Bbm Project Final (1)

8/13/2019 Bbm Project Final (1)

http://slidepdf.com/reader/full/bbm-project-final-1 1/57

Loans and Advances

M.H.I.M.S Page 1

INTRODUCTION

1.1 Finance

In modern money using economy”financial is consider to be the life blood of every business. “it is

the foundation of every economy activity and is the pivot around which every business activityrotates money (or) finance has acquired so much importance that the modern economy is descried

as money as effectively ,efficient and smoothly as a money economy.

In business, finance is defined as the provision of money when it is wanted; finance is the

art of rising and spending of money. every business concern required money(or)finance to

commerce its operation to continue its operation to continue its operation and for

expansion 9or)growth, so there must be a continuous flow of money (or)finance in and out

of every business enterprise for its success and survival. Finance is the master key which

provides access to all and merchandising activities.

Financial management is that managerial activity which is concerned with planning and

controlling of the firms financial resources, it is of recent origin as a separate activity of

discipline; it was a branch of economic till 1890 still today, it has no unique body of

knowledge of its own and grows heavily in economics for its theoretical concepts.

DEFINTION OF BUSINESS FINANCE

“Business financial can be broadly defined as the activity concerned with planning, raising,

controlling and administering of funds in the business”.

-Gathman & dougall

“Business financial deals primarily with rising administering and disturbing funds by

privately owned business units operating in non financial field of industry”.

1 Prather and wert



Loans and Advances

M.H.I.M.S Page 2

DEFINITION OF FINANCIAL MANAGEMENT

“Financial managent is the operational activity of a business that is responsible for obtaining

and effectively utilizing the funds necessary for efficient operation”.

1 Joseph and massie

“Financial management is the application of the planning and control functions to the finance

function”.

“Financial management is the area of business management devoted to a judicious use of

capital and careful selection and careful selection to move in the direction of reaching its goal “.

1 j .f Bridler

SOURCES OF FINANCE.

The source of finance through which a company meets its financial requirement is broadly

divided as:-

1. Long term sources

2. Short term sources

The long –term sources are:

1. Shares

2. Debentures

3. Preference shares

4. Leasing

5. Public deposits

The short term sources are

1. Trade credit

2. Bank credit

3. Factoring

4. Bank financing of accounts receivables

1.2 origin of bank



Loans and Advances

M.H.I.M.S Page 3

Authorities on banking are divide in their opinions regarding the origin of the term “bank”

is derived from the Italian world “bank” used as a counter for banking activitities viz.

Money changing and money lending in the market place , as such the word “bank “should

be associated with the Italian word “bank”.

HISTORY OF BANKING

According to ancient European history, the Babylonians were the earliest people to develop

a systematized banking and the priest played the role of financial agent. In 12 the century,

some bank were simply receiving deposit and lending money to the people. The bank of

England started its business in 1694 with a view to finance the government to carry on its

work with France.

What is banking?

A bank is profit seeing business firm, dealing in money and credit,it is a financial institution

dealing in money in the sense that it accepts deposited of money from the public to keep

them in its custody for safely , so also it deals in credit , by making advance out of the funds

received as deposited to needy people it , the thus function as a mobilise in the economy.

A bank is therefore, like a reservoir into which flow the saving ,the idle surplus money of

households and from which loans are given on interest to business and other who need

them for investment (or) productive.

Definition of bank:

“A person (or) corporation who holds itself out to receive from public deposit payable on

demand (or)by cheque”.

-WALTER LEAF

IMPORTANCE OF BANK

Banks plays a significant role in economic development of a country. The importance of

bank in the modern economy cannot be denied.

1) Banks mobilize the small and scattered ideal savings of people and make them available

for productive purpose. This in turn helps in capital formation.



Loans and Advances

M.H.I.M.S Page 4

2) By offering attractive interest on the of the people deposited in bank, they bank, hey

promote the habit of saving among the people.

3) By accepting the saving, bank provides safety and security to the surplus money of the

depositors.

4) Bank provides a convenient and economical means of payment through cheques and

demand drafts.

5) Bank provides convenient and economical means of transfer of funds from one place to

another through bank draft or demand draft, mail transfers and telegraphic transfers.

6) They influence the rate of interest in the money market by the supply of money.

7) They help trade, commerce and agriculture by meeting their financial needs.

8) The bank serve as the best financial intermediaries between he savers and the investors

9) Banks direct the flow of funds into productive channel by concentrating on essential

activities.

TYPES OF BANKS

1. COMMERCIAL BANK

2. INDUSTRIAL BANK

3. AGRICULTURAL BANK

4. EXCHANGE BANK

5. CENTRAL BANK

1) COMMERCIAL BANK

Commercial bank is the oldest banking institutions in the organized sector. They constitute the

predominant segment of him banking system in India. They cater to the needs of trade,

commerce, industries, agriculture, small business, transport and other activities with a wide

network of branches throughout the country. Commercial bank command a major share in the



Loans and Advances

M.H.I.M.S Page 5

total banking operations. They are called commercial banks as they mainly finance commerce.

They are also called deposit bank, as they accept deposits from publicly

2) INDUSTRIAL BANK OR INVESTMENT BANK

Industrial bank are banks, which provide long-term finance to industries. They are also called

investment banks, as they invest heir funds in subscribing o shar4es and debentures of

industrial banks. Instead, special industrial finance corporations have been se up for providing

long – term finance to industries.

3) AGRIULTURAL BANK

Agricultural banks are banks which provide financial to agriculture. These banks areorganized on co-operative basis. They extend loans to the members at a relatively

reasonable rate of interest. Agricultural bank, in India are of two types, such as:-

A) Agricultural co-operative societies.

B) Land mortgage or land development banks.

4) EXCHANCGE BANK S

Exchange banks specialize in financing the foreign trade .they supply the necessary foreign exchange for

the importers and exporters. in many countries, commercial bank themselves undertaken foreign

exchange business.

5) CENTRAL BANKS

Central bank is a special institution, which regulates the entire banking structure and monetary

stability. it regulates the notes issue . It functions in close co-operation with the government . It

maintains internal and external values of currency . In short, central bank is apex bank of thecountry.



