Finance Project - KSFE

ON OF

UNDER GUIDANCE OF: Mr. ABDUL FATHAQUE Branch Manager – KSFE Main Branch, Palakkad

Submitted in: Submitted By:

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ACKNOWLEDGEMENT I would like to express my heartiest gratitude to Mr. Abdul Fathaque (Branch Manager) for giving opportunity to associate myself to the number one financial institution in Kerala and to carry out my project titled “WORKING OF A FINANCIAL INSTITUTION”

I am sincerely thankful to all the staffs in KSFE – Palakkad Main Branch under whose guidance I have successfully completed this project and the time spend with all has been a great learning experience. I thank all for the constant encouragement, warm response and for filling every gap with valuable ideas that has made this project successful.

I would also give special thank to my father and my friends for their support, information, co-operation, advice to complete my project.

I wish to express my heartiest gratitude to _______________________________ for his support and inputs for preparing a complete project which helped me a lot in improving my skills and knowledge.

T A Radhika M.Com 3rd Semester VLB Janakiammal College Coimbatore

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KSFE (Kerala State Financial Enterprises)

TYPE

:

PUBLIC SECTOR (Miscellaneous Non-Banking Company [MNBFC])

Financial

OWNED BY

:

GOVERNMENT OF KERALA

FOUNDED

:

6th NOVEMBER, 1969

HEAD OFFICE

:

TRICHUR (Known as Hub of Chitty Business in Kerala)

NUMBER OF BRANCHES

:

289

CHAIRMAN

:

Mr. MANI VITHAYATHIL

MANAGING DIRECTOR

:

Mr. CHANDRAMOHAN PILLAI

INDUSTRY

:

FINANCE

PAID UP CAPITAL

:

Rs. 10 Crores

BUSINESS TURNOVER

:

Rs. 5,462 Crores

EMPLOYEES

:

MORE THAN 4,000

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INDEX CHAPTER 1: INTRODUCTION……………………………. 5
OBJECTIVE OF THE STUDY
SCOPE OF THE STUDY CHAPTER 2: PROFILES……………………………………………..7
HISTORY OF THE COMPANY
GROWTH PATH
RECENT DEVELOPMENTS
PRESENT SCENARIO
VISION OF THE COMPANY CHAPTER 3: PRODUCTS PROFILE……………………………….. 13
LINE OF PRODUCTS
CHITTY FUNDS – THE PILLAR PRODUCT OF KSFE
BRIEF ABOUT OTHER PRODUCTS CHAPTER 4: WORKING OF A BRANCH…………………………. 32
ORGANIZATION CHART
DUTIES AND RESPONSIBILITY
WORKS DONE IN THE BRANCH
PROCEEDURE OF ACCOUNTING THE DATAS CHAPTER 5: CONCLUTION………………………………………. 46
FINDINGS
SUGGESSIONS
SWOT ANALYSIS
CONCLUSION
DECLARATION 4

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CHAPTER 1

INTRODUCTION

OBJECTIVE OF THE STUDY SCOPE OF THE STUDY

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OBJECTIVE OF THE STUDY The project was conducted in KSFE, Palakkad, keeping the following objectives in view:
The project was done to understand the working of a financial institution.
To understand the different financial instruments / products used in a financial institution and the response of the public on different products
To understand / study the organization structure and the roles and responsibility of each individuals working in the company.
To understand the accounting procedures of different type of financial products like Chitty Products, Savings Deposit, and Fixed Deposit etc.

SCOPE OF THE STUDY The following bulletin points will describe the important “SCOPE” of the project conducted:
The data for this project is collected from internet and from KSFE, Palakkad Main Branch.
The reader of this project can understand about the Financial Products in Kerala. Mainly about CHITTY FINANCE concept in Kerala.
To understand and to describe about the working of a financial company.
Through this project we can know the growth of the company and the present scenario of KSFE and the Financial Market in Kerala.

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CHAPTER 2

PROFILES

HISTORY OF THE COMPANY OBJECTIVES OF THE COMPANY VISION OF THE COMPANY FUTURE PLANS OF THE COMPANY

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HISTORY OF THECOMPANY During the year 1967 Government of Kerala took a policy decision to the effect that Chitties / Kuries should be conducted under State auspices. The then Finance Minister in his budget speech for financial year 1967-68 made the following announcement on the floor of the Assembly: “I view this decision as a bold step forward along the path towards socialism, aimed at bringing banks and other financial institutions under social control”. The Chitty/Kuri business being what it is, there existed ample scope for exploitation of the ignorance, indifference and gullibility of the needy people by unscrupulous promoters, who organized financial institutions in the name of chitty/kuri fund in order to mobilize fluid resources in their own interest and appropriate for themselves substantial profit accrued out of such organizations. Government wanted to introduce a check on the unbridled growth of such financial institutions with a view to safeguard the interest of the general public and at the same time to channelise the savings so consolidated for productive purposes. With these objectives, Government appointed a Special Officer in the year 1967 to prepare a comprehensive scheme for starting chitties and kuries under Government control. The Special Officer presented his report on 7th October 1967 analyzing all aspects involved in the proposal and recommending strongly the entry of Government in the field of chitties and kuries. Though the recommendation was for conducting the business as an adjunct of the Registration Department, Government, however, took a different view and decided to bring within the purview of Government control not only chitties/kuries but also some other financial transactions for which socialsation was felt necessary. Hire purchase 8

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financing and insurance were the new areas suggested for inclusion within the ambit of the proposed organization.

