gmcb

UNDERSTANDING of BANKING OPERATIONS & CREDIT

CONTROL

AT

GANDHIDAM MERCENTILE CO-OPERATIVE BANK

A PROJECT REPORT submitted by

Jitendra Parmar

Shivang Suchday

2011-2013

11054

11079

To

Director (PGDM)

In partial fulfillment of the requirement of

TOLANI INSTITUTE of MANAGEMENT STUDIES, ADIPUR

For the award of the degree of

Post Graduate Diploma in Management

Tolani Institute of Management Studies.

Adipur – 370205 (Kachchh).

JUNE 2012.

Tolani Institute of Management Studies

2

ACKNOWLEDGEMENT

To achieve the success in any stage of life there needs to be proper guidance, co-

operative and support by many individuals. Many people have contributed towards

making this project a success

We express our sincere Thanks to Mr. Suresh M. Kundliya and all staff members of

GMC Bank for being the light & showing the path for the doing project since it was

new to us.

We would like to express our gratitude for faculty members and mentor Mrs.Deepa

Mishra and the director of PGDM, Mrs.Sampada Kapse, and all the faculty members

who extended their helping hand whenever required.


3

EXECUTIVE SUMMARY

This study is attempted with an objective to get familiar with banking transactions and

to get knowledge about operational banking at GMCB-Gandhidham. Banking is

financial inter-mediation between the financial savers on one hand and the funds

seeking business entrepreneurs on the other hand. A bank accepts deposits from

customer and lends them to earn profit and in this way bank earns profit but at the

same time it has to maintain liquidity. Our main objective was to know about banking

operations which was very well explained by the employees of GMCB.

The operations which we studied at GMCB includes Depository services, Transfer,

Loans, Clearing, Safe Deposit vault , Inward and outward bills for collection. The

demand draft or pay orders how it is made and useful, for this GMCB has a tie up

with the HDFC & INDUSDIN. The loans or OD given to customers as advances, they

are given in many ways. How the other bank cheques are cleared in the clearing

house. The facilities given to shareholder and how can they avail these facilities.

The other part of the project gives us knowledge about Credit control policies in

Banks. How they manage cash .During receipt and payment of cash which points

should be taken care of and how CRR and SLR is maintained in GMCB.

The Primary data for banking operations is collected through the primary source from

the employees of the GMCB. The secondary data was collected through the internet,

books and the annual reports of the bank.


4

TABLE OF CONTENTS

Sr. No. Description Page. No.

ACKNOWLEDGEMENT 2

EXECUTIVE SUMMARY 3

LIST OF TABLES 5

LIST OF FIGURES 6

LIST OF ABBREVIATIONS USED 7

1 INTRODUCTION

1.1 Introduction to Industry 9

1.2 History of GMC Bank 19

2 METHODOLOGY 23

3 OPERATION OF GMCB 24

2.1 Deposits 25

2.2 Cash Department 34

2.3 Remittance 36

2.4 Ancillary 48

4 CREDIT CONTROL 61

5 FINDINGS & RESULTS 101

6 CONCLUSIONS & RECOMMENDATIONS 102

7 APPENDIX

7.1 Balance Sheet 103

7.2 Profit & Loss Account 110

7.3 Bibliography 111


5

LIST OF TABLES

Sr. No. Title of Table Page. No.

1 Minimum SLR holding 18

2 Term Deposit Rate 32

3 Daily cash register 35

4 Instrument charges 37

5 Difference between RTGS & NEFT 38

6 Difference between Transfer & Clearing 41

7 Different types of slips & their colour 42

8 Codes in software for entries 42

9 Necessary documents of individuals for opening account

in the bank

56

10 Necessary documents of companies for opening account

in the bank

57

11 Necessary documents of Partnership firm for opening

account in the bank

57

12 Necessary documents of Trust & founders for opening

account in the bank

58

13 Tier I & II capital 64

14 Other reserves included in Tier I 64

15 Risk Weighted Assets 65

16 Other Advances less BDDR Provisions 65

17 Provision for NPA 68

18 CRR report maintained by Bank 71

19 Monthly Statement of CRR to be sent to RBI 74

20 Statement of valuation of SLR Securities 76

21 Loan & their rate of interest 93

22 Types of loan & their no.of accounts in the bank 94

23 Difference between Overdraft & Loan 94

24 Balance sheet as on 31st March,2012 103

25 Profit & Loss for the period form 1-04-11 to 31-03-12 110


6

LIST OF FIGURES

Sr. No. Title of Table Page. No.

