TABLE OF CONTENT CHAPTER NO.
1 1.1
CHAPTER NAME
INTRODUCTION SCOPE OF THE STUDY
2
OBJECTIVES
3
RESEARCH METHODOLOGY
PAGE NO.
2-3 4 5-6 i
7-8 3.1
LIMITATION OF THE STUDY
9
4
COMPANY PROFILE
10-21
5
LITRATURE REVIEW
22-40,.
6
DATA PRESENTATION
41-67
7
FINDINGS
68-69
8
CONCLUSION
70-71
9
SUGGESTION
72-73
10
ANNEXURE
74-75
11
BIBLIOGRAPHY
76-77
EXECUTIVE SUMMARY
During summer training at bank of Maharashtra I have tried to cover the glimpse of working of credit lending department of bank. Bank of Maharashtra is one of the major nationalize banks in India which was established in 1935. This report talks about company first. Afterward it proceeds towards the theoretical aspect of the project and about various research method used for the data collection. This project includes a procedure regarding Home Loan, Vehicle Loan and Education Loan. Further it‟s discussed about the documentation for taking loan from the bank. It also includes case studies of education loan, home loan, vehicle loan. Report also explains number of loans sanctioned by Branch, Net Income of bank of Maharashtra and NPA for last 3 years. Lastly at the report, it talks about findings, conclusion of the project.
INTRODUCTION
The recent financial crises have become the main cause for recession which was started in 2006 and was spread across the world. The world economy majorly affected from crises. The securities in stock exchange have fallen down drastically which has become the root cause of economic and financial crises is credit default of big companies and the individuals which has badly impacted worlds economy. So in the present scenario analyzing one‟s credit worthiness has become very important for any financial institutions, providing any form of credit facility so that such situation does not arrives in the near future again. Asset Liability Management of the Banks
Bank is one of the industries. Every industry has its own assets and liabilities. Banking is generally known for accept deposits from common people and lends loan to them as well as provides services such as safe deposits, vault facility to the customers, underwriting shares, issuing letter of credit credit etc. therefore “A Bank is an institution which deals in money & credit 1‟, hence for bank‟s deposits are their liability because they have to return the money to customers fund whereas in case of when they demand and lending money in the forms of loan is their assets. Banks provides money to the needed customers and charges interest on them as their commission. It‟s the income of the bank. Also the given money to borrower is return by him to the t he bank as it i t is the assets asse ts of the bank. There are two types t ypes of lending viz. fund based and non fund based. In fund based facility, the bank is actually parting with funds whereas in case of non fund based facility there is no necessity to part with funds. Hence lending the money for specific purpose is a major function of the banks especially after Nationalization of banks. Loan given by the banks is known as advances in banking terminology and Retail lending is one of the portfolios of the advances. While sanctioning the loans to the customers bank has to follow some rules and conditions for which bank has framed lending guidelines which are mandatory for each bank to circulate.
SCOPE OF THE STUDY
The scope of the study is restricted only to retail lending policy which includes Housing Loan, Education Loan and Vehicle loan for my study. The geographical scope for the project is NANDURBAR region. The given project does not include business loans or short term loan (working capital). So that present project is restricted to retail lending portfolio of the bank which includes only three retail loans viz. housing loan, education loan and vehicle loan. Project analysis is based on following points: The standard loan application submitted by the borrower and scrutiny thereof The enclosures submitted along with the loan application. Eligibility of the borrower on the basis of his income. Repayment capacity of the borrower. Most important is whether proposal is well within the lending policy of the bank.
IMPORTANCE IMPORTANCE OF THE STUDY
It is the requirement of the common man to have own house, own vehicle and to give higher education to their children. It is practically difficult to raise the funds easily and here the banks plays important role. In order to go in detail credit appraisal of the large borrowers, we have concentrated our exercise on retail lending portfolio in the bank and that too t oo with specific reference re ference to housing loan, vehicle loan and education loan. Moreover retail lending is considered as priori ty sector by government as well as reserve Bank of India.
PRIMARY OBJECTIVES:
To study the basics of lending policies of bank of Maharashtra.
To study various loan cases (credit appraisal) in bank of Maharashtra.
To study various document required for loan procedure in bank of Maharashtra.
To study last three years loan disbursement from bank of Maharashtra & contribution to bank income.
SECONDARY OBJECTIVES:
To study the last three years NPA accounts. To study profile of bank of Maharashtra.
To study concept of banking.
To study the concept of credit appraisal.
To study concept of NPA.
PROBLEM STATEMENT
Study of retail lending policy and lending proposal of the bank of Maharashtra.
RESEARCH DESIGN
The data of the present project is descriptive in nature.
SOURCE FOR DATA COLLECTION Primary data:
Informal interviews with assistant general manager, senior branch manager and other staff members at BANK OF MAHARASHTRA, NANDURBAR branch, Nandurbar.
Secondary data: ❖Bank
circular on lending policy and loan review policy.
❖
Database at bank of Maharashtra.
❖
Internal reports of the banks.
❖
Websites.
DATA PRESENTATION AND ANALYSIS
The collected data is tabulated and analyze with the help of necessary statistical methods diagrams and graphs. The data was collected by interview of respondent from bank of Maharashtra. Analysis and interpretation of the data was done with the help of frequency tables which helped to come out with findings. The conclusion and suggestion were drawn on the basis of findings of study. LIMITATIONS
As the credit rating is one of the crucial areas for any bank, some of the technicalities are not reveled which may have cause destruction to the information and our exploration of the problem.
Credit appraisal system includes various types of detail studies for different areas of analysis, but due to time constraint our analysis was of limited areas only.
HISTORY OF BANK
Banking sector p ays an important part in financing the various business and household sector. Whether the business is small scale or major industry finance for various purposes is needed to meet the requirement. Due to government interface this sector has flourished. In older days due to Zamindari and Savkari system of lending money, many people were exploited and were forced to go by lender‟s decision. But due to RBI and various governing bodies the t he working of banks is smoothened.
The latest trend of banking is e-banking. There are various generations of banking. First dealing started through baiter system. In this there was no interference of third party sue as bank. People used to meet their requirement bv exchanging their goods and m exchange used to take goods they required.
but after some time when the markets ma rkets began to spread in all the directions, directi ons, it was not easy to carry the huge quantity of goods from one place to another
therefore the new generation took place and what was a coin of various precious metals and this was the first introduction of money. there after a new improvements in forms of money were introduced.
During all this economical and financial changes India was improving its position rapidly in tie as years of independence. India became developing country from underdeveloped country. Much technological, financial, economical change took pace, ten so oo mg towards the world have been changed due to globalization in 1990‟s.6 1990‟s.6
HISTORY OF THE BANK OF MAHARASHTRA PRE NATIONALISATION
Bank of Maharashtra is a common man‟s bank. It was registered on 16
th
September
1935 with an Authorized capital of Rs. 10.00 lakhs, by a group of visionaries with the objectives to serve the common man from Pune who were till then neglected by the Banking System. The Bank started functioning on 8 th February 1936. In July 1969 when it was nationalized with 13 other major Banks, The banks had developed its roots in entire Maharashtra and continued to have the support and patronage of the common man. Right from its inception, the focus of the Bank has been to assist small business enterprises, traders, self-employed and other commonly known as Priority Sector Category. POST NATIONALISATION
After Nationalization, the Bank expanded rapidly in other states. At present the Bank has 1361 branches and 13 Extension counters in 22 states and 2 Union Territories of which 45% of the branches are in rural centers and 15% in semi urban centers. In the state of Maharashtra the Bank is a force to reckon, with more than 900 branches - the largest network of branches by any Public Sector Bank in a state. Bank of Maharashtra started firstly at Bajirao Road Swargate Pune. It had business around 50,000 cr. in the year 2006. The Bank has been operating in three-tier system i.e. corporate office, regional office and branches. The bank has now totally 1361 regional offices and branches in which, 588 rural branches, 201 semi-ur4an branches, 287 urban branches and 256 metropolitan branches. AUTONOMY
The Bank is rated as one of the progressive Nationalized Banks that achieved autonomy in the year 1998 and continues to enjoy the status by virtue of good performance. The Bank has been earning net profit for the last nine years consecutively.
