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CHAPTER 1 INTRODUCTION OF BANKING SYSTEM AND CO-OPERATIVE BANKING

1.1 INTRODUCTION OF BANKING SYSTEM 1.2 STRUCTURE OF BANKING SYSTEM IN INDIA 1.3 ABOUT CO-OPERATIVE BANK 1.4 THREE TIRE STRUCTURE OF CO-OPERATIVE BANK IN INDIA

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1.1 INTRODUCTION OF BANKING SYSTEM : Development of banking system is on inventible precondition for healthy rapid development of national economy structure. Banking system has contributed of the world and hence a banking institution is indispensable in a modern society. It plays pivotal role in the economic development of a country and forms crore of the money market in an advance country. What is Bank? The word bank derived from the latine word bancusorbanca meaning a bench. A bank refers to the function of accepting deposits, lending, repaying the deposited money on demand and functioning as an agent of any national economic structure. The development of banking is an inventible pre-condition. The trace of the development of banking is found us early as 2000 B.C. but in the middle 12th century banks were established at Venice and Genaca. Bank of England came up in 1694 and in 1786 the general bank of India was established for the first time in India. Banking system in India: In the economic development of a nation bank occupy an important place. Indian money market comprises both organized as well as unorganized sectors. The unorganized sectors include moneylenders and indigenous bankers and largely cater to the needs of person living in villages and small towns. Financial institutions in the organized sector have grown significantly. Among the institution in organized sector of the Indian money

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market Commercial banks, Co-operative banks, Regional Rural banks, Development banks etc. In 1770,first Indian bank known as bank of Hindustan was started and was closed down twenty years later. Later on, the east India Company started three presidency banks with government participation. There were: Bank Of Calcutta 1806 Bank of Bombay 1840 Bank of madras 1843 1865 Other banks such are Allahabad bank came in to existence in Alliance bank of Simla in 1873

The first Indian joint stock bank known as Oudh commercial bank was set up in 1880 and Punjab National Bank was launched in 1894. There were as many as 648 commercial banks in India by the end of 1947 and as many as 161 bank failed during 1913-14. Thus there was great need of an institution to control and regulate banking in the country. As a result, The RBI was set up in 1935 for regulating the banks in the country. A scheme of social control on banks was enforced through statutory measures with effect from 1st Feb 1969. The banking industry saw a revolution after 14 major commercial were nationalized in June 1982. More than 90% of the bank deposits come under the control of the government Agricultural Credit Development, Rural Planning and Credit Cell and agricultural refinance and Development Corporation were combined together to set up Rational Bank for Agricultural and Rural Development. In July 1982. Later the Exim Bank and National Housing Bank were set up in 1988 respectively.

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1.2 STRUCTURE OF BANKING SYSTEM IN INDIA : 1) Commercial banking 2) Central banking 3) Development banking 4) Co-operative banking Others are (1) Exim banking (2) Regional rural banks (3) Land development banks (4) National bank for agriculture and Rural Development (NABARD) 1.3 ABOUT CO-OPERATIVE BANK : A STATEMENT ON THE CO-OPERATIVE IDENTITY As per the definition given by the international co-operative alliance a co-operative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically controlled enterprise. Co-operative is based on the values of self-help responsibility, Democracy, equality and solidarity. In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility and caring for others.

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CO-OPERATIVE BANK IN INDIA The co-operative movement was started in India in 1904, with a view to providing agriculturists with finance required for agricultural operation at low rates of interest. Under the co-operative credit societies at 1904 a number of primary societies were set up in various part of the country. Section 2(f) of National Bank for Agriculture and Rural Development act, 1981 defines Co-operative society as a society registered or deemed to be registered under the co-operative society act, 1912 (2 of 1912) or any other law relative to co-operative societies for the time being in force in any state. According to section 5 of the National Bank for Agriculture and Rural Development Act, 1981 that co-operative bank and a primary Co-operative Bank. In economy, co-operative banks have played a limited but important role in the banking system of the country. In there are number of such banks and societies, which include: State Co-operative Banks, Central CoOperative Banks, Primary Co-Operative Banks, Land Development Banks, and Farmers Service Societies. Unlike the commercial bank, the co-operative banks do not lend on the basis of a prime-lending rate. They also are various tax sops because of their holding pattern and lending structure and hence percentage on saving deposits. Many these co-operative banks diversified in to specialized areas like car finance, house loans, truck finance etc. in order to keep pace with their public sector and private counterparts, the co-operative banks too have invested heavily in information technology to offer high and computerized banking services to its clients.
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Quite a few expert committees have recommended far reaching reforms for the banking sector that that has been grappling with perpetual problems of the asset quality astronomical overheads, low productivity, to name but few. The Narasimha committee report made radical recommendation for banking sector by emphasizing the need for deregulation and liberalization. Some specific recommendations were: Deposit interest rates to be reduced along with reduction of Statutory Liquidity ratio. A separate body under the auspices of RBI to monitor the functioning of banks. The capital base of banks should meet with international norms of Capital adequacy. The Statutory Liquidity Ratio and Cash Reserve Ratio should be reduced to judicious levels coupled with the withdrawal of concessional lending. RBI should have centralized control over the banking system PRINCIPLES OF CO-OPERATIVE BANK The co-operative principals are as under: 1) Principle of Voluntary and open Membership: Co-operative is voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination. 2) Principle of Democratic Member Control: Co-operative is democratic organizations controlled by their members, who actively participate in setting their policies and decisions,