1 Banking Structure in India 11

2 Co-operative Banks 13

3 Types of Banks 18

4 Hierarchy of GMC Bank 21

5 Operation of GMC Bank 24

6 Types of Deposits in the Bank 25

7 Graph of Current Deposit 27

8 Graph of Saving Deposit 28

9 Graph of Saving, Current & Term Deposit 29

10 Graph of Recurring Deposit 31

11 Pie chart of Deposits 33

12 Cheque Clearing Process 39

13 Types of cheques 42

14 Types of Banks Guarantee 53

15 Types of Loan 80

16 Loan Process 82


7

LIST OF ABBREVIATIONS

Acronym Full Forms

1. RBI Reserve Bank of India

2. UCB Urban Cooperative Bank

3. CAMELSC Capital adequacy, Asset quality, Management, Earnings,

Liquidity, Systems and Control

4. CRAR Capital to Risk Asset ratio

5. NPA Non -Performing Asset

6. NDTL Net Demand and Time Liability

7. GMCB Gandhidham Mercantile Cooperative Bank

8. RTGS Real Time Gross Settlement

9. P.F Provident Fund

10. BCCB Bhuj Commercial Cooperative Bank

11. DD Demand Draft

12. PO Pay Order

13. SBI State Bank of India

14. OBC Outward Bill Collection

15. IBC Inward Bill Collection

16. KYC Know Your Customer

17. SDR Saving Deposit Receipt

18. FDR Fixed Deposit Receipt

19. CDR Cumulative Deposit Receipt

20. KDR Kuber Deposit Receipt

21. LFD Loan Against Fixed Deposit

22. MSL Machinery Loan

23. CSL Consumer Loan

24. GHL General Housing Loan

25. SLR Statutory Liquidity Reserve

26. CRR Cash Reserve Ratio

27. EDL Educational Loan

28. SOL Social Loan


8

29. SHL Staff Housing Loan

30. CCL Clean Cash Loan

31. VHL Vehicle Loan

32. HYP Hypothecation

33. BKD Books Debt

34. CCC Clean Cash Credit

35. FDO Overdraft Against Fixed Deposit

36. OGS Overdraft Against Government Securities

37. SOD Overdraft to Staff

38. BDDR Bad & Doubtful Debt Reserve

39. KDCC Kutch District Cooperative Bank

40. GSC Gujarat State Cooperative


9

INTRODUCTION TO INDUSTRY

Bank:

A bank is a financial institution and a financial intermediary that accepts deposits and

channels those deposits into lending activities, either directly or through capital

markets. A bank connects customers that have capital deficits to customers with

capital surpluses.

Standard Activities:

Banks act as payment agents by conducting checking or current accounts for

customers, paying checks drawn by customers on the bank, and collecting checks

deposited to customers' current accounts. Banks also enable customer payments via

other payment methods such as Automated Clearing House (ACH), Wire transfers or

telegraphic transfer, EFTPOS, and automated teller machine (ATM).

Banks borrow money by accepting funds deposited on current accounts, by accepting

term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend

money by making advances to customers on current accounts, by making installment

loans, and by investing in marketable debt securities and other forms of money

lending.

Banks provide almost all payment services, and a bank account is considered

indispensable by most businesses, individuals and governments. Non-banks that

provide payment services such as remittance companies are not normally considered

an adequate substitute for having a bank account.

Banks borrow most funds from households and non-financial businesses, and lend

most funds to households and non-financial businesses, but non-bank lenders provide

a significant and in many cases adequate substitute for bank loans, and money market

funds, cash management trusts and other non-bank financial institutions in many cases

provide an adequate substitute to banks for lending savings too


10

Channels:

Banks offer many different channels to access their banking and other services:

Automated Teller Machines

Mail:

Most banks accept cheque deposits via mail and use mail to communicate to

their customers, e.g. by sending out statements.

Mobile banking is a method of using one's mobile phone to conduct banking

transactions

Online banking is a term used for performing transactions, payments etc. over

the Internet

Relationship Managers, mostly for private banking or business banking, often

visiting customers at their homes or businesses

Telephone banking is a service which allows its customers to perform

transactions over the telephone with automated attendant or when requested

with telephone operator


11


12

The beginning co-operative banking in India dates back to about 1904, when official

efforts were made to create a new type of institution based on principles of co-

operative organization & management, which were considered to be suitable for

solving the problems peculiar to Indian conditions.

