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    EXECUTIVE SUMMARY

    Once a project opportunity is conceived and it is considered after the preliminary

    screening, a detailed feasibility study has to be undertaken covering marketing, technical,

    and financial aspects of the project. The study in the form of cases deal with calculations

    of MPBF (Maximum Permissible Finance), along with going through the borrowers

    information, general information of the proposal, past record of borrower and details of

    security mortgaged. Financial records of the borrower audited, provisional and projected

    such as Profit and loss account statements, Balance Sheet and Cash and Fund Flow

    Statements needed to be considered. The ratios such as current Ratio, Debt Service

    Coverage Ratio etc are also checked. The ultimate decision whether to grant the credit to

    borrower for the application or not and how to go about it , is undertaken after this study

    which discloses whether the borrower has good past record and information provided are

    true and fair.

    My project concerns with the Calculations of MPBF i.e. Credit Appraisal and Renewal,

    in which I need to asses if the borrower should be granted credit, and what should be the

    recommended loan amount. This all is done after carefully evaluating the financials and

    securities provided by the borrower.

    Various financial ratios are calculated for the past and future data provided by the

    borrower after checking the veracity of the same. The various ratios, which are frequently

    calculated include:

    Current ratio:

    [(Receivables + material and finished good inventory)/ (creditors for goods andexpenses)]

    Long term debt-equity ratio

    [Long Term Debt/ Net worth]

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    Interest coverage ratio

    [(Profit Before Interest Provision for Tax)]/(Interest payments due for the year]

    Fixed assets coverage ratio

    [Fixed Assets/ (Term loan and other long term debt obligations)]

    Debt-service coverage ratio

    [{(Profit after tax + Interest on term loan + Depreciation} + Other non-cash

    charges]/ [Interest on term loan + Principle Repayment ]

    Profit after tax/sales

    Debtors Velocity

    [Average Receivables/Credit Sales* No. of days in a year.]

    Creditors Velocity

    [Average Payables/Credit Purchase* No. of days in a year.]

    Stock Velocity

    [Average Stocks/Cost of goods Sold* No. of days in a year.]

    Two other important criterions are IRR and DSCR

    Financial institutions calculate the Internal Rate of Return (IRR). The Internal Rate of

    Return refers to the rate of return that the project is expected to generate based on its

    projected cash flows accruing over its expected lifespan. Institutions have a threshold

    IRR that the project needs to surpass to assess its viability.

    DSCR refers to the ability of the project to generate sufficient cash flows to repay the

    debt taken to finance the project. This includes the principal along with the interest

    component.

    The above ratios are taken and matched with the standard, though a certain amount of

    flexibility is exercised depending on the perception and personal judgment of the

    appraising officer. A rating is assigned to the project based on the scores of the different

    ratios. A cut-off rating determines financing decision (whether the project would financed

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    or not). Above the rating, the projects maybe categorized into excellent, good and

    average. Based on this and the project characteristics, the final terms and conditions of

    financial assistance are decided upon like:

    Moratorium

    Repayment period

    Availability period

    Security (like first charge, personal guarantee etc.)

    Interest rate

    All the expenses like service fee, processing fee, document fee and other expenses like

    inspection of site, factory, etc. are charged to the applicant and are a source of income for

    the lending institution.

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    The new identity for J&K Bank is a visual representation of the Banks philosophy and

    business strategy. The three colored squares represent the regions of Jammu, Kashmir

    and Ladakh. The counter-form created by the interaction of the squares is a falcon with

    outstretched wings a symbol of power and empowerment. The synergy between the

    three regions propels the bank towards new horizons. Green signifies growth and

    renewal, blue conveys stability and unity, and red represents energy and power. All these

    attributes are integrated and assimilated in the white counter-form.

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    COMPANY PROFILE

    Jammu and Kashmir Bank Limited was incorporated on 1st October, 1938 and

    commenced its business from 4th July, 1939 in Kashmir (India). The Bank was the first in

    the country as a State owned bank. The Bank was established as a semi State Bank with

    participation in capital by State and the public under the control of State Government.

    The bank had to face serious problems at the time of independence when out of its total

    of ten branches two branches of Muzaffarabad and Mirpur fell to the other side of the line

    of control (now Pak Occupied Kashmir) along with cash and other assets.

    According to the extended Central laws of the state, Jammu & Kashmir Bank was

    defined as a govt. Company as per the provision of Indian companys act 1956. In the

    year 1971, the Bank received the status of scheduled bank. It was declared as "A" Class

    Bank by RBI in 1976.

    Today, Jammu & Kashmir Bank is one of the fastest growing banks in India with a

    network of more than 500 branches/offices spread across the country offering world class

    banking products/services to its customers. The Bank has a status of value driven

    organization and is always working towards building trust with Shareholders, Employees,

    Customers, Borrowers, Regulators and other diverse Stakeholders, for which it has

    adopted a strategy directed to developing a sound foundation of relationship and trust

    aimed at achieving excellence, which of course, comes from the womb of good Corporate

    Governance. Good Governance is a source of competitive advantage and a critical input

    for achieving excellence in all pursuits. J&K Bank considers good Corporate Governanceas thesine qua non of a good banking system and has adopted a policy based on all the

    four pillars of good governance transparency, disclosures, accountability and value,

    enabling it to practice trusteeship, transparency, fairness and control, leading to

    stakeholders delight, enhanced shareholder value and ethical corporate citizenship. It also

    ensures that bank is managed by an independent and highly qualified Board following

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    best globally accepted practices, transparent disclosures and empowerment of

    shareholders, besides ensuring to meet shareholders aspirations and societal expectations

    following the principles of management's executive freedom to drive the bank forward

    without undue restraints but within the framework of effective accountability. The

    excellence achieved by the bank in its operations stemming from the roots of voluntary

    good Governance has not gone unrecognized and Bank has recently bagged three very

    prestigious awards for following fair business practices and commitment to social

    obligations.

    Key Developments

    The Bank should be an organ of public interest and not an instrument for the

    government or the shareholders to achieve their own end.

    The J&K Bank seems to have made some headway in getting there. The Bank has

    changed the business model and made it relevant to the people of the state.

    The further story explains it all

    In the last two years, the Bank has registered a 140 per cent increase in profits, a 108 per

    cent increase in the rate of return on equity, thereby showing a vast improvement in the

    Banks efficiency to generate profits from every invested rupee.

    Similarly, the efficiency of using the assets of the Bank to generate earnings has increased

    104 per cent in two years.

    As far as safety is concerned, Bank has covered itself very well. The NPA coverage ratio

    has been increased from 48 to 65 per cent

    The stock price has more than doubled in the last two years. The Bank touched a high of

    Rs 788 in the month of May, showing a 288 per cent increase. And above all, the Bank

    has produced, for the second consecutive year, a completely transparent balance sheet,

    which has no auditors' qualifications.

    Outperforming the sector, as the bank has done in the last two years is the hallmark of a

    good company. For a company like J&K Bank, which operates in a region of low

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    development and poor financial intermediation, it is also important to see how these

    numbers are generated. As it is, the J&K Bank is much more than a mere bank for the

    people of the state. Not only is it the most successful company of and from the state, it is

    a citadel of civil society. Going beyond that, it is a testimony of the competencies of the

    people of the state in the building of a national institution.

    Future Goals of the Bank

    To build a global brand, the Bank feels a need to do two things go global physically and

    second, more importantly, have a unique business model, product offering and service

    standards, all of which are globally recognized.

    The bank has taken initial steps to achieve the first. As of today, after the state

    government, the banks second largest shareholders are Foreign Institutional Investors,

    with a combined stake of almost 36 per cent. Some of the biggest names in the world

    figure in the sixty plus funds that have invested in the Bank. The list is truly international,

    with funds from USA, Europe, Singapore, Japan, Sweden, Mexico and Spain, having

    investments valued at more than $300 million in the Bank.