Accordingly, Government decided to organize a public sector undertaking with the name ‘The Kerala State Financial Enterprises Limited’ for the purpose of conducting Chitty, Hire Purchase and Insurance business under Government control.

The Kerala State Financial Enterprises Limited is fully owned by the Government of Kerala and is the first Public Sector Company to conduct chit business in the whole of India. It was incorporated on 6th November 1969 with its registered office at Trichur. It has an authorized capital of Rs.25 lakhs divided into 25,000 equity shares of Rs.100 each and a paid up capital of Rs.2 lakhs as initial contribution from Government of Kerala. The share capital contribution of Government was progressively increased from Rs.2 lakhs to Rs.7 lakhs in the year 1970-71, to Rs.12 lakhs in the year 1971-72, to Rs.15.5 lakhs in the year 1972-73, to Rs.20.5 lakhs in the year 1973-74, to Rs.27 lakhs in the year 1974-75, to Rs.28 lakhs in the year 1977-78 and to Rs.38 lakhs in the year 1987-88. The authorized capital was raised to Rs.50 lakhs in the year 1974-75 and to Rs.100 lakhs in the year 1989-90.

The Management of the company is vested in the Board of Directors constituted by Governor from time to time. The number of Directors shall not be less than 2 and shall not be more than 9. The maximum number has been subsequently raised to 15. The Directors shall hold office during the pleasure of the Governor. The Governor may, from time to time, appoint 2 Directors other than the Managing Director as Chairman and Vice Chairman of the Board. The first Board was constituted as per Government Order No.G.O. (RT) 4876/69/Fin. Dated 26th November 1969 and they assumed charge on 28th November 1969. The Managing 9

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Director is appointed by the Governor on such terms and remuneration as he may think fit from among the Directors for the conduct and Management of the business of the company subject to the control and supervision of the Board of Directors. General Body representing the shareholders shall be the supreme governing body of the Company.

OBJECTIVES OF THE COMPANY The objectives of the company are listed in the Memorandum of Association of the company. The important objects are as follows: (a) To start, conduct, promote, manage and carry on the business of chitties in India or elsewhere. (b) To promote, undertake, organize, conduct, manage and carry on the business of general and miscellaneous insurance of any kind in India or elsewhere. To start, promote, conduct, operate, carry on and manage the business of dealers, agents and traders under hire purchase system of articles, vehicles, machinery, materials goods and tools, of all capital goods and consumer goods and property of all nature and description for personal, domestic, office, commercial, industrial and community use and consumption as a business of the Company or as agents of the Government, State or Central or any body or organization there under or of any other Company. Besides these objects, there are many other objects, which is incidental or ancillary to the main objects such as to advance, deposit with or lend money, securities, property or to receive loans or grants or concession of any nature or deposits from Banks, Government or Governmental organizations or others. 10

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VISION OF THE COMPANY The vision of Kerala State Financial Enterprises is to become a significant player in the financial services sector by:-

 Providing a whole range of quality services and products.  Adopting technology and benchmark standards in customer service and performance.  Spreading our wings beyond the borders of Kerala, on a global level.  Retaining the pre-eminent role in Chitty business.  Continuing focus on extending resources to the Govt. of Kerala.  Sustaining commitment to the weaker sections of society, as the neighborhood institution for support, trust and security.

FUTURE PLANS OF THE COMPANY The government is taking appreciable steps to widen the business activity of KSFE and to reach every category of people. The future plans of the company include the following: Making KSFE a fully computerized Company  Opening more and more new branches, including chitty units to establish its presence in all major centers and backward areas, aiming at effective rural penetration.  Introducing value additions in chitty schemes - for coping with the fierce competition in the financial market, for more popularity and widening our customer base.  Acting as the collection agent for KSEB, KWA, etc., throughout the state. 11

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 To construct a multi-storied building in KSFE's own premises in Kakkanad, Cochin and to house among others a Staff Training College for itself.  Introduction of new schemes like, Educational Loan, Agricultural Overdraft and Cumulative Deposit Scheme.  Expanding its door collection facility to loan accounts and deposit schemes suitably, this is expected to create considerable employment opportunities as part of its social objective.  Introduction of chitties with simultaneous draw and auction which can be offered as an incentive to regular customers for whom it will be a great attraction, particularly for those with saving attitude.  Introduction of Daily/Weekly draw/auction chitties, which is expected to have a wide scope among traders, will raise the Company's market share considerably.  Enter the arena of Credit/Debit Card business - immediately after branch networking the Company plans to launch the 'Debit Card' business.  Starting of Virtual Branch through net worked computer systems for the benefit of NRIs particularly Malayalees in the Gulf & other countries is on the anvil. This will obviate the need for "brick and mortar branches" and will enable customers who have internet access, to transact with the Company through virtual branches.

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CHAPTER 3

PRODUCTS PROFILE

LINE OF PRODUCTS CHITTY – THE PILLAR PRODUCT OF KSFE

BRIEF ABOUT OTHER PRODUCTS

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LINE OF PRODUCTS
Chitty
Chitty Loan
Consumer/Vehicle Loan
Reliable Customer Loan
Gold Loan
Passbook Loan
Trade Finance
Housing Finance
Sugama Deposit
Fixed Deposit
Car Loan
Flexy Trade Loan
Sugama Security Scheme
Deposit-in-Trust Scheme
Safe Deposit Locker
Tax Planning Loan Scheme
Western Union Money Transfer 14

