A PROJECT REPORT ON
“LOAN MANAGEMENT SYSTEM” At DHANSHRI MULTI-STATE CO-OPERATIVE SOCIETIES BANK LTD, SOLAPUR. SUBMITTED BY MR. SURYAWANSHI S.SANDIP Under The Guidance Of •
Prof. ASHWINI BARPUTE
• SUBMITTED TO University of Pune in partial fulfillment of the requirement for the award of degree of Master of Business Administration Through • Jaywant Shikshan Prasarak Mandal, Nahre Technical Campus. Batch – 2014-15
DECLARATION
I SURYAWANSHI S SANDIP. MBA II YEAR Studying at JSPM Narhe Technical Campus Pune hereby declare that the project report titled. “LOAN MANAGEMENT SYSTEM” was carried by me in the partial fulfillment of MBA program under university of Pune This project is undertaken as part of the academic curriculum according to university rules and norms, and has no commercial motive or interest. It is original work. It is not submitted to any other organization to any other purpose.
Date: Place: Pune
SURYAWANSHI S.SANDIP MBA (Finance)
ACKNOWLEDGEMENT
•
I take this opportunity of submitting this report to express my regards towards those who offered their individual guidance in the hour of need.
•
I sincerely acknowledge with deep sense of gratitude and indebtedness to Director of JSPM narhe technical campus Pune DR. N.S Nehe and my internal guide Prof. Ashwini Barpute who has guided me with valuable inputs throughout the project. He gave knowledgeable insights about the topic, which helped e throughout the problems.
•
I also would like to thank prof. shobha kalunge for giving me this opportunity to work on this topic; it surely has given me insights into areas I was not much familiar earlier. I have tried to share those insights with you in this report.
• This project was really worthwhile to work on because it encompassed all the learning for a management student. Thus it provided a ground to implement what is learned and also depicted the real tasks that have to be undertaken in the witty-gritty involved in the system
• Sr no.
Index Title
Page no.
1
Introduction. 1.1 Objective of the Project. 1.2 Selection of the topic for the Project. 1.3 Limitation of the Study. 1.4 Rationale of Study.
2
Profile of Company. 2.1 Historical Background of Bank. 2.2 Features And Awards of Bank. 2.3 Board of Directors of Bank.
3
Theoretical aspect of the topic
4
Research Methodology
5
Loan Policy Of Sindhudurg dcc bank ltd.
6
Data Analysis and interpretation
7
Finding
8
Suggestion
9
Conclusion
10
Annexure
11
Bibliography
•
•
EXECUTIVE SUMMARY
EXECUTIVE SUMMARY
It’s a thing of massive gratification for me to present the Project Report on the topic “Study of Loan Management System for Dhanshri Multi-state Co-operative Societies Bank Ltd. ” I have deep interest in studying the loan procedure and system of credit risk management in banking industry. This project attempts to identify and know about loan sanctioning work and lending procedure in Dhanshri Multi-state Co-operative Societies Bank Ltd. It also attempts to develop at least first approach to these areas, to think through policies, principles, and
practices to accomplish the new tasks. By this practical training I am able to equip understanding, the thinking, the knowledge, and the skills for today and also for tomorrow’s credit managerial work in financial institutions. Initially I was just having the bookish knowledge about all lending system, practices and functions, but after doing this project, I got most of the practical knowledge. I have come to know, what actually happens in the department of credit in banking industry. Though it is not possible to have the information of all the spheres in market, in such a very short period, but I tried to get more and more about all functions and practices applied in practical working, I have particularly stresses on. This study, complex as it is, has acquired new dimensions with the dynamic social and technological changes of the past two decades. Changing trends, cultural diversity, more educated work force and Awareness of rights and privileges have prompted a new look at the entire organizational structures and systems. After the study and analysis of various aspects about the system of Loan management I have come to the various findings and observations regarding the actual data analysis which have led me to the suggestions and recommendations which will help bank to improve its position by reducing non-performing assets and lend money to increase profit position and status of the bank. I have studied Loan management system project in Dhanshri multi-state CoOperative Societies Ltd. through their financial statement of last 3 years. In 2012-13, 2013-14 & 2014-15 Deposits is high which a good sign is for the bank. It represents rapidly the increasing the Deposites and comparively Loan. The amount sanctioned by bank as loan has shown gradual increase year by year. •
Bank has to keep provision for its defaulter and N.P.A. it is up to 100% of loan amount naturally it create financial burden on bank. The percentage of NPA is decreasing from year 2012 to 2013 which is good for the bank.
•
CHAPTER 1
•
INTRODUCTION
Introduction I had complete project on”Loan Management System” at Dhanshri multi-state Cooperative Societies bank ltd. Within two month. This project attempts to identify and know about loan sanctioning work and lending procedure in Dhanshri multi-state Cooperative Bank Ltd. It also attempts to develop at least first approach to these areas, to think through policies, principles, and practices to accomplish the new tasks. By this practical training I am able to equip understanding, the thinking, the knowledge, and the skills for today and also for tomorrow’s credit managerial work in financial institutions. Loan Policy is aimed at accomplishing its mission of retaining the bank's position as a Premier Financial Services Group, with World class standards and significant global business, committed to excellence in customer, shareholder and employee satisfaction and to play a leading role in the expanding and diversifying financial services sector, while continuing emphasis on its Development Banking role. All the function of a modern bank, lending is for the most important. Advances comprise very large portion of a bank’s structure.The strength of a bank is thus primarily
judged by the soundness of its advances. A wise & prudent policy in regard to advances is considered an important factor inspiring confidence in the depositors & prospective customers of a bank. All types of business activity including trade, industry and agriculture depend on bank finance in one form or the other. Bank assists in creating more avenues of employment and thus helps raising the standard of living of people.
1.1 Objectives of the project:To understand the various types of loan accounts, documents, terms & condition for the sanctioning of loans.
•
To analyse the loan sanctioning procedures of the applicants in Dhanshri multi-state Co-operative Societies Ltd
•
To identify the credit worthiness of the borrowers.
•
To study disbursement and Loan recovery in Dhanshri multi-state Co-operative Societies Ltd
•
To analyse the profit generation out of money lending for the bank.