    As a next step in this direction, the bank plans this year to raise money abroad. The bank

    will offer Global Depository Receipts and list the Bank in international capital markets.

    This will be a landmark in J&K bank illustrious history.

    The second way to becoming a global brand is to have a unique business model, which is

    a far more formidable task. The Bank has a wonderful brand in Pashmina.By and large

    most global brands are products. What the bank is setting out to do is to create a global

    brand in the financial services industry.

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    The BANKS MISSION STATEMENT

    The most important change is to move away from trying to govern to trying to serve .

    The banks overriding mission as a corporation is to use its core competency to serve and

    empower the people of the state in general and entrepreneurs in particular, rather than

    serving them as an afterthought.

    SERVICES OFFERED

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    Depository Services Scheme of J&K Bank

    Dematerialization (Demat)

    Stock Broking through INVESTMART an initiative of ILFS

    Depository

    Depository Participant

    Market transaction

    Off-market transactions

    Pledge of securities

    Rematerialisation (remat)

    Insurance offered by J&K Bank

    Insurance products of Jammu and Kashmir Bank are offered in association with Bajaj

    Allianz General Insurance Co. Ltd.

    Motor insurance

    Hospital cash

    Burglary

    Shop keepers

    In association with MetLife, the Bank is offering the following Life Insurance Policy to

    its customers:

    Met Bhavishya- A flexible money-back plan

    Met Junior- Par Endowment

    Met Mortgage Protector SP- Single Premium Mortgage Protection Plan

    Met 100- Limited Pay Whole Life Insurance

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    Met 100 Gold- Par Whole Life

    Met Platinum (Endowment)-Participating endowment assurance for face amount

    above Rs. 3 lakh

    Met Riders- Customization tools for policies.

    Credit Card of J&K Bank

    Initially there are three types of Credit Cards issued by Jammu and Kashmir Bank:

    Gold Card

    Silver Card

    Blue Card

    All the above cards are also available with photo along with a family address on Cards.

    The Card is accepted by all those Merchant Establishment who honour MASTER cards.

    ATMs linked with MASTER cards accept J&K Bank Credit Card.

    Customer Service

    The Jammu and Kashmir Bank has proved to be customer driven organization and the

    people in the organization understand that innovation creates opportunity, quality creates

    demand and teamwork makes it happen. The Bank, feeling the pulse of customers need

    that they demand more for less, has endeavored to provide them better quality service,

    wider choice and above all innovative products. The Bank is always ready to add value to

    its customers and takes every possible step to improve quality of customer service. The

    Bank proves its promises to customer quality service by establishing. CustomerAdvisory Foray at its every major branch. The number of such foray has been

    consistently rising. In monthly meetings of these forays, the branch managers and

    customers interact to sort out issues relating to customer service or other related

    problems. The Bank has a very efficient complaint redress mechanism. It handles the

    customer queries and complaints on priority. One can find Customer Suggestion Card,

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    at all branches of the Bank and also on its website. Customers accessing the website of

    the Bank have the option to send their queries through e-mail.

    Bank on Information Technology

    The bank has a constant focus on application and augmentation of the information

    technology in order to modernize Banks operations and deliver value-added services to

    the customers. The Bank covers more and more branches under the computerization

    programmes.The bank has extended Anywhere Banking and Tele-Banking facilities to

    many new locations/branches, The number of ATMs (both off-site and on-site) installed

    by the Bank has increased to 78 during the year under report, of these 51 ATMs were

    networked through IST Switch. The Bank is in the process of setting up its DATA centre

    at Delhi for which creation of infrastructure is in progress. With the commencing of the

    said data centre the Bank will be able to introduce Internet Banking.

    Customer Orientation

    The Bank has come up with various value added products and services to suit customers

    expectations and requirement. Its Marketing and Research Cell has been functioning for

    three years now. The market research is conducted on an ongoing basis to identify needs

    and expectations of the customers and shape products / services accordingly. Even value

    addition to the extant products/services is made to suit the growing needs/ demands of the

    customers. Bank provides value to its customers by delivery of innovative products and

    services in an effective and efficient manner. In order to reach extant and potential

    customers in an effective manner creative promotional campaigns are being undertaken to

    create a strong "Brand Identity" for the Bank. With multiple options available to customer

    in shopping their products, more focus was laid on retail advertising during the year and

    extensive promotional campaign through print and electronic media was undertaken

    which showed significant results in the form of increased demand for the Banks products

    and customer base. As a part of the advertising strategy the Bank has sponsored weekly

    radio programmes named "JK Bank Dairy" which is aired from the three stations of radio

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    Kashmir viz., Srinagar, Jammu and Leh. It is an innovative programme and is

    successfully running for last 18 months. The programme is being produced by Banks

    own staff. The programme has gained wide popularity among the people as it provides

    awareness and up-to-date information about banking in general and products/services

    offered by the Bank in particular. People from all walks of life with their responses have

    appreciated the usefulness of the programmes, which is evident from hundreds of

    responses received every week from the listeners.

    Banks web site is a powerful resource for customer education and information. The

    website provides the visitors up-to-date information about all the products/services

    offered by the Bank and other matters of interest relating to the Bank besides, providing

    some on-line services. The updating of the site is done on daily basis so as to provide thevisitors latest information about the Bank. The site attracts on an average 700 visitors

    weekly.

    Branch Expansion

    With a view to increasing its reach to potential markets and extending banking facilities

    to un-banked areas coupled with catching on new business opportunities Bank has been

    opening new branches selectively at centers offering highest business potential. In

    keeping with this strategy the Bank opened 15 new branches/extension counters during

    the period under report raising the total number of offices to 454 at the end of March

    2003.

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    J&K BANK

    BRIEF FINANCIAL (IN RS. MN.)

    Profit / Loss A/C FY 2007-08 FY 2006-07

    Net profit 360 274.49

    Net Interest Margins 2.95% 2.97%

    Operating Income 1055.45 928.06

    Net interest income 810.44 767.85

    Fee based income 245.01 160.21

    Operating Profit 651.84 555.62Deposits 28593 25194

    Return on Assets (%) 1.1 0.96

    Post Tax Return on Equity (%) 16.68 14.42

    Earnings per Share 74.26 56.62

    CRAR 12.80% 13.24%

    Tier I 12.14% 12.60%

    Tier II0.66% 0.64%

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    J&K BANK AT A GLANCE

    Incorporated in 1938 as a limited company.

    Governed by the Companies Act and Banking Regulation Act of India.

    Regulated by the Reserve Bank of India and SEBI.

    Listed on the National Stock Exchange (NSE) and Bombay Stock Exchange

    (BSE)

    53 per cent owned by the Government of J&K.

    Rated "P1+" by Standard and Poor- CRISIL connoting highest degree of safety.

    Four decades of uninterrupted profitability and dividends

    Unique Characteristics: One of a Kind

    Private sector Bank despite government holding 53 per cent of equity.

    Sole banker and lender of last resort to the Government of J & K.

    Plan and non -plan funds, taxes and non-tax revenues routed through the bank.

    Salaries of Government officials disbursed by the Bank.

    Only private sector bank designated as agent of RBI for banking.

    Carries out banking business of the Central Government.

    Collects taxes pertaining to Central Board of Direct Taxes in J & K

    The J&K Bank identifies empowerment as the process of enhancing the capacity of

    individuals or group to make choices and to transform those choices into desired actions

    and outcomes. Central to this process are actions that build both individual and collective

    assets, and improve the efficiency and fairness of the organizational and institutional

    context that governs the use of these assets.

    Registered Office Corporate Headquarters

    M A Road M A Road

    Srinagar 190 001 Srinagar 190 001

    Jammu & Kashmir Jammu & Kashmir

    www.jkbank.net

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    http://www.jkbank.net/http://www.jkbank.net/
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    TASK ASSIGNED

    I was assigned a project in J&K Bank that deals with evaluating and providing credit

    assistance to applicants and consumers from business establishment to consumable

    requirements, taking the prescribed norms of the RBI and J&K Bank into consideration.