Loans and Advances

M.H.I.M.S Page 6

FUNCTIONS OF COMMERCIAL BANK

Commercial bank perform a variety of crucial functions which are as follows :-

PRIMARY FUNCTIONS

1) Acceptance of deposits

2) Creation of credit

3) Lending of funds

4) Investment of funds on securities

PRIMARY FUNCTIONS:

1) Acceptance of deposits:

Accepting deposits in one of the primary functions of commercial banks. Deposits serve

as the major source of supply of deposits from all types of income earners. They are:

a) Fixed deposits.

b) Savings deposits

c) Current deposits

d) Recurring deposits

2) creation of credit

Commercial banks receive deposit from the public and also lend funds to the needy but also

create money. In the process of lending funds, they lend money more then their cash deposits

which they actually received from the public. This way it creates or money in the market.

3) Lending of funds:

The basic purpose of commercial banking is to do the business of lending. banks earn income in the from

of interest through granting loans and advances . Banks lend funds to public by way of :-

A) Secured advances

B) Unsecured advances



Loans and Advances

M.H.I.M.S Page 7

4) Investment of funds on securities:

Investment of funds on securities is one of the important function of the commercial banks. hey invest a

considerable amount of their funds in government and industrial securities.

Definition of banker:

“ A dealer in debt . his own and there peoples according to this definition the essential function

of a bank s dealing in debt and lending of the needy, this definition makes mention of onely the

main function of a bank, but not its subsidiary services.

-CROWTHER

Definition given by Indian banking regulation act:

Section 5(1) of the Indian regulation act of 1949 defines the term “banking companies” as any

company which transact the business of the banking in Indian.

Section 5(1)9(b)of the same act defines the term “bankig “as” accepting for the purpose f

lending (or) investment of deposits of money from the public, repayable on section 5(1)of the

Indian banking regulation act of 1949 defines the term “banking companies “”as” any company

which transact the business of banking in Indian.

Section 5(1)(b) of the same demand (or) other wise and withdrawal by cheque, draft order(or)

otherwise”.

This act, beasties starting the main banking activities also enumerates , in section 6 the various

subsidiary service such as the collection of cheque draft and bill remittance of funds,

acceptance of safe custody deposits etc ,that are performed by a bank . this act also stipulates

that banking , business should be the main business of the bank, again section 1 of this act

required that every banking company should use as part of its name, the “bank” “bankers”9or)

banking company” .



Loans and Advances

M.H.I.M.S Page 8

1.3 MEANINGS OF LOAN

Loans are financial arrangement, under which the bank to a borrower on a serrate account

grants an advance.

When the loan is sanctioned to a barrower and it is paid to the borrower are once in lump sum

either in cash or transfer to the credit of his current account. The repayment of the loan also is

made in one lump sum or in instalments.

1.4 TYPES OF LOANS:-

Short term loan

Medium term loan

Long term loan

A loan is generally , granted for a short period of one year or less than one year, such a

loan is called short term loan or demand loan.

Loan may also be granted for period of more than one year like , 2 year ,3 year ,4year,7

year etc. Such a loan is called term loan.

The loan is given for a period raining from more than one year usually for three to five

year it is called a medium term loans.

The loan is given for still longer period; it is called a long –term loan.

A loan once repaid in full r part cannot be drawn again by the borrower unless the banker

sanctions a fresh loan. A loan is granted either against collateral securities or against the person

security of the borrower.

The rate of interest is changed on a loan is comparatively lower than changed on an over draft

and a cash credit.

A banker prefers to make an advance in the form of a loan for two reasons. he can collect

interest on the entire amount of the loan sanctioned .



Loans and Advances

M.H.I.M.S Page 9

A loan involves him with very little. Accounting work, as the granted &repayment of the loan

are done in a lump sum.

However the barrower does not prefer this form of advance, as he is required to pay interest on

the full amount of loan sanctioned to him irrespective of the amount actually with drawn by

him.

ADVANCES

Advances are granted on the mere personal security of the borrowers, therefore , in the event

of the default of the borrower, the banker as only personal rights of action against the

borrower these advance are very risk , as they should be given only to highly credit worthy

borrower further they should be given only for short periods.

SECURED ADVANCES

According to sec 5(a0 of the banking regulation act of 1949 a secured advances means loan or

advances made on the security of assets, the market value of which is not, at any time less than

the amount of such advances granting advances against collateral-securities a banker should

bear in mind

The following points .

1. Ready reliability

2. Stability of prices

3. Yield

4. Absence of disability

5. Validity of title

6. Absence of prior charge

7. Cos of supervision

8. Right method of creating charge

9. Documentation



Loans and Advances

M.H.I.M.S Page 10

I. Advancing money against tangible securities is the margin for advance.

1. Degree of sale ability of securities.

2. Fluctuations in prices of securities.

3. Interest and other change.

4. Credit worthiness of borrowers.

5. Reserve bank’s directives.

II. Advancing against stock exchange securities.

III. advances against government securities.

A government security includes securities issued by central and state

government.

1. Bearer bonds

2. Inscribed stocks

3. Government promissory notes

4. Saving deposit certificates

IV. advances against shares of public companies

V. Advances against shares of private companies.

VI. Advances against be dentures of joint stock companies.

VII. Advances against documents of title to goods.

VIII. Advances against plant and machinery.

IX. Advances against real estates, immovable properties or land and buildings.

X. Advances against gold ornaments.

XI. Advances against life insurance policies.

XII. Advances against fixed deposit receipts.

XIII. Advances against supply bills.



Loans and Advances

M.H.I.M.S Page 11

UNSECURED ADVANCES

Wherever the borrower does not have sufficient security to offer and if he has exchange

all securities he can required the banker to accept the surety of the party. The banker has no

collateral or tangible security they may take the forms of:-

a) advances on the mere personal security of the barrower (O.D)

b) Advances against guarantees.

a) advances on the mere personal security:-

In this case advances are granted on the mere personal security of he barrower. In the

event of the default of the borrower and as such there are very risky. Advances should

be given only to highly credit worthy borrowers and they should be given only for shortperiod.

b) advances against guarantees:-

The personal who gives security for the loan raised by the principle debtor is called

guarantee. Section 126 of the Indian contract to perform he promise or discharge the

liability of a third person in case of his default. it means a third person agrees to

discharge the liability of the principle debtor ID he principal debtor fails to clear the

money due to creditor.

