous
year.

Interpretation :

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Graph 3 showing total savings of bank deposits:

Inference:

From the above table it is inferred that total savings bank deposit year by year.

This shows bank is only working on the interest of savings customers accounts.

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Table No:4

Table showing total current bank deposits

YEAR AMOUNT(Rs In Crore) PERCENTAGE INCREMENTAL

% GROWTH

2008 30122 100 -

2009 44049 146.23 46.23%
2010 42915 142.47 3.76%
2011 43397 144.07 1.6

Analysis:

From the above table it is observed that there is increase in the percentage of total current
deposits in year 2009 there was an increase of 46.23% and than there was a slight decrease of
3.76% and in the following year there was increase of 1.6%.

Inference

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Graph 4:

showing total current bank deposits.

Inference:

From the above table it is inferred that there is an increase in the year 2009 than there was a
down fall in year 2010 and than the bank further saw increase of 1. 6% in the year 2011.

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This shows that the efforts are made to control and reach towards a sustainable position.

Table No: 5

Table showing total capital of the bank.

YEAR AMOUNT(Rs In Crore) PERCENTAGE INCREMENTAL

% GROWTH

2008 49852 100 -

2009 58302 116.95 16.95%
2010 61584 123.53 6.58%
2011 61563 123.49 0.04%

Analysis:

From the above table it is observed that there is increase in the percentage of the total capitalof
the bank in the year 2009 increase of 16.95% and again in the year 2010 increase of 6.58% and
in the next year 0.04% in2011.

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Graph 5:

Table showing total capital of bank

70000

60000

50000

Inference:

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From the above it is inferred that total capital of bank increases year by year.

The reason for the increase in the total because of opening of more loan accounts of depositors

Table No. 6

Table showing total reserves of the bank

YEAR AMOUNT(Rs In Crore) PERCENTAGE INCREMENTAL

% GROWTH

2008 10644 100 -

2009 12707 119.38 19.38%
2010 13121 123.27 3.89%
2011 11726 110.16 -13.11%

Analysis:

From the above table it is observed that there is a increase in the percentage of total reserve in
the year 2009 there was increase of 19.38% as compared to previous year and in the year 2010
increase of 3.89% and in the year 2011 there was a drastic decrease of 13.11% as compared to
previous years.

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Graph No 6

Table showing total reserves of the bank

AMOUNT

Inference:

From the above table it is inferred that the reason for increase the total reserve are

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Increase in the statutory reserves, and staff gratuity of the bank and increase in the statutory
reserves and bad and doubtful debt reserve of the bank. In the year 2011 there was decrease of
statutory reserve and bad and doubtful debt of the bank.

Table no : 7

Table showing total investments of the bank.

YEAR AMOUNT(Rs In Crore) PERCENTAGE INCREMENTAL

% GROWTH

2008 102910 100 -

2009 99143 96.33 -3.67%
2010 97958 95.18 -1.15%
2011 97243 94.49 -0.69%

Analysis:

From the above table it is observed that there is a decrease in the percentage of investment in the
year 2009 there was a decrease of 3.67% as compared to previous year and the year 2010 againa
decreaseof1.15%andintheyear2011it‟sadeclineof0.69%ascomparedtopreviousyears.

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Graph no: 7

Graph showing total investments of the bank.

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Inference:

From the above the table it is inferred that there is a decrease in the percentage of total
investment year by year.

This is due to lack of communication with the clients and no proper communication with the
corporate people.

Lack of maintenance of accounts.

Table no: 8

Table showing total advances of the bank.

YEAR AMOUNT(Rs In Crore) PERCENTAGE INCREMENTAL

% GROWTH

2008 21511 100 -

2009 21362 99.30 -0. 7%
2010 18900 87.86 -11.44%
2011 18011 83.72 -4.14%

Analysis:

From the above table it is observed that there is a decrease in the percentage of total advances of
the bank deposits in the year 2009 there was a decrease of 0.7% than there was a huge declineof
11.44% in the year 2010 as compared to 2009 and in the year 2011 there was a reduced decline
of 4.14% as compared to 2010.

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Graph no: 8

Graph showing total advances of the bank.

Inference:

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From the above table it is inferred the reason for decline in the advances of the bank are
improper deployment of funds of the bank

Due to restriction in the growth of advances imposed by RBI.