    The task starts with the application from the borrower. Then a checklist is created to

    confirm the presence of all relevant documents and guarantees duly certified and to the

    satisfaction of JK bank. These documents contain the Detailed Project Report (DPR) in

    case of term loan, the stock reports and companys financials along with guarantee in

    case of cash credit, the salary slips in case of consumable loans to salaried persons and

    securities in every case. The DPR contains the financial outlook, projections and the

    assumptions in accordance to the company applying for the loan. After initial scrutiny the

    borrower is requested to submit any further documents, if required and/or for clarification

    and queries. For a complex and large project, agency may also be asked to make a

    presentation to the team of appraisers, where the queries and clarification are addressed to

    obtain the complete documents and clarification. The Team prepares a final appraisal note

    in form of Report. We start with institutional financial viability assessment first, which

    contains the assessment of the net worth of the main promoters (both individuals and

    corporate according to the share holding pattern), the net worth of companies giving

    corporate guarantee along with the main company asking for loan. The relevant

    information from the audited reports of all is taken into account for this assessment. This

    is how we come across to a fine picture of financial position of the company requesting

    for financial aid. Confidential reports from existing bankers and lenders to the agency are

    also sought to ascertain the borrower/promoter's track record. For our regular borrowing

    agencies, the past record with JK Bank is also checked for any default.

    From here on the financial appraisal takes up examining the projected future Cash Flowsand Balance Sheet. The main criterions used by JK Bank are DSCR (Debt Service

    Coverage Ratio) and DER (Debt Equity Ratio). The guidelines issued by JK Bank govern

    the required criterion.

    I was required to assess the working capital requirements of various firms applying to JK

    bank forCash Credits (Working Capital Loans). We were required to estimate MPBF for

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    the same. Maximum Permissible Bank Finance is the maximum limit of credit that Bank

    can lend. It is calculated as follows:

    Maximum Permissible Bank Finance (MPBF)

    Current Assets ( All Current Assets)

    Less: Current Liabilities ( Crs. + Other Current Liabilities)

    Working Capital Gap

    Less: 25% of the Total Current Assets or NWC whichever is

    higher of the two amounts

    MPBF

    Assessment Of Working Capital Fund Based : under MortgageLoan Scheme

    Sales for last financial year

    Projected Sales for next financial year

    Accepted Sales

    (Maximum 125% of the achieved turnover)

    Permissible Limit

    (20% of the accepted sales)

    A

    Forced Sale value of Property

    Permissible Limit

    (75% of the forced Sale Value)

    B

    Maximum Permissible Limit

    (Lower of A or B)

    C

    Available Limit

    Limit Recommended by the branch

    FORMS OF BANK FINANCE

    A firm can draw funds from its bank within the maximum credit limit sanctioned. It can

    draw fund in the following forms:

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    Overdraft

    Under the overdraft facility, the borrower is allowed to withdraw funds in excess of the

    balance in his current account up to a certain specified limit during a stipulated period.

    Though overdrawn amount is repayable on demand, they generally continue for a long

    period by annual renewals of the limits. It is a very flexible arrangement from the

    borrowers point of view since he can withdraw and repay funds whenever h desires

    within the overall stipulations. Interest is charged on daily balances- on the amount

    withdrawn-subject to some minimum charges. The borrower operates the account through

    cheques.

    Cash Credit

    It is the most popular method of bank finance for working capital in India. Under this

    method a borrower is allowed to withdraw funds from the bank up to the sanctioned

    credit limit. Borrower is not required to borrow the entire sanctioned credit once, rather,

    he can draw periodically to the extent of his requirements and repay by depositing surplus

    funds in his cash credit account. There is no commitment charge; therefore, interest is

    payable on the amount actually utilized by the borrower. Cash credit limits are sanctioned

    against the security of current assets. Though funds borrowed are repayable on demand,

    banks usually do not recall such advances unless they are compelled by adverse

    circumstances. Cash credit is the most flexible arrangement from borrowers point of

    view. It is more often than not is used for working capital.

    Purchase of Discounting Bills

    Under the purchase or discounting of bills, a borrower can obtain credit from bank

    against its bills. The bank purchases or discounts the borrowers bills. The provided under

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    this agreement is covered within the overall cash credit or overdraft limit. Before

    purchasing or discounting the bills, the bank satisfies itself as to the creditworthiness of

    the drawer. Though the term bills purchased implies that the bank becomes owner of the

    bills, in practice, bank holds bills as security for the credit. When a bill is discounted, the

    borrower is paid the discounted amount of the bill.

    Letter of Credit

    Suppliers, particularly the foreign suppliers, insist that the buyer should ensure that his

    bank will make the payment if he fails to honor its obligation. This is ensured through a

    letter of credit arrangement. A Bank opens a Letter of Credit in favor of a customer to

    facilitate his purchase goods. If the customer does not pay to the supplier within the credit

    period, the bank makes the payment under the L/C arrangements. This arrangement

    passes the risk of the supplier to the bank. Bank charges the customer for opening the

    L/C. The Bank extends such facility to the financially sound customers. Unlike cash

    credit or overdraft facility, the L/C arrangement is an indirect financing; the bank makes

    payment to the suppliers on behalf of the customer only when he fails to meet the

    obligation.

    There are two banks involved in L/C arrangements. The L/C opener Bank on behalf of

    the applicant or purchaser and the advisory bank on behalf of the beneficiary or supplier.

    The L/C opener Bank issues L/C after taking required security. The beneficiary or

    supplier gives the goods invoice & bill of exchange to the advisory bank. The advisory

    bank sends the same to the Opener Bank for acceptance, the opener bank take an

    acceptance from the applicant and sends back the same to the advisory bank. Now the

    L/C opener Bank makes payment to the beneficiary or supplier in case of purchaser

    default. The bank charges the customer for opening the L/C.

    Bank Guarantee

    A Bank Guarantee is a guarantee made by a bank on behalf of a customer (usually an

    established corporate customer) should it fail to deliver the payment, essentially making

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    the bank a co-signer for one of its customer's purchases.

    A bank guarantee is more risky for the merchant and less risky for the bank.

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on

    time and for the correct amount. In the event that the buyer is unable to make payment on

    the purchase, the bank will be required to cover the full or remaining amount of the

    purchase.

    With a bank guarantee, a client can default and the bank assumes the liability.

    Thus it can be said that Bank Guarantee is a commitment made by a bank to a foreign

    buyer that the bank will pay an exporter for goods shipped if the buyer defaults.

    Housing Loan

    The Bank provides facility of housing loan to consumers fork purchase, construction,

    renovations or for repairs of the house. The eligibility criterion of the bank is as follows:

    Employees of Govt., Semi-Govt. Dept., Civic Bodies, PSU's with minimum 5

    years service.

    Reputed Businessmen with minimum 5 years standing.

    Professionals & Self employed like Doctors, Engineers , CA's , Advocates with

    minimum 5 years standing

    The quantum of loan that can be sanctioned to the consumer is:

    For Construction /Purchase 60 months net salary or 75.00 Lacs whichever is

    lower.

    For repairs/renovation 20 months net salary, subject to a maximum of Rs.10.00

    Lacs.

    For purchase of land: 20 months net salary/income subject to maximum of Rs.5

    Lacs within J&K and Rs10.00 Lacs outside J&K.

    Also as an incentive for small borrowers, the loans up to Rs. 1.5 Lacs granted for

    repairs/renovations of existing houses would now be secured by third party

    guarantee of two persons or such other security as is deemed appropriate by the

    Bank.

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    The Bank as against the loan amount asks for security from the borrower, the conditions

    for which are as follows:

    Primary: Mortgage of the house Property to be purchased / constructed.

    Collateral: Third party Guarantee of one person, or assignment of LIC Policies,

    pledge of Govt. securities etc.