SOCIAL BANKING
The Bank excels in social Banking having good share of priority sector lending of more than 40% of total advances. Bank enjoys the overwhelming support & loyalty of more than 10 million clientele. The Bank provides a wide range of banking services that satisfy the changing needs of depositors as well as small, medium and big/corporate borrowers as well. The Bank undertakes all kinds of traditional/nontraditional banking activities including financing of exports/imports and different kinds of foreign exchange transactions. The Bank has established two Rural Development Centers, one at Hadapsar and the other at Bhigwan in Pune district to cany out research, technical support, education, demonstration and rural development activities. These centers have taken a lead in promoting micro-finance to weaker sectors through Self Help Groups. The Bank has set up Mahabank Self Employment Training institute (MSETI) at Pune, Nagpur, and Aurangabad in co-ordination with NABARD and Government of Maharashtra which have become fully operational. The institutes train urban unemployed youth to take up self-employment ventures in industry, services and business sector. The Bank is first and foremost in establishing a Trustee Company as its su bsidiary su bsidiary known as “The Maharashtra Executor & Trustee Co. ltd.”
CONVENER OF STATE LEVEL BANKERS COMMITTEE
The Bank is successfully acting as the convener of state level bankers committee for the state of Maharashtra as also for Rajbhasha. The Bank has lead bank responsibility in six districts namely Aurangabad, Jalna, Nasik, Pune, Satara and Thane. The Bank has sponsored Three Regional Rural Banks with their head quarters at Nanded, Aurangabad and Thane in Maharashtra. MOU WITH EXIM BANK
The Bank signed a MOU with EXIM Bank of India in February 2000for co-financing of project exports under which arrangement, EXIM Bank will accord preferential Status to Bank of Maharashtra for specific project/export proposals.
DEPOSITORY SERVICES
Realizing the requirements of customers and keeping pace with changing times, the bank is offering Depository Services and Demat Facilities to the investor customers since September 99. The Bank is a Depository Participant (DP) of Central Depository Services (India) Ltd. The Services were initially provided in Mumbai and steps are initiated to offer services through all 500 WAN enabled branches. COMPUTERISATION
The Bank has the distinction of being the first among the Public Sector Banks to start a computerized branch in as early as 1982. All the branches of the bank are under computerized. 583 Rural and Semi urban branches are computerized with a bilingual TBA (BIBAS) solution.
Toady 100% of bank‟s business is under computerization. The Bank has introduced facilities like ATM, Tele-Banking, Query Terminal, Touch Screen etc. at various Branches/offices. A specialized In-house Training Institute has been established at Pune for imparting training to officers to upgrade skills in usage of Computer Technology. EMBLEM The Deepmal
With its many lights rising to greater heights The Pillar Institution- Symbolizing strength. The Diyas
Branches- Symbolizing service. The 3 M’s Symbolizing-
-Modernization of methods. -Mobilization of money. -Motivation of staff.
The Bank aims to cater all types of needs of the entire family, in the whole country. Its dream is “One Family, One Bank, Bank of Maharashtra”. The health of the economy is closely related to the soundness of its banking system. Bank of Maharashtra is playing very important role in the economic life of the nation. It‟s borrowing, lending and related activities facilitate the process of production, distribution, exchange and consumption of wealth. In this way Bank of Maharashtra is becoming very effective partners in the process of economic development. The bank is mobilizing the savings of the people for the investment purposes, for catering the needs of its customers and the utilization utiliz ation of the resources of the country. MILESTONE
1936 :
Commenced operations on 08-02-1936 in Pune.
1938 :
Second branch of the bank was opened in 1938 at Fort, Bombay.
1940 :
Third branch came up at Deccan Gymkhana, Pune.
1944 :
Status as Scheduled Bank obtained.
1946 :
Deposits crossed Rs One crore marks. Formed fully owned subsidiary, The Maharashtra Executor & Trustee Company. First branch outside Maharashtra opened in Hubli (Mysore Starte, Now Karnataka).
1949 :
Expansion to AP: Flyderabad branch opened
1963 :
Expansion to Goa: Panjim Branch opened
1966 :
Expansion to Madhya Pradesh: Indore branch opened. Entered in Gujarat: Baroda branch opened.
1969 :
Nationalised alongwith 13 other Banks. Entry in Delhi by opening Karolbagh branch on 19-12-69.
1974 :
Deposit base crossed Rs. 100 Crore mark.
1976 :
Marathwada Grameena Bank, first RRB established on 26-08-1976.
1978 :
New Head Office building inaugurated by Hon'ble Prime Minister of India Shri. Morarji Desai Deposits crossed the figure of Rs.500 Crores
1979 :
“Mahabank Agricultural Research and Rural Development Foundation”,
registered as a public trust, was established for undertaking research and extension work and to provide more extensive services to farmers. Golden Jubilee Year Celebrations launched at the hands of Dr. Mannnohan Singh, Governor Reserve Bank of India. 1986
: Thane Grameena Bank sponsored.
1987
: The 1000th branch of the Bank was inaugurated at Indira vasahat, Bibwewadi, Pune at the auspicious hands of Dr.Shankar Dayal Sharma, the Honourable Vice President of India.
1991 :
: "Mahabank Farmer Credit Card” was launched. Entered in to Domestic Credit Card Business. Main Frame Computer installed. Became member of the SWIFT.
1995 :
: Diamond Jubilee Celebrations - Dr C Rangarajan the RBI Governor was the Chief Guest. Deposits crossed Rs 5000 crore mark.
1996 :
: Moved into “A” category from, the earlier “C” ca tegory. Autonomy obtained.
2000 :
: Deposits crossed Rs 10000 crore marks.
2004 :
: Public Issue of Shares - 24% owned by Public. Listed in BSE and NSE.
2005 :
: Bancassurance and Mutual Fund distribution business started.
2006 :
: Crossed total business level of Rs.50, 000 Crore. Branch CBS Project started.
2009 :
: Entered in to 75th year of dedicated service to the Nation. Adopted 75 underdeveloped villages for integrated overall development.
2010 :
: 100% CBS of branches achieved Total Business crossed Rs One lakh crore. Opened 76 branches in the Platinum Year taking the total to 1506. , Platinum Jubilee Year concluding ceremony at the hands of the then Finance Minister, Shri Pranab Mukherjee held at Vigyan Bhavan, New Delhi. New initiatives like Mahachetana, opening of E-lounges in Pune, Mumbai and Delhi, Micro Asset Recovery cells were implemented.
2011 :
: First SHG Branch opened in Pune. Bank sponsored Maharashtra Gramin Bank achieved 100% CBS in record 77 days.
77th anniversary of Foundation day celebrations a t the hands of Honble Finance Minister, Shri Pranab Mukherjee dedicating 5 specialised branches to SHGs and opening of 5 Mid-Corporate branches on the occasion. First ever visit of Union Finance Fina nce Minister to Bank‟s Central Office Honble Finance Minister, Shri Pranab Mukherjee visits Lokmangal, the Bank‟s Head quarters in Pune on 7-11 7 -11 -2011. 2012 :
: Hon‟ble Union Finance Minister Shri P Chidambaram inaugurates the Bank‟s 1624th branch at Rajgambiram on 25.08.2012. Sept 2012: Bank‟s total business crossed Rs. 1,50,000 cr and reached the level of Rs. 1,51,320 crore. Bank of Maharashtra awarded “Best Banker - Customer Friendliness” for 2012 by The Sunday Standard. Received the Dun & Bradstreet - Polaris Financial Technology Banking
Listed in BSE and NSE. Bancassurance and Mutual Fund distribution business started. Crossed total business level of Rs.50, 000 Crore. Branch CBS Project started. Entered in to 75th year of dedicated service to the Nation. Adopted 75 underdeveloped villages for integrated overall development. 100% CBS of branches achieved Total Business crossed Rs One lakh crore. Opened 76 branches in the Platinum Year taking the total to 1506. , Platinum Jubilee Year concluding ceremony at the hands of the then Finance Minister, Shri Pranab Mukherjee held at Vigyan Bhavan, New Delhi. New initiatives like Mahachetana, opening of E-lounges in Pune, Mumbai and Delhi, Micro Asset Recovery cells were implemented.
