credit management & npa of co-operative bank ltd
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PROJECT REPORT ON
CREDIT MANAGEMENT & NPA OF
RAJKOT DISTRICT
CO-OPERATIVE BANK LTD.
(RDC BANK)
A PROJECT REPORT SUBBMITTED IN PARTIAL FULFILLMENT OF THE
M.B.A. DEGREE
PROJECT GUIDE
Mr. P. S. TALAVIYA, STATISTICS OFFICER,
RDC BANK LTD.
SUBMITTED BY
DHAMSANIA VISHAL (ROLL NO. )
S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
GANDHINAGAR, INDIA
JULY 2005
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RAJKOT DISTRICT CO-OPEARTIVE BANK (H.O.)
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Preface
The banking activities play a crucial role in overall economic
development, in case of developing country. This now progresses rapidly along
with its various activities.
I represent to you SHRI RAJKOT DISTRICT CO-OPERATIVE
BANK a joint venture sector enterprise promoted by the Gujarat state co-
operative bank.
The Rajkot District Co-Operative Bank provided me the golden
opportunity for me to enrich my knowledge by comparing theoretical knowledge
with practical knowledge, and also helped me to understand how important it isto important aspect of any study. It helps to students to observe and analysis real
life practical with the help of theoretical knowledge. Project report is a part of
study in the curriculum to know the practical aspect of activities in banking. It
provides opportunity to work with people and interact with them.
It was a privilege for me to work in such a reputed bank like RDC bank,
RAJKOT. This has given me an opportunity to work in truly professional
environment where teamwork scores over individual efforts. This study was
undertaken during the project work for the period of June-July 2006, as partialfulfillment of MBA programme ofGUJARAT UNIVERSITY.
DATE :-
VISHAL DHAMSANIA
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We learn in Management is Manage + Men + T (Time, Task, etc.). I agree
with this statement & wish to include that it would have been not possible to
complete this project with out help and support of many people. I am thankful to
all of them.
First and foremost I am thankful to Mr. M. B. Ladani, Additional Deputy
Manager and my Project Guide Mr. P. S. Talaviya, RDC Bank for giving me
this valuable opportunity to have our Summer Project at the well-known Co-
Operative Bank, RAJKOT DISTRICT CO-OPERATIVE BANK LTD. I thank
them to take keen interest in my work, and guide me throughout the project.
I would like to take this opportunity to thank my college, S. K. PATEL
INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES,
GANDHINAGAR, for giving me this tremendous opportunity to work in the
banking industry for the real-time project.
It is with a deep sense of gratitude that I would like to acknowledge our
DirectorProf. S Chinnam Reddy and all Faulty members who have been kind
enough to me in regard to completion of the project.
I would like to acknowledge with thanks the resource full service and
support rendered by Librarian and Lab assistant at SKPIMCS.
It would be an incomplete acknowledgement if I dont remember my
Parents. This report would not have become a reality without blessing of my
Parents who constantly inspired me, supported me, and contributed their
precious knowledge toward my project. I sincerely extend my gratitude to them
for their inspiration and prayer.
Last but not the least I thank to almighty GOD who gave an opportunity to
me to work on this project with the co-operation of others and I have reached
this milestone successfully. I am also thankful to my seniors, my classmates and
other friends who helped me in getting through this project work, smoothly.
Special thanks to those who inspired me to go for this project, and also to those
who think Why This & Why Not This!
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OBJECTIVE OF STUDY
Banking is the activity of my interest. I have seen from the annual reports of the
various banks and find that most of their income is from the interest getting on
the credit given so I choose and hence I studied on credit management.
Game of statistics is always attracts me and banking is one the place where we
can learn it very well. So I have selected bank and have preferred credit
management as topic for my project.
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RESEARCH METHODOLOGY
There are many methods, which are well known today for research
methodology, out of which one I have chosen is sampling method, which is
really easier, still producing accurate results.
Sampling in laymens language, is nothing but selecting pockets or samples
representing the whole group and analysis of these samples gives the idea about
the respective groups. On the basis of this, prediction is done and full
information about group is integrated.
Though this is not a first hand method, it gives sufficiently good outcomes if
used carefully by experts. It saves the time and energy. The only care should be
taken, in order to have great accuracy, is selection of sample should be such that
it should represent the whole group and information we get from them should be
cent percent reliable.
Salient features of my chosen sample
The biggest co-operative bank having head office in my vicinity enables
me to do my work efficiently. This is the striking feature of my sample.
The exclusive schedule bank in Rajkot and hence gets priority over the
others.
Generally the new bank lacks the experience so it is mandatory to select a
sample, which has enormous experience. RDCB has a gigantic experience
of successful 50 years, under the lights of which work becomes easier.
The other enchanting point is that RDCB have maximum number of
shareholder.
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CONTENT
Executive Summery
Preface
Acknowledgement
Objective of study
Research methodology
Content
INTRODUCTION
Early history of banking
Origin of word bank
Status wise bifurcation of bank
Types of bank
RDCB - The Small Mans Big Bank
PROJECT
Main Fund Inflow (sources of funds)
Main fund outflow (funds used)
Meaning of credit and credit management
Forms of credit/advances
Time wise bifurcation of advances
Security wise bifurcation of advances
Process of credit
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CREDIT POLICY
General eligibility criteria for credit in RDCB
Table of interest rate on various advances
Scrutiny of credit
Types of credit
Explanation of all types of credit
Data analysis and observation and suggestion
CREDIT APPRAISAL
Appraisal format
Observation and suggestion
CREDIT MONITORING, FOLLOW UP AND REVIEW
Credit monitoring system in RDCB
Follow up actions for credit monitoring in RDCB
Observation and suggestion
NPA MANAGEMENT
Identification of Non Performing Advances
Asset classification
Classification of Non Performing Advances
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Provision for NPA
Findings (reason for NPA)
Suggestions (NPA reduction techniques)
RECOVERY
Process of recovery
Finding/observation
LIMITATION OF STUDY
BIBLIOGRAPHY
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EXECUTIVE SUMMARY
Name of the Student : Dhamsania Vishal Chhaganlal
Name of the Institution : SKPIMS, GANDHINAGAR
Name of the Project Guide : Mr. P.S. Talaviya
Name of the Organization : Rajkot District Co-operative Bank
Purpose of project : Study of Indian Banking performance in
credit policy & non performing assets
Objectives : To study the Indian Co-operative
banking sector
To study the different aspects of thefinancing in India.
To study and analyze different
instruments for credit management.
To study the procedure of Credit
Rating in India
Steps taken which are in best
interest of the Bank.
Methodology : The project is a blend of the primary as
well as the secondary data. The data
were from the Banks past record,
various websites, publications and other
projects.
Conclusion : The project has been completed
successfully and the objectives were
met.
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INTRODUCTIONINTRODUCTION
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EARLY HISTORY OF BANKING
As early as 2000 B.C., the Babylonians has developed a banking system. There
is evidence to show the temples of Babylon were used as banks. After a period
of time, there was a spread of irreligion, which soon destroyed the public sense
of security in depositing money and valuable in temples. The priests were longer
acting as financial 45 agents. The Romans did minute regulations, as to conduct
private banking and to create confidence in it. Loan banks were also common in
Rome. From these the poor citizens received loans without paying interest,
against security of land for 3 or 4 years.
During the early periods, although private individuals mostly did the banking
business, many countries established public banks either for the purpose of
facilitating commerce or to serve the government.
However, upon the revival of civilization, growing necessity forced the issued in
the middle of the 12th century and banks were established at Venice and Genoa.
The Bank of Venice established in 1157 is supposed to be the most ancient bank.
Originally, it was not a bank in the modern sense, during simply an office for the
transfer of the public debt.