TYPES OF ADVANCES

The various types of advances given by the bank are as follows:I. Loans

II. overdraft

III. cash credit

IV. discounting of bills

V. clean loans

VI. letter of credit.

I.

LOAN

Loan is a financial accommodation under which bank an advance on a separate account called

loan account. Interest is changed on entire amount o loan sanctioned. Loan is given to all type

of persons against the personal securities of the borrower or against the movable and

immovable properties.



Loans and Advances

M.H.I.M.S Page 12

II. OVER DRAFT

An over draft is a financial accommodation under which a current account holder is amount over drawn

by the customer. It is granted against the security of the borrower. It is advantageous to the borrower

because interest is charged only on the amount actually over drawn by him.

III. CASH CREDIT:

A cash credit is a financial accommodation under which an advance is granted on a

separate account called cash credit account up to a specified limit. Interest is changed

on the amount made use f the borrower. it is granted against to security of goods or

person security of one or more person other than borrower . Traders prefer cash credit

to direct to direct loans as they need not pay interest on the entire amount.

IV. DISCOUNTING OF BILLS:

Discounting of bill is a financial arrangement under which a customer holding a bill of

exchange can get loan equivalent to the value of the bill, less discount. The discount

represents interest on the money lent for the unexpired period of the bill. On maturity,

the banker collects the proceeds of the bill from its acceptor.

V. CLEAN LOANS

This is a type of advances where in the banker makes advances to the customer against his

personal security and security of one or more person. That amount is credited to the

customer’s account immediately after sanction sand is repayable in lump sum or in instalments.

The period of loans will be lightly higher compared to cash credit or over drafts.

The interest is changed on the entire amount of loan.

VI. LETTER OF CREDIT (LOC):

This is a sort of loan facility extended extended by a banking institution to his customer . yhis is

given to customers who will be on travel and to business people . a letter f credit is undertaking



Loans and Advances

M.H.I.M.S Page 13

given by an issue banker to pay the specified sum of money to the person or drawee bank

which pays money to the holder of LOC.

a) Traveler facility letter of personal credit letter.

b) Letter for commercial credits (LC).

a) Traveler facility letter:

This is issued to a customer who will be traveling abroad for a specific period. the person who

stays abroad for a given time period will have an arrangement with the issuing bank to get

money where every he may be .the issuing bank to pay a certain agreed amount to the

customer and opens an account and debits it with the specified sum.

b) Commercial letter of credit (LC)

This is also called ‘documentary letter of credit’. this is issued by the undertaking bank to pay to

exporter the value of bill of exchange accompanied by shipping documents which are to be

submitted the bank LC may be revocable or irrevocable or confirmed and the nature of

undertaking depends upon type of LC issued by the bank.

VII. SANCTION OF LOANS & ADVANCES

While sanctioning after security of the loan application the bank may sanction in full the loan

applied for, reduced the loan amount or period of repayment, after the condition with regard

security or reject the loan application. The bank is not bound to inform the applicant the

reasons regarding its decision. However the applicant shall be advised about the rejection while

disposing of the loan application, the decision of the bank in final.



Loans and Advances

M.H.I.M.S Page 14

UTILIZATION AND REPAYMENT OF LOAN

1. A member shall utilize the amount of loan sanctioned for the purpose for which it was

sanctioned. In case the sanctioned amount is utilized for a purpose different from the purpose

for which it was sanctioned, the bank to recall such loans together with interest up to date.

2. It shall be the duty of every borrower to repay promptly the instalment on the loans and

advances as per terms and advances as per terms and conditions prevailing at the time sanction.

3. When the loans and advances are repaid by the borrower, the overdue instalment and interest

towards unsecured loans and advances shall be recovered first and the balance amount shall be

towards secured loans and advances.

VIII. RATE OF INTERST

1. The rate of interest charged on various types of loans and advances shall be fixed by the

bank from time to time.

2. Penal interest shall be charged above the normal interest rate on overdue loans and

such interest shall be treated as income.

3. Interest on loans and advances shall be calculated on daily product basis and charged at

quarterly rests. Interest so calculated on daily product basis and charged at quarter rest.

interest so calculated as a 30 June, over draft accounts on the last day of the quarterly

not with standing any interest in due in a loan a/c such interest shall be recovered first

out of and amount realized.

4. When interest on any loan or part these of is due to the bank a member that amount

shall b revoked by the bank first from any amount that may be paid in to the bank

behalf of the member.

5. For the purpose of calculation interest or penal interest for fractions of a month, actual

number of days shall be taken in to account.



Loans and Advances

M.H.I.M.S Page 15

6. Interest and overdue interest shall be charged to all the loans and advances at the end

of each calendar quarter and capitalized. However UN recovered portion of his interest

shall not be taken to profit and loss account as an income unless it is fully realized.

IX. PRINCIPLES OF LENDING LOAN &ADVANCES

As we have observe, majority of commercial bank funds are employed in the form of loan advances .

Loans bring good money to the bank in the form of profit by changing interest lending activity of a

commercial bank is reciprocal activity in the sense, bank gets and the loans get benefit of money

required for their activities.

All and sundry cannot get loan from banking institution. Before they lend, commercial banks have to

follow certain guidelines or principles. These principles are discussed at length in the first part of this

volume under investment policy. However as a passing reference these principles are explained n brief.

1. LIQUIDITY

Liquidity here we mean the ready convertibility of advances into meet the customer demand

across the counter. This does not mean that they should hold all the deposits they receive in

the from of cas.oly a portion is held to meet the demand and major portion is lend. While

making such loan, the banker should bear in mind hat it is easily convertible into cash without

loss. Hence he should make loans only of short – team nature. The secret of banking consists in

knowing the different between a mortgage and a bill of exchange. this statement clearly

indicates the when a banker lends against mortgage, the bank funds will be linked against a bill

of exchange , the bank funds will be locked up for a long time and liquidity concept is taken not

of and the bank will be locked up for a long time and liquidity loosed ground . Whereas when it

lends against a bill of exchange, the liquidity concept is taken not of and bank will be getting

bank its money is short period.