First SHG Branch opened in Pune. Bank sponsored Maharashtra Gramin Bank achieved 100% CBS in record 77 days. 77th anniversary of Foundation day celebrations at the hands of Honble Finance Minister, Shri Pranab Mukherjee dedicating 5 specialised branches to SHGs and opening of 5 Mid-Corporate branches on the occasion. First ever visit of Union Finance Minister to Bank‟s Central Office - Honble Finance Minister, Shri Pranab Mukherjee visits Lokmangal, the Bank‟s Head quarters in Pune on 7-11-2011. 2012 :Hon‟ble Union Finance Minister Shri P Chidambaram inaugurates the Bank‟s 1624th branch at Rajgambiram Raj gambiram on 25.08.2012. Sept 2012: Bank‟s total business crossed Rs. 1,50,000 cr and reached the level of Rs. 1,51,320 crore. Bank of Maharashtra awarded “Best Banker - Customer Friendliness” Friendliness” for 2012 by The Sunday Standard. Received the Dun & Bradstreet - Polaris Financia l Technology Banking
Award 2012 as Best Public Sector Bank under the category “Asset Quality”. BoM hosted Bancon 2012 in Pune on 24th- 25th November 2012. Hon‟ble Union Finance Minister Shri P. Chidambaram inaugurated the Conference. Journey of the bank under the leadership of: Prof. V. G. Kale
(1936 to 1943)
Shri. D. K. Sathe
(1943 to 1953)
Shri. V. P. Varde
(1954 to 1966)
Shri. S. L. Kirloskar
(1966 to 1967)
Shri. C. V. Joag
(1967 to 1973)
Shri. V. M. Bhide
(1973 to 1977)
Dr. M. V. Patwardhan
(1977 to 1983)
Shri P. S. Deshpande
(1983 to 1989)
Shri. T. K. K. Bhagavaft
(1989 to 1993)
Shri. P. B. Kulkarni
(1993 to 1995)
Shri. S. A. Kamath
(1995 to 1997)
Shri. T. S. Raghavan
(1997 to 1998)
Shri. M. M. Vaish
(1998 to 2000)
Shri. S. C. Basu
(2000 to 2005)
Shri. M. D. Mallya
(2006 to 2008)
Shri. Allen C. A. Pereira
(2008 to 2010)
Shri. A. S. Bhattacharya Bhattacharya
(2010 to 2012)
Shri. Narendra Singh
(2012)
MAHABANK SAVINGS ACCOUNTS SCHEMES
MAHABANK CURRENT ACCOUNT SCHEMES MAHABANK TERM LOAN PRODUCT/SCHEME PRODUCT/SCHEME
TERM DEPOSIT SCHEME
PRODUCT/SERVICES Mahabank Gold Coin ATM Services DEMAT Services Distribution of Mutual Funds Capital Market Application fASBA) Executors and Trustee Services RTGS/NEFT Mahabank Swasthva Yoina Maha Griha Suraksha E Payment Taxes Mahabank Swarna RD Scheme Credit Card Bancassurance Western Western Union Money Transfer facititv ASBA PLUS Mahabill Pay MAHAeTRADE MAHAeTRADE (On line Share Trading Facility') Maha Suraksha Yoiana New Pension Scheme Govt Business
Door Step Banking What is bank?
Finance is the life blood of trade commerce and industry. Now a days ,banking sector act as a back bone of modern business. Development of any country mainly depends upon the banking system.
The term bank is derived from the French word Banco which means a Bench or Money exchange table. In olden days, European money lenders or money changers used to display coins of different countries in big heaps (quantity) on benches or tables for the purpose of lending or exchanging. A bank is a financial institution which deals with deposit and advances and other related services. It receives money from those who want to save in the form of deposit and lend money to those who need it. Definition of bank
Oxford dictionary defines a bank as “an establishment for custody of money, which it pays out on customer‟s order. >
Features of bank
1.
Dealing in money
2.
Individual/firm/company
3.
Payment and Withdrawal
4.
Connecting link
5.
Banking business
6.
Ever increasing functions
7.
Profit and service orientation
8.
Giving Advances
>
WHAT IS CREDIT APPRAISAL?
Credit appraisal is a process by which a lender appraises the technical feasibility, economic viability and financial viability including credit worthiness of the prospective borrower. Credit appraisal process decides the capability of a customer to repay the loan amount in the stipulated time period or not. It is determined in terms of the norms and standards set by banks. Being a very crucial step in the sanctioning of a
loan, the borrower needs to be very careful in planning his financing modes. However Page | 23
integrity of borrower and his capability to run the activity (in case businessman) and adequate cash generation for repayment of loan in cease of salary employed plays important role. The need to be cautions and here the credit appraisal plays important role. All bands evaluate the credit worthiness of their customers. >
Two types of Lending:
1.
Short Term Loan or Term loans:
If repayment periods is less than one year it called as short term loan where as loan repayment period exceeding one year is known as long term loans. It is for fixed period ranging from 3to 5 years. In case of housing loan minimum repayment period is 5 year and maximum is 20 years. 2.
Working capita) facility
It is generally assessed for a period of one year review/renewal is taken of the account. Bank provides the facility in the form of cash credit limit or in the form of non fund based facility viz. Bank Guarantee or Letter of Credit. >
WHAT IS NPA?
A non performing asset (NPA) is defined as a credit facility in respect of which the
interest and/or installment of principal has remained „past due‟ for a specified period of time. All those assets which generate periodical income are called as Performing Asset (PA).while all those assets which do not generate periodical income are called as
Non-Performing Assets (NPS). If a customers do not repay principal amount and interest for a certain period of time then such loans become non-performing assets. Thus non-performing assets are basically non-performing assets loans. >
Identification
NPA is classification used by financial institutions that refers to loans that are in jeopardy of default. Once the borrower has failed to make interest or principle payments for 90 days the loan is considered to be a non-performing asset. Non performing Assets ate problematic for financial institutions since they depend on interest payments for income. Troublesome pressure from the economy can lead to a sharp increase in non-performing loans and often results in massi ve write. > Types of NPA NPA have been divided or classified into following four types, 1. Standard Assets:
A standard asset is a performing asset. Standard assets generate continuous income and repayment as and when they fall due. Such assets cany a normal risk and are not NPA in the teal sense. 2.
Sub-standard Assets:
All those assets (loans and advances) which are considered as non-performing for a period of 12 months are called as Sub-Standard Sub-Standard Assets. 3.
Doubtful Assets.
All those assets which are considered as non-performing for period of more than 12 months are called as Doubtful Assets. 4.
Loss Assets:
All those assets which cannot be recovered are called as Loss Assets. These assets can be identified by the Central Bank or by the Auditors. > Provision 011 types of assets SR.NO
TYPES OF ASSETS
PROVISIONS
l
Standard assets
0.25% for all types Standard Advances
2
Sub-Standard Assets
10%for all types of Standard Advances
3
Doubtful assets -Up to one year
100% of Unsecured Advances and 20% of secured advances
-one to three years
100% of Unsecured Advances And
30%
of
Secured
Advances -more than three years
100% of Unsecured Advances And
100%of
•
Secured
Advances 4
Loss Assets
100% of Unsecured Advances And
100%of
Secured
Advances
>
SARFAEST Act 2002
The securitization And Reconstruction of Financial Assets and Enforcement of Security Interest Act. This act follows bank and financial institution to auction properties (residential and commercial).When borrowers fail to repay their loans, it enables bank to reduce their non-performing assets (NPA) by adopting measures for recovery or reconstruction. If borrower defaults on repayment of his/her home loan for si x months at stretch, bank give her/him a 90-days period to legalize the repayment, that is, start repaying. On failure to do so, bank declare the loan an NPA and auction it t o recover the debt. The price of the property is depends on the market value of the property. Professional values determine the property value based on which bank fix a reserve or minimum bid price. The valuation tends to be on the conservative side as it is a distress distr ess sale. sal e. If the price fetched exceeds the banks dues. The excess amount is given to the borrower.