Again the origin of modern banking may be traced to the money dealers in
Florence, who received money on deposit, and were lenders of money in the 14 th
century and also in 1349, the business of banking was carried on by drapers of
Barcelona.
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In India, as early as the Vedic Period, banking, in most crude from existed. The
books of Manu contain references regarding deposits, pledges, policy of loans,
and rate of interest. True, the banking in those days largely mint money lending
and they did not know the complicated mechanism of modern banking.
This is true not only in the case of India but also of other countries. Although,
the business of banking is as old as authentic history, banking institutions have
since than changed in character and content very much. They have developed
from a few simple operation involving the satisfaction of a few individual wants
to the complicated mechanism of modern banking, involving the satisfaction of
capital slowly seeking employment and thus providing the very life blood of
commerce.
THE ORIGIN OF WORD BANK
The word Bank itself derived from the word bancus or banque that is a
French. There were others of the opinion that the word Bank is originally
derived from the German word back meaning joint for which was Italianised
into banco.
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STATUS WISE BIFURCATION OF BANKS
Scheduled Banks.
Non-Scheduled Banks.
Scheduled Banks
In first schedule, Government of India notifies the Primary Banks, which are
licensed and whose demand and time liability are not less than 50 crores in 1987.
Government of India notifies the Primary banks, which are licensed and whose
demand and time liability are not less than 100 crores can only qualify to be
included in the second schedule since 1993.
A bank becomes scheduled when it fulfils the followings:
A grade rating from RBI
Demand and Time Liability over 100 Crores
Satisfy the RBI guidelines related to CRR and SLR
As per the norms Priority Sector wise lending
Benefits of Being a Scheduled co-operative are described below:
RBI would provide Rediscounting facility at nominal rate
RBI gives remittance facility at par
The demerit of being a scheduled co-operative bank is that the bank will not get
0.5% subsidy from RBI.
The conferment of scheduled status on the banks has certain advantages like
refinance facility, directly industrial finance from Reserve Bank of India, avail
of Reserve Bank of India Remittance facility scheme, accept deposits from local
bodies, quasi-government organization, religious, and charitable institutions,
guarantees and cheques issued by Banks are accepted by Government
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Departments. At the same time, it casts greater responsibility on the banks in the
maintenance of books of accounts and submission of returns.
Non-Scheduled Bank
The banks, which are not applicable as per the criteria of Scheduled Banks, are
called as a Non-scheduled Banks. These are very small banks.
TYPES OF BANKS
Regional Rural Bank
Nationalize Bank
State Bank Group
Co-operative Bank
Private Bank
Foreign Bank
RESERVE BANK OF INDIA
The Hilton-young commission, appointed in 1926 has recommended the
necessity of centrally empowered institution to have effective control over
currency and financial transaction in the country. Accordingly, the Government
had then passed Reserve Bank of India Act, 1934 and established the Reserve
Bank of India with effect from 1st April 1935. The principal aim behind this was
to organize proper control over the currency management in the interest of
country benefits and to maintain financial stability. With this, the RBI mainly
looks after the following important functions:
To keep effective control over creation of credits and currency supply
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To control the Banking transactions of Central and State Governments
To act as Central administered Authority of all other Banks in the Country.
To organize control over Foreign Currency Transaction
To assist for improvement in financial aspects of the country
Nationalize Banks
The Banking Company Act establishes it in July 1969 by nationalization of 14
major banks of India. The sent percent ownership of the bank is of government
of India.
State Bank Group
The State Bank of India was established under the State Bank of India Act,
1955, the subsidiary banks under the State Bank of India (subsidiary Banks) Act,
1959. The Reserve Bank of India owns the State Bank of India, to a large extent,
and rest of the part is some private ownership in the share capital of State Bank
of India. The State Bank of India owns the subsidiary Banks.
Old Private Banks
These banks are registered under Company Act, 1956. Basic difference between
co-operative banks and private banks is its aim. Co-operative banks work for its
member and private banks work for earn profit.
New Private Banks
These banks lead the market of Indian banking business in very short period,
because of its variety of services and approach to handle customer, also because
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of long working hours and speed of services. This is also registered under the
Company Act, 1956.
Foreign Banks
Foreign Bank means multi-countries bank. In case of India Foreign Banks are
such Banks, which open its branch office in India and their head office is outside
of India.
Regional Rural Banks (RRB)
Regional Rural Banks are added in Indian Banking since October 1975. The
Government of India in terms of the provision of the Regional Rural Bank Act
1976 has established these banks. The distinctive feature of Regional Rural Bank
is that through it is a separate body corporate with the Commercial Bank, which
has sponsored the proposal to establish it. The Central Government, while
establishing a Regional Rural Bank at the request of a Commercial Bank, shall
specify the local limits within which it shall operate. The Regional Rural Bank
may establish its branches or agencies at any place within the notified area.
State Bank of Saurashtra sponsors Regional Rural Banks in Saurashtra.
Co-operative Banks
State Co-operative Banks
State Co-operative Bank means the principal Co-operative society in the state.
The primary objective of which is the financing other co-operative societies in
the state.
Central / District Co-operative Banks
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Central / District co-operative Bank means the principal co-operative society in a
district, the primary objective of which is the financing of other co-operative in
that particular district.
Primary / Urban Co-operative Banks
The primary objective of principal business of which the transaction is of
banking business and paid up share capital and reserve of which are not less than
rupees 100,000 and bye-laws of which do not permit admission of any other co-
operative society as a member.
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RDCB - The Small Mans Big Bank
SHRI RAJKOT DISTRICT CO-OPERATIVE BANK LTD., RAJKOT
H I G H L I G H T S
(AS ON 31-03-2006)
1) Bank was registered in 1959 and have commenced working in 1960.
2) Bank is holding business License No. RPCD-AHM-55-C dt. 14/911994.
3) Bank is having 127 branches in the district.
4) Bank having 65 its own Branch building including head office.
5) 72 branches having its own Safe Deposit Lockers facilities (including
H.O.)
6) Bank is having 770 employees as on dt. 31/03/2006 (118 in Head Office +
625 in branches).
7) 101 branches including H.O. are Computerized and remaining will be
covered within quarter to 100% computerization.
8) Since last 31 years, bank is obtaining Audit Class A.
9) The total deposit is Rs. 677.68 crores, which consists 57.03% law cost
deposit.
10) Bank is having share capital of Rs.2135.01 lakhs, Reserve fund and other
funds Rs.9735 lakhs, working capital Rs. 9391 lakhs.
11) Total investment is Rs. 20,670 lakhs. (with building, furniture &
computer).
12) Bank has obtained loans of Rs. 11,906.90 lakhs.
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13) Total advances outstanding are Rs. 674 Crore.
14) Bank is earning profit since its beginning. As on 31st march, 2006 after
providing enough provision, the Net Profit was of Rs. 1065 lakhs.
15) Bank is paying maximum dividend according to the provision of the Act,
since last 14 years.
16) As on 31st March, 2006 the cost of management was 2.28% (average).
17) As on 31-3-06, financial margin of the bank is 3.61% and net margin is
1.47% level (average).
18) Capital risk adequacy ratio as on 31st March, 2006 is 12.80%.
19) Since last 12 years, Bank is receiving first prize from the GSCB for the
best recovery performance. As on 30th June, 2006 recovery was 99.87%.
20) Rate of interest on deposits are between 4% to 7%.
21) Maximum Short Term Agriculture Loan issued during the year 2005-06
was Rs. 64,714.48 lakhs at the rate of interest from 7.5% to 10.5% as perGovernment of Indias doubling criteria.
22) Out of 585 non-subordinate staff, 231 employees are trained as on date
31/3/2006.