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CHITTY – THE PILLAR PRODUCT OF KSFE Chitty is a unique scheme incorporating the aspects of a recurring deposit and an advance scheme. In chitty, the subscriber has an opportunity to bid and avail of advance which amounts to a certain percentage of the total denomination of the chitty (sala), whereas in recurring deposit the advance can be availed only on the paid up amount. In case bidding is delayed due to draw of lots in the initial installments, one can resort to availing of chitty loan, which is a loan that "bridges" the gap between the need of the subscriber for money and the delay in the chitty getting prized. BASIC INFO ABOUT “CHITTY” Who Conducts a Chitty? A Chitty is conducted by a person or an institution and this entity is called the foreman. In the case of KSFE Chitties, KSFE is the foreman. What is a Chitty? A chitty is basically a contract between the foreman and the Subscribers. As per the contract, each subscriber agrees to remit a fixed amount of money every month for a number of months. How many tickets can be enrolled in each chitty? The number of tickets enrolling in a chitty will be equal to the number of months for which the remittance have to be made or the duration of chitty in months. What is Chitty “Prize Money”? The total of the periodic subscription, called the chitty amount, will be given out as “prize money” to the person who bids by allowing for the maximum reduction in the prize money. 15

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The maximum reduction possible is 25% as per the prevailing Chitty Act and if there is more than one subscriber interested in bidding at 25% reduction, the numbers of the such bidders will be put to a draw. Thus each subscriber gets an opportunity to receive the prize money once during the tenure of the chitty. All the promoters have to contribute the periodic subscription till the end of the chitty. Foreman’s Commission The foreman is entitled to a certain percentage of the chitty amount (not more than 5% of the chitty amount) as his commission from each member. How many tickets can one subscribe in a single chitty? Maximum number of tickets one can subscribe is limited to 10% of the total number of tickets of that chitty, subject to approval by Foreman. Services rendered. The Company has appointed daily door collection agent who will come and collect the amount towards monthly installment daily from a subscriber’s office/ residence. Customer can remit the chitty installment in any of the Branches of KSFE. How can one enroll in a chitty? A person can enroll in a chitty either by visiting the Branch or through the agents of KSFE. You may either click the feed-back or directly ring to any one of the Branches which is nearer to your location. For finding the list of Branches you may go to the menu (BRANCHES)

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Participation in the auction A subscriber can participate in the auction, which will be conducted in the Branch where the chitty pertains to, either in person or through proxy. What are the Securities Acceptable for Payment of Prize Money? The types of security acceptable for chitty prize money payment, belong to various categories like personal sureties (of employees of Government, aided schools, public undertakings, banks etc.), financial documents (like fixed deposits with banks and reputed organizations, Deposit-in-Trust, LIC policies, bank guarantees, National Savings Certificates etc.), Sugama Security, landed property or Gold ornaments. Liability waiver In case of unfortunate death of the subscriber the future liability subject to a maximum of Rs.1 Lakh will be written off subject to certain conditions. CHITTY FINANCE - PROCEEDURE The installment per month for chitties range from Rs. 500 to Rs. 1, 00,000 and the usual duration of chitties are 30 months, 40 months, 50 months, 60 months and 100 months.

• PURPOSE: Chitty is intended to provide a measure of saving for people who aspire to save for the future by setting apart a portion of their income. Chitty is a unique scheme where the saving aspect & the advance aspect are blended together.

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• ELIGIBILITY: Any Indian citizen who has attained majority can subscribe in Chitties. Enrolment in joint names is not allowed. In the case of Non-Resident Indians, condition of RBI, if any, have to be observed. A subscriber cannot hold more than 10% of the total tickets in chitty. The existing rules regarding Chitty canvassing agents stand revised with effect from 1.5.1999(see circular 64/99)

• MONETERY RANGE & DURATION OF CHITTIES Sala of our chitties range upto 10lakhs with monthly subscriptions of Rs.25000/.Branches are permitted to start short duration chitties below 40 months with the consent of Regional Manager concerned. Similarly to start chitties with a sala exceeding 5 lakhs prior Head Office permission should be obtained.

• DEFAULT INTEREST 9% on Non-prized default & 14% on prized default on the subscription amount

• SUBSTITUTION A non-prized default subscriber, after serving a removal notice, may be removed from subscribers registered & another person may be substituted in his place. Substitution is allowed only upto 60% of the duration of Chitty. If cheque remittance is made for substitution, the benefits of the substitution can be enjoyed only after the cheque is realized. In the event of non- substitution by other parties or after 60% of duration of Chitty, Company can substitute default tickets in its favour & auction them for Re.1/-If there is no eligible subscriber to be prized. In the event of death of the Subscriber non-prized as well as prized tickets can be substituted by the nominee & he will be entitled to all the rights under the chitty as if he was the original subscriber. 18

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NEW CHITTY LOAN • PURPOSE: Through an advance aspect is built into the chitty scheme. It cannot be denied that a subscriber will have to wait for some time to avail of the benefit of getting the ticket prized NCL is introduced to bridge the gap between the real need of the subscribers & the uncertain point of time in future, when the ticket gets prized. • REGISTRATION CHARGE: RS.10/• LIMIT: a) Loan amount is limited to a maximum of 50% of the chitty sala (per ticket), rounded off to the lower Rs.100/b) Number of loans alive at a time: A subscriber should not have more than four live loans at a time in the company; the total of which should not exceed Rs.5 Lakhs. • ELIGIBILITY: a. Every non-prized subscriber of chitties will be eligible for availing new chitty loan upto 50% of sala after remittance of 10% of the total installments, provided the remittance are upto date. b. The system of allowing NCL after the 1st auction of the chitty is permitted to the following cases only subject to a max of Rs 50,000 i. Where the applicant for NCL is an employee acceptable to the company as surety.

ii. When financial documents viz., FD Receipts, Bank Guarantee, LIC Policies, NSCs, KVPs, etc., are offered security.