>
THEORETICAL BACKGROUND OF RETAIL LENDING
Brief overview of loans: Lending of money in the form of loans is the main and important function of every bank. Every branch has right to sanction the loan up to Rs.2lacs considered the branch is large. For the lending purpose lending purpose branch do the risk analysis because while giving bank money to the other person it in involve risk. A.
Sanctioning power in the hands of the different authorities in
different branches of bank of Maharashtra:
General manager(credit)& GMS in Sanctioning powers(in rupees) the field Dy. General managers
2.00 lacs
Asst, general managers
1.00 lacs
Chief manager
0.50 lacs
Branch manager in scale III
0.20 lacs
Branch manager in scale II
7500
Branch manager scale I
4000
1.
Proposals within the delegated sanctioning powers of GM and above. The
new proposed for credit limit of above as 10 Cr. Falling within the powers of GM and above shall be vetted by NBG at central office. 2.
Proposals falling within the sanctioning powers of GM(credit. priority and
mid corporate) for GM heading the relevant function shall seek approval on proposal from credit approval grid.
Objectives Objectives of lending policies
Due to compliance of all regulatory requirements such as exposure norms, prudential norms, asset liability management by government of India, RBI and bank board of director. To ensure planned lending and healthy growth of loan portfolio and achieve lending targets as per the corporate plans. NPA level should be minimum. To include improvement of system procedure and decentralized decision making ensuring expeditious decision making. To have a well balanced and diversified loan portfolio with a proper pricing policy. Special emphasis on flow of credit towards segment of priority sector i.e. agriculture, MSME, retail trade, export. To enlarge client base through aggressive credit marketing and meets the diverse needs of the customer through product mix or development innovation. To improve (he non fund business. Strategies Borrower identification and design of specialized products. Adherence to risk management policy.
Intensive and focused credit marketing. Validity of any of the sanctions. Diversification of credit portfolio ■
Thrust area
■
Industries/sectors Industries/sectors under low priority areas.
Credit approval grid.
B.
Exposure ceiling
Exposure ceiling means the sanction limit or outstanding limit which can bank reckoned for giving loans. Bank has to follow the capital fund limit ratio while sanctioning the loan. Exposure includes: Credit exposure:-
It includes all types of funded and non funded credit limit. Investment expo sure:-
It includes investment in share and debentures, PSU bonds, commercial papers. Exposure ceiling for: Normal borrower
15% of capital fund for single borrower and 40% for group. For infrastructure project 20% of capital for single borrower and 50% of capital for group. For partnership
5% of bank net worth and for company 10% of net worth Sectorial ceiling for different sectors Real estate sector 32.50% of gross credit of immediate preceding quarter.
Housing loan to individual - 12.50% S Housing Commercial real estate — estate — 10% 10% S Commercial Indirect real estate - 10% S Indirect
Infrastructure sector - 40%
Power sector - 20% S Power Road - 6% S Road Telecommunication - 5% S Telecommunication Residual infrastructure - 9% S Residual Non fund business-30% Ceiling for industries
Sugar industries - 2% Textile industries — industries — 5% 5% Film industries - 1% Software industries - 5% Auto and auto ancillary - 10% Any other industries - 10% C.
Statutory Statutory and other restriction on lending Statutory restriction
•
Advances against banks own share shall not grant any loan and advances on
the security of its own shares. •
Restrictions to giving the advances to the batik director‟s.
•
Restriction on credit to companies for buyback of their securities. Regulatory restriction
Granting loans and advances to the relatives of the director. Restrictions on grant of loan and advances to officers and relative of senior officers of
bank. / Loan and advances to officer of the bank. Officer himself cannot grant or sanction
loan for himself or for his/her relatives, Loan against certificate of deposits. No loan granted. Bank finance to non banking financial institutions. Criteria for financing
Amount should be sanctioned within the overall ceiling of the prudential exposure norms given by RBI. Develop requisite expertise for apprising technical feasibility, financial viability and bank ability of projects with reference to risk analysis and sensitivity analysis. For public sector term loan granted only for corporate entity. For public sector bank provides special purpose vehicle loan (SPV‟s) by extending the given or investing in bonds. Availability of state government securities may not take as a substitute for satisfactory credit appraisal. Condition for financing
Funded exposure of at least 10% of the exposure granted. Approval from credit approval grid. Report to the next higher authority. All banks guarantors should be in conformity with all other internal requirement in terms of ghosh committee recommendation. Relaxation permitted under FEMA, as per guidelines. D.
Types of loan
Loans are of two types Fund base and Non Fund base:
Fund base loans means
The bank is actually parting with funds. It includes s Working
capital or credit lending: - it means running account facility. Purpose of
this lending is to meet the working capital requirements. It is for maximum one year. S
Term loan: - term loan is given for fixed period of time and repayment in
installment over a fixed time. Amount is generally give 75% of the cost of maintaining a margin of 25%. S Bill
discounting: - it is the nature of post sales limit. Amount is generally up to
specified percentage of the value of the bill. Its discounting under L/C of firm order. Non fund base means
In case of non fund based facility there is no necessity to part with funds. Banks keep certain amount in the name of the borrower in form of the letter of the credit (LC) or bank guarantee. Letter S Letter
of credit facilitates purchase of material or goods.
S Bank
guarantee facility for the issuance of guarantee in the nature of bid bonds,
performance bonds, etc. E. Documents standards
Bank give due importance in improving the quality of documentation by the means of issuance of instructions. Sanction amount is Rs. 500 lacs or above the documents must vetted by law officer S Sanction or advocate or panel before disbursement. If amount is Rs. 50 lacs and above but less than 500 lacs security is to be completed S If before disbursal the document must be vetted within three months from the date of disbursement and any other rectification.
S Responsibility of maintaining documentation shall rest with the bank manager or
concern credit officer. Documents should renew within one year. S Documents Data should be properly updated in front office of core banking system on renewal S Data of documents. F. INTEREST RATE POLICY
While charging the interest on loans bank follows the base rate system Base rate system is aims at enhancing the transparency in lending rates of banks and enabling better assessment of transmission of monitory policy. RBI decides each bank base rate on the basis of their whole expenditure. Bank of Maharashtra's base b ase rate for the year 2013-2014 is .10.25%. Applicability of base rate ■S Base Base rate could also serve as the reference benchmark rate for floating rate loan
product apart from external market benchmark rate. The floating interest rates based on the external benchmark should be equal to or above the base rate at the time of sanctioning of renewal. Changes in base rate shall be applicable in respect of all existing loans link to the S Changes base rate in the transparent and non discriminatory manner. No lending below base rate. S No Base rate is applicable to old and new loans. S Base Bank give due importance in improving the quality of documentation by the means of issuance of instructions. Sanction amount is Rs. 500 lacs or above the documents must vetted by law officer ■f Sanction or advocate or panel before disbursement. If amount is Rs. 50 lacs and above but less than 500 lacs security is to be completed S If before disbursal the document must be vetted within three months from the date of
disbursement and any other rectification. v'' Responsibility of maintaining documentation shall rest with the bank manager or concern credit officer. Documents should renew within one year. S Documents Data should be property updated in front office of core banking system on renewal S Data of documents. F. INTEREST RATE POLICY
While charging the interest on loans bank follows the base rate system Base rate system is aims at enhancing the transparency in lending rates of banks and enabling better assessment of transmission of monitory policy. RBI decides each bank base rate on the basis of their whole expenditure. Bank of Maharashtra's base b ase rate for the year 2013-2014 is. I 0.25%. Applicability of base rate
v/ Base rate could also serve as the reference benchmark rate for floating rate loan product apart from external market benchmark rate. The floating interest rates based on the external benchmark should be equal to or above the base rate at the time of sanctioning of renewal. ^ Changes in base rate shall be applicable in respect of all existing loans link to the base rate in the transparent and non discriminatory manner. No lending below base rate. S No Base rate is applicable to old and new loans. S Base Allowing reduction in applicable rate of interest is in the hands of higher authority at central office.