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men and women serving, as elected representatives are accountable to the membership. In primary co-operative members have equal voting rights (one member one vote) and co-operative at other levels are also organized in a democratic manner. 3) Principle of Member Economic Participation: Members contribute equitably to and democratically control the capital of their co-operative. At least part of that capital is usually the common property of the co-operative Member usually receive limited compensation, if any on capital subscribed as condition of membership. Members allocate surplus for any of the following purposes: developing their co-operative, possibly setting up reserves, part of which at least would be indivisible, benefiting members in proportion to their transactions with the co-operative and supporting other activities approved by the membership. 4) Principle of Autonomy and Independence: Co-operative is autonomous, self-help organizations controlled by members. If they enter in to agreements with other organization, including governments or raise capital from externals sources they do society on terms that ensure democratic control by their members and maintain their cooperative autonomy. 5) Principle of Education, Training and Information: Co-operative provide education and training for their members, elected representatives, managers and employees society that, they can contribute effectively to the development of their co-operative. They inform the general public particularly young people and leaders about the nature and benefit of co-operative.

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6) Principle of co-operative Among co-operative: Co-operative serves their members most effectively and strengthens the regional and co-operative movement by working together through local, national, international structures. 7) Principle of Concern for Community: Co-operative work for the sustainable development of their communities through policies approved by their members. 1.4 THREE TIRE STRUCTURE OF CO-OPERATIVE BANK IN INDIA : 1) Primary Co-operative credit society: A Primary credit society can be started with ten or more person, normally belonging to a village. So that the village co-operative credit society was expected to direct deposits from among the well to do members and non-members of the village. It should of the loan and advances to needy members mainly out of these deposits. 2) Central Co-operative Bank: The Central Co-operative credit society is federation of primary credit society in a specified area, normally a district and is usually located at the district. The Central Co-operative banks have been under taking normal commercial banking business also such as attracting deposits from the general public and lending to the needy against proper securities. 3) State Co-operative Bank: State co-operative bank expectivelly co-ordinator the activities of district &central co-operative banks and give them required guidance. State co-

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operative bank is a between co-operative activity and countrys money market. STRUCTURE OF CO-OPERATIVE BANK: State Co-operative Bank Central Co-operative Bank Primary Co-operative Bank CHART: Co-operative Bank

State Co-operative Bank Centralized Co-operative Bank

Agriculture Credit

Non-Agriculture Credit

Primary Agriculture Credit So Grain Banks Farmers Services Society

Urban Co-op. Banks (Figure:1)

Employees Co-op. Credit Societies

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CHAPTER

INTRODUCTION OF VARACHHA CO-OPERATIVE BANK


2.1 HISTORY & DEVELOPMENT OF THE BANK 2.2 BOARD OF DIRECTORS 2.3 ORGANIZATION CHART 2.4 TIME KEEPING SYSTEM & INSURANCE FACILITIES 2.5 FINANCIAL POSITION OF THE BANK

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2.1 HISTORY & DEVELOPMENT OF THE BANK : The Varachha co-operative bank was set up with license no. UBD GUJ 1153:P on 1st July 1995 and registered on 27th January 1995. The registered office of the bank is at Affil tower, L.H.Road, Surat-6.Within the period of four months after obtaining license the bank has started it working on 16th October 1995. The opening of the bank was done by the Swami Sachidanand in present of other many important guests. Varachha cooperative bank was having fourteen directors during its first year. After starting working on 16th Oct, 1995,The Varachha co-operative bank made a giant leap in short period of 5 years. During progress the Varachha co-operative bank has became fully computerized. The banks first branch was opened at Ring Road. It is because of textile market area, thus the branch was become more activated and the bank was continuing in progress. After ring road branch, the Varachha banks directors have decided to set up other branch at Kamrej. Thus, continue in progress, the bank has set up its other Branches at Kadodra, Kapodra, and at Katargam. These branches are result of smooth, speedy and healthy relative activities, services and highly facilities to its customers and members. The Varachha Co-operative bank is providing accident insurance scheme to its members and his customers. The Varachha bank has offered attractive Interest on deposit and loans to its customers.