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iii. Where the applicant for NCL is a professional/Businessman having a taxable annual income of Rs 1 Lakh and above(to prove the income, applicant has to produce last 3 yrs income tax returns) iv. Where the applicant, whether employed or not, offers personal sureties as security, provided one of the sureties offered belongs to the SREG (Salary Recovery Enforceable Group) c. Subscribers in chitties with sala of more than Rs 1 Lakh can apply a second time for NCL upto 50% of the sala, on remittance of 10% of installments which have become due for remittance. i. He should be upto date and prompt in the payment of the concerned NCL interest and corresponding chitty installments. ii. Outstanding dues if any, against the existing NCL account should be cleared either by direct remittance or by adjustment from the fresh NCL amount to be sanctioned d. Where the installment amount with interest is 5000/- and above, the unit head should ensure the repaying capacity of the loanee and make a note of it for sanctioning the loan. e. Loan should not be sanctioned to a loanee whose previous loan account is in default. • INTEREST RATE The interest rate of the advance is 14.5% (simple) and for defaulted accounts 16.5%. PASS BOOK LOAN: • PURPOSE: To provide quick loan to non-prized subscribers to meet the urgent needs on the security of paid up subscriptions in the chitties. 20

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• LIMIT: As per chart prescribed, based on the paid up amount in the chitty and the period remaining for termination of the chitty. Gross subscription remitted reduced by Forman’s Commission and debit balance is the paid up amount. Loan is rounded to the lower Rs.100/- of eligible amount. • ELIGIBILITY: Chitty subscribers who have made up-to-date remittance in unencumbered chitties are eligible. Applicant should not be defaulter in any of our schemes as principal debtor or surety/guarantor. • INTEREST RATE: Interest is charged at 13% monthly compounding on the loan This will be applicable to a loanee who remits his/her chitty monthly installments on or before the due date. In case of default in chitty installments the interests the interest rate will be 15% monthly compounding. • AUCTION OF THE CHITTY: The chitty can be allowed to be auctioned subject to the limit of 30% if the prize amount will be adequate to cover the future liability in his chitty, the loan amount and interest thereon. Prior written permission from the Unit Head to auction the chitty should be obtained.

• REPAYMENT OF LOAN: The loan and interest due thereon can be settled at any time by remitting the total dues in lump. To charge interest only for the exact outstanding loan amount after adjusting the part remittance on the same day itself and only for the days in debt

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provided such remittances are not less than 10% of the outstanding balance as on the date of remittance. • PAYMENT OF INTEREST: The loanee can make periodical interest payment and lump sum interest payment as well. The practice of treating fraction of a month as full month is discontinued and interest will be charged only for the exact number of days. • WHEN CHITTY IS DEFAULTED: When chitty installments are defaulted the subscriber is removed observing the usual procedures and the loan and interest thereon are adjusted from the RSC or APSTC as the case may be. • AGREEMENT: Chitty loan agreement is executed on stamp paper of value of Rs. 50/-. • BOND PREPARATION CHARGE: Bond preparation charge is 0.2% of loan amount at minimum Rs.10/- and minimum Rs.60/-

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BRIEF ABOUT OTHER MAJOR PRODUCTS A. GOLD LOAN SCHEME: The gold loan scheme was launched by the company on 16th Oct 1989. Under the scheme, short term loans upto Rs. 20,000/- for a maximum period of 12months are provided on the security of gold ornaments. • PURPOSE: The scheme is intended to provide short term loans for people who are urgently in need of money, on the security of gold ornaments. Gold coins and bullion will not be accepted as security. • APPLICATION: Application form will be supplied free of cost. • LIMIT OF LOAN: Maximum loan amount in this scheme is limited to Rs. 1, 00,000 per individual per day. To insure the identity of the customer copy of documents like Electoral card, Passport, Driving license or introduction of any KSFE Employ or Gazette Officer, MPs, MLA’s etc. Customer known to unit head may be obtained and identified. • ELIGIBILITY: The maximum amount that can be granted per gm of 22carat gold jewellery at any point of time is limited to 70% of the prevailing market price rounded off to the lower rupees ten, provided the principle plus interest should not exceed 75% of the market value at any point of time during the loan period. The prevailing market price of gold listed in any leading newspaper on the date of gold loan is to be recorded in the loan application by the concerned J.E. and it is to be certified by 23

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the unit head. The same should also be noted in the personal ledger folio. If the market price of gold in various towns within the state differs from one another, the lowest prize quoted may be taken as the base for fixing the eligible loan amount per grams. • APPOINTMENT OF APPRAISER: The branch manager concerned may select suitable person who has sufficient experience in appraising gold ornaments as appraisers for the branch with the approval of the Regional Manager concerned. The selected appraisers have to take a fidelity insurance policy for a sum of Rs.5000/The appraiser should have the following essential qualifications. (i)

Should know Malayalam (both reading and writing).

(ii)

Should have engaged in the manufacture of gold

ornaments & must

have sound knowledge and experience of goldsmith work. (iii)

Should have completed 25yrs of age and should not have completed 6 65yrs as on the date of engagement.

(iv)

Should hold goldsmith certificate issued by Central Excise Authority.

• PERIOD OF LOAN : Maximum period of loan is 6 months. • OVER DUE GOLD LOAN: The unit heads should send notices demanding the remittance of up-to-date interest within 15days from the date of notice. If the loanee, in response to our notice, remits at least the interest due for 6 months within the stipulated time, his account can be kept live for the period remaining to cover the maximum period of 12months. .