•
To identify the proportion of advances against deposits.
•
To provide suggestions and recommendation for improvisation.
•
1.2 Selection of the topic for the project:-
•
I have deep interest in studying the loan procedure and system of credit risk management in banking industry.This project attempts to identify and know about loan sanctioning work and lending procedure in Dhanshri multi-state Co-operative Societies Ltd.
•
On the discussion with the management, of Dhanshri multi-state Co-operative Societies Ltd. it is understood that the subject of Loan Management System has not been studied earlier & bank needs to study the same.
•
Bank also wants to know the actual position of Deposits and Loan policy.
• 1.3 Limitations of the Study:-
•
Some data due to the purpose of secrecy was not disclosed by the bank.
•
The main limitation of the research is the data source. The data is collected from the audited financial statements, which are prepared on the historical cost basis.
•
These financial statements are prepared at the end of the financial year. So, it gives a view on particular date.
•
There was time constraint & restriction on the part of management while giving specific financial information.
•
Some information is provided by the staff of the Ltd.
• 1.4 RATIOANLE OF THE STUDY •
Study of Loan System requirement helps to know the banking position about Deposit and loan comparision yearly.
•
Any money accepted as deposits must be for the purpose of lending or investments, making advances & making investments of funds are equally important function. They are two main sources of the bank.
•
There are few general principles of good lending which every banker follows when appraising an advance proposal.
•
In a demand loan account, the entire amount is paid to the debtor at one time, either in cash or by transfer to his savings bank or current account. No subsequent debit is ordinarily allowed except by way of interest, incidental charges, insurance premiums, expenses incurred for the protection of the security etc. Repayment is provided for by installment without allowing the demand character of the loan to be affected in any way
•
Efficient management of Loan System could enable the bank to reap the benefits as and when their proportion of Deposits and Loans are good and also enable the bank to consolidate its position in the market.
•
Chapter 2 PROFILE OF THE BANK
• PROFILE OF THE BANK: •
BANK AT A GLANCE
Name of The Bank
:
Dhanshri Multi-state Co-operative Societies Ltd
Registered and Central Office
:
Damaji road,mangalwedha,Dist.solapur Maharashtra, India.
Registration Number
:
S.U.R /M.D.A /R.S.R 1436
Registered on
:
1st Jan 2005
Email-id
:
[email protected] &
[email protected] www.dhanshrimultistateb.com 02188-220132
Website Contact No. Number of Branches
:
35
Regular Members
:
2570
Nominal Members
:
400
Paid Up share capital
:
3.79 Crores
Reserves and Surplus
:
1.5 Crores
Total Deposits
:
180Crores
Total Staff
:
250
Profit of the year
:
1.70 Crore
Investments
:
40.68Crores
Audit Class
:
A
• 2.1 Historical Background of Bank:
Dhanshri multi-state Co-operative Societies Ltd. is established on 1st Jan 2005. This bank has constituded with the object of providing funds to Firms,Education,co-operative societies & others in Solapur, Jat & Vijapur district. Prof. Shivajirav Kalunge is founder of Dhanshri bank.Firstly Kalunge sir had started Dhanshri PATPEDHI but after 2002 Goverment including so many Rules & restrication on all PATHPEDHI that's why they had started Dhanshri co-operative society bank. Currently we are operating with the network of 35 branches in entire Solapur, Jat & Vijapur district. Our bank playing very important role in financial sector of Solapur, Jat, Vijapur District. Our bank is known as farmer's bank & We implemented different schemes in the interest
of farmer & people of Solapur, Jat & Vijapur are having full confidence on our bank. Therefore nearly more than 40% people of total population of Those District are our account holders. Currently our working capital is 40.68. crores & our total deposit is 180 cores.
• 2.2 FEATURES AND AWARDS OF BANK Features •
Insurance security up to Rs 1,00,000/- deposit.
•
Nomination facility available for deposit account
•
Safe deposit Locker facility available in Solapur, Pandharpur, Jat, Borale, Sangola City, Mohol, Gheradi, Marawade & Head Office .Counter branch.
•
Dhanshri bank had started recuring deposite from 1Jan 2005.
•
Easy Loan facility for 85 different categories Small scale industries. •
Rs 50,000 accidental insurance security for “ kishan”cardholder.
•
Loan available for agriculture farming, dairy, poultry, forest farming & irrigation.
•
Salary mortgage loan available.
•
first multi-state bank in solapur which was started the ''KANYARATNA YOJNA''
•
Half percent more interest available on all types FD for Senior citizen & co-operative Society.
•
Loan Available for agriculture graduates for agri clinic & agro industries.
•
The bank has been awarded ‘A’ Audit classification for the year ended on 31st march
2015.
• AWARDS •
Awarded as SAHAKARRATNA Best Multi-State co-op Societies in the years 20112012
•
Awarded as SAHAKARRATNA Best Multi-State co-op Societies in the years 20132014
•
State Co-op bank has Awarded our Bank as Best banker for fullfilment Financial criteria in the year 2014-2015
• 2.3Board of Directors:
Chairman-Smt.Shobha kalunge Vice Chairman- Shree.Ishvar gadade No.
Name of Director
Address
Telephone no
1
Shree. Shivajirao kalunge
1220.A/P:Mangalwedha,Tal;Mangalwedha
(02188)221132
2
Smt.Suvarna shivajirao Pawar
1920, mangal karyalay A/P:Mangalwedha Tal:-mangalwedha
(02362)221345
3
Smt.Rajlakshmi kalunge-Gaykawad
320,solapur-pune highway.Tal:Solapur
(02367)220132
4
Shree.Yadappa mali
A/P.Hulajanti,Tal, Mangalwedha
(02188) 252101
5
Shree.Nyandev javir
456,A/P:Mangalwedha Tal:mangalwedha
(02188)221150
6
Smt.Prabhadevi kanshetti
A/P:Hulajanti Tal:mangalwedha
(02188) 246508
7
Shree.Kisan sawanji
A/p:Mangalwedha Tal:-mangalwedha
(02188) 225225
8
Shree.Dattatray Nagne
724A/P:- Nagne galliTal:Mangalwedha
(02188) 253030
9
Smt.Manisha Kore
S/V.45 A/P:Mangalwedha Tal:mangalwedha
(02188) 224277
10
Smt.Sangita Tad
(02188) 237570
11
Shree.Sharad Hembade
412 A/PMangalwedha Tal:-mangalwedha A/P:-Mangalwedha Tal:-mangalwedha
(02188) 253031
.