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2.2 BOARD OF DIRECTORS NAME ARE AS FOLLOWS : Name Mr. P. B. Dhakecha Mr. Pravinbhai V. Pansuriya Mr. Dr.Lavjibhai M. Nakrani Mr. Dhirubhai L. Ghevariya Mr. Bhupendrabhai K. Ribadiya Mr. Bhavanbhai B. Navapara Mr. Kanjibhai R. Bhalala Mr. Jivarajbhai K. Patel Mr. Narendrabhai M. Kukadiya Mr. Kanjibhai R. Vadariya Mr. Vallabbhai P. Savani Mr. Prabhudasbhai T. Patel Mr. Kanubhai V. Savaliya Mr. Babubhai V. Mangukiya Mr. Manjibhai M. Patel Mr. A.D. Bhalani (Head Office) Manager Mr. B.C. Sorathiya (Head Office) Mr. V.B. Dhanani (Kapodra) Mr. B.V. Patel (Kamrej) Mr. K.A. Dobariya (Ring Road) Mr. S.D. Kakdiya (Kadodra) Manager Manager Manager Manager Manager Post Est. Chairman Chairman Loan Committee Chairman Staff Committee Chairman Vice President M.D. Director Director Director Director Director Director Director Director Director General

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Mr. A.V. Patel (Katargam)

Manager

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2.3

ORGANIZATION CHART :

BOARD OF DIRECTORS

CHAIRMAN

MANAGING DIRECTOR

GENERAL MANAGER

BRANCH MANAGER

OFFICERS

HEAD CLERKS

CLERKS

(Figure:2)

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2.4 TIME KEEPING SYSTEM & INSURANCE FACILITY Time Keeping System The Varachha co-operative bank has no separate department for time keeping system headed by manager or officer. As far as payment of wages and salaries are concerned. Present managers, officers, clerks and peon of the bank are required to sign in attendance register. These records are send to general manager of the bank. There is one shift in a day. Monday to Friday Saturday 10.00 A.M.to 5.00 P.M. 10.00 A.M.to 3.00 P.M.

Insurance Facility The Varachha bank has provided a special facility of accident insurance to its members, each and every account holders. Staff Member Share holder Account holders (1) Saving/Current & Fixed deposit (2) Loan Accident Insurance Accident Insurance 50,000 1 to 3 lacs. Accident Insurance Mediclaim Accident Insurance 10 lacs. up to 2 lacs. 2 lacs.

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2.5 FINANCIAL POSITION OF THE BANK : Capital structure: (RS.IN CRORE) SR NO 1 2 3 4 5 PARTICULARS Share Capital Total deposit Total loan Profit Working capital 2001 2.51 101.83 55.21 3.67 115.83 (Table:1) 2002 3.11 123.04 67.32 4.70 146.41 2003 3.44 129.79 67.25 4.73 159.35

BANK PROGRESS CHART


140 120
RS. IN CRORE

100 80 60 40 20 0 2001 2002 YEAR 2003 DEPOSIT LOAN PROFIT

(Graph:1)

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Progress in number of Members: The no. of Members are: SR NO 1 2 3 4 5 PARTICULARS Members Account holders Borrowers Audit class Dividend 2001 6887 58222 5098 A 15% (Table:2) 2002 7342 66109 5727 A 15% 2003 8148 75435 5055 A 15%

MEMBERS PROGRESS CHART


80000 70000 60000 NO. OF MEMBERS 50000 40000 30000 20000 10000 0

MEMBERS A/C HOLDERS BORROWERS

2001

2002

2003

YEAR
(Graph:2)

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CHAPTER

LIMITATIONS OF STUDY

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LIMITATIONS :
The limitations of this study are as follows: -

The time period is limited for this study. The comparative study is limited to only two banks. There is also difficulty to get properly loan relevant information of comparative bank.

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CHAPTER 4 DESCRIPTION OF LOAN & ADVANCES


4.1 MEANING OF LOAN

4.2 4.3 4.4 4.5 4.6 4.7

GENERAL LOAN PROCEDURE KINDS OF LOAN SIGNIFICANCE OF LOAN DRAWBACK OF LOAN LOAN PROCEDURE OF THE VARACHHA COOPERATIVE BANK VARIOUS TYPES OF LOAN & ADVANCES ISSUED BY VARACHHA CO-OPERATIVE BANK