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If the loanee fails to remit the interest as demanded by the company with in the stipulated time, the unit heads should initiate immediate steps for the auction sale of pledged gold ornaments after fulfilling the usual formalities. The maximum period for repayment of gold loan is 1year and even in cases where the loanee has remitted interest for the first 6months, the account has to got closed immediately after the completion of 12months. • INTEREST: Up to 5,000 - 12% 5,001-25,000 - 13% Above 25,000 - 14% • PART PAYMENT: Part payment towards the loan is accepted at any time provided the interest till the date of remittance is paid in full and remittance towards principal is made in hundreds or its multiples. • DOCUMENTATION: Loanees stamped receipt, promissory note etc., are the documents for payment of gold loan.

B. FIXED DEPOSIT • PURPOSE: This scheme aims at raising fund for financing our schemes, paying attractive interest rates. • LIMIT: Rs .500/- or above.

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• INTEREST RATE: Simple interest will be paid as fixed by the company from time to time. The rate of interest on fresh fixed deposit as well as for renewal of existing deposits accepted from public is;• PERIOD

RATE

For 1year and above but not exceeding60 months • FIXED

DEPOSITS

GENERATED

FROM

9.75% PRIZE

MONEY

CHITTIES: Fixed deposits created from prize money of chitties and offered as security towards the future liabilities irrespective of the duration of the chitties and quantum of future liabilities. a. Should be deposited in full without any deduction. b. Subscribers who avail this facility should open a Sugama account in his/her name. c. Should be a single deposit, initially. It can be split up into 2 or more deposits for different period on the depositors’ request, when it becomes renewable, provided the subscriber is up to date in remittance. • PAYMENT OF INTEREST: Interest will be paid monthly for deposits of Rs.10, 000/- and above. The interest will also be transferred to the depositors Sugama Account, chitty or loan account as per request. • PREMATURE CLOSURE: (a) Period of deposit less than one month - Nil (b) Period of deposit one month and above but less than one year –Sugama rate of interest.

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• RENEWAL: Fixed Deposits can be renewed with retrospective effect. When F.D. is renewed on a later date interest will be given from the maturity date of the original deposit provided the deposit is renewed for a minimum period of one year from the maturity date of the original deposit. The rate of interest will be the rate applicable on the date of maturity of the original deposit. • LOAN FACILITY ON ENCUMBERED F.D: (a) Only one FD Loan account can exist against a deposit at any one time. So the depositor can draw a second loan on FD, equal to 75% of the deposit or the amount he requires, whichever is lower, as a new loan after closing the existing loan on FD. (c) A loan on the same FD can be allowed for an amount not exceeding 75% of the unencumbered portion. • OTHER FEATURES: Deposits can be in the name of individuals, joint names of two or more persons, firms and companies. a) The deposit receipts issued by the company are not transferable. b) The deposit receipts can be pledged as security for chitty payment and for availing loans under various schemes of company. c) Nomination facility is also available.

C. LOAN ON FIXED DEPOSIT: • PURPOSE: The loan is intended to provide quick loan to depositors on their Fixed Deposits. • APPLICATION: Application is issued free of cost. 27

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• LIMIT: 75% of the F.D amount is paid as loan. The Regional Managers are authorized to consider individual cases on merit for FD loan above this limit of 75% subject to a maximum of 90% of FD amount. • ELIGIBILITY: Normally the FD on which the loan is intended to be availed must be free of any liability. Only 1 FD loan account can exist against a deposit at any one time. • PERIOD OF LOAN: The period of loan can go up to the maturity date of the FD on which the loan is availed. • RATE OF INTEREST: The interest chargeable on a FD loan is 2% above the rate applicable to the FD on which such loan is granted.

D. SUGAMA DEPOSIT SCHEMES: • PURPOSE: Sugama deposit scheme aims at providing a deposit facility similar in many ways to SB accounts in bank but without the cheque facility. The scheme helps the customers in the following manner. a. The customers can give standing instructions to the company to transfer the monthly installments towards chitty on the due dates from the Sugama account. b. Interest on FD can be transferred to this account as and when it becomes due on the basis of standing instructions obtained from the depositors.

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• MINIMUM BALANCE: Minimum balance to be maintained at any time should not be less than Rs.100/-. The minimum balance to be maintained in the Sugama for interest eligibility should be Rs.250/- or more. • ELIGIBILITY: The person who intends to open the account should be introduced by a customer or respected person known to the co., A Sugama account can be opened. a. By a person in his own name. b. On behalf of any minor relative. • INTEREST RATE: 5% on the minimum balance maintained in the account between 6th and the last day of any month. The interest will be credited twice in a year, on 30th Sep and 31 Mar. • MODE OF DEPOSIT: Remittance of amount for the credit of the account should be made in cash at the branch office concerned or by way of transfer credit of any amount not exceeding Rs.20000/- due to the depositor, on request; a subscriber is permitted to transfer the chitty prize money in full to a sugama account. • WITHDRAWAL: Withdrawal from the account shall be made through withdrawal slips supplied by the co., According to the income tax rule, deposit above Rs.20000/- shall be refunded only by crossed cheques; this limit being applicable to the total withdrawal of the day.