Co-operative Banks in India are registered under the Co-operative Societies

Act. The cooperative bank is also regulated by the RBI. They are governed by

the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies)

Act, 1965.

The Co-operative Banks Act, of 2007 (the Act) defines a co-operative bank as

a co-operative registered as a co-operative bank in terms of the Act whose

members –

o are of similar occupation or profession or who are employed by a common

employer or who are employed within the same business district; or

o have common membership in an association or organization, including a

business, religious, social, co-operative, labour or educational group; or

o Reside within the same defined community or geographical area.

o Co-operative bank, in a nutshell, provides financial assistance to the

people with small means to protect them from the debt trap of the

moneylenders.

o It is a part of vast and powerful structure of co-operative institutions which

are engaged in tasks of production, processing, marketing, distribution,

servicing and banking in India. A co-operative bank is a financial entity

which belongs to its members, who are at the same time the owners and

the customers of their bank.

o Co-operative banks are often created by persons belonging to the same

local or professional community or sharing a common interest. These

banks generally provide their members with a wide range of banking and

financial services (loans, deposits, banking accounts…). Co-operative

banks differ from stockholder banks by their organization, their goals, their

Values and their governance.


13

o The Co-operative Banking System in India is characterized by a relatively

comprehensive network to the grass root level. This sector mainly focuses

on the local population and micro- banking among middle and low income

strata of the society. These banks operate mainly for the benefit of rural

areas.


14

Urban Banks Department

The Urban Banks Department of the Reserve Bank of India is vested with the

responsibility of regulating and supervising primary (urban) cooperative

banks, which are popularly known as Urban Cooperative Banks (UCBs).

The RBI defines Urban Co-operative banks as ―small sized co-operatively

organized banking units which operate in metropolitan, urban and semi-urban

centers to cater mainly to the needs of small borrowers, viz. owners of small

scale industrial units, retail traders, and professional and salaries classes.‖

Objectives and functions Urban Co-operative banks

Primarily, to raise funds for lending money to its members.

To attract deposits from members as well as non-members.

To encourage thrift, self-help ad mutual aid among members.

To draw, make, accept, discount, buy, sell, collect and deal in bills of

exchange, drafts, certificates and other securities.

To provide safe-deposit vaults.

While overseeing the activities of 1926 primary (urban) cooperative banks, the

Urban Banks Department performs three main functions: regulatory,

supervisory and developmental. The Department performs these functions

through its 17 regional offices.

I. Regulatory Functions

(i) Licensing of New Primary (Urban) Cooperative Bank

For commencing banking business, a primary (urban) cooperative bank, as in the

case of commercial bank, is required to obtain a license from the Reserve Bank of

India, under the provisions of Section 22 of the Banking Regulation Act, 1949 (As

Applicable to Cooperative Societies).


15

(ii) Licensing of Existing Primary (Urban) Co-operative Banks

In terms of sub-section (2) of Section 22 of the Banking Regulation Act, 1949 (As

Applicable to Cooperative Societies), the primary (urban) cooperative banks

existing in the country as on March 1, 1966, (when some banking laws were

applied to UCBs), were required to apply to the Reserve Bank of India. They were

given three months to obtain a license to carry on banking business. Similarly, a

primary credit society which becomes a primary (urban) cooperative bank by

virtue of its share capital and reserves reaching ` 1,00,000 and above was to apply

to the Reserve Bank of India for a license within three months from the date on

which its share capital and reserves reach Rs. one lakh. The existing unlicensed

primary (urban) cooperative banks can carry on banking business till they are

refused a license by the Reserve Bank of India.

(iii) Branch Licensing

Under the provisions of Section 23 of the Banking Regulation Act, 1949 (As

Applicable to Cooperative Societies), primary (urban) cooperative banks are

required to obtain permission from the Reserve Bank of India for opening

branches.

(iv) Statutory Provisions

The regulatory functions of Urban Banks Department relate to monitoring

compliance with the provisions of the Banking Regulation Act, 1949 (As

Applicable to Cooperative Societies) by urban cooperative banks. These

provisions include:-

Minimum Share Capital

Under the provisions of Section 11 of the Banking Regulation Act, 1949

(As Applicable to Cooperative Societies), no primary (urban) cooperative

bank can commence or carry on banking business if the real or

exchangeable value of its paid-up capital and reserves is less than Rs.one

lakh.