Penal interest is applicable when there is a defaulted installment at repayment by the borrower. Penal interest is charged over & above the normal applicable rate of interest
shall be restricted to 2%. Revised rate of interest Fixed option
Bank of Maharashtra head office provides with the effect from 26 th august 2013, the revised rate of interest for housing loan, education loan and vehicle loan. They are as follows. For Education loan
Loan sanctioned under the model education loan scheme, the revised rate of interest given by the bank of Maharashtra head office is as follows. (Base rate @ 10.25%) Loans up to Rs. 4.00 lac (Base Rate + 1.75%) Loans above Rs. 4.00 lac (Base Rate + 2.75%) Simple interest during moratorium period, there after compounded monthly 1% interest concession may be provided to the loanees if the interest is serviced regularly as and when applied during the study period when repayment holiday is specified for interest/ repayment under the scheme. Interest concession is available only for moratorium period. For housing loan
For housing loan BOM provides two options for ROI i.e. floating options and fixed option. FLOATING option means the ROI change according to changes in the base rate. As the base rate change the ROI is changed. FIXED OPTION means there is a fixed ROI. There is no any change in ROI because of change in base rate of the banks. (Base rate @ 10.25%) Tender
Up to
Above
Above
Rs.25.00 lakh amount
Rs.25.00 lakh
and
up
to
Rs.30.00 lakh
Rs.75.00 lakh &
Rs.30.00 above lakh & less
than Floating option
Rs.75.00 lakh
Up
to
and
inclusive
Base
Rate Base
(10.25%)
Rate Base Rate + Base
(10.25%)
of 5 years Rate
Rate
0.50%
0.75%
(10.75%)
(11.00%)
Above 5 years
Base
+ Base Rate + Base Rate + Base
Rate
and
0.20%
0.25%
1.00%
1.25%
up to and
(10.45%)
(10.50%)
(11.25%)
(11.50%)
+
+
inclusive of 10 years Above 10 years
Base
but
0.30%
below
Rate
& (10.55%)
+ Base Rate + Base Rate + Base
Rate
0.50%
1.25%
1.50%
(10.75%)
(11. 50%)
(11.75%)
inclusive of 20 years
Up to Rs. 30 00
Abobe Rs. 30 lakh Rs. 750.00 lakh
lakh
and less than Rs
and above
75.00 lakh Up to and inclusive 11.45%
12.45%
12.70%
12.70%
12.90%
of 5 years
Above 5 years and up 11.95%
+
to and inclusive of 10 years Fixed option
Above 10 years but below & inclusive of 20 years For
repair
/ Base rate + 1.25% (11.50
%)
renovation i
For vehicle loan
The revised rate of interest for vehicle loan is given by bank of Maharashtra head office is as follows (Base rate @ 10.25%) / When borrower takes a loan and makes a repayment within 3 years the ROI is Base rate + 1.25% (I 1.50%). ^ When repayment period is above 3 years the ROI is Base rat e + 2.25% (12.50%). ✓ If
borrower takes a loan to purchase second hand vehicle then the ROI is Base rate
+ 5.00% (15025%). G. Brief overview on education loan, housing loan and vehicle loan
Banks provides money to the people for their education, to built or purchase their own house or to purchase own vehicle. It is difficult for common man to raise such large amount from their own source. To fulfill their need banks helps them in form of lending that is giving money to them. Education loan under model education loan scheme for vocational courses
Existing model education loan scheme caters to the student pursuing higher education, but vocational course are not covered in this scheme. For that purpose the model
education loan scheme for vocational courses has been developed as an extension of the existing model education loan scheme for pursuing higher education in India and abroad, to support the national initiatives for skill development. The focus was mainly on technical and professional courses in recognize college and universities. The vocational vocational courses offered by ITI‟s ITC's, polytechnics and other technical‟s institutions and bodies were not covered in the model education loan scheme. The model education loan scheme for vocational courses aims at providing financial support from the banking system to those who, after passing 10 lh class wants to pursue employment oriented skill development courses offered by recognized institutions. ^ Student Student
eligibility
The student should be Indian national. Student should have passed I0 ,h standard examination conducted by state or central board. Have secured admission to a government recognized vocational training course, which is employment oriented. S Course Course
eligibility
Vocational skill development courses of duration from 6 month to 3 years leading to certificate or diploma offered by a recognized state / central government institution or statutory / technical body or training department of government, etc. the vocational courses offered by ITTs, ITC's, polytechnics and other technical institution will come under the eligibility criteria. Banks are free to add other skill development program me having regard to employability. S Age Age
limit
There is no specific age limit for student for education loan under the model educational loan scheme for vocational courses. If the student is minor and the parent has executed document for the loans the banks will obtain a letter of rectification from him/her upon attaining majority.
S Quantum Quantum
of loan
For courses of duration up to one year Rs. 50000/- for courses of duration above one year Rs. 150000/S Margin Margin
NIL S Rate Rate
of interest
Rate of interest will be parity with model education loan scheme that is base rate + 1.75% (Base rate is 10.25%). Note: servicing s ervicing of interest during study period and an d moratorium commencement offer payment is optional for student. 1% interest concession provided by the bank if interest is serviced during the study period and subsequent moratorium period prior to commencement of repayment. ■S Processing Processing
charges NIL S Security Security
No collateral or third party guarantee will be taken. However, the t he parent will execute loan document along with the student borrower's as joint borrower. Moratorium Moratorium period
For courses of duration up to one year is 6 months from the completion of course. Repayment
Repayment period will be for the course up to one year the repayment period is 3 to 5 years. For the courses above one year the repayment period is 5 to 7 years. Other terms and condition
Other terms and conditions as applicable to the model educational loan scheme for
pursuing higher education in India India and abroad will be applicable to the scheme also. Case studies (For various loans) Housing loan
It is a requirement of common man to build own house or purchase flat. Banks provides money in the form of home loan to the borrower. Housing loan is most important as it lias national level priority. As housing loan is term loan, the repayment period for housing loan is maximum 20 years. To got one housing loan proposal daily it is an ultimate aim of the bank of Maharashtra. Documents needed and submitted by the applicant:
Photocopy of PAN card. S Photocopy Last three years tax paid return. S Last Pay slips of at least 3 months in case of borrower is in service. •/ Pay Address proof latest light bill/ telephone bill. y Address Search and title report on banks panel. S Search Photos. S Photos. Visit report. S Visit ■/ Builders document like agreement, sanction building plan, commencement
certificate of PCMC/ PMC, completion certificate issued by PMC/ PCMC, no objection to mortgage the flat given by the builder, index II of the aforesaid agreement, registration receipt of the aforesaid agreement. Documents submitted by GUARANTOR
Photocopy of PAN card/ election card. S Photocopy Address proof. S Address Last 3 years tax paid return form no. 16 (saral form 11). •S Last
Latest 3 months pay slip in case of service. S Latest Photos. S Photos. CASE STUDY
Proposal under Mahabank Housing Loan scheme for public Branch
Nandurbar,Nandurbar
Name
Mr. Mahindra gaikvvad
Co-applicant
Mrs. Sushila Mahindra gaikwad
Residential
Surya plaza, Nandurbar.
address Business/ office 56, Girija, Vardhana Nagar. 425412 . Nandurbar Address CC A/c No.