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E. RELIABLE CUSTOMER LOAN (RCL): The scheme is intended to provide easy credit facility to our customers. • APPLICATION FORM: On registration by payment of Rs. 10/- application can be obtained from the unit he/she intends to take the loan. • LIMIT: The maximum amount of loan is Rs.25000/-. But in the case of single surety, offered by an unemployed customer, the maximum loan liability is limited to Rs. 20000/-. • ELIGIBILITY: All the customers of KSFE can be considered for the RCL. a. He/She should have been a customer of the branch in which he/she is applying for the finance, continuously for a minimum period of 12 months. b. He/She should not be a defaulter at the time of applying for the loan. c. He/She should not have committed default for more than 3months during past 1year. • PERIOD OF LOAN: The minimum and maximum period of the loan is 12months and 36 months respectively. • RATE OF INTEREST: Interest will be charged at 14% yearly diminishing basis. • REPAYMENT OF LOAN: The loan together with interest shall be repaid in monthly installment as per the EMI table. 30

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• PENAL INTEREST: Penal interest of 2% for each month of default on the defaulted installments amount will be charged.

• NUMBER OF LOAN WHICH CAN BE AVAILED UNDER RCL: At any one time, there should be one and only one live RCL in the co., in the name of a customer. To ensure this the covering abstract should be sent to HO and clearance obtained before issuing the loan. • PREMATURE CLOSURE: For premature closure re-calculation of EMI up to the month of closure is made minimum one year’s interest is taken.

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CHAPTER 4

WORKING OF A BRANCH

ORGANIZATION CHART DUTIES AND RESPONSIBILITY WORKS DONE IN THE BRANCH PROCEEDURE OF ACCOUNTING THE DATAS

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ORGANIZATION CHART

DUTIES AND RESPONSIBILITY Duties and Responsibilities of Branch Manager:He will be responsible for the environment with in the Units in which his subordinates work and will create conditions conducive to effective work; To prepare a master plan outlining the proposed activities with the objectives to be attained in accordance with the policies of the organization and forward it to the Head Office during February each year to enable the Company to prepare a realistic budget every year. In addition to the implied duties he will have the following specific functions;

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To do all the basic tasks of the Manager, such as; • To plan the operations of his subordinates, organize, integrate, control and co-ordinate their activities for maximum contribution to the Branch Manager as head of financial unit. • To post proper persons to various positions in the Branch, train and develop them to accomplish their task effectively. • To organize their role relationship To start chitties conforming to the pattern prescribed by the Head Office and achieve the targets fixed by the Company; To issue advertisements, if necessary, directly to the local dailies with the approval of the Regional Manager. To perform the duties and to exercise the rights of the foreman under the relevant provisions of the Acts relating to the chitty. To receive proxy form on behalf of subscribers enter the details in the register prescribed, to file the proxy forms chitty-wise, and to be responsible for the proper inclusion of their names in the auction/ draw. To keep correct minutes of the proceedings of every auction and drawings, sign the minutes on behalf of the foreman and to file a true copy of the minutes with the Registrar on the due date. To take steps for the payment of the amount due to the defaulting subscriber on the due date. To demand in writing, consolidated payment of future subscription from defaulting subscriber on the due date. To prepare a separate Annual Balance Sheet for each chitty and to take steps for the audit of such balance sheets and filing of copies with the Registrar at the appropriate time. To initiate timely action under R.R. Act to collect defaulted subscriptions or other dues recoverable, wherever necessary. 34

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To send intimation cards indicating the amount due for the next installment to the subscribers/ banks having standing instructions from the subscribers, timely. To send recovery schedules to the drawing / disbursing officers in respect of subscribers who have joined our salary deduction scheme and to ensure the remittances so received are duly entered in the books of accounts promptly. To develop chitty business of the branch by starting chitties timely and attain the budgeted sala of business. To verify the correctness of the entries in the Money orders Register, sign the Money order forms, and to receive the Money order, on behalf of the Company. To ensure that all the amounts received by Money order on the day have been duly acknowledged by the cashier. To ensure that the day-to-day accounts in the Units are written up on a current basis and satisfactorily maintained. To be responsible for the proper identification of the subscriber and of his acknowledgements on the documents, payment voucher, cheque counter foil, personal ledger folio etc and hand over the cheques to the parties concerned. To be responsible for the safe keeping of all the documents relating to the payment of prize money/ removed subscribers contribution To reconcile the Bank accounts, Head Office Current Accounts and Regional Office Current Accounts. To arrange for the preparation of subscribers personal ledger schedules and their tallying with control accounts. To schedule payment of prize money in such a way that they are more or less evenly distributed over the month, also taking into account the ways and means position and giving priority of payment based on the date of receipt of surety/security applications and subsequent execution of documents. 35

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To transfer funds to the Regional Office within the date stipulated towards: a) Other Branch collections b) Salary deduction c) Share of tax and Head Office administration overheads To deposit the entire collections of a day in the bank the same day or on the morning of the next day. To check occasionally and ensure that the employees have already performed their assigned duties (including carrying out checking procedure) satisfactorily; To build up and enhance the reputation of the Company in its dealings with the subscribers and prospects, fostering friendliness with the general public projecting always the good image of the Company so that we may merit a reputation of our own for the quality of service; To be responsible for the proper maintenance and updating of a) Personal files of all employees in the Unit b) Service records/books c) Loans, advances and their repayments Duties and responsibilities of the Asst. Managers:Assistant Manager/Deputy Manager will be the front line supervisor in the Officers’ Cadre who will discharge the following duties, functions and exercise the following powers and report direct to the Unit Head. 1. To do all the basic tasks of the front line supervisor, such as: (a) To plan the operations of his subordinates organize, integrate, control and coordinate their activities for maximum contribution; (b) To post proper persons to the various positions under his control, train and develop them to accomplish their task effectively; (c) To organize their role relationships;