Even the bank balance sheet is prepared according to the liquidity concept. Cash appear as the

first item in the balance sheet. But the percent of cash held of the total funds is less, as bank



Loans and Advances

M.H.I.M.S Page 16

believes by experience that a major portion can be employed in lending activity. But while

lending, they must keep in mind he point of liquidity i.e. ready convertibility of earning assets

into cash, without loss. The bank, when get rediscounting facility form the RBI, they have to

consider the cost of borrower bank. Considering all these factors, the lending activity of a bank

should be governed by the liquidity principle.

2. PROFITABILITY

Profitability means earning profit on the assets acquired. Assets here refer o the bank loan and

advances

Whenever the banks obtained deposits they have to pay interest to deposits’. beside this , the

shareholder of the bank

Should receive some return on their investment. It is the responsibility of the bank that it

should receive some return on their investment. It is the responsibility the bank management

to leave some surplus to declare dividend to shareholders. Hence banks have to meet the

liquidity. Hence the banker should always decide the quantum of funds to be employed in the

earning assets leaving enough amounts to meet the liquidity situation. While employing the

funds the bank should keep in mind the for a and steady returns on the earning assets.

3. SAFETY

Safety is another principle to be borne in mind while employing the funds since earning assets .

if the bank funds are not safely employed , bank cannot survive . whatever be the advances

made by the banker should come bank to the banker within the stipulated time without

resorting to legal action hence, the advances as far as possible should be made only to people

who are for repaying the bank loan honesty . Insurance and dishonest should not be given the

loan. They only the bank funds will be safe

4. DIVERSIFICATION

Another important principle to be followed by the banker is to see that loans and advances are

spread to different categories. This means, advances should not be concentrated in only in



Loans and Advances

M.H.I.M.S Page 17

sector. Every advance is a risky advance and this can be distributed. If advances are made in

different categories to large number of people scattered in a wide area. Hence while lending;

the banker should keep in mind the concept of diversification.

5. OBJECT

The object of advance is also another principle to be borne in mind by the banker while making

advances. If he advances for productive purpose like industry agriculture or trade, the fund will

come back quickly and without any difficulty. Because these organization will get back money

by selling their products and this cash inflow. Thus the object of advance is also a guiding factor

in lending.

6. SECURITY

Another guiding factor in bank advances is security. When the banker advances without

security he will rent his risk of losing the money. If the loan is prompt in repayment then there

will be no worry. But it essential that the banker should have substantial security for his

advance. This thinking is gradually changing. The purpose of advances the security offered is

assuming important. However the traditional thinking still prevails. The banker is not advancingwithout sufficient security. Because he will be managing the public money, and if the

confidence of the public is lost, there will be run-on the bank. Hence the banker will not

advanced, interest their o and other charges. Thus the banker should also bear in mind the

security principle while lending.

7. PUBLIC POLICY

The banker should keeping mind the national policies and programmers while lending. The

government takes up several welfare measures and activities relating to economic growth. The

lending should fall in with these government programmers. This principle is well considered

only after nationalization of commercial bank.

CHARGES ON SECURITY



Loans and Advances

M.H.I.M.S Page 18

A there are different methods of creating charges on securities. The term ‘charge ‘refers to

have a legal hold on immovable properties. The forms of legal hold are:-

1. LIEN

‘Lien’ is a term used to identify the right to retain a property belonging to a debtor till such time

until the debtor discharges the debt to the retainer of property. Lien will be lost when his

possession of the property is lost.

Lien is divided in to two heads such as:-

General lien

Particular lien

2. PLEDGE

The Indian contract act defines the term ‘pledge’ as a bailment of goods as a security for

payment of debt or performance of a promise. the person who pledges the property is called

‘pledger’ or ‘pawner’ and the person in whose name the property is pledged is called ‘pledge’

or ‘Pawnee’.

A valid pledge has following requisites

a) it is a charge on the movable property

b) They should have either oral or written contract between themselves.

c) The physical delivery of the pledged property is essential.

d) The ownership of the goods will be retained with the pledge.

e) The pledge can sell the property by giving reasonable notice to the pledged. In case

pleder fails to repay the debt.

3) HYPOTHECATION:

Hypothecation is a charge against property for an amount of debt where neither ownership not

possession is passed to the creditor. It is a charge against movable property. But the good will

be retained with borrower. The borrower gives only a letter stating that the goods are



Loans and Advances

M.H.I.M.S Page 19

hypothecated to he banker as security for the loan granted. The process of hypothecation take

place by executing a letter by the borrower called ‘letter of hypothecation’.

The features of hypothecation are:-

I. Neither the possession nor the ownership f he property is transferred to the banker.

II. It is an equitable charge created against immovable property.

III. For the banker, hypothecation is safe as pledge.

IV. The contents in the letter of hypothecation decide the right of the banker.

5) MORTGAGE:

The term mortgage is defined “as the transfer of the interest in a specific movable property for

the purpose of securing the payment of money advances “. the person who transfers the

interest of a specific property is called a ‘mortgager’. the person in whose favour the interest of

the property is transferred is called the ‘mortgagee’ .the principle money and interest payment

are called ‘mortgage money’ and he document through which the interest of the property is

transferred is called ‘mortgage deed’.



Loans and Advances

M.H.I.M.S Page 20

Chapter-2

MEANING OF RESEARCH

Research is a scientific and systematic search for pertinent information on a specific concept or

fact.

Research is a organized enquiry designed and carried out to provide information for solving aproblem and it is a careful injury or examination to discover new information or relationships

and to expand to very existing knowledge for the purpose of gaining knowledge. Through each

research study has its own specific purpose, we may think of research objectives as falling into a

number of following broad groupings:

To gain familiarity with a phenomenon or to achieve new insights into it.

To portray accurately the characteristics of a particular individual situation or group.

To determine the frequency with it is associated something Else.

To test a hypothesis of casual relationship between variables.

MEANING OF REARCH DESIN



Loans and Advances

M.H.I.M.S Page 21

Research design is the conceptual structure within which research is conducted . it is an

organized enquiry. it is also referred to as a search of fact. It constitutes the blue print for the

collection , measurement and analysis of data as such the design include an outline of what the

researcher will do from writing the hypothesis and its operational implication to the final

analysis.

2.1 TITLE OF THE STUDY OR RESEARCH:-

A project report on the “Loans and advances at corporation bank, vijayanagar branch,

Bangalore.