• 2.4 Departments of the Dhanshri Multi-State Co-operative Societies Ltd
::Executives::
::Name::
::Contact No.::
Chief Executive Officer
Mr.R.K.Fadtare
(02188) 220132
Manager (Adm.)
Mr.S.B.Sawant
(02188)220833
(02188)220832 (Accounts, & Audit) Manager
Mr.R.A.Unhale
Mr.P.A.Kalunge
(Loan, Dev & Planning)
(02188)220134 . (02188)244314 (02188)244315
Manager (Field & Recovery)
Mr. H.D.Bedare
Manager (P&D)
Mr. R. B. Sawant
(02188) 245070 EPABX (02188)221215
Chapter 3 Theoretical aspect of the topic
Mr. P. S. Sawant
3.1 CONCEPT OF BANK: Banking means the accepting deposits for the purpose of lending or investments, from the public repayable on demand or otherwise & withdrawal by cheque, draft, order or otherwise. Any money accepted as deposits must be for the purpose of lending or investments, making advances & making investments of funds are equally important function. They are two main sources of the bank. Importance of advances in banking business:All the function of a modern bank, lending is for the most important. Advances comprise very large portion of a bank’s structure. The strength of a bank is thus primarily judged by the soundness of its advances. A wise & prudent policy in regard to advances is considered an important factor inspiring confidence in the depositors & prospective customers of a bank. All types of business activity including trade, industry and agriculture depend on bank finance in one form or the other. Bank assists in creating more avenues of employment and thus helps raising the standard of living of people.
3.2 MULTI-STATE CO-OPERATIVE SOCIETIES: Co-Operative Societies Definition-
A Society reggistered or deemed to be registered under (2002 *39* ) this Act and includes a national co-operative society and a federal co-operative.it's main object to serve the interests of members in more than one state.
A co-operative Society is an autonomous of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically enterprise. The co-operative Societies in plays an important role even today in rural financing.
Values-
Co-operative Society in India are registered under the Co-operative Societies(2002) Act. The cooperative society is also regulated by the Central Govt. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965. Co-operative bank is based on the values of self-responsibility, democracy, equality and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty openness, social responsibility and caring for others.
• 3.3 Types of Co-operative Banks in India The co-operative banks are small-sized units which operate both in urban and non-urban centers. They finance small borrowers in industrial and trade sectors besides professional and salary classes. Regulated by the Reserve Bank of India, they are governed by the Banking Regulations Act 1949 and banking laws (co-operative societies) act, 1965. The co-operative banking structure in India is divided into following 5 categories:
Primary Co-operative Credit Society The primary co-operative credit society is an association of borrowers and non-borrowers residing in a particular locality. The funds of the society are derived from the share capital and deposits of members and loans from central co-operative banks. The borrowing powers of the members as well as of the society are fixed. The loans are given to members for the purchase of cattle, fodder, fertilizers, pesticides, etc.
Central Co-operative Banks These are the federations of primary credit societies in a district and are of two types-those having a membership of primary societies only and those having a membership of societies as well as individuals. The funds of the bank consist of share capital, deposits, loans and overdrafts from state co-operative banks and joint stocks. These banks provide finance to member societies within the limits of the borrowing capacity of societies. They also conduct all the business of a joint stock bank.
State Co-operative Banks The state co-operative bank is a federation of central co-operative bank and acts as a watchdog of the co-operative banking structure in the state. Its funds are obtained from share capital, deposits, loans and overdrafts from the Reserve Bank of India. The state co-operative banks lend money to central co-operative banks and primary societies and not directly to the farmers.
Land Development Banks The Land development banks are organized in 3 tiers namely; state, central, and primary level and they meet the long term credit requirements of the farmers for developmental purposes. The state land development banks oversee, the primary land development banks situated in the districts areas in the state. They are governed both by the state government and Reserve Bank of India. Recently, the supervision of land development banks has been assumed by National Bank for Agriculture and Rural
development (NABARD). The sources of funds for these banks are the debentures subscribed by both central and state government. These banks do not accept deposits from the general public.
Urban Co-operative Banks
The term Urban Co-operative Banks (UCBs), though not formally defined, refers to primary co-operative banks located in urban and semi-urban areas. These banks, till 1996, were allowed to lend money only for non-agricultural purposes. This distinction does not hold today. These banks were traditionally centered on communities, localities, work place groups. They essentially lend to small borrowers and businesses. Today, their scope of operations has widened considerably.
3.4 Difference between Commercial bank & Co-operative bank Co-operative banks also perform the basic banking functions of banking but they differ from commercial banks in the following respects 1. Commercial banks are joint-stock companies under the companies’ act of 1956, or public sector bank under a separate act of a parliament whereas co-operative banks were
established under the co-operative society’s acts of different states.
2. Commercial bank structure is branch banking structure whereas co-operative banks have a three tier setup, with state co-operative bank at apex level, central / district cooperative bank at district level, and primary co-operative societies at rural level.
3. Only some of the sections of banking regulation act of 1949 (fully applicable to commercial banks), are applicable to co-operative banks, resulting only in partial control by RBI of co-operative banks and
4. Co-operative banks function on the principle of cooperation and not entirely on commercial parameters.
3.3 FUNCTION OF BANK Functioning of a Bank is among the more complicated of corporate operations. Since Banking involves dealing directly with money, governments in most countries regulate this sector rather stringently. The process of financial reforms, which started in 1991, has cleared the cobwebs somewhat but a lot remains to be done. The multiplicity of policy
and regulations that a Bank has to work with makes its operations even more complicated. Banking Regulation Act of India, 1949 defines Banking as "accepting, for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawal by cheques, draft, order or otherwise."Deriving from this definition and viewed solely from the point of view of the customers, banks essentially perform the following functions: 1) Accepting deposits from public/ others (Deposits) 2) Lending money to public (Loans) 3) Support to local business 4)Personal Finance 5) Support to farming 6) Small unit Industries
The banks are not limited only these six functions. There are so many functions involved in the activities that a bank performs today. Banks are organized in a linear structure to perform these activities at the base of which lies a Branch. The corporate office of a bank is normally called a head office.