23) As on year ending 2006, the Non-performing Assets were Rs.1881.77
lakhs, thus gross NPA is 2.79% and net NPA is 0.53% of total assets.
24) As per prudential norms bank has made the provision of Rs.2886.30 lakhs
against the requirement of Rs. 2363.50 lakhs for loan outstanding of
Rs.67,397.13 lakhs.
25) On 31st March, 2005 the total number of an affiliate borrowing PACS are
436 out of these 412 are profit making.
26) Each societies having its own godown facilities and having independentwell qualified secretaries.
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27) Average work load Per Staff during the year 2005-05 was Rs. 181.21
lakhs.
28) There are 440 PACS affiliated with the Bank. Out of 440 PACS, 3 are
overdue as on 31-3-2006.
29)
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PROJECTPROJECT
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MAIN FUND INFLOW (SOURCES OF FUNDS)
Owned deposit
Deposits
Borrowings
Others
Owned deposit
The owned funds consisting of paid capital of the bank, reserve fund, and other
reserves.
Deposits
It is sum of current deposits, fixed deposits, saving deposits, special saving
deposits, NRI deposits, inoperative deposits, etc. It is the main Cash Inflow for
any institution.
Borrowings
The borrowed funds consisting of borrowings from other banks (as per some
writer deposits of various types is also part of borrowed funds), debentures
offered to public, etc.
OthersIncrease in current liabilities, reduction in debtors, fund from operations like net
income, depreciation, and reserves, less payment to creditors, reduction in
advances, reduction in inventories, reduction in cash, sold marketable securities,
etc.
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MAIN FUND OUTFLOW (FUNDS USED)
CRR (Cash Reserve Ratio) with Reserve Bank of India
SLR (Statutory Liquidity Ratio) in Reserve Bank of India approved securities
Loanable Fund
Others
CRR (Cash Reserve Ratio) with Reserve Bank Of India
The capacity of credits creation of bank is depending upon their cash flow
received. To restrict this credit creation, the reserve bank of India has directed
their terms. In case of scheduled banks and sec.18 of banking regulation act are
required to maintain the cash reserve ratio *@ 4.75% and non-scheduled bank @
3% of their demand and time liability amounts separately. The scheduled banks
are required to deposit the cash reserve ratio amount with Reserve Bank of India
while the non-scheduled banks are required to maintain separate account for this.
The Reserve Bank of India is also empowered to raise the cash reserve ratio up
to 15% only in respect of scheduled banks. It is maintained reported to RBI
every fortnight.
*30th April RBI declared new credit policy and as per that RBI reduced CRR
with 0.25%
Demand and time liability:
Time liability is related with time like, fixed depositsDemand liability is related with the demand like, Current deposits, inoperative
deposit, and matured fixed deposits
SLR (Statutory Liquidity Ratio)
The cash flow for regular banking transactions mainly depends upon deposit
received in the bank. The reserve bank of India there fore puts some restrictions
on utilization of these amounts. The scheduled and non-scheduled banks are
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required to deposit 25% amount of their demand and time liability amount in the
security approved by reserve bank of India. These securities are converted into
cash and therefore they are termed as liquid assets and 25% amount termed as
liquid ratio. The reserve bank of India is empowered to raise this liquidity ratio
from 25% to 40%. It is maintained average fortnight and reported to RBI.
Loanable Fund
Credit deposit ratio is not more than 70%.
Loanable funds means amount of money, which is applicable for lending. Three
main factors own fund, deposits, and borrowings decide it. Advances can never
be more than loanable fund.
Loanable fund is a total of:
75% of own funds
70% of deposits
100% of borrowings
Others
Purchase of fixed assets, purchase of marketable securities, addition to advances,
addition to inventories, payment to creditors, payment of dividend, etc..
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Meaning of CREDIT
The word credit is actually derived from the Latin word Credere. Credere
means to have trust or faith. Thus credit is directly related with trust. That is
why State Ford stated that Credit is nothing more than that of trust. By this we
can say that credit is a tool that is resulted by the complete mutual trust/faith.
Credit creation implies a situation when a bank may receive interest simply by
permitting customer to overdraw their accounts or by purchasing securities and
paying for them its own cheque or bank may pay amount to borrower or directly
to seller of goods whom against borrower get amount.
CREDIT MANAGEMENT
Credit management means the total process of lending start from inquiry from
potential borrower to recover the lending amount from borrower. Whenever my
study is concern, credit management in sense of banking sector is the set of
activities like Except application, loan appraisal, Shakh posting, monitoring,
recovery, NPA management, etc.
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FORMS OF CREDIT/ADVANCES
Loan (term loan)
Cash credit and overdrafts
Purchase /discounting of bills
Bank guarantee
Loan/term loan
In case of a loan a specified amount is sanctioned by the banker to the customer,
who may either draw the amount in case immediately or may like the amount to
be credited to his current account. But legally it is presumed that he has
withdrawn the amount from the bank and deposited it in his current account. He
is required to pay interest on the full amount from the date of sanction. A loan
may be repayable in installments or in lump sum.
Cash credit
Cash credit is the main method of lending in India and accounts for above 70%
of total bank credit. Under the system, the banker specifies the limit, called the
cash credit limit for each customer, up to which the customer is permitted to
borrower against the security of tangible assets or guarantees. The customer
withdraws from his cash credit account as and when requires the funds and
deposits any amount of money, which he finds surplus with him on any day. Thecash credit amount is thus an active and running account to which deposits and
withdrawals may be affected frequently. The customer is required to provide
tangible assets as security to cover the amount borrowed from the banker. The
borrower is charged interest on the actual amount utilized by borrower and for
the period actually utilized only.
Overdrafts
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When a current amount holder is permitted by the banker to draw more than
what stands to his credit, such an advance is called an overdraft. The banker may
take some collateral security or may grant such advance on the personal security
of the borrower. The customer is permitted to withdraw the amount as and when
he needs it and to repay it by means of deposit in his account as and when it is
feasible for him. Interest is charged on the exact amount overdrawn by the
customer and for the period of its actual utilization
Bills Purchase
The Banker credits customers account with the amount of the bill after
deduction his charges. As the demand bills are repayable on demand and there is
no maturity, the banker is entitled to demand their payment immediately on
presentation before of drawee. Their practice adopted in the case of demand
bills, is known as purchase of the bills.
Bills Discount
In case of bills discounting, a bank credits the amount of the bill to the drawers
account before the realization of the bill and thus lends its funds to him after
deduction his charges. The bills purchased and bills discounted by a bank are,
therefore, shown in its balance sheet as part of loans and advances. In case of a
bill maturing after a period of time maximum for 180 days in RDCB, the bankerretains the bill for that period and realizes the amount of bill from the drawee on
its due date. This practice is called discounting of the bill.
Bank Guarantee
It is a contract to perform the promise or discharge the liability of a third person
in case of his default. In case of guarantee, Bank is taking responsibility to pay
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the amount to seller if buyer will not pay amount in time.
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TIME WISE BIFURCATION OF ADVANCES
- Short-term Finance : Up to 26 months
- Medium-term Finance : 26 to 66 months
- Long-term Finance : Above 66 months
SECURITY WISE BIFURCATION OF ADVANCES
Secured Finance / Advances:
Secured Advances are those advances, which provide absolute safety to theBanker by means of a charge, created on the tangible assets of the borrower in
favor of the Banker. In such cases, the Banker gets certain rights in the tangible
assets over which a charge is created. A Secured Loan or Advance means a loan
or advance made on the security of assets, the market value of which is not at
any time less than the amount of such loan or advance.
Unsecured Finance / Advances:
Unsecured Loan or Advance means a loan or advance, which are not secured,
this types of advances is not preferable for any banking institutions.