2.2 OBJECTIVES OF THE STUDY:-

This study is mainly aimed to cover all details of loans and advances available in corporation

bank, vijayanagar branch, Bangalore, and their advantages and other details such as structure,

type of loans, duration, rules and regulations and the type of deposits etc.

1.

To mobilize or borrow funds.2. To prepare and finance projects to improve the economic conditions of the member

particularly those belonging to weaker sections of the society.

3. To find out the percentage of non – performing assets.

4. To find out he effectiveness of various lending schemes.

5. To extend financial and technical assistance to the unemployed to start their wn

industry or profession .

6. To encourage member to promote trade and industry and to do such other things as are

incidental and conductive to the promotion and advancement of their objects of the

business of the society.

7. To study the lending policies of corporation bank.



Loans and Advances

M.H.I.M.S Page 22

8. To analyze whether the lending schemes have been implemented by the bank as per the

guidelines of the RBI.

2.3 research methods:-

The banks can give the loans advances o the customers the various metode are as

follows.

1. Liquidity

2. Demand loan method

3. Recurring deposit method

4. Fixed loan method

5. S.B account method

6. insurances service

7. equipment purchase loan

8. hire purchase

2.4 TOOLS OF COLLECTING DATA

Data sources-both primary and secondary data were used.

PRIMARY DATA:-

For the study the data was collected by means of detailed interview schedules and

questionnaires use for banking employees.

SECONDARY DATA:

The use of existing information on the topic under study was collected from the sources such as

magazines, publications, circulars, annual report etc. And websites.

2.5 NEED FOR STUDY:

Bangalore is the fast growing city7 it is developing in a rapid speed with economic

liberalization, which has huge marketing transactions, industrial activities, financial



Loans and Advances

M.H.I.M.S Page 23

transactions, banking, and money market transactions. So it is very important have a

field study about loans & advances in detail.

2.6 STATEMENT OF PROBLM:-

in the present competitive world to securing a huge funds for a business is a complicated

matter, so it is necessary to study about loans and advances for obtaining loans we should

consider so many matter such as rate of interest, duration, securities, rules and regulation of

hypothecation, different types of loans in different type of bank and in other financial institution

. Now a days, this has become more and more complicated because of lack of awareness about

the above matter.

Though each research study has its own specific purpose, we may think of research

objectives as falling into number of following broad grouping.

RELATES TO THE BANKER

I. The borrower cannot repay the amount banker consider the debt amount, in this case

the banker as to bear the problem.

II. In the golden method the gold rate is immediately down, that time the banker also fall

the proems

RELAES TO THE CUSTOMER

He bank should take legal steps to recover the balance due from a borrower and his sureties. If

they fail to pay i according to the terms of the loan agreement the bank will initiate legal steps

to recover the dues with in 6 months from the date of loan becoming over due.

2.7 INTEREST ON DEPOSITS :-

These include interest paid on all type of deposits from bank other institutions.

2.8 SCOPE OF THE STUDY:-



Loans and Advances

M.H.I.M.S Page 24

The study on lending polices of cooperation bank was conducted to study the various schemes ,

procedure, rules and regulations and their policy

Guidelines followed while loans to the customers.

The area of the study includes entire corporation bank.

The data pertaining to the study is taken from annual reports of past three year [2006-07, 2007-

08, 2008-09] and from internet.

2.9 METHODOLOGY :

The study was started with a discussion with a branch manager at corroboration bank,

vijayanagar branch, Bangalore.

The information was collected from annual report of the bank, few text books and

references books and personal visits were made to bank o collect necessary

information.

2.10 LIMITATIONS OF THE STUDY:-

Study on loan & advances lacks detailed study of each entity due to limited data

available.

Due to time constraint study is restricted to loans and advances of a bank only.

non – availability of the required data in some cases like personal loans , gold loans ,

vehicle loans , etc become hardly to the study.

Data collected are deemed to be true.

The study was done only for two months.

RELATES TO THE BANK:

1. The customer shoes the irrelevant documents and improper information.

2. RELATES TO THE CUSTOMER.

a. The banker to lien their property.



Loans and Advances

M.H.I.M.S Page 25

b. The banker changes high rate of interest like compound interest.

2.11 PLAN FOR ANALYSIS

The data collected from the information provided by the manager, internal guide and staff

member of the corporation bank branches was prepared, tabulated and analyzed. The

tabulated information is presented in the form of table and graphs by using simple percentage

under different heading. The analyzed information has been explained under each heading.

CHAPTER-4

4.1 OBJECTIVE OF ANALYSIS

To mobilize or borrow funds.

To lend money to its member to porches on hire purchase of hypothecation of

machineries equipment and motor vehincial as defined in the motor vehicles act.

To create funds for the promotion of corporation education.

To create or to support or to pay in the instalment of funds of net profit for the welfare

of the member and their dependents subject to the rules on named by the board.

To do banking business.

To prepare finance project to improve the economic condition of the member

particularly belonging to weaker sections of the society subject to the limits prescribed

by the board.



Loans and Advances

M.H.I.M.S Page 26

to create funds for promotion of education of member children subject to the limits

prescribed by the board.

To discount member short term bills or business bill in accordance with the rules framed

by board.

To possess, acquire, alter or construct site or building.

To issue to accept, to sell or purchase notes, drafts warrants, Share certificates and

other negotiable instrument on behalf of its customers.

To give financial and technical assistance to small scale industry, transport operators

and self employed professional to promote their business.

To extent financial and technical assistance to the unemployed to start their own

industry or profession.

To establish death relief fund of the benefit of member and extend relief to the family of

the decreased members.

To encourages member to promote trade and industry and to do such other things as

are incidental and conductive to the promotion and advancement of there objects and

of the business of the surely.

4.2 ANALYSIS OF METHODOLOGY

Liquidity

In this method the banker charge simple interest before 90 days after 90 days or 3 months they

will charge compound interest, valuation changes in 3 rs. On 1000 and service changes is 10 rs.

And insurances charge is 5 rs.

Demand loan method



Loans and Advances

M.H.I.M.S Page 27

In this method the loan holders are paid immediately or instalment and the banker compound

interest also the customer did not paid the amount with in 24 months the bank can lien their

property it the loan holders can not repay the amount granters should pay their amount.