Xxxxxxxxxxxxxx Xxxxxxxxxxxxxx with bank of Maharashtra kondhwa branch & presently avails CC facility of Rs. Xx lacs. Account operations are satisfied.
Phone No.
99xxxxxxxx / 020 xxxxxxx
Date of Birth
10/06/1963
Age
50
Occupation
Business
Length of
15 years
business/ Service PAN No.
ABxxxxxxxxxxxxx ABxxxxxxxxxxxxx
Purpose
Purchase of flat no. xyz 2 nd floor, at Devi Ahil iyabai Chowk, Near Halt Darwaja . 425412 . Nandurbar Nandurbar admeasuring 1090 ft.
Eligibility applicant
of Applicant is running business in the name of the and style as superheat inspection services is our valued client and are enjoying CC facility with our branch since last 6 years. Last review was on 20/04/2013 when the CC limit was enhance from Rs. Xxx/- to Rs. Xyz/-. He is also availing BD limit Rs. Abe/- and term loan of Rs. Pqr/- lacs. With outstanding balance Rs. Abe/- lacs when CC facility was reviwed/
satisfactory. Therefore applicant is eligible to avail loan under the scheme. Age criteria
Being in business complied as for professional, the upper age limit is 55 years.
KYC norms
Various accounts with credit facility at our branch.
Existing
CC facility of Rs. Xyz/- lacs; BD facility Rs. Abe/- lacs and term
facilities
from loan Rs. Pqr/- to M/S superheat inspection service, proprietor of the
our bank
firm Shri. Mahindra gaikwad
Remark CRR
The borrower is rated AA (low risk, high safety)
CIBIL
Reference is made to CIBIL. No adverse comments observed. Copy of report enclosed.
Cost of property to be constructed and means of finance
Rs. In Lacs.
Cost of flat
20.00
Other payments towards maintenance charges, electricity, water and connection charges. Stamped duty( 1.93 lacs) not considered from stamp duty
-
Total cost
25.00
Means Bank loan
15.00
Own contribution
5.00
Total means of finance
20.00
Computation of income A Y 2012- 2013
Applicant
Co-applicant
Rs. In lacs max. eligibility
Net income
20
Gross cash accrual
30
(including depreciation)
...
65.00
Income (NPAT + depreciation) as per IT returns
A.Y 2010-2011
14.55 lacs.
A.Y 2011-2012
24.66 lacs
A.Y 2012-2013
30.00 lacs
14.55 +24.66 + 30.00 - 69.21 lacs. Average for three years = 69.21 / 3 = 23.07 lacs
Rs. In lacs
Eligibility of loan
Maximum limit of finance for house No limit property in urban area (A) Maximum limit of finance in view of margin
requirement
of
25
%
15.00
for
construction new flat (75% of 40.00 lacs.) (B) Loan
applied
for
requested
by
the
15.00
applicant (C) Amount 4 times of average income (D)
92.28
Lower of the above A, B, C, D
15.00
Eligibility as per R/O reduction from income
Average gross income of applicant and coapplicant Proposed EMI of loan
16628 * 12
Installment of existing other loan Nil
A
23.07 lacs. 1.995 lacs Nil
Income (NPAT + depreciation) as per IT returns in personal name
Proposed deduction
16628 * 12
Total monthly deduction
1.995 lacs B
] .995
% of B to A 8.68% Thus the % of total deduction (including proposed EMI) to net total income falls within the permissible limit of 65% as per the norms of the scheme. In the view of above, proposal is recommended for sanction on following terms and condition.
Margin
25%
Repayment
Repayment is commencing immediately from July 2013 to June 2028. We recommend period of 180 months for repayment of loan which is per request of the applicant and eligible under the scheme. EMI to start w.e.f. July 2013 to June 2028.
Search report
Title report from builder‟s advocate is held on record. Condition of getting search and title report from panel advocate is stipulated.
Security
The primary security is the form of equitable mortgage of flat valued of Rs. 20.00 lacs. Thus sufficient security support available for the loan Rs. 15.00 lacs.
Guarantor
As per norms of scheme no guarantor is required.
Facility
Home loan 15.00 lacs
Rate of interest
Base Rate + 0.30% = 10.55% p.a. floating rate, (at present base rate is 10.25%)
Vehicle loan
To have an own vehicle it‟s a dream of every common man. But it is not possible for him to raise such a large fund to buy vehicle. In that case banks provides the vehicle loan with some terms and condition for purchasing a new vehicle whether it is two wheeler or four wheeler. Documents needed and submitted by the applicant •S Identity Identity proof like photo
copy of PAN card, election card. Address proof like ration card, electric bill, telephone bill etc. S Address Pay slips for last three to four months. S Pay Income tax return. S Income ■S Quotation Quotation of vehicle
v' Amount paid receipt of vehicle if given earlier. Photos. ■S Photos. •/ Guarantors details with supporting proof like residential, employment, income
certificate etc. Hypothecation charge with RTO authorities. S Hypothecation Case study
Branch
Nandurbar branch.
Name of the applicant
Santosh bhosle
PAN number
XYxxxxxxxx
SB A/C No.
6432xxxxxx with our branch.
Address
Fait no. 10 sun plaza, nandurbar, 425419
Phone No.
02569-xxxxx
Date of birth
12-5-1975
Age
38
Business/activity/service
Working in reliance communication
KYC Norms
Complied salary A/C No. 6432xxxxxx with our branch.
Remark
Mr. Bhosle is working as manager in Reliance
telecommunication.
Their
dealing of account is good.
Eligibility
Income
Gross
income
Rs.55000/-
for
p.m.
April net
Rs.35000/18 times gross emolument
Rs.990000/-(A)
Cost of vehicle
Rs.6.00 lacs
Minimum margin 15%
Rs.l50000/-(actual 25%)
Loan amount
Rs.450000/-(B)
Loan applied for
Rs.450000/-(C)
Loan eligible(minimum of above)
Rs.450000/-(75%)
Eligibility as per norms in r/o deductions from income
Rs.
2013
income
of of
Gross income of applicant Proposed
A
10125
EMI
55000 -
of
proposed loan
(EMI
fir
the
purpose of deciding eligibility is calculated presuming rate
of
interest
as
12.5% p.a.) Rs.10125 for
60
months period Other
2000
deductions Installment of existing loan
of
other bank Total deduction
B
42875
% of B to
77.95%
A Thus the percent of total deduction(including proposed EMI) to gross monthly income falls well within permissible limit of 60% as per the norms of the scheme.
Scheme requires one guarantor. The applicant has offered one guarantor as below. Guarantor
Name
Mr.
Manoj
friend of the applicant has offered
his
guarantee for the loan. He is employed at
FebTech
projects and engineers ltd. His drawing monthly salary of Rs. 3 0000/- and net salary is Rs.
23000/-
form No. 16 for
year
ended 31- 32012 with the salary
of
income
of
Rs.4.2
lacs.
Condition of submission of IT returns for
F.Y.
2012-2013 & 2011-2012 within months stipulated. Means
and
worth of the proposed guarantor
is
commensurat e
with
the
size
of
advance. Hence
the
guarantee of Mr. Manoj is acceptable. Date of birth 10/05/1978 or PAN No.
or ADxxxxx
Address
House
No.
45 Nandurbar, Nan durbar-, 425419 Phone No. Repayment
60 months
02569-xxxxx
period
Proc. Fees 2000 + service tax (subject to banks latest processing charges) In the view of above, the proposal is sanctioned as per the following terms and condition. Facility
Vehicle loan for four wheeler
Amount
Rs. 450000/-
Purpose
Purchase of Maruti Ertiga petrol Ixi, white as per the quotation of M/s wonder cars.
Security
Hypothecation of vehicle to be purchase.
Guarantor
Mr Manoj .
Margin
25% in banks favor.