Table no: 9

Table showing cash balance of the bank.

YEAR AMOUNT(Rs In Crore) PERCENTAGE INCREMENTAL

% GROWTH

2008 28124 100 -

2009 31536 112.13 12.13%
2010 35712 126.98 14.85%
2011 37822 134.48 7.5%

Analysis:

From the above table it is observed that there is increase in the percentage of total cash balance
of the bank in the year 2009 there was increase of 12.13% as compared to previous year and in
the year 2010 there was a increase of 14.85% and the bank saw a slightly reduced increase of
7.5% as compared to previous years.

This indicates …………………….reasons…………..

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Graph no:9

Table showing total cash balance of the bank

40000

35000
c

30000

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Inference:

The reason for the increase trend of cash balance are as follows

Increase in the liquidity position of the bank

The bank has kept additional cash to cover deposits withdrawals and meet emergency expenses.

Table no: 10

Table showing total balance with otherbanks

YEAR AMOUNT(Rs In Crore) PERCENTAGE INCREMENTAL

% GROWTH

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2008 12665 100 -
2009 27920 220.4 120.4%
2010 22681 179 -41.4%
2011 32074 253.24 74.24%

Analysis

From the above table it is observed that there is a increase in the percentage of total balance with
other bank in the year 2009 there was a huge increase of 120.4% as compared to previous year
and the year 2010 the bank saw a decline of 41.4% and again in the year 2011 there was a steep
increase of 74.24% as compared to previous year.

Graph no: 10

Graph showing total balances with other banks.

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 35000

30000

25000

Inference:……………….change‟‟‟‟‟‟‟‟‟‟‟‟‟‟‟‟‟‟‟‟‟‟

• The reason for declining trend in bank balance with other banksare:
• Decline in the fixed deposits of the bank with the subsidiaries of SBI and notified bankin
the year 2010
• Again in the year 2011 there was increase fixed deposits of the banks withthe
subsidiaries of SBI and notifiedbank
• By this we can tell that there was fluctuations in the bank every year from otherbanks.

Table no: 11

Table showing credit deposit ratio

PARTICULARS 2008 2009 2010 2011

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CREDIT 21511 21362 18900 18011
DEPOSITS 33213 34898 33049 33163
RATIO 64.76 6121 57.18 54.31
INCREMENTAL 0 -3.55 -4.03 -2.871
GROWTH

Analysis:

The ratio of credit deposit is one of the important ratio to asses the liquidity position the ratio of
credit to deposit of the bank is a fluctuating trend

From the above table it is observed that the credit deposit ratio was 64.76 during the year 2008
which was reduced to 61.21 and during the year 2010 it was further decreased to 57.18 and by
the year 2011 it again saw a decline of 54.31 thus it is not good progress by the bank. In the
following years.

Graph no: 11

Graph showing credit deposit ratio.

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 140000

80000

ratio

growth

Inference:

The ratio of credit to deposit of the bank shows decrease trend due to the following reasons

Fall in credit level of the bank

Restriction on the growth of advances imposed by RBI

Increase of liquidity of the bank.

Table no: 12

Table showing investment deposit ratio

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PARTICULARS 2008 2009 2010 2011
CREDIT 102910 99143 97958 97243
DEPOSITS 33213 34898 33049 33163
RATIO 30.98 28.40 29.64 29.32
INCREMENTAL 0 -2.58 -1.24 -0.32
GROWTH

Analysis

From the above table it is observed that the investment deposit ratio was 30.98 in the year 2008
and in the year 2009 it was reduced to 28.40 and again the year 2010 it was recovered to 29.64
and again in the year 2011 it recovered up to 29.32.

Graph no: 12

Graph showing investment deposit ratio.

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 400000

350000

300000

50000

-50000
ratio

growth

Inference:

From the above table it is inferred that investment deposit ratio decreased year by year.

Table No:13

Table showing statement of loans and advances of the bank

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 YEAR SHORT TERM MEDIUM LONG TERM
TERM
2008 81743 43482 27257
2009 86868 32389 30819
2010 70010 26993 28454
2011 66795 24464 25302

Analysis:

From the above table it is observed that the bank has advanced 81743 crore in the form of short
term loan during the year 2008 it was increased in the year 2009 to 86868 crore then there was a
decline in the year 2010 to 70010 as compared to previous year and in the year 2011 it was
reduced to 66795.