    Negative lien on the property to be repaired/renovated without mortgaging the

    same to the Bank.

    In the view of above conditions bank sanctions the loan to the borrower. The bank asks a

    margin of 15% for construction/purchase of built flat and 20% for renovation/purchase of

    land. The J&K Bank charges a processing fee @0.25% of loan amount.

    Following is the table for rate of interest that bank charges against housing loan amount.

    They are subject to change.

    Rate of Interest (Subject to change)

    Floating Fixed

    Up to Rs.15

    lacs

    Above Rs.15

    lacs

    Up to

    Rs.15

    lacs

    Above

    Rs.15 lacsRepayable up to 5

    years 10.00% 11.75% 10.75% 12.75%

    Above 5 years up to

    10 years 10.50% 12.75% 11.75% 13.50%

    Above 10 years up to

    15 years 11.50% 12.75%

    Above 15 years up to

    20 years 11.75% 13.25%

    Education loan

    The J&K Bank also provide assistance to gain education to the Indian Nationals, who

    have secured admission to professional/technical courses through entrance test/selection

    process or have secured admission to foreign universities/institutions or have passed the

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    qualifying examination for admission to the courses or to employed person intending to

    improve their educational qualification and/or receive training in modern technology in

    India or abroad provided training offers prospects of better placement. The quantum of

    finance is Rs. 7.50 Lacs for studies in India and Rs. 15.00 Lacs for studies abroad. The

    courses that are finances ranges from Graduate/P.G. Courses in: Medicine, Surgery,

    Engineering, Hotel Management, Design, Architecture, Bio-chemistry, Agriculture,

    Veterinary etc. to Graduate / P.G Courses in : Business Management, Chartered or Cost

    Accounting , Company Secretary ship.

    The security against finance amount is Personal guarantee of borrower and Collateral

    security equal to amount of loan. The margin that J&K Bank asks for is nil to the loan

    amount of Rs. 4 lacs and for loans above Rs. 4 lacs, 5% in case studies pursued in Indiaand 15% in case studies pursued abroad..

    . Rate of Interest (Subject to change)

    Loan Amount Interest Rate

    Up to Rs.25,000 9% p.a

    Rs.25,001 to Rs.5.00 Lacs 10.50% p.a

    Above Rs.5.00 Lacs 11.50% p.a

    Apart from above said assistance bank also provide special education loans such as Term

    loan for B.Ed/M.Ed. Courses. The purpose of this loan is to provide loan to students or

    employed persons who want to pursue B.Ed/M.Ed courses and for meeting admission/

    tuition/ examination/ library/ lab Fee. The nature of this type of loan is not called

    educational loan but term loan. It is offered to Indian Nationals, who have completed

    their graduation in any discipline from any recognized university, should have secured

    admission to the recognized Institution/College imparting the B.Ed/M.Ed Course. The

    loan application should be forwarded by the principal of the college. The quantum of

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    bank finance is maximum Rs. 25000 with 10% margin and a processing fee 0.05% or

    minimum Rs. 25. The security in this case is third party guarantee of one person. The

    interest rate is PLR with quarterly rests.

    The J&K Bank also provide opportunity to children to have good quality primary

    education for which it provides term loan assistance under the special tagBudshah

    Primary Education Finance. This facility is to finance the entire cost of education of a

    child including school fee, uniform, books, etc. The finance is granted in the name of

    Guardian who has an independent regular source of income, for all children above the

    age of 3 years, on producing a Certificate from the concerned recognized/ registered

    school where the child has been granted admission and the loan application should be

    forwarded by the principal of the school. The bank asks for personal guarantee of the

    parent/guardian and third party guarantee of one person as the security (However third

    party guarantee does not apply in case of Government employees drawing salary through

    J&K Bank Branches). The bank also asks for a margin of 10% and a processing fee @

    0.05% of the amount sanctioned with a minimum cap of Rs. 25 to be paid upfront. The

    interest rate is charged with quarterly rests. The Quantum of Finance is given ahead:

    Quantum of Finance

    Class School Maximum Amount (Rs)

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    Pry.Edu. Private 30,000.00

    Pry.Edu Govt. 2,000.00

    Sec.Edu Private 25,000.00

    Sec.Edu. Govt. 5,000.00

    Car Loan

    The J&K Bank provide car loan facility to the employees of Government/Semi

    Government, Civic Bodies PSU's / Individual / Proprietorship Concerns / Firms / Limited

    Companies known to the Bank. The eligibility criterion for Employees of Government /

    Semi Government., Civic Bodies is: their Net annual income should not be less than Rs.

    60000 per annum. Spouses income can also be included for calculating the eligibility for

    quantum of finance. The applicant (individuals) should have a valid driving license inhis/her own name. The employees of the State Govt/Semi Govt. Departments/Other

    Organizations should have a minimum of 5 years active service in the

    organization/department. The security is as follows: Primary: Hypothecation of vehicle

    Financed. Collateral: Third party guarantee of one person.

    However, no Third Party Guarantee is required in respect of government employees

    drawing salary through the bank and maintaining account with us or where drawing and

    disbursing authorities undertake deduction of required monthly installments from their

    salaries.

    In respect of others like professionals, businessmen etc. guarantee of one person good for

    the amount is obtained along with an affidavit to the effect that the prospective borrower

    is not defaulter with any bank/ branch of the bank.

    The quantum of loan is calculated on the basis of 24 months net monthly income/salary

    which is subject to maximum finance of Rs. 10.00 lacs with a margin @ 20%. There are

    no processing charges as such however the bank charges interest @ 11.50% (Fixed.)

    Amount of loan is to be repaid within 7 years.

    Apart from the above car loan facility the J&K Bank provides loan facility for used cars.

    The purpose of such a finance is to let borrower buy an old car/jeep (not more than 5

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    years old) any model. This loan facility is available for Permanent employees of

    Government/Semi-Government Undertakings, Autonomous bodies, Public Sector

    Undertakings, Private Companies or reputed establishments. Professionals or self

    employed individuals, Proprietorship Concerns. Partnership Firms, Private /Public Ltd

    Co.

    There is age criteria attached with this loan facility which is as follows: in case of a

    salaried individual the applicant should be at least 21 years old at the time of application,

    and below 58 years of age at the time of maturity of the loan but in case of institutions,

    where retirement age is 60 years, the upper age limit shall be 60 years. In case of Self-

    Employed Individual, any Proprietor, Partner, Professional or director above 21 years of

    age but below 65 at the time of the loan's maturity. The bank asks for a margin @ 25%for vehicles having age less than 3 years and 30% for vehicles having age of 3 years and

    above up to 5 years. The maximum loan amount that the bank can finance is 2.5 times of

    the net annual income or 15 lacs, whichever is lower. If married, the spouse's income also

    considered provided the spouse guarantees the loan. Loan amount for used vehicles shall

    be subject to a maximum limit of Rs. 15 lacs.

    The security for the same is as follows: Primary: Hypothecation of vehicle to be

    purchased. Collateral: No third party guarantee required in respect of employees drawing

    salary through our branches & where letter of undertaking from employer is available.

    Third Party Guarantee of two persons for all other applicants. Third Party Guarantee may

    be waived off in case of existing account holders having good reputation. Instead Post

    Dated Cheques may be accepted.

    The rate of interest is fixed considering repayment period. If the repayment period is up

    to 4 years then rate of interest would be PLR+ 0.25% p.a. and if the repayment period is

    above 4 years and up to 6 years the rate of interest would be PLR+0.75% p.a. In case

    cheques drawn for repayment of the loan gets bounced the bank charge Rs. 200 as

    penalty.

    The value of the vehicle is ascertained on the basis of present market value of the new carof same variety & configuration less than depreciation

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    Consumer Loan

    The J&K Bank grants Consumer Loan for purchase of durable consumer goods like:

    Desktop Computer ( P.C )/ Laptop

    Motor Cycle / Scooter / Air Conditioner

    Color TV / DVD Player/ VCR / Generator/ Washing Machine (automatic) /

    cooking range.