Chapter 4 RESEARCH METHODOLOGY
RESEARCH METHODOLOGY
Research: According to Clifford Woody research comprises defining redefining problems, formulating hypothesis or suggested solutions, collecting, organizing and evaluating data, making deductions and reaching conclusions, last carefully testing the conclusions to determine whether they fit formulating hypothesis. The researcher has done the research by using two types of data. Mostly secondary data is used for the study; in some cases the authorities of the Bank have provided their original record. Sometimes informal discussions are also carried out for collecting the required information. In order to collect the data the finance department extends its full co-
operations. PRIMARY DATA The data collected originally by the investigator for his research project is called primary data collection of primary data is not an easy task it requires good amount of time, money and effort knowledge experience and common sense.
Following are the method of collecting primary data. 1) Observation Method. 2) Interview Method. 3) Information from Correspondents. The primary data was collected by interview and discussion with manager & employeesstaff.
SECONDARY DATA Secondary data consist of information that already exists. Secondary data provide a starting point for research and offer the advantage of the cost. Secondary data was collected through. Internet. Reference Book, Journal, Newspaper etc. Bank Annual Report.
CHAPTER 5 LOAN POLICY
• 5.1 LOAN TYPES OF DHANSHRI MULTI-STATE COOPERATIVE SOCIETY.BANK LTD.
Name of loan:-
Dhanshri Pagar Taran Karj Yojana (Salary mortgage loan)
Loan purpose:-
Personal needs of the borrower
Eligibility:-
Govt. servant, state transport cooperation, Insurance Company, M.S.E.C, Municipal corporation employee residing in Solapur District.
Limit of loan:-
•
Maximum upto Rs 5,00,000/- 20 times salary of (bank salary, VDA and offer allowances).
•
Salary deduction should not exceed 75% of total salary including EMI.
Rate of Interest:-
16% EMI
Repayment Period:-
Maximum upto 7 years.
Security:-
Two salaried guarantor, Tri-Party agreement between bank, borrower and salary issuing officer/employer.
Documents Required
•
Photograph, Residence proof of borrower and guarantor.
•
Recent salary slip of borrower and guarantor.
•
Tri-party agreement.
•
To facilitate borrower bank has deligated loan sanctioning powers of branch manages upto loan amount of loan amount of Rs. 75000/at branches level.
Name of loan:-
Home loan
Loan purpose:-
Construction/purchase of house, purchase of flat, Repair/Renovation
of Home/flat.Personal needs of the borrower
Eligibility:-
80% estimated cost or per square feet construction cost R.C.C – Rs 1800/- Sq. feet Load Bering & slab – Rs 1500/- sq. feet Laterite/bricks construction of Rs 1000/- sq. feet Mangalore roof/cement sheets cr mental sheets As per estimated cost or cost as per above mentioned cost whichever is lowest for house/flat repair and renovation maximum loan limit is upto 2.00 lac.
Limit of loan:-
Up to Rs 20.00 lac.
Rate of Interest:-
Upto Rs 5.00 lacs 15.0% EMI Above Rs 5.00 lacs 16.0% EMI
Repayment Period:-
Upto 15 years. For repair/renovation upto 7 years
Security:-
Reg mortgage of land and building or flat, two competent guarantors
Loan disbursement:-
Loan disbursement will be made in two to three installments by verifying the work progress •
7/12 extract, Plan and estimate by civil Engineer or architect, Grampanchayat permission for house construction. N.A. permission. Income proof of borrower and guarantor, title verification search Report
•
Bank also take over house loan obtained by customer from other banks/financial institutions
Documents Required
Name of loan:-
CONSUMER DURABLE
Loan purpose:-
for the purchase of T.V, fridge, furniture, computers, two wheeler, mobile
Eligibility:-
90% of the cost/quotation For salaried persons deduction upto 75% of the total salary.
Limit of loan:-
Max upto Rs. 50,000/-
Rate of Interest:-
16.0 %
Repayment Period:-
upto 5 years in case of two wheelers & mobile, maximum upto 3 years
Security:Documents Required
Hypothecation of the articles to be purchased •
Photograph & Residence proof of the borrower and guarantor
•
salaried person, latest salary slip and for others income tax returns or income documents
•
Quotation of the articles to be purchased
•
for two wheeler, driving license For professional/businessman loan can be repayed via small savings accounts Loans upto 40000/- limits can be sanctioned at banks branches level
Name of loan:-
Vehicle Loan
Loan purpose:-
Purchase of four wheeler and commercial vehicle.
Eligibility:-
Upto 80% of the quotation cost and repayment capacity of the Borrower
Limit of loan:Rate of Interest:-
Commercial Vehicle-17%EMI Own Car-16%EMI
Repayment Period:-
Upto7 years Commercial 5 years self use
Security:-
Hypothecation of the vehicle and if needed more security in the from of land, Building, Deposit
Guarantors:-
Two Guarantors
Documents Required:-
•
Photograph and residence proof of borrower and guarantor.
•
Income proof of borrower and guarantor’s salary slip, IT returns, Bank statement of business.
•
Quotation of the vehicle (including tax, insurance, Registration)
•
In case of used vehicles valuation of vehicle to be purchased. Also loan for purchase of used vehicle can be obtained. Maximum 3 years old Vehicle can be financed by the bank.
5.3 LOAN SANCTIONED PROCESS:
The Documents, Terms & Conditions Require Being For Application For Various Types Of Loans For Sanctioning:1) Borrower & guarantors should be shareholder account holder of the bank. 2) Reason for the loan & income certificate of the Borrower & guarantors 3) Xerox copy of Reshan Card / Home bill / Electricity proof.
Bill / Phone bill for address
4) Photo id of the borrower and guarantors which Includes Election Card/PAN Card/Driving 5) Balance sheet and Profit & Loss statement order for Previous three years of the business. 6) Stock statement, furniture, Machinery, shop papers if He is giving it as security. 7) Two photos of both borrower and guarantors. 8) For additional security 1) LIC policy 2) Other banks cheques 9) If amount of loan is than 1, 00,000 then the borrower should have additional shares at 5.0 % of the loan amount. If he doesn’t have it then he has to purchase it.