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4.1

MEANING OF LOAN : Loan is a such types of promises under which bank gets ready to

lending money to a borrower for a fixed period. Borrower needs it for specific purposes so bank is ready for lending him a credit for a specified period. In this period borrower has to repay it with interest and installments. In other words when a banker makes a advance in a lump-sum which can not be paid wholly or partly and which the customer has permission to withdraw subsequently, it is called a loan. Loan are promises for future payment, they have to be repaid in periods beyond a year and are therefore long-term liabilities. Loan can play a significant role in times when borrower needs funds for fixed assets or non-respective type of activities and thus seeks money from the bank that is withdrawn in one lump sum. The loan amount is normally repaid in installments. Loan may be shot-term, medium-term or long-term. Loans and advances are classified in to secured and unsecured. Secured Loan or Advance: Secured loan or advance means a Loan or Advance made on the security of assets. The market value of which is not at any time less than the amount of such loan or advance. Unsecured Loan or Advance: An unsecured loan or advances means a Loan or advance not so secured. A partly covered loan or advance is partly covered by the security of assets, the market value of such securities being less than the amount that has been lend or outstanding at any time.
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4.2

GENERAL LOAN PROCEDURE :


Normally various National and Co-operative banks adopt following

procedure for loan sanctioning. (1) Submission of Loan Application: The borrower may submit the application to any of the term lending institution .The borrower is required to fill out a common application form which seeks comprehensive information about the project the common application form covers the aspects like promoters background, particulars of the industrial concern, particulars of the project, cost of the project means of financing, marketing and selling arrangement, profitability and cash flow, economic consideration etc (2) Initial processing of Loan Application: When the application is received, an officer of the receipt institution reviews it to ascertain whether it is incomplete the borrower is asked to provide the required additional information when the application is considered complete, the recipient institution prepares a Flash Report. It is evaluated at the senior executive meeting .for the conveniences of borrow, financial institution operates a scheme of participation for rupee term loans and underwriting assistance. (3) Issue of the letter of sanction: After the board of directors of the lead financial institution approves the proposal, a financial letter of sanction is issued to the borrower this communication to the borrower the assistance sanctioned by the lead institution and the assistance sanctioned/to be sanctioned by other participating in the consortium arrangement Each of the participating institution would, after approval by its board of directors or other
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appropriate authority, convey sanction of its shares of assistance to the lead institution under a advice to the borrower. If a participating institution is not able to make available its shares of assistance, the same will be shared on prorates basis amongst the lead and other participating institutions. (4) Acceptance of the Terms and Condition by the borrowing units: On receiving the letter of sanction from the lead financial institution, the borrowing unit convenes its board meeting at which the term and condition associated with the letter of sanction are accepted and an appropriates resolution is passed to that effect. The acceptance of the terms and condition has to be conveyed to the financial institution within thirty days. (5) Execution of Loan Agreement: The lead financial institution after receiving the letter of acceptance form the borrower, sends the drafts of the agreement to the borrower to be executed by authorized person and properly stamped as per the Indian stamp act, 1899.the agreement, properly executed and stamped, along with other document as required by the financial institution also sings the agreement, it becomes effective. (6) Disbursement of Loan: Periodically, the borrower is required to submit information on the physical progress of the project, financial status of the project, arrangement made for financing the project, contribution made by the promoters, projected funds flow statement, compliance with various statutory requirements and fulfillment of pre-disbursement conditions. Based on the information provided by the borrower, the lead financial institution will determine the amount of terms loans to be disbursed from time to time.

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Before the term loan is disbursed the borrower must fully comply with all the term and conditions of the loan agreement. (7) Creation of Security: The term loans and the differed payment guarantee assistance provided by the all India financial institutions are secured through the first mortgage by way of deposit of title deeds of immovable property and hypothecation of movable properties. As the creation mortgage, particularly in the case of land, tends to be a time consuming progress, the institution permit interim disbursement against alternate security. The mortgage, however, has to be created within a year from the date of the first disbursement otherwise the borrower has to pay an additional charge of 1% interest.

4.3

KINDS OF LOAN :
Generally National and Co-operative bank grant loans for different

period like shorts, medium and long and for different purpose. Broadly, the loans granted by banks are classified follows Bank Loans

Short-term Loans

Medium & Longterm loan

Composite Loans (Figure:3)

Consumption Loans

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Short-term Loans: Normally Short-term loans granted for short time period such as for

less than one year. Short-term loans are granted to meet the working capital needs of the borrowers. These loans are granted against the securities of tangible assets mainly the movable assets like goods and commodities, share debenture, etc. (2) Term Loans: Medium and long-term loans are usually called term loans. These loans are granted for more than a year and are meant for purchase of capital assets for the establishment of new units and for expansion or diversification of an existing unit. Such loans constitute a part of the project finance which industrial enterprises are required to raise from different sources. These loans are usually secured by the tangible assets like land, building, plant and machinery, etc. (3) Composite Loans: When a loan is granted both for buying capital assets and for working capital purpose, it is called a composite loan. Such loans are usually granted to small borrowers, such as artisans, farmers, small industries, etc. Maximum time period for this loan is 3 to 4 years. (4) Consumption Loans: Normally banks provide loans for productive purpose only, but as an exception loans are also granted on a limited scale to meet the medical needs or the educational expenses or expenses relating to marriages and other social core monies etc. of the needy persons such loans are called consumption loans.