Recurring deposit method

The minimum amount 50 rs. To deposit RD account in a bank. The 80% of loan given to the

customer on their depositing amount 9 to 13% interest given to the customer on their

depositing amount and 2% extra interest should be charged as their loan.

Fixed loan method

The 80% of the loan will give to he customer on their original property.

Table showing net profit

Year Amount [in crores] %change

2005-06 444.46 40.2

2006-07 536.14 44/73

2007-08 734.9 36/94

2008-09 892.77 21.52



Loans and Advances

M.H.I.M.S Page 28

Analysis:

analysis the above table the net profit of “corporation bank” rs.444.46 crores in the year of

2005-06 , rs 536.14 crores in the year 2006-07, rs 734.99 crores in the year 2007-08 rs.892.77 in

the year of 2008-09.

Inference:-

The net profit to its general customer or farmer by corporation bank indicates that banks

financial power in last year has increased the following data represent fact &figures.

444.6

536.14

734.99

892.77

0

100200

300

400

500

600

700

800

900

1000

2005-06 2006-07 2007-08 2008-09

NET PROFIT

NET PROFIT



Loans and Advances

M.H.I.M.S Page 29

Table showing net profit


2005-06 32877 28.24

2006-07 423456 29.44

2007-08 55424 30.85



Loans and Advances

M.H.I.M.S Page 30

2008-09 73984 33.48

Analysis:

Analysis the above table that the deposits of “corporation bank” rs.32877 crores in the year of

2005-06, rs 42356 crores in the year 2006-07, rs 55424 crores in the year 2007-08 rs.73984 in


Inference:-

Deposits formed by the largest simple source of funds of the bank the deposits of the bank was

increased rs. 32877 crores in the year of 2005-06, to rs 42356 crores in the year of 2006-07 , to rs 5542

crores in the year of 2007-08, rs 73984 crores in the year of 2008-09 increasing the year to year.



Loans and Advances

M.H.I.M.S Page 31

4.3 inferences:-

1. limitation

0

10000

20000

30000

40000

50000

60000

70000

80000

2005-06 2006-07 2007-08 2008-09

32877

42356

55424

73984

DEPOSITS

DEPOSITS



Loans and Advances

M.H.I.M.S Page 32

If the customer shows the irrelevant documents and improper information.

If the customer are irregular.

If the banker did not encourage the member o promote trade industry.

If the banker did not give the employed opportunity to the unemployed people.

If did not accept purchase promissory notes, drafts, warrants.

If the bank did not prepare financial projects to improve the economic condition.

If the bank did not create funds for promotion of corporation bank.

2. problems

If the customer cannot repay the amount.

If the market value of gold comes down.

If the banker charge interest that means compound interest.

If the banker should take the legal action.

Table showing total advances



Loans and Advances

M.H.I.M.S Page 33


2005-06 23962 20.79

2006-07 29950 24.98

2007-08 39186 30.83

2008-09 48512 23.79

Analysis:

analysis the above table the advances of “corporation bank” rs.23962 crores in the year of

2005-06 , rs 29950 crores in the year 2006-07, rs 39186 crores in the year 2007-08 rs.48512 in


Inference:-

The advances to its general customer or farmer or farmer by corporation bank indicate that banks

financial power in last four year has increased the following data represent fact & figures.



Loans and Advances

M.H.I.M.S Page 34

GRAPH SHOWING TOTAL ADVANCES

Table showing NET NPT% to total advances

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

2005-06 2006-07 2007-08 2008-09

TOTAL ADVANCES



Loans and Advances

M.H.I.M.S Page 35


2006-07 141.93 0.47

2007-08 126.92 0.32

2008-09 139.30 0.29

Analysis:

analysis the above table the net NPA of “corporation bank” rs.141.93 crores in the year 2006-

07, rs 126.92 crores in the year 2007-08 rs.139.30 in the year of 2008-09.

Inference:-

The above reveals that the net nap to total advances varies based on the changes in the

amount and also decreases the percentage changes.



Loans and Advances

M.H.I.M.S Page 36

115

120

125

130

135

140

145

2006-07 2007-08 2008-09

141.93

126.92

139.3

NET NAP%

NET NAP%



Loans and Advances

M.H.I.M.S Page 37

Table showing GROSS NET NPT% to total advances


2006-07 624.57 2.05

2007-08 581.41 1.47

2008-09 559.21 1.14

Analysis:

analysis the above table the GROSS net NPA of “corporation bank” rs.624.57crores in the year

2006-07, rs 581.41 crores in the year 2007-08 rs.559.21 in the year of 2008-09.

Inference:-

The above graph reveals that the gross nap to total advances provided by corporation bank

decreased year to year .their financial power in last three years as decreased the following

data represent facts & figures.



Loans and Advances

M.H.I.M.S Page 38

Graph showing GROSS NET NPT% to total advances

35%

33%

32%

gross NAP%

2006-07

2007-08

2008-09



Loans and Advances

M.H.I.M.S Page 39

Table showing DIVIDEND (%)

Year Amount [in crores]

2005-06 70

2006-07 90

2007-08 105

2008-09 125

Analysis:

The above table shows that the dividend is paid by the bank are varies from one year to

another year it is the simple sources of funds

Inference:-

The dividend to its general customers or farmer by corporation bank indicates that the bank

financial power in last four years has increased the following data represent facts and figures.



Loans and Advances

M.H.I.M.S Page 40

Graph showing DIVIDEND

0

20

40

60

80

100

120

140

2005-06 2006-07 2007-08 2008-09

7090

105

125DIVIDEND



Loans and Advances

M.H.I.M.S Page 41

CHAPTER-5

5.1 CONCLUSION:

The corporation banks playing a significant role in the financial system of the country. They

mobilize saving from the lower and middle income groups and lend to the relatively lower

incomes and vulnerable sections of the so city. The urban corporation banking movement has

shown greater vibrancy since 1993 when reserve bank of India adopted a liberated policy in

licensing of new primary corporation banks. During the last six year, 530 new corporation banks

have come up making a total of 1,936 banks the total branches net works has grown to 5,934

offices.

Banking regulation in India always been a key element in influencing the role of banks, it seeks

to protest the depositors interest and at the same foster an efficient , competitive banking

system .this is particular evident in to day’s environment when corporation banks are seeking

to offer broader range of services . the growing incident of non –performing assets and related

banks problems are forcing bankers and banks regulators to increase their emphasis on the

sound operation of individual banks the over all stability of the banking system.