In case of house /Flat /Shops /Plot there are some extra documents required as:
• • • • •
Plot purchase copy Ownership city survey 7/12 document original. Original agreement copy between & builder. To be complete. Stamp paper according to demand condition.
Loan procedure of The Dhanshri Multi-State Co-operative Society Bank Ltd Why people take loan from bank? The answer for this question is very loan & the best answer for this question can be given by the banker only. People take loan for their personal need, because they don’t have money spend to satisfy their needs and wants etc. The reason of the loan can be anything. By categorizing these reasons the bank introduces the various types of loan into the market. All the files for the loan proposal comes to the head office of the Bank.At the Head Office in every month the bank conduct two meeting of board directors where the files are decided to sanction or Every file comes to the head office with the report of the manager. Because bank manager knows very well that how is the transaction of that applicant on his account. Then the file goes to the Loan Manager at Head Office for his report on that report. Every
one gives their own view on the basis of the applicant’s transaction & on the basis of document which is submitted by the applicant. After the report the file is placed in to the Director’s Meeting on 5th or 21st of every month in which board of directors decides that which file should be sanctioned and which is not to be sanctioned. After the meeting all the unsanctioned files is sent to the respective with all document which was previously submitted by the applicant & the sanctioned files remains in the Head Office in the Loan Department for the further provisions Then bank takes the signature of the person to whom the loan is sanctioned along with his two guarantors. The bank takes the signature of their own sanctioned form on which it is written that the borrower and the guarantors are liable to pay the amount of loan. The bank also takes the signature of the borrower on three debit voucher. Debit voucher and Credit voucher is used for internal transaction of the bank. Bank also takes the signature on another four documents that are •
1) Promissory Note
•
2) Loan Agreement
•
3) Lien & Set Off
•
4) Letter of Guarantee
After that bank ask for the original papers of the property which is to be given as security. If the borrower had given the LIC policy then bank assigns it in bank’s favours. So that if the borrower will fail to pay that loan amount of the bank then the bank can recover it from LIC policy by giving it to the LIC Company. The bank always gives loan to the borrower up to 75% to 80% of the total security which is given by the borrower. After the completion of all the document and signature the file goes to the branch manager for the signature on the Sanctioned Letter. Once the signature is done then the bank staffs open the loan account of the borrower and transfer the amount of the loan to the Saving, Current, Cash Credit or any other account of the borrower.
5.4 Loan Recovery Procedure: This is the more significant section of the whole bank as people here are having more work. This is so because, the Bank has 3.44% NPA (Non Performing Asset) and it is harmful to the banks business, as the name implies this section deals with the recovery of loan. Researcher study the loan recovery procedure, each bank has its own procedure of recovery it includes policy adopted by bank for its recovery. Each and every bank tries to recover its money as early as possible so banks take observation and also strict supervision from borrowers. If bank fails to recover the money in time then it is adversely impacted on banks reputation, so to reduce upcoming problems recovery is necessary. ‘Recovery procedure’ includes • • • •
Importance of recovery of loan Provision of bank as per category of borrower Recovery of loan to its doubtful borrower. Recovery of loan before its maturity period.
I. Importance of recovery of loan-: Every banks loan department focuses more attention on its recovery of loan. In brief quick recovery of loan shows financial soundness of bank to protect from restrictions of R.B.I. and N.P.A. provision, each bank has very serious about recovery of loan. The loan recovery policy and its terms are as follows. 1. Banks first recover its interest amount and then recover the principle amount. 2. Bank has to bridge the gap between loan amount and its financial burden and provision. 3. Recovery is important because it converted borrower into defaulter then bank has to
bear various expenditure, such as a) Maintaining proper books of loan. b) Proper inspection of mortgaged items c) Expansion incurred due to recovery such as legal expenses. 4. Defaulter converted into N.P.A., and then it is permanent loss of bank which cannot fill up. 5. Each and every time bank has to make the provision for doubtful loan. 6. Share of profit will decreases due to provision. 7. Due to rising N.P.A., R.B.I. takes strict action against those banks it will harmful for bank it may lose its reputation. Above mentioned are points shows that why recovery of loan is important and how it will impact on banks financial condition.
II. Provision of bank as per category of borrower The bank divides the borrower into 2 type’s viz. standard borrower doubtful borrower. The borrower who pay the instalment at regular interval/period, called ‘standard borrower and those borrower who do not pay the instalment regularly called doubtful borrower. Bank should make a provision on its standard and doubtful borrower, it standard borrower pay instalment regularly still bank has to make provision on that loan amount.
III. Recovery of loan to its doubtful borrower Recovery of loan from doubtful borrower is very difficult task, so bank must be proper alert about its recovery from doubtful borrower. Bank has to take following steps to doubtful borrower. 1. Bank sends remerging notice to borrower which inform borrower that his loan account was overdue
2. Bank charge penalty interest on loan account. 3. Bank sends notice to guarantor, to pay the balancing instalment. 4. If still borrowers don’t give any responses then bank send him 2 nd notice to repay the loan amount within given period. 5. If borrower don’t repay the loan, then bank take legal action against him. Bank has full right to recover of loan and for recollecting loan, bank sale the mortgaged asset into market and recover amount. If still the selling value should lesser than actual loan amount, then bank strictly recover the balancing amount from borrower.
IV. Recovery of loan before its maturity period Recovery is important we know that to recover loan amount, from defaulter is very difficult task for bank. So bank has to careful watch on recovery. In some cases bank already found that to recollect loan so its demands loan before its maturity. In case of following things are happen. 1. Borrower failed or unwilling to pay the instalments within prescribed time period 2. No any transaction in cash credit account for more than 3 months. 3. Borrower not follows the rules and regulation prescribed by R.B.I. and board of director of bank. 4. Borrower should not repay last 3 months instalment that time account should converted into doubtful account. 5. Bank found that whichever documents submitted by borrower were duplicated. 6. Bank found that financial condition of borrower is not sound. 7. Bank take precaution that doubtful loan account should not converted into N.P.A
Problems Faced By Bank Regarding Its Recovery Researcher task is to identify what are the problems faced by bank regarding its recovery. Researcher finds out these problems with the help of unstructured interview of bank
officer. Following are mentioned various problem faced by banker regarding its borrowers.