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4.4

SIGNIFICANCE OF LOAN :
Loan and advance can play a significant role in development of

1. To Develop Business: business because it become helpful to meeting capital needs timely. For developing of business large capital is needed to take new technology adopt so at time machinery loan and other term loans are used to expand business activity. 2. Financial Discipline on the Borrower: As the statement suggest that a time repayment of the loan or its installment is fixed in advance, this system ensured a grater degree of selfdiscipline on the borrower as compared to the cash credit system. 3. Periodic Review of local Account: It is necessary for every bank to make a periodic review of local account of any loan account or banks other account. Whenever any loan is granted or its renewal is sanctioned the banker get an opportunity of automatically reviewing the loan account. 4. Profitability: The system is comparatively simple; interest accrues to bank on the entire amount lend to customer.

4.5

DRAWBACK OF LOAN :
In the lending system of loan there is more inflexibility in Co-

1. Inflexibility: operative bank. Borrowers may borrow in excess of their exact requirement to provide for any contingency.

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2. Abuse of funds: Banks have control over the use of funds borrowed by the customers. However, banks insist on hypothecation of the assets purchased with loan amount. 3. Indistinct period: Though the loans are for fixed period but in practice roll over, i.e. they are renewed frequently. 4. Complexity for document: Loan documentation is more comprehensive as compared to each credit system.

4.6

LOAN

PROCEDURE

OF

THE

VARACHHA

CO-

OPERATIVE. BANK :
The loan application passes through the following process: 1. First of all, there is submission of loan application with all relevant documents normally required, and submitted by borrower to the bank. 2. After submission of application, needed securities be obtained by bank and appraisal made on the security as well as on the loan borrower and on its business. 3. The next step is that proposal put forward in the Loan committee. 4. After clear searching on the proposal, the board can give approval for sanctioning a loan. 5. Many times a specific conditions received from board. 6. After solving the conditions the borrower must make documentation as required and signing of paper as per needed by bank. 7. At the last stage, bank make disbursement of loan, it is under the types of loan scheme.
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4.7

VARIOUS TYPES OF LOAN & ADVANCES ISSUED BY VARACHHA CO-OPERATIVE BANK :


The Varachha co-op. bank has performed good work by issuing many

type of loan. So bank also bring new changes time to time for increasing its effectiveness. The various types of Loan are following way: 1) Term Loan : The Varachha Co-op. Bank sanctioned loan to applicant who want to purchase a new technology, Machinery, equipments and material or stock for developing his business by expaning it bank can give loan amount of 70% of the quotation. Limit: - There is no limit for Term loan Rate of Interest: Particular Term loan Interest rate Up to Rs 2 lacs 14% Above Rs 2 lacs 15% (Table:3) Margin: - Margin for Term loan is 25% to 35%. Security: - Bank provides loans against up to mortgage and hypothecation provide by applicant. Requirement for Term Loan: All Basic documents: Xerox of rationing card of proprietor as well as two guarantors. Two photocopy of loan applicant and one-one photocopy of guarantor Lightbill/telephonbill xerox of applicant as well as two guarantors.
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Rebate 2% 2%

Net rate 12% 13%

Housing tax bill xerox of applicant and two guarantors. Evident of shareholders. Other Documents: Income Proof for loan applicant as well as two guarantors. Directors signature is required for recommendation. Photocopy of property file is submitted to bank. Duplicate copy of city survey. Last three years firms statements and Income tax return copy. Quotation of purchasing new machinery. 2) Vehicle Loan : The Varachha co-operative Bank provides loan for purchasing various types of vehicle such as two, three and four-wheeler. Generally vehicle loan is completed within 2 year but above one lacs loan or generally four wheels loans is completing within 3 years with monthly installments. Limit: - There is no limit for Vehicle loan. Bank provide loan amount up to 70% of quotation Rate of Interest: Particular Vehicle loan Interest rate Up to Rs 1 lacs 13% Above Rs 1 lacs 14% (Table:4) Margin: - Margin for Vehicle loan is 25% to 30%. Security: - Bank provides loans against equitable mortgage and against hypothecation.
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Rebate 1% 1%