    Refrigerator / Dish Antenna/DTH Equipment/ Kerosene Room Heater/ Washing

    machine

    Vacuum cleaner

    Water Filter cum purifier / CD Players /Cassette Players / Geyser / Cooler, etc.

    The scale of finance range from Rs. 3000 to Rs. 40000 per article however maximum

    finance is Rs. 75000 subject to 12 times net monthly Salary.

    The borrower must be one out of the following: Employees of Govt., Semi-Govt., Civic

    Bodies, Self employed (with assured income).

    The Security is as follows: Primary: Hypothecation of article financed. Collateral: Third

    party Guarantee of one person. Rate of interest keep changing however current rate of

    interest is 14% with no processing charges. The margin is 25%.

    Consumption Loan

    The main features of Consumption loan provided at J&K Bank are as follows:

    Disbursed in cash

    No questions asked about its end-use.

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    Revolving type facility, as full limit can be restored on request of the borrower

    subject to the following:-

    Outstanding balance reduced to below 40% of the loan amount.

    At the time of reinstatement of the limit, applicant must have sufficient remainingyears of service so that loan is repaid within the borrowers remaining years of

    service.

    Fresh D.P Note for full amount of loan.

    Borrower has not had more than two installments in arrears on any point of time

    during currency of loan.

    Borrower shall have to furnish an undertaking from drawing and disbursing

    officer for intimating the bank about their transfer and noting that outstandingfrom the bank and the monthly installment obligation in their LPC forwarded to

    the next drawing and disbursing authority.

    The borrower must be Permanent employees of State, Central Government, autonomous

    bodies, corporates, public & private sector undertakings having minimum of 3 years

    confirmed service. The quantum of loan is 30 months gross salary or Rs 7.00 lacs

    whichever is less. There is no margin asked and rate of interest is 14% subject to change.

    Working Capital Loan/Term Loan or Mortgage loan for Trade & Service Sector

    Banks are the main institutional sources of working capital finance in India. After trade

    credit, bank credit is the most important source of financing working capital

    requirements. A bank considers a firms sales and production plans and the desirable

    levels of current assets in determining its working capital requirements. The amount

    approved by the bank for the firms working capital requirements is called credit limit.

    Credit limit is the maximum funds which a firm can obtain from the banking system.

    In case of firms with seasonal businesses, banks may fix separate limits for the peak level

    credit requirements indicating the periods during which the separate limits will be utilized

    by the borrower. In practice, banks do not lend 100% of the credit limit; they deduct

    margin money. A margin requirement is based on the principle of conservatism and is

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    meant to ensure security. If the margin requirement is 30%, bank will lend only up to

    70% of the value of the asset. This implies that security of banks lending should be

    maintained even if the assets value falls by 30%.

    A borrower may sometimes require ad hoc or temporary accommodation in excess of

    sanctioned credit limit to meet unforeseen contingencies. Banks provide such

    accommodation through a demand loan account or a separate non operable cash credit

    account. The borrower is required to pay a higher rate of interest above the normal rate of

    interest on such additional credit.

    The purpose of such loan is to provide hassle free working capital finance to the

    borrower. The nature of this loan can be cash credit, overdraft or a term loan. The

    borrower should have a good track record of 3 years.

    The security in this case goes as follows: Primary Hypothecation of stocks and book-

    debts Collateral Mortgage of Unencumbered residential house/flat, commercial or

    industrial property with a clear marketable title in the name and possession of the

    borrower/Proprietor/ Partner/s/Director/s either self occupied or vacant.

    The Rate of interest is PLR+1% with monthly rests. The term loan (against mortgage of

    immovable property) from a minimum Rs. 0.50 lacs to maximum Rs. 50 lacs or 30 times

    net monthly income whichever is lower. The security is the Mortgage of the

    unencumbered residential house/flat, commercial or Industrial property with a clear

    marketable title in the name and possession of borrower/proprietor or partner/s/Director/s

    either self occupied or vacant with a security cover of 1.5 times the amount of loan. The

    Rate of Interest is PLR+2.5% with a repayment period of 60 months.

    Factors to be taken into consideration while determining

    requirements for working capital:

    Production Policies

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    A sugar factory which belongs to a seasonal industry would obviously have its working

    capital need affected by the length of the crushing season. The production schedule i.e.

    the plan for production, has great influence on the level of inventories. In some cases raw

    material can be procured only in a particular season and have to be stocked for the

    production of the whole year. In many others, the production cycle is limited to a part of

    the year and raw materials have to be accumulated throughout the year. In all such cases

    the need for working capital will vary according to the production plans. Similarly, the

    decision of the management regarding automation, etc, also affects working capital

    requirements. In a labor- intensive process, the requirements of working capital will be

    higher. In the case of highly automatic plant, the requirements of long-term funds would

    be greater.

    Nature of the business

    The shorter the manufacturing process, the lower is the requirements of working capital.

    This is because, in such a case, inventories have to be maintained at a low level. Longer

    the manufacturing process, higher will be the requirements of working capital. This is the

    reason why highly capital-intensive industries require large amount of working capital to

    run their sophisticated and long production process. Similarly, a trading concern requires

    lower working capital than a manufacturing concern.

    Credit policy

    The credit policy of the company also determines the requirements of working capital. A

    company, which allows liberal credit to its customers, may have higher sales but

    consequently will have large amount of funds tied up in sundry debtors. Similarly a

    company, which has very efficient debt collection machinery and offers strict credit

    terms, may require lesser amount of working capital than the one where debt collection

    system is not so efficient or where the credit terms are liberal. The credibility of a

    company in the market also has an effect on the working capital requirements. Reputed

    and established concerns can purchase raw material on credit and enjoy many other

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    services also like door delivery, after sales service etc. This would mean that they could

    easily have large current liabilities; therefore the required working capital may not be

    very high.

    Inventory policy

    The inventory policy of a company also has an impact on the working capital

    requirements since a large amount of funds is normally locked up in inventories. An

    efficient firm may stock material for a smaller period and may, therefore, require lesser

    amount of working capital.

    Abnormal factors

    Abnormal factors like strikes and lockouts also require additional working capital.

    Recessionary conditions necessitate a higher amount of stock of finished goods

    remaining in stock. Similarly, inflationary conditions necessitate more funds for working

    capital to maintain same amount of current assets.

    Market conditions

    Working capital requirements are also affected by market conditions like degree of

    competition. Large inventory is essential as delivery has to be off the shelf or credit has to

    be extended on liberal terms when market competition is fierce or market is not very

    strong is a buyers market.

    Conditions of supply

    If prompt and adequate supply of raw materials, spares, stores etc. is available it is

    possible to manage with small investments in inventory or work on the just in time (JIT)

    principle. However if the supply is erratic, scant seasonal, channel zed through

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    government agencies etc., it is essential to keep large stocks increasing working capital

    requirements.

    Business Cycle

    Business fluctuations lead to cyclical and seasonal changes in production and sales and

    affect the working capital requirements.

    Growth and expansion

    The growth in volume and growth in working capital go hand in hand. However, the

    change may not be proportionate and the increased need for working capital is felt right

    from the initial stages of growth.

    Level of taxes

    The amount of taxes paid depends on taxation laws. These amount usually have to be

    paid in advance. Thus need for working capital varies with tax rates and advance tax

    provisions.

    Dividend policy

    Payment of dividend utilizes cash while retaining profits acts as a source of working

    capital. Thus working capital gets affected by dividend policies.

    Price level changes

    Inflationary trends in the economy necessitate more working capital to maintain the same

    level of activity.