Submission Documents: Bank usually demanded stock statement 3 month for checking financial soundness of borrower in cash credit loan, but some borrower delay to submit its stock statement regularly.
Dividend: Borrower must be member of bank if he is not the member of bank, then bank give him temporary membership and give some shares. Bank must pay dividend on share holders suppose the borrower become defaulter and he does not pay instalment regularly still bank has to pay dividend on shares. It creates financial burden for bank.
Misuse of loan: Many times it was found that borrower take loan for some purpose but it used for different purpose. It is misuse of loan and such condition there may be possibility of defaulter of loan.
Overdue, N.P.A. provision: Bank has to keep provision for its defaulter and N.P.A. it is up to 100% of loan amount naturally it create financial burden on bank.
Expenditure: For recovery defaulter of loan bank has to pay various expenditure such as legal, suspensions of property etc. there will not any possibility of getting money back so it is
unavoidable expenditure for bank. Above mentioned are the various problems faced by bank regarding its sanctioning procedure as well as recovery. I.e. Duplicate documents, misuse of loan are the most important problems. If bank has overcome these problems then it help to improve the banking business.
CHAPTER 6 DATA ANALYSIS & INTERPRETATION
DATA ANALYSIS & INTERPRETATION
6.1) Performance Analysis of Deposit & Loans Of The Dhanshri Multi-State Cooperative Society Bank Ltd Table 1 Year
Deposit
Loan
2012-2013
150.35 Cr.
110.7 Cr.
2013-2014
165.50 Cr.
122.12 Cr.
2014-2015
180.75 Cr.
136.48 Cr.
•
Graph Showing The Increase And Decrease In The Deposit & Loan Of Dhanshri Multi-State Co-operative Society bank ltd.
•
Figure 1
•
Interpretation:As we have seen Deposits are continuously increasing from 2013, 2014 &
2015. Because Fixed Deposits are increasing continuously last three years. As we have seen deposits are increasing so that loan is also increasing in same proportion.
•
6.2) Performance Analysis Of Loans Of The Dhanshri Multi-State Co operative
Society Bank Ltd For Last 3 Years. •
Table 2 Items
Book Debt Hypothecation Agst Fixed Deposit
Loan2010 412125.39 3411808.6
Loan 2011
Loan 2012
838892.78 8312390.75 2557707.3
1481648.6
503167
537708.13
850559.5
1554336
2997983
3524165.6
Gold Loan Cash Credit
House hold
1898127.22
1461691.46 1213650.11
Plant & Mach.
68647
48602.62
48364.62
Vehicle Loan
76574
76402
57480
Term Loan against Saving A/c
1726174.55
Housing Loan A/c Term Loan For Staff
194555 3703655.96
2189680.1 2623162.45 289192
229562
4837503.5 5631362.55
•
% Change In Amounts Given For Various Loans.
•
Figure 2
Interpretation:•
The Housing, Vehicle, Gold Loan of Bank increased continuously.
•
The Hypothecation, Cash Credit Loan of Bank decreased on 2012-2013.
6.3)Table Showing The Amount Of Hypothecation Loan Of Bank For The Last 3 Years. •
Table 3
FINANCIAL YEAR 2012-13 2013-14 2014-15
•
127887940 87582872 68075425
Graph Showing The Increase And Decrease In Hypothecation Loan Of Bank For The Last 3years.
•
AMOUNT (IN RS)
Figure 3
Interpretation:The hypothecation loan was disbursed the most in the year 2013 & 2014 and then there was a gradual decrease in the loan as other kinds of loans like, Gold loan etc. loans come up
6.4) Table Showing the Amount of Gold Loan for Last 3 Years Table 4 FINANCIAL YEAR
•
AMOUNT (IN Cr.)
2012-13
22.48
2013-14
19.26
2014-15
16.62
Graph Showing The Increase And Decrease In The Gold Loan of Bank.
•
Figure 4
Interpretation: Gold Loan was provided by Bank and hence it took time for the bank to increase its loan sales. Because Interest taken on gold loan is “10%”And method is use for interest is daily rating method. And the chances of loss are very low.
6.5) Table Showing The Amount Of Cash Credit Of Bank For Last 3 Years •
Table 5
FINANCIAL YEAR
AMOUNT (IN RS)
2012-13
189278714
2013-14
147065875
2014-15
115547820
•
Graph Showing The Cash Credit Bank.
•
Figure 5
•
Interpretation:-
The year 2012-13 the Cash Credits decreases slightly. Because of that bank management decided to overcome of that type of loans. Because Recovery of this loan low as compared to other types of loan.
6.6) Table Showing Profit Amount Of The For The Last 3 Years •
Table 6
FINANCIAL YEAR
•
AMOUNT (IN RS)
2012-13
1.22 Cr.
2013-14
1.40 Cr.
2014-15
1.70 Cr.
Graph Showing The Amount Of Profit The Dhanshri Multi-State Co-operative Society Bank For The Last 3 Years
•
Figure 6
•
Interpretation:-
Profit of bank is increase due to housing loan finance and Gold loan is increased that’s why it affects follows on profit. In bank its NPA percentage is low so that provision for it is decreased by bank. Recovery of loan is also increased. But so far for last 3 years it has been observed that the degree of increase of the profit is steady and big rise in profit has
not seen for Bank.
6.7) NON PERFORMANCE ASSET Meaning: According to RBI ,Terms loans on which interest or installment of principal remain overdue for a period of more than 90 days from the end of a particular quarter is called a Non Performing Asset.
•
An asset, including a leased asset, becomes nonperforming when it ceases to generate income for the bank.
•
A NPA is a loan or an advance where Interest and/ or instalment of principal remain overdue for a period of more than 90 days in respect of a term loan.