Net rate 12% 13%

Requirement for Vehicle Loan: All basic documents. Income evident of loan applicant as well as two guarantors. Photocopy of property submitted to bank. Register certificate (RC) book of vehicle is kept by particular banks. When totally installment of vehicle loan is at that time RC book and other original documents are given back to them. 3) Cash Credit/Over Draft Loan : A Cash Credit is a facility by which a banker allows his customer to borrow money up to certain limit against either a bond of credit by one or more securities. This is most common mode of borrowing by large commercial and industrial house in India because the advantage that customers need not borrows the whole amount at one times but may draw such amount as he requires at different times. The bank provides these facilities to borrower for meeting their temporary needs and to solve problem with related to short-term capital. Limit: - There is no limit for Cash Credit and Over Draft loan. Rate of Interest: Particular Cash credit & Over Draft loan Interest rate Up to Rs 2 lacs 13% Above Rs 2 lacs 14% (Table:5) Rebate Net rate 13% 14%

Margin: - Margin for Cash Credit and Over Draft loan is 15% to 20%. Security: - Bank provides loans against up to mortgage and hypothecation provide by applicant.

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Requirement for Cash Credit and Over Draft loan: All basic documents. Evident of other income of proprietor or partner. Director signature. Firms last three years balance sheet and income tax return copy. Statement of last six month of firms account in the bank or other banks. To include certificate of company registration and articles of association if applicant is private limited company. 4) Machinery Loan : The Varachha Co-operative Bank sanctioned a loan to applicant who wants to adopt new technology, machinery, equipment etc. for expanding his business. Limit: - Maximum limit for Machinery loan is Rs. 30,00,000/Rate of Interest: Particular Machinery loan Interest rate Up to Rs 2 lacs 14% Above Rs 2 lacs 15% (Table:6) Rebate 2% 2% Net rate 12% 13%

Margin: - Margin need for Machinery loan is 25% to 35%. Security: -Bank sanctioning loans against up to mortgage and hypothecation provide by applicant. Requirement for Machinery loan: All basic documents. Machinery list and xerox of bills.

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Invoice of purchasing new machinery. Evident of other income of proprietor or partner. Director signature. Firms last three years balance sheet and income tax return copy. Statement of last six month of firms account in the bank or other banks. 5) Fixed Deposit Loan: The Bank provides loan against fixed deposit. In fixed deposit loan applicant takes loan against fixed deposit certificate. During this time certificate lien under the bank. This loan is based on renewal and any applicants invest his money in fixed deposit scheme with different rate. Limit: - Bank can give loan 75% of against fixed deposit. Rate of Interest: Particular Fixed Deposit Loan Interest rate F.D. rate + 2% (Table:7) Margin: - Margin need for fixed deposit loan is up to 25%. Security: -Bank kept fixed deposit certificate of borrower. Requirement for Fixed Deposit loan: All basic documents relevant to applicant. No need of guarantors. Fixed deposit certificate of borrower. 6) Loan Against Government Security: The Varachha co-operative Bank provides also loan against government security such as National Saving certificate, Kishan Vikash
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Rebate --

Net rate F.D.rate+2%

Patra etc. For this loan, before making an advance on the securities of the NSC& KVP, the bank should take an applicant in the prescribed form from the borrower in whose name the certificate stand. This certificate should then be sent to the concerned post office or the issuing authority for transfer to the lending banks name. Banker should grant the advance after made on the certificate or after new certificate. Limit: -Bank gives advance up to 65% against the NSC/KVP certificate. Rate of Interest: Particular NSC/KVP Loan Interest rate 13% (Table:8) Margin: - Margin need for NSC/KVP loan is 35%. Security: -Bank kept NSC/KVP certificate of borrower. Requirement for NSC/KVP loan: All basic documents relevant to applicant. No need of guarantors. NSC/KVP certificate of borrower. 7) Surity Loan: The Varachha Co-operative Bank is issued this type of short-term loan. Bank issuing loan with a few documents requirement for them. Limit: -Bank gives advance up to Rs. 30,000/-. Rate of Interest: Particular Surity Loan Interest rate 14% (Table:9) Margin: - No need margin for Surity loan.
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Rebate --

Net rate 13%

Rebate 1%

Net rate 13%

Security: - There is no need of any security. Requirement for Surity loan: All basic documents. Employer must present salary certificate, which is approved by appointing organization. Employer ought to two guarantors who work in same organization or working under that organization and also necessary salary certificate of two guarantors. 8) Gold Loan: Sometimes people need some financial help to meet their daily requirements. In these circumstances the bank gives loan against the mortgage of their jewelry considering the report of the bank. The bank issued major part on gold because gold loan is safety one. Borrower has not need to ought any guarantor. Limit: - Loan sanctioned against the gold. So on the bases of gold provide by applicant bank issued advance to him. Bank gives advance up to 60% of gold value. Rate of Interest: Particular Gold Loan Interest rate 13% (Table:10) Margin: - Margin need for Gold loan is 40%. Security: - Loan provides against gold ornaments. Requirement for Gold loan: All basic documents and personnel information of applicant. No need of guarantors.
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Rebate --