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    Operating efficiency

    Efficient and coordinated utilization of capital reduces the amount required to be invested

    in working capital

    Securities Required in bank finance

    Banks generally do not provide working capital without adequate security. The following

    are the modes of security which a bank may require:

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    Hypothecation

    Under hypothecation, the borrower is provided with working capital finance by the bank

    against the security of movable property, generally inventories. The borrower does not

    transfer the property to the bank; he remains in the possession of property made available

    as security for the debt. Thus hypothecation is a charge against property for an amount of

    debt where neither ownership nor possession is passed to his creditor. Banks generally

    grant credit hypothecation only to first class customers with highest integrity. They do not

    usually grant hypothecation facility to new borrowers.

    Pledge

    Under this arrangement, the borrower is required to transfer the physical possession of

    the property for the payment of debt. In case of mortgage, the possession of the property

    may remain with the borrower, with the lender getting the full legal title. The transferor

    of interest (borrower) is called mortgager, the transferee (bank) is called mortgagee, and

    the instrument of transfer is called the mortgage deed.

    The credit granted against immovable property has some difficulties. They are not self

    liquidating. Also, there are difficulties in ascertaining the title and assessing the value of

    the property. There is limited marketability and therefore security may often b difficult to

    realize. Also, without the courts decree the property can not be sold. Usually, for

    working capital finance, the mode of security is either hypothecation or pledge.

    Mortgages may be taken as additional security.

    Lien

    Lien means right of the lender to retain property belonging to the borrower until he

    repays credit. It can be either a particular lien or general lien. Particular lien is a right to

    retain property until the claim associated with the property is fully paid. General lien, on

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    the other hand, is applicable till all dues of the lender are paid. Banks usually enjoy

    general lien.

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    Case

    Studies

    Assessment of Working Capital /Cash Credit

    Facility/Term Loan

    M/S Quality Crafts Store

    M/S Quality Crafts Store Proprietor Mr. Shah Alam Mateen 256-D 1st floor, Green

    Towers, established in the year 2002, is engaged in retail business of Kashmiri shawls

    particularly trading ofPashmina and woolen shawls and allied items. The party has been

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    in connection with and dealing with the J&K Bank Lajpat Nagar branch since year 2006

    with satisfactory dealings and good conduct. The turnover of account is encouraging. The

    party has established good trade connections and is involved in related trade. No negative

    complaints has been registered or found against the party ever since the opening of

    account with the bank branch. The amount is frequently routed through the account and

    the performance of account is good.

    Borrowers Information

    Name of Applicant Borrower : Mr. Shah Alam Mateen

    Address of the Head/Regd. Office : 256-D 1st floor, Green Towers

    Constitution : Individual

    Date of Establishment : Year 2002

    Period since dealing with branch : Year 2006

    Net worth as on 31.10.2007 : Rs. 9.00 lacs

    General Information of the Proposal

    Existing Banking Arrangements : Sole Banking

    Proposed Banking Arrangements : Sole Banking

    Sanction Comes Under Powers of : Branch Head

    Activity : Trading of Pashmina, woolen

    shawls etc.

    Sector : Trading

    Present Facilities by the Applicant : Nil

    Facility Requested by the Applicant : Cash Credit

    Purpose of Borrowing : For Expansion of Existing Business

    Amount Requested : Rs. 5.00 Lacs.

    Securities Proposed for the Facility

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    Primary Security

    Hypothecation of stocks and Book Debts

    Collateral Security

    Third Party Guarantee of two persons:

    1. Mr. Azam Ahmad S/o Mr. Naseeruddin Ahamad

    2. Mr Shoeb Tak S/o Mr. Younis Tak

    Both the guarantors are dealing with the J&K Bank Branches. As reported Both are

    availing cash credit facility with their respective branches and with a satisfactory

    performance.

    Financials of the Firm (Amt. in Rs. Lacs)

    Particulars 31/03/2007 31/03/2008

    Projected

    Sales 6.12 19.00

    Purchases 4.12 17.53

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    % of Sales Growth 325.00

    Net Profit 1.42 2.23

    Liabilities

    Share Capital 2.64 3.30Total Term Liabilities 2.64 3.30

    Current Liabilities

    Working Capital 0.00 8.00

    Sundry Creditors 0.38 1.20

    Expenses Payable 0.23 0.65

    Borrowings 0.00 0.00

    Other liabilities 0.00 0.00

    Total Current Liabilities 0.61 9.85Tolal Liabilities 3.25 13.15

    Assets

    Investments 0.00 0.00

    Fixed Assets 0.24 0.72

    Total Fixed Assets 0.24 0.72

    Current Assets

    Stocks 1.24 8.50

    Sundry Debtors 0.52 3.16

    Cash in hand/Bank Balance 1.25 0.77

    Loans/Advances 0.00 0.00

    Total Current Assets 3.01 12.43

    Total Assets 3.25 13.15

    Financial IndicatorsParticulars 31/03/2007 31/03/2008

    Net Working Capital (In Rs. Lacs) 2.40 2.58

    Current Ratio 4.93 1.26

    Stocking Velocity ( Days) 108 175

    Debtors Velocity (Days) 31 60

    Creditors Velocity (Days) 33 25

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    Apart from the above financials of the party, the account statement reveals the following

    transactions of the party with the Bank Branch (Amt. in Rs. Lacs) :

    Debit Summation Credit Summation

    From 01/04/2006 to 31/03/2007 (1 year) 6.52 6.50

    From 01/04/2007 to 31/10/2007 (7 months) 11.62 11.10

    Comments and Observations:

    Financial Indicators has been calculated as follows:

    a) Net Working Capital: Total Current Assets less Total Current Liabilities.

    b) Current Ratio: Total Current Assets divided by Total Current Liablities.

    c) Stocking Velocity: Stock for the year divided by Cost of Goods Sold or Credit

    Purchase during the year multiplied by 360 days.

    d) Debtors Velocity: Average Receivables or Debtors for the year divided by CreditSales during the year multiplied by 360 days.

    e) Creditors Velocity: Average Payables or Creditors for the year divided by Credit

    Purchase during the year multiplied by 360 days.

    Other Comments and observations:

    f) The party has projected to achieve a sales target of Rs. 19.00 Lacs over previous

    year achievement of Rs. 6.12 Lacs. The projected sales target seems to be

    achievable owing to the fact that up to 31/10/2007 (7 months) the party has a sales

    turnover of Rs. 11.62 lacs through the account.

    g) Stock Velocity reveals the part of sales always invested in stock during the year or

    in other words it refers to the period of sales sans obstacles out of the current

    stock in case the production halts due to strike or other reason.

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    The stocking period of 175 days is on higher side hence its been accepted at 90

    days level.

    h) Debtors Velocity reveals the duration within the debtors are expected to be

    realized. The projected debtors period seems reasonable hence accepted for

    assessment as projected.

    i) Creditors Velocity reveals the duration within the creditors are expected to be

    paid. Lesser the days better is the position of the firm. The projected creditors

    velocity is at a lower level, keeping the kind of stocks in trade into consideration,

    the velocity has been accepted at 50 days level.

    Assessment of MPBF (Amt. in Rs. Lacs)

    Particulars Amount

    Accepted Sales 19.00

    Accepted Purchase 17.53

    Current AssetsStock (17.53*19360) 90 days 4.38

    Debtors (19*60360 60 days 3.16

    Cash in hand 0.54

    Loans & advances 0.00

    Total Current Assets (a) 8.08

    Current Liabilities

    Creditors (17.53*50360) 50 days 2.50

    Other liabilities 0.00

    Total Current liabilities (b) 2.50

    Working Capital Gap (a-b) 5.58

    Margin (as projected by the party) 2.58

    MPBF 3.00

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    Recommendations of Bank Branch

    In view of above, it is proposed, if agreed, to allow Cash Credit Facility of Rs. 3 Lacs

    (Rupees three lacs only) in favor of M/S Quality Crafts Store Prop. Mr. Shah Alam

    Mateen for a period of one year subject to renewal after review against securities as

    discussed.