•
EXAMPLE :-
We suppose that a party was disbursed a loan on 1st Jan 2012, it's due date is 1st June 2012. But a party does not make a payment.So *It will be an Standard asset from 1st Jan 2012 till 1st June 2012 (Due Date) *It will be Special Mention Account from 2nd June 2012 till 29th August 2012 (90 Days ) *It will be Sub-standard from 30th August 2012 till 29th August 2013 *It will be doubtful from 30th august 2013 till 29th august 2014
•
Comparative Statement of NPA’s;
•
Table 7
Sr. No.
2010-11
2011-12
2012-13
Total adv.
1963
2149.64
2500.03
Less provision
160
166
169
2
Net adv.
1803
1983.64
2331.03
3
Gross NPA
298.18
283.55
249.28
4
Net NPA
138.18
117.55
80.28
7.66%
5.93%
3.44%
1
Particulars
•
Graph Of Comparative Statement Of NPA :
•
Figure 7
Interpretation:NPA of the year 2012-13 is less than the previous two years i.e. year 2010-11& 2011-12. It is the good for bank but it is expected less the NPA, more it will be beneficial to bank
so that the whole managing body of the bank is focused on how to minimize the NPA or how to avoid the blockages so that bank run very well in competitive situation.
CHAPTER 7 • FINDINGS
FINDINGS:-
1)Bank takes into consideration the Character, Capacity, Collateral and
Condition
while sanctioning the loan. 2) Loans and deposits increase in same manner. Due to deposits are increased in 2014, we have seen in increment in loans sanctioned accordingly. 3) The Housing loan finance is having highest portion of loan in total loan. 4) The amount sanctioned by bank as loan has shown gradual increase year by year. 5) Cash credits have inctreased in 2014 due to the recovery from NPAs is observed. 6) The amount of profit from year 2013 to 2015 has shown increase. The percentage of NPA is decreasing from year 2013to 2015 which is good for the bank.
FINDING ABOUT WORKING OF BANK:
Loans for self employment Due to recession, lock outs and frequent strikes in the industry, people find it safe to be self employed. So there is a need to attract new and young entrepreneurs. Bank lending for a self employment purpose is increasing therefore more attention should be given towards this area. Advertising The area of operations of the bank is mainly the industrial as well as residential sector in the area of Solapur, Vijapur, and other district’s places. The bank should take advantage
of this and arrange any advertising campaigns and loan festivals to attract new customers.
Housing Loans As there is more demand for housing loans, it forms the major part of advances portfolio of the bank. Almost 25% of the total advances are given for the housing loan purpose. Population is increasing rapidly in the places where the branches are located especially in the area of Solapur, Pandharpur and mohol and also people shift their homes from old chawls and buildings to newly constructed, fully furnished flat systemised buildings, which costs a lot than the resale value of their previous houses. Now in this case people require housing loans to meet the margin. So such customers can be targeted and served considering their convenience. First of all is to keep the margin for housing loans to lower side. Because the cost of accommodation is increasing and its very much difficult for a common man to buy a house with his own savings. The bank may bring flexibility in their rules and follow easy instalment schemes. If possible, the bank should be more liberal while lending for housing purposes. At present the bank advances 30 times of the net income of the borrower. Instead the bank should advance more times of customer’s salary/ income.
Broaden the work area The bank should broaden the area of work and its service. At present the bank already has 35 branches in Maharashtra & Karnataka. But still some important districts are unexplored by the bank. Districts like Baramati and Usmanabad, where the industrial
area is much widen now a days, these districts are still untouched by Bank.
Special scheme offering Bank can introduce new and attractive loan scheme at the time of festival or such occasions so that more number of customers can be delighted with the special offers or discounts. The bank has to give attention towards the interest rates it charges from the competitor analysis it has been found that almost all the banks charge at reducing balance method. Today the bank has to change with changing time and improve their lending rates.
Concentration on personal loan It has been observed that the personal loan has higher interest rates. Personal loan in the bank is given up to 6.65 Cr. only. Thus it indicates that the proportion of the money lend is relatively smaller than the money they will have to lend in case of housing loan or vehicle loan. It is also observed that the customers are willing to get personal loan for the purpose of repayment of previous debts. It means the customer has hurry to get the personal loan from the bank as soon as possible. Thus on higher rate of interest and with lenient security against loan or without any mortgage the bank can provide the loan and create the bank value in the eyes of the customer.
Small scale industry finance. Small scale industry finance seems the ignorant sector from the big commercial bank like ICICI , IDBI and HDFC banks. Small scale sector is growing rapidly. So that, the bank needs to attend the small scale industry customers and serve their purpose. Today small scale industry can be said as the back bone of industry. So the bank can’t ignore this anymore. More encouragement is required to be given to the small scale businessmen by the bank.
Documentation of guarantors To decrease the growing numbers of NPAs, bank needs to take more care while selecting the guarantor. The guarantor’s financial viability should be up to the mark and he should complete his all the documentation work for the forward procedure of the money lending. At least 2 valid guarantors should be there in any loan application.
Easy instalment facility The applicant should be made available with the easy instalment facility. The borrower sometimes may be busy with the work or due to any other reasons he may not be able to come to the bank personally to make the payment of instalment of the loan taken. In this case the bank should facilitate the borrower with the direct debit from the saving bank account service. This will save the time of borrower and make him relax and tensionless. From the bank’s point of view, time to time payment will be made from the borrower which will result into a good reputation of the bank.
Check of fraud It is observed that in general more number of bank related frauds is made by borrower of loan. Fake and forger documents are represented and thus loans are taken. So to avoid that special auditing department to check the viability and competency level of the loan applicant should be created. Document inspection, special interview and personal inspection in case of property mortgage should be done by the department. This department should check the creditworthiness of the loan applicant and then they will submit their report to upper level which is Credit department which is in charged by Mr.Fadatare.R.V
Proper Remainder System: It is very much observed that Bank lacks in proper remainder system for the loan account holders to pay their due instalments in time. It will also help their creditworthiness with the bank. Therefore, I would advice to the bank to keep good remainder system to remind its loan account holders. It will certainly reduce the amount of NPAs. If the NPAs amount goes down then, it will surely reflect in the profit of the bank.
CHAPTER 8 SUGGESTIONS
•
• •
Suggestions: The basic function of the bank is to accept deposits in various ways through customers which are account holders of the bank and invest them into productive activities in the form of loans. The difference between the rate of deposits and the rate of interest on lending money in term of loan is the profit for the bank.