The bank has advanced Rs,43482 crore in the form of medium term loan during the year 2008 it
was saw a huge decline in the year 2009 to 32389 the medium term loan declined consistently in
the following years as compared to previous years.

The bank has advanced Rs.27527 crore in the form of long term in the year 2008 in the year
2009 it saw a raise to 32389 the bank again faced a decline in the year 2010 to 28455 and in the
year 2011 it was reduced to 25302.

Graph no: 13

Graph showing statement of loans and advances of the bank.

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 short term

long term

Inference:

From the above table it is inferred that the short term loan decrease gradually year by year.Even
the medium term loan has declined marginally very high in the year 2009 when compared to
2008 there after the medium term loan continues decrease gradually. It is also inferred that the
long term loans increases in the year 2009 there after we see that the long term loan decreases
gradually.

The bank should provide more loans skims for customers from the bank so that it can increase
loans and advances of the bank

Table No:14

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Table showing working capital position of the bank

YEAR AMOUNT PERCENTAGE% INCREMENTAL

GROWTH
2008 45289 100 -
2009 49740 108.5 8.5
2010 50534 110.2 1.7
2011 53355 116.4 6.2

Analysis:

From the table it is observed that there is an increase in the working capital in the year 2009
increase of 8.5% when compared to previous year in the year 2010 it was further increased by
1.7% in the year 2011it was again increase to 6.2% .

Graph no: 14
graph showing working capital position in the bank.

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 amount

percentage

Inference:

From the above table it is inferred that there is an increment in the percentage of workingcapital
in the year 2009 it is increased up to 8.5% again in the year 2011 it reached up to 6.2 this shows
that the bank maintains good workingcapital.

Table No:15

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Table showing components of borrowings

YEAR NABARD KARNATAKA KARNATAKA

APEX BANK MINORITIES
HO(KAB) DEVELOPMENT
2008 229.71 229.64 0
2009 0 765.8 0
2010 0 195.8 0
2011 0 0 0

ANALYSYS:

From the table it is observed that the main sources of funds for the bank is the borrowing from
Karnataka state co-operative bank H.O.(KSCAB) it has increased its borrowing in the year 2009
from 229.64 to 765.8 when compared to 2008 where as in the year 2010 it has reduced its
borrowing and in the year 2011 it has not borrowed any amount.

The second main source of borrowing for the bank is from NABARD it has borrowed 229.71
from it in the year 2008 but where as in the following years it has stopped its borrowing .

The bank has not borrowed any amount from Karnataka minorities development.

Graph no: 15

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Graph showing components of borrowings

Inference:

It is inferred that the bank has repaid a major part of its borrowing in the year 2009.

Table No:16

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Investment pattern of the bank(Rs. In lakhs)

INVESTMENT 2008 2009 2010 2011

1.central and 9055.21 8678.07 8559.56 8586.04
stategovernment
securities KSFC
&PD a/cwith
treasury
2. other trustee 0 0 0 0
securities
3.shares in co- 30 30 30 30
operative
institutions
4.other 998.50 998.50 998.50 998.50
investment at
KSCAB
5.Banaglore 7.76 7.76 7.76 7.76
district co-
operative bank
6.public sector 200 200 200 100
bank
Total 10291.47 9914.33 9795.82 9724.30

Analysis:

From the table it is observed that the total investment has decreased over the years. It may also
be noted that the bank has invested more in the government securities because of less risk and
more safety,

Graph no: 16

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Graph showing investment pattern of the bank (Rs in lakhs)

9000

8000

7000

6000

5000

4000

Inference:

This shows that the bank has invested more in central and state government securities because
that is less risky and investment is safer than the other securities.

Table No:17

Table showing total NET NPA‟S in the bank

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 YEAR AMOUNT PERCENTAGE% INCREMENTAL
GROWTH
2008 9399 100 -
2009 4866 51.77 (-)48.23
2010 2379 25.31 (-)26.46
2011 9300 98.94 73.63

Analysis:

From the above table it is observed that there is a huge decline in the net NPA in the year 2009
it was to 48.23again in the year 2010 it was reduced to 26.46 and in the year 2011 there was a
tremendous increase to 73.63. it shows that efforts has been taken to control the NPA.