Net rate 13%

As a security gold ornaments provide by applicant. 9) Self-employed Loan: This loan is given to the various self-employed people like doctors, engineers, charted accountant, advocates, etc. This loan is provided for starting their practices as well as to expansion the area of their business. The bank providing a loan to educated unemployed people for started them own business. Bank provides a loan amount of 70% required by borrower. Limit: -There is no limit for Self-employed loan. Rate of Interest: Particular Self-employed loan Interest rate Up to 2 lacs.14% Above 2 lacs.15% (Table:11) Rebate 2% 2% Net rate 12% 13%

Margin: - Margin for this is 25% to 30%. Security: - Bank gives loans against up to mortgage and hypothecation provide by applicant Requirement for Self-employed loan: All basic documents and personnel information of applicant as well as two guarantors. Bank gives loan on behalf of certificate of degree. Evident of shareholders. 10) Staff Loan: This loan is providing only to the staff members of the bank. This loan is provide to staff members for meeting any financial needs, for any social occasion in family and for purchasing any respective items such as vehicle.

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Limit: - Bank gives loan amount up to Rs 30,000/-. Rate of Interest: Particular Staff loan Interest rate 6% (Table:12) Margin: - No need of margin for Staff loan. Security: - Bank needs salary slip of applicant required for staff loan. Requirement for Staff loan: One photocopies of applicant as well as two guarantors the work in the bank. Personnel information of applicant as well as two guarantors. Submit the application form with salary slip. Rebate -Net rate 6%

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CHAPTER 5 COMPARATIVE ANALYSIS OF LOANS & ADVANCES


5.1 5.2 5.3 5.4 LOAN SANCTIONED BY VARACHHA CO-OPERATIVE BANK IN YEAR 2001-02 & 2002-03 COMPARISON OF INTEREST RATE ON LOAN SCHEME OF VARACHHA BANK WITH SUTEX BANK COMPARATIVE STUDY OF LOAN SANCTIONED BY BOTH BANKS COMPARATIVE STUDY OF LOAN SANCTIONED (IN PERCENTAGE) BY BOTH BANKS

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5.1

LOAN SANCTIONED BY VARACHHA CO-OPERATIVE BANK IN YEAR 2001-02 & 2002-03 : (Rs. in Lacs) Sr. Types of 2001-02 2002-03 Amount Percentage Amount Percentage No Loan 1 Term Loan 567.63 8.97 934.10 14.44 2 Vehicle Loan 678.10 10.70 433.23 6.70 3 CC/OD Loan 3628.95 57.33 3698.60 57.17 4 Machinery Loan 611.72 9.66 621.84 9.60 5 FD Loan 207.26 3.27 233.65 3.61 6 NSC Loan 52.08 0.83 57.00 0.88 7 Surety Loan 87.31 1.40 60.42 0.94 8 Gold Loan 410.60 6.48 359.49 5.55 9 Self-employed 74.96 1.18 57.81 0.89 10 Staff Loan 11.08 0.18 13.86 0.22 (Table:13)
LOAN SANCTIONED BY BANK Percentage
70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%
an an an ed an an Lo Lo an an an pl oy Lo Lo Lo Lo Lo Lo Lo an

2001-02 2002-03

rm

ry

ic le

FD

SC

et

ol

hi ne

Te

Nam of Loan e
(Graph:3)

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Se lfe

Ve h

ac

Su r

St a

/O

ff

LOAN SANCTIONED IN YEAR 2001-02 :

LOAN SANCTIONED IN 2001-02

Term Loan FD Loan Self-em ployed

Vehicle Loan NSC Loan Staff Loan

CC/OD Loan Surety Loan

Machinery Loan Gold Loan

(Graph:4) LOAN SANCTIONED IN YEAR 2002-03 :

LOAN SANCTIONED IN 2002-03

TermLoan FD Loan Self-em ployed

Vehicle Loan NSC Loan Staff Loan

CC/OD Loan Surety Loan

Machinery Loan Gold Loan

(Graph:5)

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5.2

COMPARISON OF INTEREST RATE ON LOAN SCHEME OF VARACHHA BANK WITH SUTEX BANK :

SR. NO 1 2 3 4 5

TYPES OF LOAN CC/OD Loan FD Loan Machinery Loan Vehicle Loan NSC Loan

VARACHHA BANK 14% 11.5% 15% 13% 13% (Tabe:14)

SUTEX BANK 14% 11% 13% 12.5% 10%

INTEREST RATE
Percentage 20% 15% 10% 5% 0% CC/OD Loan Machinery Loan Vehicle NSC Loan FD Loan Loan