16

Maintenance of CRR and SLR

As in the case of commercial banks, primary (urban) cooperative banks are

also required to maintain certain amount of cash reserve and liquid assets.

The scheduled primary (urban) cooperative banks are required to maintain

with the Reserve Bank of India an average daily balance, the amount of

which should not be less than 4.75 per cent of their net demand and time

liabilities in India in terms of Section 42 of the Reserve Bank of India Act,

1934. Non-scheduled (urban) cooperative banks, under the provision of

Section 18 of Banking Regulation Act, 1949 (As Applicable to

Cooperative Societies) should maintain a sum equivalent to at least 3 per

cent of their total demand and time liabilities in India on day-to-day basis.

For scheduled cooperative banks, CRR is required to be maintained in

accounts with Reserve Bank of India, whereas for non-scheduled

cooperative banks, it can be maintained by way of either cash with

themselves or in the form of balances in a current account with the

Reserve Bank of India or the state co-operative bank of the state concerned

or the central cooperative bank of the district concerned or by way of net

balances in current accounts with public sector banks. In addition to the

cash reserve, every primary (urban) cooperative bank (scheduled/non-

scheduled) is required to maintain liquid assets in the form of cash, gold or

unencumbered approved securities which should not be less than 25 per

cent of the total of its demand and time liabilities in accordance with the

provisions of Section 24 of the Banking Regulation Act, 1949 (As

Applicable to Cooperative Societies). Out of the prescribed SLR, the

UCBs have been advised to maintain a certain amount in the form of SLR

Securities as under:


17

Sr.No. Category of

bank

Minimum SLR holding in

Government and other

approved securities as

percentage of Net Demand

and Time Liabilities (NDTL)

1 Scheduled

banks

24%

2 Non-Scheduled

banks :

a)With NDTL

of Rs.25 crore

& above

25%

b) With NDTL

of less than

Rs.25 crore

25%

II. Supervisory Functions

To ensure that the UCBs conduct their affairs in the interests of the depositors and

also comply with the regulatory framework prescribed by the Reserve Bank of

India, the department undertakes on-site inspection of these banks with frequency

ranging from one to two years depending upon the financial condition / status of

banks. The thrust of supervision is to ensure that banks' affairs are not conducted

in a manner detrimental to the depositors' interest and also to assess the solvency

of the bank vis-à-vis its liabilities, besides examining the banks' compliance with

the existing regulatory framework. The department also undertakes off-site

surveillance of scheduled banks and non-scheduled banks with a deposit base of

`100 crore and above based on a set of quarterly and annual returns.


18

Types of banks

Commercial banks

Public Sector Banks

Private Sector Banks

Foreign Banks

Specialized banks

Central banks Co-operative

Banks

Primary Credit Socities

Central Co-operative Banks

State Co-opeartive Banks

III. Developmental Functions

With a view to extending institutional credit support to tiny and cottage units, the

Reserve Bank of India grants refinance facilities to urban cooperative banks under

the provisions of Section 17 of the Reserve Bank of India Act, 1934. The

refinance is given at the Bank Rate.

Training is imparted to the middle and top management of urban cooperative

banks through College of Agricultural Banking, Pune.

Types of Banks


19

History of GMC Bank

During the first half of the 90‘s, due to liberalization and removal of License Raaj

policy, businessmen and traders of the Gandhidham complex were busy with their

expansion plans. The mercantile community of the town was putting their sincere

efforts and hard earned money in business to cope up with the boom and increased

demands. This was the time when they strongly felt the need of a co-operative bank

that can gear up their smooth financial dealings and uplift the morale of the mercantile

community by standing along with them – always.

“Need is the origin of creation”. True. The Gandhidham Chamber of Commerce &

Industries strongly backup the will of their members. Under the leadership of late Shri

Bhomrajbhai Jagani, the chamber for this mammoth task selected total 15 promoters.

After completion of all the formalities, in reward of their sincere efforts and long

awaited passion, the bank was registered with District Registrar and was issued a

license by Reserve Bank of India during 1994-95, under name & style of ―The

Gandhidham Mercantile Co-Operative Bank Ltd.‖ Finally, the bank started the

operation on auspicious day of Raam Navmi, 09.04.1995, by former chief minister of

Gujarat Shri Sureshchandra Mehta being the chief guest of the opening ceremony.