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PROCESS OF CREDIT
Application inward
Shakh report
Advocate report
Branch report
Loan report
Inspection report
Committee report
Fulfill conditions
Equitable mortgage and equitable extension
Make/sign document
Open account
Insurance posting
Record department - filing
Inward application
A customer seeking an advance is required to submit an appropriate application
form. There are different types of application forms for different types of
advances available. The information furnished in the application covers, inter
alias, the following: name and address of the borrower and his establishment, the
details of borrowers business, the nature and amount of security offered. Theapplication form has to be supported by various ancillary statements like the
financial statements and financial projections of the firm. A separate inquiry
department is set under the loan department. Here, different types of application
forms are available and collect process charge from borrower; application is
accepted and entered into computer.
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Shakh report
This is one of the strangest facility of RDCB compare with other co-operativebanks in Rajkot district because of its computerization. This facility provides
bank to total kundali of the borrower related to dealing with bank not only as a
borrower but also as partner, as a director also as a guarantor and same detail of
the guarantor also and also about all the types of loans, which are already paid
up, which are overdue, which are running and also about past performance of
particular.
Advocate report
Bank through its legal departments staff in two matters prepares advocate report
mostly, which are given below:
In case of land and building loan
Before equitable of immovable property as a security
When the bank prepares advocate report, bank charges some amount from
borrower.
Branch turn over report
This report mostly prepare in case of cash credit review/renew, is also known as
a branch turn over report. This report presents:
Performance of borrower with the branch in previous year
Debit-credit transaction of borrower,
Submission of stock statement,
Payment of interest
Last outstanding balance
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Processing of application/loan report
The application is processed by the clerical staff and checked and passed by
senior loan officer and monitoring by loan manager. The preliminary involves an
examination of the following factors:
Ability, integrity, and experience of the borrower in the particular
business
General prospects of the borrowers business
Purpose of advance
Requirement of the borrower and its reasonableness
Adequacy of the margin
Provision of security
Period of payment
And prepare the appraisal report for committee approval
Inspection report
Before presenting appraisal report against the committee, bank sends his field
officer/inspection officer to on site inspection. The situation which created by
borrower by providing information of his business to bank is it fact or not? After
the inspection report, this application is ready for putting against the loan
committee of the bank. Inspection varies according to the various loans. For e.g.
In case of cash credit he personally visits the business site and verifies the
original books of accounts with that of submitted books of accounts. He verifies
the real stock with the stock mentioned if any difference is found it is clearly
mentioned in the report.
In case of housing loan inspection officer visits the place and check whether the
building is really in existence or not, whether the construction is as per the
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statical figure provided to him and plan is as per sanctioned by the municipal
corporation.
Committee approval and terms and conditions
Once the application is duly processed, it is put for sanction to the appropriate
authority. Here appropriate authority means various loan committees, standing
committee and board of directors. Loan manager is a sanctioning authority only
in case of review of cash credit facility. Types of committee and its lending
powers are given below:
If appropriate authority gives sanction, along with the sanction of advance
the bank specifies the terms and conditions applicable to the advance. These
usually cover the followings:
The amount of loan or maximum limit of the advances
The nature of the advances
The period for which advance is valid
The rate of interest applicable to the advance
The primary security to be charged
The insurance of the security
The detail of collateral security, if any, to be provided
The margin to be maintain
Other restrictions or obligations on the part of the borrower
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S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
Name Of Committee
1. Board of directors
2. Standing committee
3. Reconsideration committee
4. Loan committee (Rs.500001 to 1000000)
5. Loan committee (Rs.300001 to 500000)
6. Loan sub-committee/1 (Rs.150001 to 300000)
7. Loan sub-committee/2 (Rs.75001 to 150000)
8. Loan sub-committee/3 (Up to Rs.75000)
9. Loan sub-committee/4 (Up to Rs.5,000)
10.Committee for loan against immovable property/1 (Rs.2,50,001 to
5,00,000)
11.Committee for loan against immovable property/2 (Rs.1,50,001 to
2,50,000)
12.Committee for loan against immovable property/3 (Rs.25,001 to
1,50,000)
13.Committee for loan against immovable property/4 (Up to
Rs.25,000)
14.Recovery committee/1 (more than Rs.3,00,000)
15.Recovery committee/2 (Rs.1,50001 to 3,00,000)
16.Recovery committee/3 (Up to Rs.1,50,000)
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It is common banking practice to incorporate important terms and conditions on
a stamped security document to be executed by the borrower. Rate of stamp
duties are given follows:
Demand promissory note : Rs. 1
Letter of guarantee : Rs. 60
*Agreement letter Up to 5,00,000 : Rs. 50
(Letter of lien) Above 5,00,000 : Rs. 2/thousand
Letter of pledge : Rs. 50
Letter of continuity : Rs. 50
Agreement letter for Cash credit/Overdraft
Up to 5,00,000 : Rs. 110
Above 5,00,000 : Rs. 2/thousand
Maximum limit of stamp duty is Rs. 2,00,000
*Agreement letter is in case of vehicle loan, security loan, bills purchase, bills
discounting, guarantee, education loan, etc.
Equitable Mortgage And Equitable Extension
When the loan is sanctioned with condition that to put the real document as a
mortgage in security (prime/collateral), it is must that to make the equitable
mortgage of the property. Some time a property which given in mortgage by
borrower is already put before the bank in case of other loan as a security at that
time equitable mortgage is already done by party so there is no need of equitable
mortgage again but the equitable extension is only needed.
Equitable mortgage on non-judicial stamp paper
Amount of sanctioned loan loan of non-judicial stamp paper for equitable
mortgage
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Up to 15,00,000 1/2% of sanctioned loan
Above 15,00,000 1% of sanctioned loan OR Rs. 1,00,000
(Whichever is less)
Make/sign document
This application is now in the document department, document department take
signature of loanee and guarantors in specimen card and also on the sanction
letter to seat beside and verify all the documents. Types of documents are
discussed in each type of loan separately. This process is last for borrower, after
this loan is sanctioned. No formality is remaining at the borrower side.
Open account
Now loan is sanctioned, all formalities are completed. So bank is giving your
amount of loan either by credited in your account or pay the amount to the party,
whose quotation is provided by borrower to bank. Bank opens your account with
himself to get the actual transaction between bank and borrower.
Insurance posting
It is must for loanee to insure the property or equipment, which is hypothecated
with the bank against loan as a security. This policy is assigned in favor of bank,
which is also required. In case of immovable property or new purchase ofmachinery, equipment, etc. insurance of same amount and in case of old
machinery, goods stock, etc. twice of the price insurance is needed. In case of
education loan, the life insurance of student is required. Shakh department is
posting it in borrowers account.
Record department filing
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Now total process is over and whole documents are need filing for bank record.
Record department does this work. Record department file the documents and
store it to proper place.
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CREDIT POLICYCREDIT POLICY
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General Eligibility Criteria For Credit In RDCB
As per the rules of co-operatives, any one who wants to avail finance has
to become a member of the bank.
As a shareholder of the bank, he/she have to make compulsory deposit, or
the payment of deposit as per rules and regulations of the bank and
thereafter, he/she can submit the application for loan. In all the practice
with the bank, you are known by bank through your compulsory deposit
number.
The application will have to be submitted in the prescribed form, wherein
all details and particulars will have to be furnished as demanded in the
form. He/she has to submit further particulars as may be asked by the
bank.
The loanee will be advanced loan against the security and he/she has to
submit 1 or 2 guarantors, who will be the recognized member and
accepted to the bank.
The interest will be calculated on month-to-month basis.
Taking in view the total amount of loans taken for different purpose by the
firm or individual, the interest will be calculated at the same rate on all the
advances.