    Rate of Interest : PLR presently 13 % with monthly rests or any other rate

    This may be prescribed by the Bank from time to time.

    Margin : 40% on Stocks

    50% on Book-Debts (excluding book debts older than

    6 months).

    .

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    M/S A.M. CLASSIC

    M/S A.M. Classic Proprietor Mr. Saleem Siddique E-115 Cannought Circle New Delhi,

    established in the year 1997, is engaged in wholesale and retail trading of shawls,dress

    material and artificial jewelries. The party has been in connection with and dealing with

    the J&K Bank Lajpat Nagar brannch with satisfactory dealings and good conduct. The

    turnover of account is encouraging. The party has established good trade connections and

    is involved in related trade. No negative complaints has been registered or found against

    the party ever since the opening of account with the bank branch. The amount is

    frequently routed through the account and the performance of account is good. The party

    was maintaining current account with J&K Bank Lajpat Nagar Branch and was

    accommodated by way of cash credit facility of Rs. 5.50 lacs in December 2005 against

    collateral security of 3rd party guarantee of two persons. The said C/C limit was renewed

    on 31/01/2007.

    Borrowers Information

    Name of Applicant Borrower : Mr. Saleem Siddique

    Address of the Head/Regd. Office : E-115 Cannought Circle New Delhi

    Constitution : Sole Proprietorship

    Date of Establishment : Year 1997

    General Information of the Proposal

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    Existing Banking Arrangements : Sole Banking Arrangements

    Proposed Banking Arrangements : Sole Banking Arrangements

    Sanction Comes Under Powers of : Zonal Office Delhi

    Activity : Trading

    Sector : Handicrafts

    Present Facilities by the Applicant : C/C facility of Rs. 5.50 lacs against

    Collateral security of 3rd party

    Guarantee of two persons.

    Facility Requested by the Applicant : Cash Credit under banks scheme of

    Mortgage loan for Trade & Service

    Sector

    Purpose of Borrowing : For Expansion of Existing Business

    Amount Requested : Rs. 35.00 Lacs.

    Securities Proposed for the Facility

    Primary Security

    Hypothecation of stocks and Book Debts

    Collateral Security

    Third Party Guarantee of two persons:

    1 Existing : 3rd Party Guarantee of two persons

    2 Offered : Mortgage of flat at F-87, First Floor, Connought Circle,

    New Delhi

    The security offered as mortgage comprises of residential flat at F-87, Connought Circle,

    New Delhi standing in the name of Mr. Saleem Siddique S/o Mr. Shahid Siddique

    (Proprietor of the Firm). As per the valuation report of P. Kumar, the market value of the

    said flat is Rs. 54.00 lacs and the realizable value (Forced Sale Value) is less by 15% of

    the cost. It is to be mentioned that the against said flat, the party is presently availing

    Home Loan Facility from IDBI Bank and the party will adjust the said loan in full and

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    final prior to availing the fresh facility from the Branch. The papers regarding clearance

    of title deeds in respect of flat to be offered as mortgage have been forwarded to Banks

    approved lawyer/Legal Department Zonal Office New Delhi for Legal Opinion.

    Financials of the Firm (Amt. in Rs. Lacs)

    Particulars 31/03/2006 31/03/2007 31/03/2008

    Sales 64.08 127.00 163.46

    Purchases 60.32 115.40 151.48

    % of Sales Growth 98.19 28.71Net Profit 3.55 4.41 5.57

    Liabilities

    Share Capital 4.20 7.85 12.77

    Car Loan- IDBI Bank 0.00 2.42 1.55

    Home Loan- IDBI Bank 14.53 12.01 0.00

    Unsecured Loans 0.00 6.00 6.00

    Total Term Liabilities 18.73 28.28 20.32

    Current Liabilities

    Working Capital 0.00 0.00 39.51

    Sundry Creditors 31.13 10.78 12.39

    Expenses Payable 1.08 0.68 0.96

    Sales Tax Payable 0.00 0.72 1.25

    Other liabilities 0.00 0.00 0.00

    Total Current Liabilities 32.21 12.18 54.11

    Total Liabilities 50.94 40.46 74.43

    Assets

    Investments 0.00 0.52 0.84

    Fixed Assets 16.96 19.31 17.87

    Total Fixed Assets 16.96 19.83 18.71

    Current Assets

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    Stocks 5.15 11.43 27.15

    Sundry Debtors 22.43 3.46 28.52

    Cash in hand/Bank Balance 6.20 5.74 0.05

    Loans/Advances 0.00 0.00 0.00

    Others 0.20 0.00 0.00

    Total Current Assets 33.98 20.63 55.72

    Total Assets 50.94 40.46 74.43

    Financial Indicators

    Particulars 31/03/2006 31/03/2007 31/03/2008

    Net Working Capital (In Rs. Lacs) 1.77 8.45 1.61

    Current Ratio 1.05 1.69 1.03

    Stocking Velocity ( Days) 31 36 65

    Debtors Velocity (Days) 126 10 63

    Creditors Velocity (Days) 186 34 29

    Apart from the above financials of the party, the account statement reveals the following

    transactions of the party with the Bank Branch (Amt. in Rs. Lacs):

    Months Debit Summation Credit Summation

    April-2006 11.94 20.91

    May-2006 7.67 1.50

    June-2006 2.62 0.36

    July-2006 2.99 0.00

    August-206 6.52 6.53September-2006 3.49 0.00

    October-2006 3.40 4.69

    November-2006 6.32 3.55

    December-2006 12.58 13.04

    January-2007 18.45 18.97

    February-2007 14.87 32.41

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    March-2007 15.27 7.84

    Total 106.12 109.80

    Comments and Observations:

    Financial Indicators has been calculated as follows:

    a) Net Working Capital: Total Current Assets less Total Current Liabilities.

    b) Current Ratio: Total Current Assets divided by Total Current Liablities.

    c) Stocking Velocity: Stock for the year divided by Cost of Goods Sold or Credit

    Purchase during the year multiplied by 360 days.

    d) Debtors Velocity: Average Receivables or Debtors for the year divided by Credit

    Sales during the year multiplied by 360 days.

    e) Creditors Velocity: Average Payables or Creditors for the year divided by Credit

    Purchase during the year multiplied by 360 days.

    Other Comments and observations:

    f) The party has achieved sales target of Rs. 127.00 lacs during the financial year

    2006-2007, out of which Rs. 109.80 lacs has been routed through the C/C account

    thorough the Bank Branch. It is about 86% of sales that have been routed through

    the account.

    g) The conduct of account has remained satisfactory.

    h) The firm is running on profitable lines and capital of the firm is showing

    continuous increasing trend.i) The firm is availing Car Loan Facility from IDBI Bank and is regularly depositing

    installments in the said account.

    j) The proprietor of the firm is also availing Home Loan facility again from IDBI

    Bank and the party intends to adjust the same.

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    Assessment Of Working Capital : (Under Mortgage Loan

    Scheme)

    Particulars Amount (in lacs)

    Sales achieved during the year 2006-2007 127.00

    Projected Sales for the year 2007-2008 163.46

    Accepted Sales

    (Maximum 125% of the achieved turnover)

    158.75

    Permissible Limit

    (20% of the accepted sales)

    31.75 A

    Market Value of property as per valuation report 54.00

    Forced Value (85% of market value) 45.90

    Permissible Limit

    (75% of the forced Sale Value)

    34.43 B

    Maximum Permissible Limit

    (Lower of A or B)

    31.75

    Limit Recommended by the branch 32.00

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    Recommendations of the Bank

    In view of above, it is recommended to sanction Cash Credit Facility of Rs. 32.00 Lacs

    (Rupees Thirty Two Lacs only) in favor of M/S A.M. Classic proprietor Mr. Saleem

    Siddique under Banks scheme Mortgage Loan for Trade and Service Sectoragainst

    before said securities for a period of one year subject to renewal after review.