Rate of interest
Base rate + 2.25% = 12.5% p.a. at present.
Processing fees
2000 + service tax
Documentation
1 125
Repayment
EMI of Rs. 10125/- to commence from the next month of disbursement of the loan. Any charges other than interest such as insurance etc. should be recovered immediately as and when incurred applied, separately in addition to EMI. Entire repayment within 60 months from the date of full disbursement.
Education loan (Under model educational scheme)
Education is most important now a days and it is the need of the today‟s era. Every common man things to study high or it is a dream of every parent to give their children higher education. For education common man needs money and it is not possible for him to raise such high amount from their own source. For that purpose banks help them by giving education loan for two purposes. One is for higher studies i.e. degree courses like MBA, BE, MCA, etc. under the model education loan scheme. Document required and submitted by the applicant:
Identity proof like PAN card, college identity card. S Identity Address proof like electric bill or telephone bill or ration card etc. •S Address Photo copy of passport (in case of abroad) ■S Photo Photo copy of visa (in case of abroad) •S Photo •/ Residential Residential agreement(in case of abroad)
Domicile certificate S Domicile Pay slip in case of applicant is in is in service S Academic Academic documents like SSC and S Pay HSC mark sheets. Case study
Branch
Nandurbar branch
Applicant student
Syed Ehsan
Co applicant(father)
Syed Zai nullah
Permanent address
Ward No. 3 laxmi area nandurbar
A/C No. Applicant
564xxxxxxxxx 564xxxxxxxxx
Phone No.
9862xxxxxxxxxx 9862xxxxxxxxxx
Occupation of father
Business
Age of co applicant
45
PAN No. of co applicant
689xxxxx
Date of birth of co applicant
14-5-1665
Particulars of students
Name
Syed Ehsan
Date of birth
04-07-1990
Age
23
Educational qualification
Name of examination
Month
and
years
of
Result
passing SSC
March 2007
Pass - 74.61 %
HSC
Feb 2009
Pass-68.61%
BBA
April 2012
Pass - 65%
Details of the course to which admission is sought
Name of the course
MBA
Name
of
the Indra college Pune
institution Duration of course
Two years
Expenditure
2.5 lacs.
involved Present request Loan total on margin Course fees
1.6lacs
Facility
Term loan
Amount
2.5lacs
Purpose
For pursuing higher studies
Security
Nil
Guarantor
Nil
CIBIL
No adverse remark
CRR
AAA- Minimal risk
Repayment
60 month
Course eligibility
The student is pursuing MBA in finance from the Indra college, Pune a reputed university affiliated to Pune university. At present he has completed Is' year of the course.
Student eligibility
The student is Indian national and perusing MBA course. Presently he is studying in the second year from a recognized college. He secured his admission through CAP round. Hence the proposal eligible under the scheme of model education loan
of bank. Due diligence
ID proofs like ID card issued by the college authorities were duly verified.
KYC norms
The applicant is an SB account holder. The KYC norms are duly complied with.
Pre
disbursement Not required
verification Details of the course to which admission is sought
Remark
Particulars
Rs.
Tuition fees
145000
University fees
3000
Living expenses
—
Purchase of instruments
30,000
Other fees
25,170
Hostel fees
46,730
Mess fees Total
2,50,000
Eligibility for loan
Rs.
Cost of education
250000
Maximum eligibility for loan (I)
250000
Outer limit of finance outside India(II)
NA
M.V security offered (111)
NA
Loan applied for/ recommended by branch(IV)
250000
Loan considered for recommendation (lower of the
250000
1,11, and IV)
Rate of interest
Base rate + 1.75?/o = 12.00% P.a. at present base rate is 10.25%
Processing fees
NIL
Delegation
Sanctioned
falls
within
the
sanctioning power of the assistant general
manager
Nandurbar
branch,Nan durbar as per latest H.O norms(model II branch)
Observ ation of student
Mr. Syed Ehsan has completed his first year MBA course. He has paid first year fees from his own sources. He has requested for payment of fees for next year of the course. The academic record of Mr. Syed Ehsan is good. He has secured his admission for higher study in MBA from the Indra College of management, Pune through merit channel. The fees structure as per latter submitted by the college is Rs. 149270 P.a. but the applicant requires hostel and mess charges. Student also required a laptop costing Rs.30000 for project evaluation/submission of other thesis. He has submitted the relevant quotation the total cost of education is Rs.250000.
He is eligible for finance under our banks model education loan scheme. The applicant is expecting to generate adequate income out of job/profession to meet the above repayment obligation after completion of the course. In the view of above, proposal is recommended for sanction on follow ing terms and condition
Facility
Term loan under model educational loan scheme
Amount
250 000
Purpose
For pursuing an education in India
Security
Nil-clean
Guarantor
Nit
Rate of interest
Base rate+1.75%=T2.00% Rate of interest will be applied on simple interest basis p.a. during moratorium period and compounding on monthly rest there after
Processing fees
Nil
Moratorium/holiday
There is an initial moratorium (for repayment of both principle and interest ) of course period +1 year or 6months from the
date
of
getting
employment
whichever is earlier. Repayment
There is an initial moratorium (for repayment of both principle and interest) of course period +1 year or 6months from the
date
of
getting
employment
whichever is earlier. Repayment will be at Rs.5561 Rs .5561 EMI for 60 month Loan sanctioned by the branch in fast three years:
Education loan
Education loan Year
Sanctioned loan
2010-2011
10
2011-2012
08
2012-2013
12
Interpretation:
The above graph represents the sanctioned of education loan is last three years that is for 2010-11, 2011-2012, 2012-2013. In the year 2010-2011 the ten education loan are sanctioned. While in the year 2011-2012 only eight loans are sanctioned. And in 2012-2013 maximum number of loan are sanctioned that is 12. Housing loan Housing loan Year
Sanctioned loans
2010-2011
25
2011-2012
33
2012-2013
29
Interpretation: The above graph represents the sanctioned of Housing loan is last three years that is for 2010-11, 2011-2012, 2012-2013. In the year 2010-2011 the 25 Housing loan are sanctioned. While in the year 2011-2012 maximum number of loan are sanctioned that is 33. And in 2012-2013 29 loan are sanctioned. Vehicle loan Vehicle loan Year
Sanctioned loan
2010-2011
16
2011-2012
08
2012-2013
14
Interpretation: The above graph represents the sanctioned of Vehicle loan is last three years that is for 2010-11, 2011-2012, and 2012-2013. In the year 2010-2011 the maximum number of loan are sanctioned that is 16. While in the year 2011-2012 only eight loans are sanctioned. And in 2012-2013 fourteen fourteen loan are sanctioned. Net income of bank of Maharashtra Year
Net income (in crore’s)
2010-2011
330.39
2011-2012
430.83
2012-2013
759.52
Interpretation: From the above graph it is seen that the income of bank of Maharashtra is continuous increasing year by year .in 2010-2011 income of bank of Maharashtra is 330.39 crores, in 2011-2012 the income is 430.83 crore and in 2012-2013 income is 759.52 crores.
Net NPA of bank of Maharashtra for last three years Year
Net NPA (in crore’s)
2010-2011
618.95
2011-2012
469.57
2012-2013
392.93
Interpretation: In the year 2010-2011, there is maximum net NPA that is Rs. 618.95 crores. But after that in the year 2011-2012 it reduced up to 469.57 crores. And in the year 2012-2013 it is again reduced up to 392.93 crores which is good indication for the bank as it helps to increased to help the profit of the bank. Margin:-
Different margin for educational loan in India and outside India
S Up to 4.00 lacs - Nil
Above 4 lacs-
S
For studies in India- 5%
S
For studies in abroad- 15%
Disbursement:-
For educational loan disbursement is made in installment. It means loan will be disbursed in stages as per requirement / demand by effecting payment to university, vendors etc. to the extent possible. Security:-
Up to 4 lacs there is
no need of security.Above
Rs. 4
lacs and up to Rs. 7.5 lacs collateral in the form ofsatisfactory third party guarantee. Repayment:-
Tlie applicant will get a repayment holiday of one year after completion of the course selected or six months after getting job whichever is earlier. The loan is then to be repaid in five years from commencement of repayment. If the amount of the loan is more than 4 lacs the repayment period is more than 10 years.