It will be necessary to make payment of share deposit or loan deposit at
the rate of 2.5% of the sanction in case of secured loan and 5% of
sanctioned loan or in case of unsecured loan. The maximum share deposit
accepted of Rs.25000 and additional deposit over Rs.25000 will be
accepted as loan deposit.
The rate of interest on share deposit is 15% and that on loan deposit is
10%.
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The company, who wants to take loan from bank, has to get its name
registered for the said loan purpose with the registrar of companies and
has to submit the document of registration charge to the bank.
In case of mortgage of immovable property steps are given below:
Title clear report
Equitable mortgage on non-judicial stamp paper
Amount of sanctioned loan loan of non-judicial stamp paper for
equitable mortgage
Up to 15,00,000 1/2% of sanctioned loan
Above 15,00,000 1% of sanctioned loan OR Rs.1,00,000
(Whichever is less)
Some time a property which given in mortgage by borrower is already put
before the bank in case of other loan as a security at that time equitable
mortgage is already done by party so there is no need of equitable
mortgage again but the equitable extension is only needed.
In case of immovable property or new purchase of machinery, equipment,
etc. insurance of same amount and in case of old machinery, goods stock,
etc. twice of the price insurance is needed. In case of education loan, the
life insurance of student is required.
Margin money means gap between purchase value and bank finance. Bank
always does payment directly to the seller. So loanee has to deposit the
margin money in the bank.
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S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
Particulars Interest
rate
Installmen
t / Rs.1000
Number of
installmen
t
Up to 25000(except vehicle
loan)
Up to 25000 vehicle loan
25001 to 200000
200001 to 1000000
Above 1000000
Surety loan, home appliances
Gold loan
Land and building (unsecured)
up to 25000
Staff surety loan
Loan against fixed deposit
Building repairing up to 75000
Building purchase,
construction
75001 to 200000
200001 to1000000
12%
14%
14%
15%
16%
16%
14%
16%
16%
More than
2% of F.D.
14%
14%
15%
32
32
32
23
23
32
50
32
23
17
17
17
40
40
40
66
66
40
26
40
66
Till the
maturity
date of
F.D.
108
108
108
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INTEREST RATE ON VARIOUS ADVANCES
Scrutiny of credit
While scrutinizing an application from the bank takes into consideration-safety,
liquidity, purpose profitability, security, and spread of advances.
Safety
Bank has to see that the prospective borrower is a reliable user of the finance and
banks money is safe in his hands.
Liquidity
Bank has to find out that the borrower is quite capable in repaying the finance
within reasonable period.
Purpose
The purpose for the finance should not be illegal. It should be creative, service
oriented, development oriented, and like. Banks should check end use of funds.
Profitability
If the project or the purpose of the finance is not profitable in the hands of the
borrower than he will not be in a position of repaying the amount to bank. It
should be profitable enough to generate the income to satisfy his needs and
banks dues.
Security
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The bank has to take into consideration the character, capacity, and capital of the
prospective borrower. Bigger advances and cash credit are to be secured with
collateral security over and above prime security.
Spread of advances
For having balanced economy the bank should choose to spread the finance
amongst various sectors of the society, so that the risk of incoming bad advances
is minimized. Concentration on one type of advances may turn into bad
advances if the scheme becomes ineffective due to some natural calamities orgovernment rules or change in taste or demands of the society, by and large.
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TYPES OF CREDIT
Surety Loan
Vehicle Loan
Security Loan
Domestic Appliances Loan
Gold Loan
Land And Building Loan/Industrial Building Loan
Educational Loan
F.D. Loan
Cash Credit
Overdraft
Bankable Loan
Bills Purchase
Bills Discounting
Bank Guarantee
Staff Loans
Staff Surety Loan
Staff Housing Loan
Staff Vehicle Loan
Staff Domestic Appliances Loan
Gyan Prakash Yojana
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EXPLANATION OF ALL TYPER OF CREDIT
Surety Loan
Purpose Personal use
Limit Rs. 5000 to 10000
Rate of interest 16%
Period 40 months
Repayable Equate Monthly installments Rs.32 per thousand
Security Personal Guarantee of two members of the bank
Documents Loan Appliances form, Letter of guarantee, DP note, letter of
Sanction.
Submit Paper In case of service person pay sleep, in case of businessperson last
yearly business report.
Other terms
% of the loan amount if the loan is sanctioned to the tune of Rs. 5000 and 1%of the loan amount is sanctioned to the tune of Rs. 10000 will have to be
deposited in the benefit fund.
Under the above scheme, if the death of the loanee under surety loan occurs, in
the said circumstances, in remaining loan in his account will be credited from
this account under his loan account and an amount of Rs. 1000, as Assistance
will be paid to the heirs of the loanee immediately from this fund
The confirmed government employee can be granted a loan of Rs. 10000 on
acceptance letter taken from his employer to the effect that they will deduct the
installment from his salary every month regularly and remit the same to Bank.
It is not applicable that the surety loan of other co-operative society is in
presence.
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Domestic Appliances Loan
Purpose For purchasing consumer durable articles viz. freeze, washing
machine, flour mill, T.V. VCD, sewing machine, room heater,
room conditioner, etc.,
Limit Minimum Rs. 5000 Maximum Rs. 20000
Margin 40%
Rate of interest 16%
Period 40 months
Repayable Equate Monthly installments Rs.32 per thousand
Security Hypothecation of goods, personal guarantee of two members of
the bank
Documents Loan Appliances form, Letter of guarantee, DP note,
Hypothecation of goods/articles purchased, insurance policy
Submit Paper In case of service person pay sleep, in case of businessperson last
yearly business report, quotation of the item obtained from
Authorized Dealer
Security Loan (Against Machinery/Furniture & Fixtures/Equipments)
Purpose For purchasing NEW/OLD machineries/furniture for business
purpose
Limit Any limit as per requirement
Margin 25% to 40%
Rate of interest Up to 25000 12%,
25001 to 200000 14%
200001 to 1000000 15%
Above 1000000 16%
Period 40 months up to 200000, 66 months above 200000
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Repayable Equate Monthly installments Rs.32 up to 200000, In case of
more than 200000 Rs.23 per thousand
Security The Hypothecation of machinery/furniture purchased as a prime
security, as a collateral security
(A) Existing old machineries
(B) Equitable mortgage of land and building
(C) Guarantee of two members of the bank as guarantors
Documents Loan Application form, Letter of guarantee, DP note, Hypothecation
of machineries old/new, insurance policy, letter of sanction
Submit Paper Last three-year business report, Shop Act License, SSI license,
Elec. Connection proof, IT Return (in case of new firm project report)
If applicant is a Partnership Firm
Partnership deed copy, Reg., of firms
If applicant is a limited company
Resolution for getting loan, Memorandum of association,
Articles of association, letter of assurance for registration in
Reg. of Companies
Other terms
The payment of this kind of loan is given to the seller directly by Bank.
In case of mortgage of old security the insurance of the double amount of old
security and about new security, the insurance of the value of purchase price, is
required to the taken out from the insurance company recognized by bank andthe said insurance policy is required to be recognized to be assigned in favor of
the bank.
The immovable property of either loanee of guarantor will have to be assigned
as collateral security to the bank.
Security Loan (Against Good Stock)
Purpose Provide loan against good stock
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Limit Any limit as per requirement
Margin 40%
Rate of interest Up to 25000 12%,
25001 to 200000 14%,
200001 to 1000000 15%,
Above 1000000 16%
Period 40 months up to 200000, 66 months above 200000
Repayable Equate Monthly installments Rs.32 per thousand up to Rs.200000, in
case of more than 200000 Rs. 23 per thousand
Security The Hypothecation of goods purchased as a prime security, As a
Collateral security
(A) Equitable mortgage of land and building
(B) Guarantee of two members of the bank as guarantors.