Loans and Advances

M.H.I.M.S Page 42

Banking laws and regulation have been extended too many aspects of banking, including how

new banks an organized, what products can offered and how banks can open new branches .

Because of the extensiveness of banking regulation , familiarity with the banking regulation act

is essential more so in the present day contest of technological innovation in the field of

banking, increased computerization and improve financial payment system , all of which have

potential of brining banking closer to its customers. It is, therefore, necessary to have a through

knowledge and familiarity with objective of corporation bank regulations.

corporation societies have been established n several sectors like credit, banking ,processing

,housing, warehousing, transport and many other spheres related with agriculture and

industries , these corporations are being engaged as effective tools for ensuring equal

distribution of state wealth among all sections of the society by providing them with govt. loans

subsidies and grants .even common people also have participated in the business of these

societies by investing their hard earned money.

in order to protect the interest of public funds and to ensure that the administrative authorities

use this fund, in the best interest of the organization, govt. it engaging corporation audit as a

main weapon .to put it in a nut shell he department is functioning not only as friend,



Loans and Advances

M.H.I.M.S Page 43

philosopher and guide to these institution but also as a watchdog of public funds as well the

corporation movement it’s status of corporation societies.

CONCLUSION OF THE STUDY

Loans and advances have gone progress to working result of this branch. This branch has

generated an income by providing finance to the development activities of entire Bangalore

city.

This branch loans and advances have also increasing year by year and this shows the financial

progress of the bank . However there is a great scope for improvement of facilities in the

existing row. Through over night gradually the emphasis of sectional progress has been shifting

from secondary to tertiary sector in the larger economic scenario.



Loans and Advances

M.H.I.M.S Page 44

Accordingly this branch also needs to shift the emphasis of its credit policy towards sector other

than agriculture and small scale of production. This branch also needs to adopt technological

innovation in the field of banking and also the computerization and improve financial payment

system, all of which brings customer loser to the bank.

This branch also needs to provide extension of the credit facility towards capital investment,

transport and communication.



Loans and Advances

M.H.I.M.S Page 45

1 Finance projects

To prepare financial projects to improve the condition

of the member particular those belonging to weaker

section of the society.

2 Money lending

To lend money to its member to purchase on hire

purchase or hypothecation of machineries equipment

and motor vehicles.

3 Negotiable instruments

To issue, to accept to self or purchase promissory

notes, drafts, warrants, share certificates and other

instrument on behalf of its customer.

4 Create funs

To create funds for the promotion co-operative

education and to create or to support or to paid in the

instalment of funds of went profit for the welfare of

members and their departments subject to the roles

famed by the bank and to create funds for the

promotion education of member children subject to

limit prescribed by the bank.



Loans and Advances

M.H.I.M.S Page 46

5 DISCOUNT

To discount member short term bill or business bill in

accordance with rules framed by bank.

6 COLLECT FUNDS Collect funds securities on behalf of its member.

7 Mobilize

The customer are must borrow or mobilize grants.

8 Extend

Extend financial & technical assistance to the

unemployed to start their own industry or profession.

9 Establish

Establish death relief funds for the benefit of member

and extend relief to the family of the deceased

members.

10 ENCOURAGE

Encourage member to promote trade and industry and to

do such other things as are incident and conductive to the

promotion and advances of there objects and of the

business.

To give financial and technical assistance to small scale

industries transport operators and self employed

professional to promote their business.



Loans and Advances

M.H.I.M.S Page 47

Chapter-6

6.1 SUGGESTIONS:-

Since the bank has set of principle which are greatly influences by the government. in the

appreciable of loans and flows there strictly only a few suggestion can be made by me

which are listed below

Except when the loan proposal if for a small and the manager is authorized to advances

the amount the appreciable of a loan proposal takes considerably.

Even when the loan proposal is for small amount and manger authorized to make

advance. The manager cannot act immediately until and unless he/she is very certain that

the barrower is a genuine party. Hence a reliable credit countries so that a quick study of

the borrower is genuine or a fraud.

The changer in the credit policies passed by the government and the RBI should be less

frequent and flexible. So that the account do not fluctuate violent and the borrowed too

or not eventually borrower beaten.



Loans and Advances

M.H.I.M.S Page 48

A strict and rigid recovery produce should be followed in order to the borrowers who are

habited in non payment of loans.

The bank itself must set up a machinery which studies all the borrows and their activities

and precise, the borrower who are irregular in paying the entire borrower and their

activities and précised.

The bank should themselves hold a system by which detained credit report on customer

can be communicated to each other. So that multiple lending by different banks.

The government must also assist the bank in the recovery of loans by setting up legal

bodies which ill given quick and fair solutions to the problem of non payment in case of

legal resorted to the borrower.

Another suggestion is the bank should attract more deposit from public and give

attractive interest rates on deposit to the public.

Once of the important suggestions is that is the bank should provide some of the gift to

the customers or borrower for their prompt repayment of loans and advances, by this the

customers or the borrowers will be motivated and they try to return the amount as early

as possible.



Loans and Advances

M.H.I.M.S Page 49

OTHER RECOMMENDATIONS:-

The banking to do daily activities to mobilize or to borrow funds.

The banks must compulsory prepare the financial projects to improve the economic

condition of the member particular those belonging to weaker section of the society

The banks are wished to lend money to its member to purchase on hire purchase or

hypothecation of machineries equipment and motor vehicles are defending it the motor

vehicles act.

The banker must create funds for the promotion of co-operative education.

The banker must create funds or support or to paid in the instalment of funds of net

profit for the welfare of member and their departments’ subjects to the roles framed by

the board.

The banker must to issue to accept to self or purchase promissory note, draft, warrants,

share certificate and other negotiable instrument on behalf of its customers.

The banker is must passes, acquire, alter, or construct site or building.

The bankers must create funds for promotion of education member, children subject to

the limits prescribed by the board.

The banker with to collect funds securities on behalf of its members.

The banker must be encouraging the member to promote trade and industry and to do

such other things as are incidental and conductive to the promotion and advancement

of these object and of the business of the society.