The intention of sincere, long-term, clear and healthy vision of the promoters was

made clear with the bank being the first co-operative bank in Gujarat, by then, fully

computerized from it‘s very first day of operation. The bank has not turned back since

then. From ―zero‖ in 1995, the bank has crossed commendable milestones in efficient

banking and dedicated customer services. During these seventeen years, the bank‘s

fully satisfied customer-base has crossed the 32,400 mark. The Deposits have crossed

`170 crores and Advances `119 crores mark. Net NPA of the bank has remained NIL

till date. With paid up Share Capital of ` 11.35 crores and total Reserves above ` 33

crores, the bank is enjoying immense and exemplary solidarity and liquidity. Just to

prove this, the bank‘s CRAR has remained 21% as on 31st March 2012 – a long way

ahead of 9% prescribed by RBI. Not only this, with profit of ` 2.02 crores, the bank

has been on top in Gandhidham complex for consecutive year in yearly profits. A

sizable amount, every year, is utilized in charity works of the complex.


20

Also, the bank staff has proved its admirable efficiency with per employee business

has been ` 807.47 lacks, per employee profit ` 13.65 lacks during the last financial

year. What‘s more could be the word of applause, when Reserve Bank of India has

itself praised the all-round progress, performance and financial soundness of the bank

in its audit.

The saga of success doesn‘t end here. The bank is committed to provide efficient,

dedicated and high-tech services to its valued clients. The new building is completed

and customers are being provided state of the art facilities. The banking will be an

enjoyable experience with GMCB. The bank will always lead the banking of the

Gandhidham complex.


21

THE GANDHIDHAM MERCANTILE

CO-OPERATIVE BANK LTD.

CHAIRMAN

VICE-CHAIRMAN

MANAGING DIRECTOR

General Manager

ADVANCE DEPT

Advance MANAGER

ACCOUNT DEPT

Account MANAGER

Loan Officer

Jr. Officer

Assistant Officer

Jr. Officer

Reliever Reliever

Sub Staff Security Staff

S.D.V

COMPUTER DEPT

EDP MANAGER

Jr. Officer

Reliever

Assistant Officer


22

Landmarks

Date Event

18.04.1994 Registered under The Gujarat State Co-Operative Societies Act,

1961, vide No. SA-1932.

16.02.1995 Granted License to commence and carry on banking business by

Reserve Bank of India, vide No. UBD.GUJ.1120 P.

09.04.1995 Commenced operations from ―Neerav Chamers‖, Plot No. 13, Sector

9, Gandhidham – Kachchh (Gujarat) 370 201.

31.03.1996 At the end of the first financial year from it‘s operations, the bank

crossed the remarkable Rs.10 crore Deposits mark.

31.03.1998 At the end of the financial year 1997-98 the bank crossed Rs. 1 crore

Net Profit mark and ` 10 crore Advances mark.

12.04.2002 Granted Permission to accept Trust Deposits, by Legal Department,

Sachivalaya, Gandhinagar, vide Notification No.

BPT/APL/1099/03/305/E

20.08.2003 Shifted into its newly constructed state of the art building ―Bankers‘

Arcade‖ at Plot No. 12, Sector 9, Gandhidham - Kachchh (Gujarat)

370 201.

20.08.2003 Started offering high-tech services like Tele Banking, Mobile

Banking, Touch Screen etc.

20.08.2003 Launched the Web Site of the bank with Web Banking facility


23

METHODOLOGY

Primary data source:

The study was mainly done using discussions with the staff members, talking to

General Manager and through observation.

Secondary data source

Secondary data is mainly collected through different books and magazines as:

Principles & Practices of Banking.

UCB hand book cum diary.

Annual Report, Websites of GMCB.

The Indian bankers & banking frontier magazines.

Website of Reserve Bank of India.


24

Operations of GMCB

Time

Deposits Demand

Deposits

Term

deposits

SDR,CDR,

FDR

Deposits

in form

of SA,CA

Cash

Departme

nt

Cash Payment

Remittance

Clearing

DD & Pay

order

RTGS/NEFT

Transfer

Loans &

Advances

Ancillary

Bilty

Franking Safe

Deposit

Vault

ATM

Deposits


25

Deposits

TYPES OF DEPOSITS NO. OF A/Cs

SB 19269

CA 5233

RD 367

SDR 121

CDR 4691

FDR 361

KDR 5

Deposits

Current Deposit Saving Deposit Term Deposit

SDR

CDR

FDR

RD

unknown Deposits

safe Deposits Vault


26

A deposit account is a current account, savings

account, or other type of bank account, at a

banking institution that allows money to be

deposited and withdrawn by the account holder.