Documents Loan Appliances form, Letter of guarantee, DP note, Hypothecation
of goods, insurance policy, letter of sanction, equitable mortgage of land and
building
Submit Paper Last three-year business report, Shop Act License, SSI license,
Elec. Connection proof, IT Return, Rent receipt
If applicant is a Partnership Firm
Partnership deed copy, Reg., of firms,
If applicant is a limited company
Resolution for getting loan, Memorandum of association,Articles of association, letter of assurance for registration in
Reg. of Companies
Other terms
The payment of this kind of loan is given to the loanee by Bank.
Insurance is twice of the value of goods price, is required to the taken out from
the insurance company recognized by bank and the said insurance policy is
required to be recognized in favor of the bank.
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The immovable property of either loanee of guarantor will have to be assigned
as collateral security to the bank.
Land And Building / Industrial Building Loan
Purpose For purchase or construction or repairing of immovable property
Limit Rs. 1000000 or value of the property which ever is less in case of secured
loan for housing purchase or construction
For industrial purpose as per requirement
Rs. 75000 Maximum (in case of secured loan repairing of
house property)
Rs. 75000 Maximum (land less than 50 yards in case of
purchase)
Rs. 40000 Maximum (repairing of building and less than 50
yards)
Rs. 25000 Maximum (in case of unsecured loan for repairing
of house property)
Margin 30% (in case of secured loan for repairing of house
property)
Rate of interest 16% (unsecured loan) and 75001 to 200000 14% and 200001 to
1000000 15 %( secured loan (purchase /construction))
14% (housing repairing (secured loan))
Period 40 months (unsecured loan)
108 months (secured loan (purchase / construction) / repairing).
Repayable Equate Monthly installments Rs.32 (unsecured loan repairing)
Rs. 17 (secured loan (purchase/construction/repairing) per
thousand.
Security Equitable mortgage of property, two guarantors guarantee
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Documents Original Lekh, certified copy of sequential document of the property,
loan application form, letter of guarantee, equitable mortgage of
property/indemnity Bond, insurance policy, letter of sanction
Submit Paper Last three-year business report, shop Act License, IT Return,
(In case of new project, project report), approved plan and estimate.
If applicant is a partnership Firm
Partnership deed Copy, Reg. of firms
If applicant is a limited company
Resolution for getting loan, Memorandum of association,
Articles of association, letter of assurance for registration in
Reg. of Companies
Other terms
Loanee is required to pay the document inspection and advocate fee along with
process charge as per the rate time-time decided by the bank.
In case of secured loan, when the loan is given for purchase of construction of
the immovable property, the full insurance of the value of construction is
required to be taken out. In case of collateral of unsecured loan, the insurance of
double the value of the sanctioned loan is required to be taken out from the
insurance company recognized by the bank. The insurance policy is required to
the assigned to the bank.
In case of unsecured loan, the applicant has to submit the original document
showing the ownership of the immovable property. For this type of loan, noinsistence is given for title clearance. But the applicant has to submit Indemnity
Bond on stamp paper of 150 whenever the demand of bank and necessary as per
the advice of the legal retainer of the bank. The insurance for the value of
building will have to be taken over and the insurance policy will have to be
assigned to the bank.
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Construction Level And Amount Passing Slab Chart
NO. OF
INSTALM
ENT
PARTICU
LAR
UPTO
GROUND
FLOOR
UPTO
1St.
FLOOR
UPTO 2 ND
FLOOR
1 Plinth level 20% 20% 20%
2 Lintel level 20% 20%
10%
20%
10%
3 Slab 30% 10%
10%
10%
10%
4 Plaster,
tiles,
electric,
Plumbing
20% 20% 20%
5 Completion 10% 10% 10%
Vehicle Loan
Purpose Purchase of new two wheeler/purchase of four wheeler old/new
Limit As per demand
Margin 25% (in case of new vehicle purchase)
OLD KIND OF
VEHICLE
YEAR OLD
MODEL
% OF VALUATION OF
VEHICLE PASSED
Truck, Tractor 2 years 60%
Matador 3-4 years
5 years
6-7 years
8-10 years11-15 years
55%
50%
40%
30%25%
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Petrol Motor 10 years
11-15 years
50%
30%
Diesel motor 5 years
6-15 years
60%
50%
*Valuation by bank recognized valuer
Period 40 months up to 200000, 66 months above 200000
Rate of interest 25001 to 200000 14%
200001 to 1000000 15%
Above 1000000 16%
Repayable Equated monthly installments Rs. 32 up to 200000 Rs. 23 more than
200000 per thousand
Security Hypothecation of the vehicle, two guarantors guarantee as a
collateral security immovable property of loanee or guarantor
Documents Copy of registration of vehicle in RTO in particular city, Higher
purchase agreement in favor of bank, loan application form, Vehicle dealers
guarantee letter, DP note, letter of sanction, insurance policy, equitable mortgage
or extension of property
Submit Paper In case of service person pay sleep, in case of businessperson
last yearly business report, IT return, Quotation of vehicle
Other terms
It is necessary to take full comprehensive insurance for the vehicle, for which the
higher purchase agreement is done in favor of the bank. The above insurance
will have to be taken from the insurance company recognized by bank and will
have assign in favor of the bank.
Bank shall make direct payment to the dealer/seller.
In case of second hand vehicle, necessary valuation report from a recognized
valuer to be submitted to the bank.
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Gold Loan
Purpose Personal use
Limit Rs. 50000 (in Rajkot city) 20000 (out of Rajkot)
Period 26 months
Rate of interest 14%
Repayable Equated monthly installments Rs. 50 per thousand.
Security Gold silver ornaments or items on Re-pledge
Documents Loan application form, DP note
Submit Paper In case of service person pay sleep, in case of businessperson
last yearly business report
Other terms
This kind of loan is given on the re-pledge of ornaments or items of gold-silver.
This kind of loan is not available to the merchants of gold-silver for the purpose
of buying selling.
This kind of loan can be given to the member of the bank, but this kind of loan
can also be given to the non-member, taking Rs. 5 as admission fee and giving
nominal membership for the loan only.
The purity of the ornaments or items of Gold, which is given on re-Pledge,
should be minimum 21 Carets.
For the purpose of this kind of loan the bank shall appoint one or more
goldsmiths, who will make valuation of the ornaments or items of gold-silverand the loanee has to accept his decision arrived at on the basis of the
kind/weight etc. of gold-silver ornaments or items.
Per 11.664 Gram (Per TOLA) Rs. 3000 is Valued & 70 % Valued Amount is
Sanctioned as Loan.
Bankable Loan
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Purpose To assist the small scale industry
Limit Rs 200000
Margin 25% to 40%
Period 40 months
Rate of interest Up to 25000 12%
25001 to 200000 14%
Repayable Equated monthly installments of 32 Rs. Per thousand
Security As a collateral security house property of loanee or guarantor or fixed
deposits or national saving certificates as a mortgage 70% of sanctioned loan,
guarantee of two guarantors
Documents Equitable mortgage of property, loan application form, letter of
guarantee, DP note, letter of sanction, insurance policy
Submit Paper Shop Act License, SSI license, Elec. Connection proof, Rent
receipt, project report
Other terms
This loan is sanctioned on the recommendation of district industrial center after
security and taking in view the value of security given against loan and
particulars of guarantor.
Amount of subsidy given and sanctioned to the application is credit in his loan
account.
The payment except amount, which is sanctioned against working capital, of thisloan is made directly to the party, who has given the quotation.