Graph no: 17

Graph showing status of NET NPA‟s in the bank

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 amount

percentage

Inference:

FromtheabovetableitisinferredtherewasahugedeclineintheNPA‟sintheyear2009it reached to
48.23 again in the year 2010 it saw a reduce decline to 26.46 but where as inyear 2011 it
increased very highly up to extend of73.63.

ThisshowsthattheNPA‟shasbeenfluctuatingeveryyear. The

bank has to take care of recoverymanagement.

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Table No:18

Table showing status gross NPA‟S in the bank(Rs. In lakhs)

YEAR AMOUNT PERCENTAGE% INCREMENTAL

GROWTH
2008 11403 100 -
2009 14696 128.8 28.8%
2010 12109 106.1 (-)22.7%
2011 10759 94.4 (-)11.7%

Analysis:

From the above table it is observed that there was an increase in gross NPA in the year 2009
28.8% from the year 2010 there was a consistently decline in the following years 2010 & 2011.

Graph no: 18

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Graph showing status of gross NPA‟s in the bank.

amount

percentage

Inference:

From the above it is inferred that the total gross NPA‟s increases in the year 2009 after that we
see a constant decline in the following years. The bank has to take measures to control and take
care of recovery management.

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Table No:19

The comparative analysis of the bank for the last four years is furnished below

SL.NO PARTICULARS 2008 2009 2010 2011

1 SHARE 498.52 583.03 615.85 615.63
CAPITAL
2 RESERVE 10644.66 12707.85 13121.08 11726.35
3 DEPOSITS 33213.39 34898.26 33049.52 33163.42
4 ADVANCES 21511.45 21362.89 18900.91 18011.39
5 WORKING 45829.31 49740.36 50534.04 53355.20
CAPITAL
6 PROFIT/LOSS -7370.67 -1007.19 -11204.10 -9779.61

Analysis:

The above particulars are evident that the bank has sustained financial growth deposits constrains
both internal and external. The profits earned by all the branches reveal that there has been
growth of business although our main focus was recovery of NPA without paying much attention
in other areas of bank functioning.

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Graph No:19

Graph showing comparative position of the bank for the last four years

sharecapita deposits working profit/loss

capital

Inference:

Decline in the growth of advances was restricted under operational instruction imposed by RBI
in the terms of which the bank is permitted to grant advances against gold ornaments/tangible
securities and advances coming under priority sector or weaker section.

Findings:

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The project is related to “A study on credit management at amanath co-operative bank following
are the findings arrived at after the analysis and interpretation.

• Amanath bank follows rules and regulations laid by the NABARD for granting loansand
advances.
• The credit management system in amanath bank was quitegood.
• The bank has their own methodology to determine if a borrower is credit worthy or not.It
is determined in terms of the norms and standard set by the banks, such as income of the
applicant/customer, education qualification, professional experience, additional sources
of income assets of the applicants and their financing pattern recurring liabilitiesetc.
• The bank has grown to be the largest urban co-operative bank in the state, with a deposit
of Rs.505 crores and net owned funds of Rs.29.53crores.
• The first co-operative bank in Karnataka to computerized all its operational and
introduced wide areanetwork(WAN)
• The first co-operative bank in Karnataka to establish its own staff trainingcollege.
• The bank has bagged the” best urban co- operative bank” award for the secondsuccessive
year from the Karnataka state co-operative federation and Karnataka state urban bank
federation.
• The bank has introduced a new scheme called micro credit for the benefits byinvolving
SHG and NGO „s who are working for the economic upliftment of thepoor
• The bank provides loan for short, medium long term loans for developing business and
becomingself-sufficient
• The bank has opened its branches in areas which are pre-dominantly resided by by
middle/ lower income groups and the areas concentrated by minorities andbackward
classes.
• The Reserve bank of India conferred the :scheduled status” on amanath bank effectivefro
29thJanuary2000 and has included the name of the bank in the second schedule the
reserve bank of India act 1934. The bank became the 1sturban co-operative bank in
Karnataka to be awarded this prestigious status. The conferment of “scheduled status”
will enableit.

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