•
Suggestions to improve bank’s lending procedure
•
Finance to business community
•
Focus on housing and commodity loan
•
Bifurcate housing loans according to the loan amount
•
Finance to small scale industries
•
Service area should be broadened
CHAPTER 9 •
• CONCLUSION:
CONCLUSION
While doing my project I had a chance to look into the vast field of Loan Procedure and disbursement. I could only touch a small part of the topic. But after going through the whole process I firmly believe that before going for any loan decision there is a need to classify the borrower type and his need according to the creditworthiness of the borrower. It is also true that there is confusion towards a new loan offer by the Banks. Not it’s always better to take loan from the bank having good past record. I have learnt the provisions of granting the loan to the borrower according to their income level and degree of need. The Dhanshri Multi-State Co-operative Bank Ltd is marketing its bank properly by adopting new banking schemes like SMS Banking, Internet Banking and Telephone Banking. Bank is the first Dhanshri Multi-State cooperative bank in Solapur,jat to introduce SMS Banking. Keeping proper marketing agenda in mind The bank is also visiting to the villages which are near to the Solapur, Jat, Vijapur district. Bank has to start the Transferring money from one place to another (remittances).It is first Multi-State Co-operative bank in Solapur ,Jat ,Vijapur to start Call Deposite for 15 Days to the customer. The Loan management of this Bank consists of many stages. It is responsibility of Loan officer to check the credit worthiness of the applicant.
• Annexure
Chapter 10
Financial Highlights
Years Gross Total Net No.of Working No.of Credit N.P.A Rate Of Audit profit Provision profit staff Capital Branches Deposit Provision Dividend Class Ratio Impaired Gross NPA Credit
As on 1-12005
-
-
%
-
205
1228.45
26
58.30%
-
-
2005- 144.00 06
96.30 47.70
437
10853.91
51
31.70%
-
-
2006- 226.12 2007
173.41 52.71
430
13304.51
51+2
53.15%
2007- 244.52 2008
185.25 59.27
421
15044.54
51+7
2008- 253.37 2009
171.88 81.49
417
18546.16
2009- 290.26 2010
196.42 93.84
410
2010- 450.02 2011
340.77 109.25
2011- 593.14 2012
10%
A
844.49 13.91%
10%
A
29.31%
761.02 19.80%
10%
A
52+14
40.99%
779.09 11.92%
12%
A
22147.91
52+15
68.05%
749.23 5.79%
13%
A
419
25571.14
55+13
70.33%
811.74 5.24%
13.5%
A
469.14 124.00
419
32545.14
62+12
65.75% 1064.48 5.68%
14%
A
2012- 550.27 2013
398.22 152.05
425
36461.01
64+13
37.69% 1183.45 10.00%
14%
A
2013- 298.07 2014
136.47 161.60434+15 41546.07
66+11
54.43% 1380.57 7.13%
13%
B
2014- 340.38 2015
165.38 175.00
433
4651.47
68+10
57.79% 1239.90 5.34%
10%
B
2005- 200.15 2006
163.17 163.17
453
50876.46
70+9
61.77% 1384.09 5.04%
10%
A
2006- 379.22 2007
263.22 116.00
442
57594.52
70+9
70.25% 1785.21 5.31%
10%
A
2007- 847.41 2008
722.41 125.00
569
63202.57
70+10
69.93% 2265.37 6.07%
7.50%
B
2008- 371.75 2009
91.82 279.93
607
69128.60
71+09
65.94% 3086.74 7.94%
2008- 464.43 2009
184.43 280.00
607
69128.60
71+9
65.95% 3086.55 7.94%
5%
B
2009- 777.71 2010
440.11 337.60
591
83184.52
82+12
68.32% 3206.88 6.57%
• Years
No of Share Reserves Total Total Advances Investments Total Total Members Capital and others Deposits & Bank Income Expenditure funds Balance Sty. Indl. Agri Non-Agri
As on 1/7/83 368
65
37.58
75.60
632.30 128.58
240.09
1995-1996
579
56 236.49
764.54 9467.16 942.11 2059.83
5585.37 1215.01
1167.31
1996-1997
594
71 265.45
942.12 11418.41 986.26 2082.80
5301.90 1519.54
1466.83
1997-1998
631
81 291.14
1118.93 13114.05 1295.66 2548.84
9214.50 1732.95
1673.68
1998-1999
653
82 338.82
1263.02 15940.31 1139.08 5395.08
9314.15 1967.70
1886.21
1999-2000
662
83 387.59
1451.61 19025.83 1212.23 11735.30
6982.80 2394.07
2300.23
2000-2001
681
91 450.82
1689.19 22025.45 1492.06 13998.00
7928.00 2908.17
2798.92
2001-2002
736
94 497.29
2150.11 28477.24 1725.71 16999.67
10114.56 3597.16
3473.16
2002-2003
771
93 540.48
2610.20 31393.35 1956.05 9876.58
21471.76 3776.95
3624.90
2003-2004
829
94 635.08
2766.69 35551.76 2530.27 16823.59
19325.62 3646.27
3484.67
2004-2005
851
98 711.06
3013.62 40143.75 2952.57 20247.87
20532.50 3782.43
3607.43
2005-2006
868 101 789.26
3192.72 44487.80 3613.92 23868.12
21285.08 3669.43
3506.26
2006-2007
847 103 866.47
3486.15 47895.58 4144.55 29505.73
22187.01 4123.36
3850.25
2007-2008
848
58 1068.65
4214.72 53376.54 5131.36 32196.59
23905.56 5191.07
5066.07
2008-2009
866
63 1280.33
4380.66 58921.53 4496.33 34361.42
27878.08 5486.48
5206.55
•
CHAPTER 10
• BIBLIOGRAPHY
•
Bibliography
•
Reserve Bank Manual.
•
Diary for co-operative banks
•
Balance sheet and manual reports of last three years of the Dhanshri Multi-State Cooperative Society Bank Ltd
•
Practical banking advance
•
Websites
•
www.loanmanagements.com
•
www.rbi.org.in
•
www.databasemanagers.com
•
www.dhanshrimsbank.com