The banker must establish death relief funds from the benefit of members and extend

relief to the family of the deceased member and also extend financial and technical

assistances or profession

The banker must give the financial and technical assistance to small scale industries

transport operation and self employed professionals to promote their business.



Loans and Advances

M.H.I.M.S Page 50

CHAPTER -7

Corporation bank

Balances sheet as on 31-march -2007

SCHEDULE Column1

particulars no 31-3-2007

Capital and liability

Capital and liability 1 143,43,78

resave and surplus 2 3661,30,48

deposits 3 42226,59,78

borrowings 4 3021,00,72

other liabilities and provisions 5 3577,66,39

TOTAL 52630,01,10

ASSETS

cash and balances with reserve

bank

India 6 2983,91,29

balances with banks an money at

cell

and 7 3735,22,30

short notice

investments 8 14320,66,98advance 9 29949,65,01

fixed assets 10 281,40,57

other assets 11 1357,56,77

good will on consolidation 1,58,18

TOTAL 52630,01,10

CONTIGENT LIABILITIES 12 23105,98,94

bills for collection 3022,12,98

significant accounting policies 17

notes on accounts 18



Loans and Advances

M.H.I.M.S Page 51

Profit and loss account for the year ended

31st

march -2008

SCHEDULE Column1


1. INCOME 13 4516,55,48

interest earned 14 699,77,85

other income 5216,33,33

TOTAL

2. expenditure

interest expended 15 3073,23,57

operating expenses 16 891,95,51

provision and contingencies 516,15,49TOTAL 4481,34,57

3. PROFIT

net profit for the year 734,98,76

Total

` 734,98,76

4.APPROPRIATION

transfer to statutory reserve 200,00,00

transfer to staff welfare reserve 15,00,00

transfer from /to investment reserve 9,87,49

transfer to capital reserve 39,72,74

special reserves 25,00,00

transfer to general resave 269,17,66

interim dividend paid 64,54,82

proposed dividend 86,06,40

tax on interim dividend paid 10,96,40

tax on dividend proposed 14,62,66

total 734,98,76

51.24



Loans and Advances

M.H.I.M.S Page 52

Corporation bank

Balances sheet as on 31-march -2007

SCHEDULE Column1





deposits 3 55425,42,22



TOTAL 66567,68,14

ASSETS

cash and balances with reserve

bank

India 6 7103,53,20


cell

and 7 999,61,60

short notice

investments 8 17325,08,78advance 9 391885,57,41




TOTAL







Loans and Advances

M.H.I.M.S Page 53

Profit and loss account for the year ended

31st

march -2008 SCHEDULE


1. INCOME 13 6067,35,15

interest earned 14 11707,21,47

other income 7174,56,26

TOTAL

2. expenditure

interest expended 15 4376,37,48

operating expenses 16 1001,57,66

provision and contingencies 903,84,50

TOTAL 6281,79,64

3. PROFIT

net profit for the year 892,76,98

Total

` 892,76,98

4.APPROPRIATION

transfer to statutory reserve 224,00,00

transfer to staff welfare reserve 15,00,00

transfer from /to investment reserve

transfer to capital reserve 379,58,50

special reserves 64,00,00

transfer to general resave 41,26

interim dividend paid 64,54,82

proposed dividend 114,75,20

tax on interim dividend paid 10,96,99

tax on dividend proposed 19,50,21

total 892,76,98



Loans and Advances

M.H.I.M.S Page 54

BALANCES SHEET AS ON 31 MARCH 2009

SCHEDULE Column1





deposits 3 73983,91,10



TOTAL 86906,81,02

ASSETS

cash and balances with reservebank

India 6 75590,06,43


cell

and 7 4949,09,49

short notice

investments 8 24937,76,65

advance 9 48512,16,06




TOTAL







Loans and Advances

M.H.I.M.S Page 55

AUDITORS REPORT

We have audited the attached balance sheet of corporation bank as on 31 st march 2009

and the profit and loss account annexed thereto for the year ended on that date, in which

are incorporated the returns of 20 branches, audited by us, 832 branches audited by other

auditore, 293 un-audited branches and 34 administrative offices, the return of which are

certified by the branch managers. The branches audited by us and the branches audited by

other auditors have been selected by the bank of India. The un-audited branches account

for 0.53 percent of advances, 2.61 per cent of deposits, 0.27 percent of interest income and

0.45 percent of interest expense. We have also audited the cash flow statement as started

in notes forming part of accounts for the year ended on that date. These financial

statement are the responsibility us to express a potion o these financial statement based on

our audit.

We have conducted our audit in accordance with auditing standards generally accepted in

India. Those standards require that we plan and perform that audit to obtain reasonable

assurance about whether the financial statements are free of material misstatements. An

audit includes examining, on a test basis, evidences supporting the amounts and disclosures

in the financial statements; an audit also includes assessing the accounting principles as well

as evaluating the overall presentation of financial statement. We believe that our audit

provides a reasonable basic for our opinion.



Loans and Advances

M.H.I.M.S Page 56

The balance sheet and the profit and loss account have been drawn up in form “a” and “b”

respectively of the third schedule to the banking regulation act, 1949.

Subject to the limitation of the audit. indicated in paragraph I above , and the limitation of

disclosures contained in the banking companies act,1980 and subject to notes no .10

regarding inter branch transaction ,11(b) and 11(c) regarding balancing of books and 12

regarding claims for agricultural debt waiver under verification and scheme for agricultural

debt relief under implementation , of schedule -18 , where adjustment are pending , the

consequential effect where of on the accounts could not be ascertained;



Loans and Advances

BIBLILOGRAPHY

1. REFERENCE

BANKING THEORY AND ORACTICE - B.S.Raman

Theory and practice of banking - Reddy and Appanaiah

Financial management - P.V.Kulkarni

Financial management - S.C.Kuchal

Business research method - Appanaiah, Reddy Ramanath

2. WEB SITES I.D. AND ADDRESS

A) http://corp.k

B) www.corp bank.com

3. MAGZINES

1. KSHEMA

YEARS:-2005

2006

2007

2008

4. ANNUAL REPORT ON CORPORATION BANK

http://corp.k/

http://corp.k/

http://www.corp/

http://www.corp/

http://www.corp/

http://corp.k/

Documents

Bbm Project Final (1)