Nam of Loan e Varachha Bank


(Graph:6)

Sutex Bank

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5.3

COMPARATIVE STUDY OF LOAN SANCTIONED BY BOTH BANKS : (Rs. in Lacs)

TYPES OF LOAN CC/OD Loan FD Loan Machinery Loan Vehicle Loan NSC Loan

VARACHHA BANK 2002 2003 GR(%) 3628.95 3698.60 1.92 207.26 611.72 678.10 52.08 233.65 621.84 433.23 12.73 1.65 (36.11) 2002 989.65 576.35 635.76 121.05

SUTEX BANK 2003 1185.73 429.19 573.32 135.38 GR(%) 19.81 (25.53) 0.72 (9.82) 11.84

6678.10 6726.05

57.00 9.45 (Table:15)

GROWTH RATE 30 20 10 0 -10 -20 -30 -40

Percentage

CC/OD Loan

FD Loan

Machinery Loan

Vehicle Loan

NSC Loan

Nam of Sch e e em Varachha Bank


(Graph:7)

Sutex Bank

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COMPARISION OF LOAN SANCTIONED BY BOTH BANKS IN 2002 :


LOAN SANCTIONED BY BOTH BANKS IN 2002
8000 7000 6000
Amount

5000 4000 3000 2000 1000 0 CC/OD Loan FD Loan Machinery Loan Vehicle Loan NSC Loan

Name of Scheme
Varachha Bank Sutex Bank

(Graph:8) COMPARISION OF LOAN SANCTIONED BY BOTH BANKS IN 2003 :

LOAN SANCTIONED BY BOTH BANKS IN 2003


8000
AMOUNT

6000 4000 2000 0 CC/OD Loan FD Loan Machinery Loan


NAME OF S CHEME

Vehicle Loan

NSC Loan

VARACHHA BANK

SUTEX BANK

(Graph:9)
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5.4

COMPARISON OF LOAN SANCTIONED (IN %) VARACHHA BANK WITH SUTEX BANK :

Sr.No 1 2 3 4 5

Types of Loan CC/OD Loan FD Loan Machinery Loan Vehicle Loan NSC Loan

Varachha Bank 80% 75% 75% 70% 65% (Table:16)

Sutex Bank 75% 70% 75% 70% 70%

LOAN SANCTIONED ( IN % ) BY BOTH BANKS


100% Percentage 80% 60% 40% 20% 0% CC/OD Loan FD Loan Machinery Loan Name of Loans VARACHHA BANK
(Graph:10)

Vehicle Loan

NSC Loan

SUTEX BANK

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CHAPTER 6
FINDINGS & SUGGETIONS

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(A)

FINDINGS:

Loan sanctioned in current year is same as compared to previous year. The banks interests on some loans are comparatively high than the Sutex Bank. The vehicle loan has decreased by 36% in current year as compared to previous year in Varachha Bank. The growth rate of Cash Credit loan and NSC loan is less than as compared with Sutex Bank. Loan procedure is simple but time consuming because board of meeting is held on a Monday in monthly. So process for passes the proposal is goes for long-time. Rate of Interest on machinery loan and NSC loan is higher then Sutex banks interest rate. Bank provides Insurance facility to its loan a/c holder, which is added service of bank. Interest rate on Cash credit loan, fixed deposit loan and vehicle loan are comparatively similar in both banks. Varachha Bank adopted a rebate system for fast repayment of loan. Bank gives 2% rebate on term loan. Machinery loan and selfemployed loan is higher than Sutex bank. It is for purposes that borrower should paid a loan installments regularly on a time.

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(B)

SUGGESTIONS:
that loan procedure will easy and more borrowers can attract by bank.

Documentation of loan should be simple and copy to some extant so The Varachha Co-operative Bank should provide a loan to an enthusiastic and ranks student, which come from middle or lower level income group for education purposes. The Varachha bank should provide a loan a people who want them own house for housing loan purposes. The Varachha Bank should reduce the interest rate on same loan scheme such as machinery loan etc. the bank can increase its customers. The Varachha Bank should take a directive action in sanctioning of fixed deposit loan because fixed deposit loan rate is decrease by 30% in current year as compared with previous year.

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BIBLIOGRAPHY

Name of book

Author

Publisher

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Banking Law & Transaction

T.J. Rana, J.B. Shah & Other

B.S. Shah

Banking Theory & Practice Banking Theory & Practice

P.K. Shriwastav Gordon & Natrajan

Himalaya Himalaya

Annual Report of Varachha Bank (Year 2001-02 & 2002-03) Annual Report of Sutex Bank (Year 2001-02 & 2002-03)

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ANNEXURE

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