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(d) To direct their work by clarifying their assignments, guiding them towards improved performance and motivating them to work with zeal and confidence; (e) To control them by measuring and correcting their activities to assure that events conform to plans and to co-ordinate their work. The major responsibilities of Asst. Managers are as follows:To be responsible for supervising and checking of all collection activities of the Branch. To ensure by test check or complete check as may be appropriate that all the financial transactions under his section are in order. To verify the correctness of the entries in the Money Order Register with reference to the Money Order Forms to initial every entry in the Money Order Register authenticating its correctness To be responsible for the correctness of the entries made in the Money Order Register and of the amounts received and recorded in the Money Order Register. To correspond with persons from whom the Money Order has been received in cases where proper details regarding such remittances are not available. To receive and enter all the cheques/demand drafts received in the “Cheques/Bank Drafts Sent for Collection Register” and to get defects, if any, rectified or to return the cheques to the parties on the same day if the defects noticed could not be got rectified, close the register every day. To ensure that the cheques / bank drafts are duly crossed and if not, to cross them “Account Payee”; To supervise the postings in the Chitty Collection Registers/ Chitty Day Book, Personal Ledgers/ Loan Registers/ Sugama Account Ledger and Collection Registers, and all the other relevant registers. 37

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To supervise and check the postings in the Personal Ledger To ensure timely preparation and tallying of quarterly collection summary. To ensure that the amount kept under suspense are cleared in time.. To regulate and conduct the draw/auction to act as proxy on behalf of the subscribers who have authorised the Branch Manager for such participation. To get the auction proceedings voucher prepared. To get the default statements (prized, non-prized and loan schemes) prepared in time. To operate the Bank account of the Branch jointly with the Branch Manager. To make physical verification of cash with the Cashier at the close of business every day, to certify the fact of having made such verification in the cash scroll and to bring to the notice of the Branch Manager difference between the actual physical cash and book balance; To arrange for the preparation of chitty balance sheets and its filing. To scrutinize the cheques/ demand drafts and ensure they are in order; To be responsible for the remittance of daily cash collection (including the Money Order collection) in to the bank on the date of collection itself or latest by the next working day, for the maintenance of the Cash in Transit Register. To be responsible for the safe keeping of the cheques received until they are deposited in to the Bank. To verify and initial transfer chalans and to be responsible for any erroneous or fraudulent entry in respect of such chalans. To ensure the writing up of the Chitty Ledger. To verify the scrutiny report, ensure that the prize amount payable agrees with the figures shown in the original auction minutes, ensure with reference to books of accounts that the deductions to be made as shown in the report are accurate and initial the scrutiny report..

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To get all payment vouchers prepared, to check and initial it, and to be responsible for its accuracy. To be responsible for the accuracy of the prize amounts and other payments made. To review and submit monthly work position reports to the Branch Manager. To ensure timely completion of annual accounts and related statements. To transfer funds to Regional Office to wards: (a) Salary deduction (b) Share of tax and Head Office administration overheads along with the other Branch collection. (c) For meeting emergency requirements. To get the Bank account and Head Office Current Account/ Regional Office Current Account reconciled monthly and to give the reconciliation statement, by 15th of every succeeding month To be responsible for the safe custody of all the relevant records, registers, vouchers etc., handled by him and seats under his control. To initiate action for the starting of chitties in the Branch and to arrange the release of advertisements with the approval of the Branch Manager. To assist the Manager in canvassing subscribers as and when necessary To obtain sufficient security for the payment of future subscription. To take steps for the payment of prize money to the prized subscriber on the due date, if the subscriber has furnished adequate security for the payment of future subscriptions, and to intimate the fact to the prized subscribers; To verify the genuineness/ liability of the subscribers/ sureties; To examine all the documents concerned with the payment of prize amount and ensure that they are in order and correct and complete in all respects.

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WORKING OF THE BRANCH 1. OFFICE HOURS The Office hours for regular employees are from 10 a.m to 5 p.m on all working days except in the case of Evening Branches. The office hours prescribed for Evening Branches are from1p.m to7 p.m. In the case of part time employees; it is fixed from 8 a.m. to 1 p.m. in regular Branches and from 11 a.m to 4 p.m. in Evening Branches. 2. LUNCH BREAK 45 minutes interval is allowed for lunch break and this has been fixed between 2 p.m and 3 p.m 3. PUNCTUALITY IN ATTENDANCE All members of the staff are expected to observe punctuality in attendance. Habitual late attendance and other irregularities connected with attendance are punishable under the provisions of the Standing Orders of the Company. Any employee found absent from his seat during office hours for a duration exceeding five minutes except with the permission of the authorised officer will be called upon to explain his absence and if this habit persists, disciplinary action will be taken against such employee who is found guilty. 4. HOLIDAYS All holidays declared by the Government of Kerala as holidays for its employees will be holidays for the company also, unless declared to be restricted to specific department in which the Company is not included. In addition to the above, the local holidays either whole or part declared by Government are also available to Company employees of the respective locality. At the beginning of every year, a list will be drawn up and released showing the public holidays on the basis of the public holidays declared by the Government. In 40