Type of business condition of subsidy
Trading firm 7500 or 10% of loan amount whichever is less
Service sector 10000 of 10% of loan amount whichever is less
Manufacturing firm 20000 or 10% of loan amount whichever is less
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Over Draft
Purpose To fulfill the need of working capital of business
Limit As per requirement
Margin 40%
Period Up to 1 year
Rate of interest Up to 25000 12%
25001 to 200000 14%
20001 to 1000000 15%
Above 1000000 16%
Repayable The customer is permitted to withdraw the amount as and when he
needs it and to repay it by means of deposit in his account as and when it is
feasible for him
Security Hypothecation of goods stock and or equitable mortgage of property
guarantee of two guarantors
Documents Overdraft application form, letter of guarantee, equitable mortgage
of property, DP note, letter of continuity, letter of sanction, insurance policy
Submit paper Last three-year business report, rent receipt, IT return, shop
act license
Cash credit (good stock)
Purpose To meet the need of working capital business unit
Limit As per require
Margin 40%
Period 12 month (to be reviewed every year and renewed every
three year)
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Rate of interest Up to Rs. 25000/- 12%, 25001 to 2,00,000 14%, 2,00,001 to
10,00,000 15%, above 10,00,000 16%
Repayable The customer is permitted to withdraw the amount as and when he
need it and to repay it by means of deposit in his account as and
when it is feasible for him
Security a) as a prime security hypothecation of goods stock
b) As a collateral security machinery, furniture equipment,
fixed deposit, national saving certificate, equitable mortgage of
immovable property
c) Guarantee of two guarantors
Document Cash Credit Application Form, Agreement Letter, Equitable
Mortgage of Property, Letter Of Sanction, Letter Of Continuity,
DP note, hypothecation of goods, Insurance Policy
Submit paper Last three year Business Report, Shop Act License, SSI License,
electricity connection proof, IT return, rent receipt
If applicant is a partnership firm
Partnership deed copy, Reg. of firms
If applicant is a limited company
Resolution for getting loan, memorandum of association,
articles of the association, letter of assurance for registration in
reg. of companies
Other terms
Loanee has to submit the stock statement to the bank every month regularly.
Loanee has to submit the balance sheet, profit and loss account every year.
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Loanee has to submit the copy of income tax return or income tax assessment
order every year.
In the cash credit account facility, the turn over will to be done thrice of the
sanctioned facility within 6 month and the same will have to be done five times
of the sanctioned facility within one year.
The insurance for twice the value of sanctioned cash credit will have to be taken
over and the insurance policy will have to be assigned to the bank.
In case of cash credit the facility can be availed maintaining the goods stock
margin.
Sale of goods and amount of recovery cannot be set off, but the same should be
credited in the bank and the amount of payment should be made by bank cheque
all the business transaction should be made through bank.
As per the norms of the reserve bank of India, a borrower cannot operate two
cash credit account at a time with two different banks.
Education Loan
Purpose This kind of loan is given to the brilliant students, who do not
further their study because of paucity of finance, with a view to
building their career. The bank is giving loan to cooperate and to
give assistance to such students for education purposeLimit a) Study in India : Rs. 1,50,000
b) Study in abroad : Rs. 2,00,000
Margin Up to 25,000 : nil
25,001 to 1,50,000 : 15%
25,000 to 2,00,000 : 25%
Rate of interest 14%
Repayable Equates monthly installments of Rs. 32 per thousand
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Security Equitable mortgage of property, guarantee of two guarantors
Document Loan application form, Equitable Mortgage Of Property, Letter Of
Sanction, Letter Of continuity, continuity security letter, DP note,
Insurance Policy of student, which is assigned in favor of bank,
letter of lien and set off, letter of guarantee, stamp application cum
agreement form
Submit paper In case of service person pay sleep, in case of businessperson last
yearly business report, two photograph of student
Other terms
Interest is required to be paid every month
The loan can be sanctioned keeping in view the loanees repaying capacity
Compulsory first class in every important examination
Loanee is that who has a property on his own name. Student has to join as a co-
loanee.
The installment of loan will be stated after 6 months of the completion of study
Fixed deposit loan
Purpose To grant loan / overdraft to an individual or a firm against F.D.R.
Limit As per requirement
Margin 50 % or less
Period Till due date of F.D.R.
Rate of interest 2 % more than F.D.R.
Security Duly discharge F.D.R.
Documents DP note, duly discharge F.D.R., form of application
Other terms Lien should be noted in the FDR account and on the back of the
F.D.R. duly discharged
Bills purchase
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Purpose To assist the customer for their short-term need of working capital
Limit As required by applicant
Margin Generally 25 %
Rate of interest 18 % per annum
Period Actual realization period
Charges Table is given
Documents DP note, letter of guarantee, letter of continuity, agreement letter
Bills Discounting
Purpose To assist the customer to provide them working capital against
his post- dated received bills
Limit As per required by applicant
Margin Generally 25 %
Rate of interest 18 % per annum
Period Maximum 180 days
Documents Letter of bills discounting undertaking, DP note, letter of
guarantee, letter of continuity, agreement letter
Charges Table is given
Other terms Interest to be covered in advance
Collection Of Cheques (O.B.C.)
Amount Of Cheques Location Listed
Above
All Other Location
Up to Rs. 5000/- Rs. 10.00 Collecting Banks
Commission + Rs.10
Postage Charge
From Rs. 5001 to
10000
Rs. 15.00 Collecting Banks
Commission + Rs.10
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Postage Charge
From Rs. 10001 to 1
Lac
Rs. 1.50 / 1000 Collecting Banks
Commission + Rs.10
Postage ChargeFor Rs. Above 1 Lac Rs. 1.50 / 1000 Collecting Banks
Commission + Rs.10
Postage Charge
Collection Of Bills (I.B.C)
Amount Of Bill Location Listed
AboveAll Other Location
Up to Rs.1000 Rs, 10.00 Collecting Banks
Commission + Rs.10
Postage Charge
From Rs. 1001 to 5000 Rs. 15.00 Collecting Banks
Commission + Rs.10
Postage Charge
From Rs. 5001 to
10000
Rs. 25.00 Collecting Banks
Commission + Rs.10
Postage Charge
From Rs. 10001 to 1
Lac
Rs. 3.00 / 1000 Collecting Banks
Commission + Rs.15
Postage Charge
For Rs. Above 1 Lac Rs, 3.00 / 1000 Collecting Banks
Commission + Rs.15
Postage Charge
Bank guarantee:
1)Performance guaranteeThis type of guarantee does not involve financial obligation
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It involves performance with regard to construction of building,
installation of plant and machineries within a given time frame and with
agreed specifications
Performance relating to supply of materials as per agreed terms and
conditions
Guarantees may be given to secure advanced payment, in place of
security deposit / earnest money deposit / tender money deposit etc.
Performance of any other work contract
Performance of plant / machinery up to agreed level capacities
2)Financial guarantee
These guarantees are given for meeting with financial obligations
Purpose To assist the business
Limit As required by applicant
Margin Cash margin (minimum 25 %) by way of F.D.R.
Equitable mortgage (rest of the part)
Period Generally 12 months
Commission 1% per annum in case of 100% cash margin
2% per annum in other cases
Charges 0.1% (upfront)
Security F.D.R. duly discharged, equitable mortgage of property
Documents Application form, counter guarantee
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Different types of staff loans
Staff surety loan
Purpose Personal use
Limit Rs. 15,000 maximum
Period 66 months
Rate of interest 16 %
Repayable Equated monthly installments of Rs. 23 / thousand
Security Personal guarantee of two staff members of the bank
Documents application form, letter of sanction, DP note, letter of guarantee
Gyan Prakash Yojana
Purpose this kind of loan is given to the staff members for the higher study
of their two children
Limit a) Study in India : Rs. 3,50,000
b) Study in abroad : Rs. 4,50,000
Margin 25 %
Rate of interest Bank rate + 1 %
Repayable Equates monthly installments of Rs. 32 / thousand
Security Equitable mortgage of property
Documents DP note, sanction letter, equitable mortgage charge extension
letter, life insurance policy of student, which assigned in favor ofbank, term loan agreement, rectification letter
Other terms Interest is required to be paid every month
The installment of loan will be stated after 6 months of the
completion of study
Staff vehicle loan
Purpose to purchase a new / old two wheeler for personal use
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Limit Rs. 40,000
Rate of interest 0 %
Repayable equated monthly installments Rs. 15 / thousand
Security hypothecation of vehicle to be purchased
Documents DP note, letter of guarantee, hypothecation of vehicle, insurance
policy
Staff domestic appliances loan
Purpose For purchasing consumer durables articles viz. freeze, washing
machine, flourmill, T.V., VCD, room conditioner, etc.