    Rate of Interest : As per CAD guidelines

    Validity : One year

    Other Conditions

    1. Prior to release of facility, the party shall have to adjust C/C facility of Rs. 5.50

    lacs sanctioned under Normal Cash Credit Scheme of Bank.

    2. Prior to release of facility, party to adjust Home loan facility with IDBI Bank in

    full and final

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    M/S Healthy Heart Hospital

    M/S Healthy Heart Hospital (Popularly known as 3H) South Extension New Delhi is

    headed by eminent cardiologist of the country Dr. Nasir. Dr. Nasir is the recipient of

    various prestigious awards and has a rich expertise in treating heart ailments. The hospital

    run with the specialization of treating heart ailments with all kinds of modern equipment

    and infrastructure. There are four stake holders of the hospital one being Dr. Nasir

    himself, apart from him, out of three stacke holders, two are doctors by profession and

    both are the daughters of Dr. Nasir. The fourth partner Mrs. Zainab Kareem is teacher by

    profession and is part of the family. All the three partner have 2% stake each in the

    Hospital rest is lying with Dr. Nasir.

    Dr. Nasir presently enjoying the facilities of Car Loan, and Housing Loan and he has

    requested for sanction of mortgage loan of Rs. 100.00 lacs. The conduct of all the loan

    accounts of Dr. Nasir is satisfactory.

    Borrowers Information

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    Name of Applicant Borrower : Healthy Heart Hospital (3H)

    Address of the Head/Regd. Office : South Extension, New Delhi.

    Constitution : Partnership

    Date of Incorporation : Year 1995

    Period since dealing with branch : Year 2002

    Net worth : Rs.600.00 lacs. Approx.

    General Information of the Proposal

    Existing Banking Arrangements : 1. Working Capital Limit of Rs. 25.00 Lacs.

    Presently Adhoc Facility of Rs.

    25.00 lacs over and above the Regular

    limit of Rs. 25.00 Lac.

    2. Term Loan Facility of Rs. 396.00 Lac with

    Outstanding Balance of Rs. 50.41 Lac as on

    Date.

    3 Term Loan facility of Rs. 15.00 lac for

    Purchase of Machinery with O/S Balance

    Of Rs. 3.99 lacs as on date of proposal.

    4 Term Loan facility of Rs. 9.00 Lac with O/S

    Balance of Rs. 7.13 lacs

    Proposed Banking Arrangements : Enhancement in working capital limit of Rs.

    25.00 lacs to Rs. 100.00 Lacs as Cash Credit

    Limit under Mortgage Loan under Trade

    And Service sector.

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    Sanction Comes Under Powers of : Zonal Office

    Activity : Running Hospital with specialization in

    Treating heart ailments.

    Sector : Professionals

    Present Facilities by the Applicant : Detailed above at the head Existing Banking

    Arrangements

    Facility Requested by the Applicant : Cash Credit limit underMortgage Loan

    Under Trade and Service Sector.

    Purpose of Borrowing : For Expansion and growth of Business

    Amount Requested : Rs. 100.00 Lacs.

    Securities Existing/Proposed for the Facility

    Primary

    Hypothecation of stocks of medicine, machinery and receivables/Book debts.

    Collateral

    The property is commercial in nature and is one of the reputed hospitals of metropolis.

    The property secured is none other thanHealthy Heart Hospitalitself. The full

    description of property is :

    Plot No-1 South Extension New Delhi with four storied building and basement. The

    property has been valued to the tune of Rs. 889.58 Lacs as per recent valuation report

    prepared by Mr. P Kumar, registered valuer on approved panel of the Bank. In view of the

    fact that real estate has witnessed enormous price escalation particularly in preceding

    years and the present property is enjoying placement at prime location the assessed value

    seems reasonable.

    Apart from above mentioned securities there is also personal guarantee of partners.

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    Details of Credit Facilities Enjoyed By Dr. Nasir Partner M/S Healthy Heart

    Hospitals (3H):

    Serial

    No.

    Nature of Credit

    Facility

    Limit Balance

    O/S

    Security

    1. Car Loan 2.26 1.70 Hypothecation of Car

    2. Housing Loan 15.00 9.90 Mortgage of Flat Purchased for

    Rs. 56.33 Lacs

    3. Housing Loan 102.00 60.00 Mortgage of House valued Rs.

    154.00 Lacs

    Financials of the Firm (Amt. in Rs. Lacs)

    Particulars 31/03/2006 31/03/2007 31/03/2008

    Audited Provisional Projected

    Income 335.38 339.16 424.55Net Profit 12.36 10.31 25.68

    % of growth in sales

    Liabilities

    Share Capital 50.96 66.21 91.64

    Term Loan-J&K Bank 84.57 54.21 38.21

    Term Loan-Other Banks 39.15 41.19 32.24

    Unsecured Loans 76.41 70.43 73.18

    Total Term Liabilities 251.09 232.04 235.27

    Current Liabilities

    Working Capital 20.82 15.89 18.39

    Sundry Creditors 73.88 70.30 84.37

    Expenses Payable

    Other liabilities 17.06 16.51 16.21

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    Total Current Liabilities 111.76 102.70 118.97

    Total Liabilities 362.85 334.74 354.24

    Assets

    Fixed Assets 346.53 321.88 297.26Total Fixed Assets 346.53 321.88 297.26

    Current Assets

    Receivables 5.40 3.48 3.20

    Cash in hand/Bank Balance 4.39 3.29 3.35

    Loans/Advances 6.53 9.39 6.10

    Others 44.33

    Total Current Assets 16.32 16.16 56.98

    Total Assets 362.85 338.04 354.24

    Financial Indicators

    Particulars 31/03/2006 31/03/2007 31/03/2008

    Tangible Net worth (In Rs. Lacs) 251.09 232.04 235.27

    Current Ratio 0.14 0.15 0.48

    Comments and Observations:

    a) The Hospital income has shown marginal increase over previous years income

    (from 335.38 lacs to 339.16). However projected income (Rs. 424.55 Lacs) seems

    achievable owing to proposed expansion program.b) The current ratio has remained below bench mark, however keeping into account

    the nature of engagement present level seems justified..

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    Assessment Of Working Capital : (Under Mortgage Loan

    Scheme)

    Particulars Amount (in lacs)

    Provisional business income during the year 2006-

    2007

    339.16

    Projected business income for the year 2007-2008 424.55

    Accepted Income/Turnover

    (Maximum 125% of the achieved turnover)

    423.95

    Permissible Limit

    (20% of the accepted Income/Turnover)

    84.79 A

    Realizable Value of the property 889.58

    Forced Value 889.58

    Permissible Limit

    (75% of the forced Sale Value)

    667.19 B

    Maximum Permissible Limit

    (Lower of A or B)

    84.79

    Loan requested by applicant 100.00

    Limit Recommended by the branch 100.00

    Recommendations of Bank Branch

    Keeping into consideration the reputation, satisfactory dealings and value of the property

    the requested enhancement of present limit from Rs. 25.00 Lacs (Rs, Twenty Lacs) to Rs.

    100.00 Lacs (Rs. One Crore only) is proposed in favour of the party underBanks

    Mortgage Loan Scheme For Trade and Service.

    In view of past satisfactory working results and excellent track record supported by

    sufficient collateral security, the sanction of Rs. 100.00 Lacs as cash credit facility is

    recommended for sanction in favor ofHealthy Heart Hospitals (3H). The facility allowed

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    is for the period of one year subject of renewal after review of performance. However

    present limit of Rs.25.00 lacs which the party enjoys will be withdrawn simultaneously

    with the release of proposed facility. Apart from this all other terms and conditions

    coming under the purview of mortgage loan scheme for trade and services will apply.

    BIBLIOGRAPHY:

    Reference-

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    Websites:www.jkbank.org

    www.google.co.in

    Book : Financial Management

    By Prasanna Chandra

    55

    http://www.jkbank.org/http://www.jkbank.org/http://www.jkbank.org/
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