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addition to the holidays fixed for each year all Sundays and Second Saturdays will be holidays for the Company. 5. MAINTENANCE OF OFFICE PREMISES The Unit Heads in the Units, Regional Managers in the Regions and Administrative Officer in the Head Office are responsible for the security, upkeep and proper maintenance of the offices concerned. The office premises shall be kept clean and tidy. All employees are expected to help in the maintenance of cleanliness of the office premises by not throwing about papers, cigarette stumps, etc., and by not disfiguring walls, pillars etc., with writing of slogans and the like and pasting and displaying posters on them. Recognized unions may, however, put up notices about legitimate union activities in the space provided for them. The offices shall be arranged to be opened at 8 a.m or earlier to enable the sweepers to sweep the rooms and premises, cleanup the furniture, fittings, bathrooms and the lavatories. The Administrative Officer in the Head Office, the Regional Managers in the Regions and the Unit Heads in the units shall occasionally inspect the above work and ensure cleanliness and tidiness of the premises. Files, registers and papers shall be methodically arranged and when not in use, should be kept neatly stacked in the space provided. No files, registers or papers shall be kept on the floor. Waste paper should be kept in the waste paper baskets provided and not strewn about on the floor. Important papers, files and other records should be kept in safe custody. It must be scrupulously ensured by all concerned that small items of stationery such as pins, gem clips, tags, carbon papers, refill, etc., are kept in their proper places and not allowed to lie strewn about on the floor. The offices should be closed at the end of the day and the doors and windows securely locked. This should be ensured by the Administrative Officer in the H.O., Regional Managers in the Regions and Unit Heads in the Units or by the persons authorised in this behalf. It is the duty of every member of the staff to observe strict economy in the use of articles supplied 41

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and facilities provided. All stationery items supplied should be economized to the maximum possible extent and all kinds of waste eliminated. Lights, fans should be switched off and water taps turned off when not required for use. 6. ACCEPTANCE OF DONATION FROM SUBSCRIBERS. Members of staff are strictly forbidden from seeking or accepting donations from subscribers or others either in the personal capacity or in his representative capacity as member or office bearer of an association. 7. DISPLAY OF NATIONAL FLAG The National Flag shall be hoisted on the office building on special occasions like Republic Day or Independence Day 8. OBSERVANCE OF BUSINESS DISCIPLINE IN THE INTEREST OF GOOD CUSTOMER RELATIONS. In the dealings of the Company with the customers, it is not enough that the employees are just and fair, but they should make the customers feel that they are just and fair. In order to ensure this the members of the staff shall observe the following business discipline in addition to the directions given elsewhere in this manual: (i) To act honestly and faithfully at all times; (ii) To demonstrate a sense of fair play and impartiality in disposing of cases; (iii) To show courtesy and consideration in public dealings; (iv) To maintain strictest secrecy regarding the Company’s affairs whatever be the Provocation; (v) To observe scrupulously the rules and regulations; (vi) To avoid seeking and receiving cash, donations and advertisements from the Company’s clients, constituents, business associates, etc., even for a good cause; (vii) To attend the public grievances promptly; 42

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(viii) To dispose of cases promptly but without undue haste; (ix) To get all oral instructions and decisions of the higher authorities down in writing and get them confirmed; (x) To give job rotation to those who are on sensitive positions; (xi) Not to issue or cause to issue cheques in favour of other subscribers/ loanee/sureties/ guarantors towards payments in connection with the business of the Company; (xii) Not to attend the auction as proxy (except the Unit Heads) on behalf of others in the Unit where they are working; (xiii) Not to accept payments in connection with the business of the Company on behalf of others except with the permission of the Unit Head, who shall exercise such caution and discretion in this regard. (xiv) Not to make payments in cash in connection with business of the Company in lieu of cheques issued; (xv) Not to encash cheques issued to subscribers/ dealers or others in connection with the business of the Company; (xvi) Only cashiers/ authorised persons shall accept cash from the transacting public who should issue proper receipt and keep proper accounts. (xvii) Not to accept blank cheques /cheques un-accompanied by pay-in-slips/ cheques not duly signed and without details of remittance. (xviii) To be impartial in all their dealings with the transacting public; (xix) To supply the intending loanees with a list of approved dealers and the choice of dealers left to them; (xx) Unauthorized stay in the Company’s office /premises is strictly prohibited.

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PROCEEDURE OF ACCOUNTING THE DATAS

Tally is used in KSFE Branches for accounting purposes and Excel is used for creating of schedules, reports, daily fund flow summary etc. The SAMPLE schedule for the major products of KSFE is as below:-

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Apart from accounting in Tally, the cashier is maintaining the Daily Cash Scroll register also. The sample of the Cash Scroll Register is as follows,

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CHAPTER 5

CONCLUTION

DECLARATION

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CONCLUTION

As there is a proverb that:“A journey of a thousand miles begins with a single step” The journey of KSFE started slowly and in a small scale basis. But not KSFE have a largest role in the financial market in Kerala.

KSFE stands outstanding with its unique and secured products type and range when comparing with the other financial institutes in Kerala. The products of KSFE is a risk free safe haven for the public as KSFE conducts only chitties fully governed by the provisions of Kerala Chitties Act, 1975. Because of the same reason and the quality of the service towards Customer Satisfaction and the products offered KSFE has got a place on the list of trusted Companies in everyone’s mind.

ALL FROM THE ABOVE STUDY NOT WITHSTANDING ITS RESTRUCTING EFFORTS KSFE AND ITS PRODUCTS IS STILL FAR AWAY WITH ITS GREAT COMPETATORS IN KERALA STATE

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DECLARATION I declare that this project report titled “WORKING OF A FINANCIAL INSTITUTION” done in The Kerala State Financial Enterprises Ltd. is an original work done by me under the guidance of Mr. Abdul Fathaque (Branch Manager). I Further declare that it is my original work as a part of my academic course.

PLACE : PALAKKAD DATE : 25th June, 2009

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