Conditions for education loan
Rate of interest: i nterest:--
For education loan rate of interest is charge on base rate. ^ Up to Rs. 4 lacs rate of interest is base rate + 1.75%. ^ Above Rs. 4 lacs rate of interest is base rate + 2.75%.
At present base rate is 10.25%. S At
Conditions for Housing loan:
Eligibility
For housing loan there is eligibility for sanctioning loan. That is salaried persons, professionals, businessman with sufficient disposable income. Farmers having minimum five acres of integrated land holding. Non resident Indians are also eli gible. Age criteria:-
There are age criteria for sanctioning home loan. S Minimum 21 years-
maximum 50 years
for
salaried
persons.
S Minimum 21 years-
maximum 60 yearsfor other than salaried
person. Quantum of loan:S For salaried class: 50 times of gross salary or 60 times of net monthly salary
whichever is higher subject to applicable margin. For businessmen: equal to average annual income (net profit + depreciation) of last S For 3 years * 4 times (B/S, IT returns). Also note r epayment of any other term liabilities. For farmers: 4 times of average annual net income. Cross check gross income, land S For holding, cropping pattern, sugar factory/APMC/other agencies bills etc. ensure for repayment capacity and repayment experience. If jointly owned consider joint holders income. Maximum loan quantum: y No maximum limit
for Metro/ Urban Area.
S Rs. 15 lakh in Semi
urban/ rural area.
Rs. 5 lakh for repairs/ renovation in all areas. S Rs. Equated monthly installments:
EMI is calculated on the basis of disburse amount. Every bark has own format to calculate EMI. It is in form of the chart in which only rate of interest and sanctioned amount is needed. Margin: Conditions and requirements for vehicle loan Conditions and requirements for vehicle loan
For home loan borrower has to give some % of margin in favor of bank. For housing loan 25% should be the margin of actual rate of the house or flat in the favor of the bank and banks provides the 75% of actual cost in the form of loan. 25% is the minimum margin which is compulsorily borrower has to provide. Borrower can give more than 25% of the margin according to his income. Eligibility: Eligibility is necessary for sanctioning loan, without eligibility bank doesn‟t sanct ion the loan. Eligibility for vehicle loan is salaried persons, permanent in service or profession and businessman. Security:
For sanctioning vehicle loan banks require the security. It is in the form of hypothecation of vehicle purchased. Also bank requires one guarantor of sufficient income acceptable to the bank. Minimum annual gross income:
Vehicle loan from the bank given for the 2 wheeler and 4 wheeler. So that for 2 wheeler minimum annual gross income is Rs. 2.00 lacs and for 4 wheeler it is divided into two parts.
For salaried person minimum gross annual income is Rs. 3.50 lacs. And ^ For others Rs. 2.00 lacs. Maximum limit:
Maximum limit for sanctioning loan amount for 2 wheeler is Rs.0.50 Lacs. And for 4 wheeler is Rs. 15.00 lacs. Margin:
For vehicle loan borrower has to give some % of margin in favor of bank. For vehicle loan 15% should be the margin of actual cost of the vehicle whether 2 wheeler or 4 wheeler in the favor of the bank and banks provides the 85% of actual cost in the form of loan. 15% is the minimum margin which is compulsorily borrower has to provide. Borrower can give more than 15% of the margin according to his income. Repayment period:
For two wheeler loan there is maximum period of 60 months and in case of 4 wheeler there is maximum period of 84 months. Processing fees:
In case of two wheeler there is processing fees is Rs. 500/- and of four wheeler there is processing fees is Rs. 2000. Rate of interest: i nterest:
Rate of interest is charged on basis of base rate system. For vehic le loan if Repayment period is up to 3 years then the ROI is base rate + 1.25%. S Repayment Repayment period is above 3 years then the ROI is base rate + 2.25%. S Repayment Second hand vehicles irrespective of tenor then the base r ate + 5.00%. S Second FINDINGS FROM CASE STUDIES
Home loan is cheaper than education loan and vehicle loan. It. means rate of interest on housing loan is less than education loan and vehicle loan, because home loan is
comes under priority sector. Mortgage papers are checked and approved by chief manager and not by branch manager or assistant general manager. Term loan has maximum repayment period is 7 years but for home loan it i s 15 to 20 years. More documentation is required in housing loan than education loan and vehicle loan. In education loan up to Rs. 4 lacs banks does not take any securities. So that before repayment banks keep equal amount of loan as reserve which helpful in case of non repayment of borrower. If the borrower has existing loan from any other bank, the bank before sanctioning of loan bank take over that amount with the permission of applicant and existing bank. Then bank add both loan amount, existing and present one and sanction the 75% of that amount after deducting margin of 25%. For education loan disbursement is made in installments. For other loans lum sum amount may disburse to the borrower. For education loan if student is unable to pay interest during education then he can pay interest at the time of repayment i.e. with principle amount. amount. From the sanctioned number of housing loan we can find that sanction number of housing loan is much than education loan and vehicle loan. This is because today the real estate sector grown rapidly and rates are also high. So many people turns to bank for finance and it is good income of bank. CONCLUSION
The project includes the study on retail lending policies. Retail lending policies includes the education loan, home loan and vehicle loan to which bank give priority. This project includes the detail study regarding the documentation required by the bank, conditions for taking the loans, guidelines given by RBI regarding loan to the bank, objectives of lending, strategies, norms and rules followed by bank for sanctioning loan. It also includes that how banks takes decision for financing the retail
loans to the customer. As the lending is assets of the bank it helps to increase the income of the bank. Every bank face the problem for recovery of loans, if there is no recovery of loan then it converts into NPA accounts which reduce the income. The project includes last 3 years bank of Maharashtra‟s NPA which reduces every year. It also includes the income of last 3 years. So it is concluded that retail lending is very crucial area where bank has to be very careful while lending. As retail lending is considered as priority sector by Government as well as Reserve Bank of India. Suggestions
There is too much manual documentation for loan. As today‟s world is technological world, so it is possible to do online documentation. It reduces the bourdon on the customer. Sanctioning of loans takes lots of time. If there is have online documentation and process, it will help to reduce the time. Bank should help customers if there is urgency of the loan by taking less time for sanctioning, by verifying all documents and followed by all steps. There should be some subsidy on interest rates for retail loans like home loan, education loan and vehicle loan if customers do the regular payment of the interests. It will attract more customers. ABBREVIATION BOM - Bank of Maharashtra RBI - Reserve Bank of India H.O - Head Office MD -
Managing Director GM - General Manager AGM - Assistant General Manager BM Branch Manager CBS - Core Banking Solution KYC - Know Your Customer MSME - Micro Small Medium Enterprises EMI - Equated Monthly Installments SPV Special purpose Vehicle ROI - Rate of Interest AY- Assessment Year F Y - Financial Year L/C - Letter of Credit BG - Bank Guarantee NPA - Non Performing Assets CC - Cash Credit CRR - Credit Risk Rating CIBIL-Credit Information Bureau India Limited NPAT - Net Profit after Tax RRB -
Regional Rural Bank NEFT-National Electronic Funds Transfer RTGS - Real Time Gross Settlement NRI - Non Resident of India SARFAESI - The Securitization and Reconstruction of Financial Assets and
Enforcement of Securities Act BD - Bank Draft WEBSITES
www.rbi.gov.in www.bankofmaharashtra.in www.monevcontrol.com www.google.com www.sulekha.com BOOKS
Banking principles and operations By: M.N. Gopinath ' Banking Function By: Vandana Darmadhikari Research Methodology By: C.R. Kothari