Limit Rs. 50,000
Rate of interest for initial 20,000 bank rate for rest amount bench mark rate
(current rate)
Repayable equated monthly installments of Rs. 20 / thousand for first 20,000
then afterward Rs. 23 / thousand
Security hypothecation of vehicle to be purchased
Documents DP note, letter of guarantee, hypothecation of vehicle, insurance
policy
Staff housing loan
Purpose To construct / purchase residential building
Limit for officers and other upper cadre : Rs. 5,00,000
For clerk : Rs. 4,00,000
For peon and others : Rs. 3,00,000
Period 20 years
Rate of interest 6.5 %
Repayable equated monthly installments of Rs. 7 / thousand
Security equitable mortgage of property, two staff members guarantee
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Documents DP note, letter of guarantee, letter of sanction, insurance policy,
equitable mortgage of property
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Data analysis and observation and suggestions
Presence of loan policy
In the RSNB, before two year there was not proper policy for loan, but separate
circular for each loan. But at present RSNB have its own loan policy and criteria
to sensor the loan. Coincidently, RBI also declared in near, each and every bank
should have its own loan policy. This is the point, which is striking us the
foresightedness of the bank management and also loan manager of that time Mr.
Bhatt who prepare present loan policy with the help of the some efficient staff
members of the loan department.
Revision made on annual basis
RSNB prepare its own loan policy just before two year. So in one sense, we can
say RSNB revised its loan policy in last two year but it is not revised every year
regularly. So I can suggest that to RSNB, for walk with the new era of credit
market, bank should try to improve own self in the field of credit management
by revising the loan policy time to time by learn from past years experience.
Loan policy cover
Delegation of lending power
Method for assessment of working capital
Rating of borrowers
Loan pricing
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Delegation of lending power
In the past time, RSNB had given delegation of lending power to its selected
branch offices but at present RBI hurdle against this. By effect of it, RSNB
cancel all the delegation power of its branch offices and burden of the head
office gives in written in language of suggestion that what should be the
decision? And head office only complete fulfils the legal formality to sanction
the loan. However it takes more time for sanctioning loan but by the practical
approach bank can solve this difficulty.
Method of assessment of working capital
In the RSNB, there are three methods for working capital, which is useful to
bank for calculating the need of cash credit or short-term loan of firm. This
method gives advantage to bank to find out if the demand borrower is fair.
Methods of working capital calculation are given below:
Capital of borrower, and borrowing from relatives are multiplied by threeDifference between current assets and current liabilities multiply by four
20 % of estimated sales
Borrower contribution 5% of the turnover in working capital is accepted
Above three whichever is less is original working capital demand of the
borrower as per the calculation of RSNB.
Rating of borrowers
RSNB has its own method of credit rating that is beneficial for both the bank and
the borrower. Because through this bank should maintain their customer who
deal with bank regularly and the borrower is appreciated for their performance.
Another side borrower gets benefit through interest rate reduction. This method
is given below:
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Credit rating of loans
AAA:
Cash credit account
In the account, interest is paid regularly; it is paid at the end of every quarter
within 10 days.
Stock statement is received regularly.
Overdraft is paid regularly with its interest.
Every document is getting regularly for review and renew of account.
Term loans
In the account, interest and installments are paid regularly.
Notice is not given on account for any reason.
AA:
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Amount of loan
sanctioned
Interest concession
25,001 to 2,00,000 1 %
2,00,001 to 10,00,000 1 %
Above 10,00,000 2 %
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Cash credit account
In the account which interest is paid regularly; it is paid at the end of the every
quarter maximum 30 days.
Stock statement is received regularly
Overdraft is paid regularly with its interest.
Term loans
Maximum two installments are due but at the end of the year i.e. on 31 st march,
there is no due installment.
Amount of loan
sanction
Interest concession
25,001 to 2,00,000 0.5 %
2,00,001 to
10,00,000
0.5 %
Above 10,00,000 1%
Loan pricing
RSNB always give more interest on deposit than other bank in Rajkot district to
attract the market, effects the loan pricing. So loan rate of RSNB is higher.
Though RSNB get customer because of its services, its speedy process, practical
approach, and its reliability in market. But here one possibility is also that the
payer of higher interest is sometime reason for future loss or burden on bank. So
try to get deposit at lower rate to reduce the loan pricing. It is also fact that in
this critical situation of co-operative banks, it is very hard to get deposits from
the market but if bank management tries to create trust in public, here one more
benefit is that the depositor and the borrower is the shareholder of the bank or
say owner of the bank. So it is less hard than other types of bank to create trust.
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Reporting format
Reporting format for excess utilization of lending process by branch manager is
now not needed, because as per the new guidelines of the RBI, branch of co-
operative bank has no power to sanction loan.
Identification of sensitive sectors and discounting further lending
RSNB is not that much big bank in compare of commercial bank, though it is
needed for the bank to watch on the general sensitive sectors means lending in
that sector which is risky / dangerous for any financial institutions. For example
lending against shares. To find out the special sensitive sector, we should
continuously watch on our borrowers. Sometimes in case of co-operative banks,
reason of their NPA is lending to particular group or industry. RSNB also keep
watch and discouraging further lending. For example builders developers cash
credit.
Monitoring of unduly large exposure to an individual or a group
To stop the unduly large exposure to an individual or a group, in RSNB loan
staff monitor and draw attention of higher authority.
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CREDIT APPRAISALCREDIT APPRAISAL
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Appraisal format
PRIMARY INFORMATION
Name of the unit
Date of establishment of business
Type of business
Date of starting of dealing with bank
Address and telephone no.: Office Godown Factory
Structure of unit
Proprietorship firm/ partnership firm / private limited / public limited
Name of the proprietor /partners / directors with CDN (compulsory deposit
number)
INFORMATION RELATED TO GUARANTORS
Names of guarantors
Compulsory deposit number
Business
Annual income
Land building property
Information about prevalent loans
INFORMATION ABOUT PREVALENT FACILITY PROVIDED BY RSNB
Types of facility
Amount granted
Due date
Present balance
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ABOUT PRESENT CASH CREDIT FACILITY
Credit turn over of last year
Amount of cash credit
Amount of cash credit with overdraft
Previous year stock
Present stock and date
Measurement Ideal Performance of party (remarks)
Credit balance compare with
saleTo payoff of overdrafts /
excess
Submission of stock statement
monthly
Interest payoff
Equated monthly installmentson loan
Account over due (yes / no)
Similarly in stock
1: 1
RegularRegular
Regular
Regular
------
10 to 15
%Difference
INFORMATION OF COLLATERAL SECURITY
IMMOVABLE PROPERTY
Name of owner and designation of him
Address of property
Land in square yard
Construction in square feet
Estimated price of property
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(Amount of land is calculated as per the address + Amount of construction
is calculated square feet * 300)
Other liability on it, mention it
MACHINERY/FURNITURE/EQUIPMENT etc.
Amount of property
SECURITY COVERAGE
Estimated value of collateral security
Minus other liability on same propert