These transactions are recorded on the bank's

books, and the resulting balance is recorded as a

liability for the bank, and represents the amount

owed by the bank to the customer. Some banks

charge a fee for this service, while others may

pay the customer interest on the funds deposited.

Current Deposits

A current account offers various flexible payment methods to allow customers to

distribute money directly to others. Most current accounts come with a cheque

book and offer the facility to arrange standing orders, direct debits and payment via

a debit card.

It‘s mainly for the business group of people. As there daily transactions are quite

often. The bank provides the facility of withdrawing the amount through cheque and

they provide they provide the statement once in a month free of charge.

Current account can be opened by:

Sole proprietorship concerns.

Two or more persons in their joint names.

Partnership concerns.

Hindu Undivided Family.

Limited Company.

Clubs, Societies.

Trusts, Executors, and Administrators.

Other government and semi Government bodies, local authorities.

In GMC bank minimum balance of `1000/- who is not having a ATM card and

minimum of `2000/- should be there else charges of `100 is charged.


27

Saving deposits

Saving accounts are opened to encourage the people

to save and collect their savings. In India, saving

account can be opened by depositing `100 to `500.

The saving account holder is allowed to withdraw

money from the account two times or three times in a

week. The interest which is given on saving accounts

is sometime attractive, but often nominal. At present,

the rate of interest is 4% p.a. in India. The interest rate

varies as per amount of money deposited and its

maturity range. It is also subject to current trend of banking policies in a country.

There is no restriction on the number and amount of deposits.

Current account Amount

2008-2009 ` 16,53,64,537/-

2009-2010 ` 18,69,32,722/-

2010-2011 ` 20,65,86,149/-

2011-2012 ` 24,09,01,292/-

0

50000000

100000000

150000000

200000000

250000000

300000000

2008-2009 2009-2010 2010-2011 2011-2012

AM

OU

NT

YEARS

CURRENT DEPOSIT

CURRENT DEPOSIT


28

0

5,00,00,000

10,00,00,000

15,00,00,000

20,00,00,000

25,00,00,000

30,00,00,000

35,00,00,000

40,00,00,000

2008-2009 2009-2010 2010-2011 2011-2012

AM

OU

NT

YEARS

Saving Deposit

Withdrawals are allowed subject to certain restrictions

The main objective of saving account is to promote savings.

The money can be withdrawn either by cheque or withdrawal slip.

The rate of interest payable is very nominal on saving accounts. At present

it is about 3.50% p.a. in India.

Saving account is of continuing nature. There is no maximum period.

A minimum amount has to be kept on saving account.

No loan facility is provided against saving account.

If a person wants to open saving account he/she has to keep minimum of

`500 balance and if ATM is there than minimum of `1000 should be there. If

amount is less than the said amount than charges upto `100

Saving Deposits Amount

2008-2009 ` 20,90,83,776/-

2009-2010 ` 27,58,00,568/-

2010-2011 ` 33,26,14,787/-

2011-2012 ` 35,54,09,887/-


29

0

50000000

100000000

150000000

200000000

250000000

300000000

350000000

400000000

2008-2009 2009-2010 2010-2011 2011-2012

AM

OU

NT

YEARS

Saving

Current

Recurring

Term deposits

An investment product where a fixed sum of money is deposited into an

account for a set period time with a interest paid over the term

Term deposits is funds deposited in a saving account, the terms of which

impose a financial penalty if funds are withdrawn before a specified date

A separate time deposit receipt is issued every time

The rate of interest for bank fixed deposits depends upon the maturity

period and special rates for senior citizens.

Time deposit is not a negotiable instrument so it cannot be transferred in

favour of the other person.

Interest is credited to the depositors account, every quarterly and if a

person wants monthly than bank provides the interest accordingly.

1. SDR( Short deposits receipt):

Duration for SDR is minimum 15 days and maximum 365 days.

Interest is calculated according to the number of days the deposit is kept.


30

2. CDR(Cumulative deposits receipts):

This term deposit is for more than a year.

Here the interest is calculated on cumulative basis i.e. interest is

calculated on face value plus the interest.

The time period is from 13 months to 72 months.

3. FDR(Fixed deposits receipts):

The deposit more than 365 day‘s period specified by bank can be kept

as fixed deposit.

In fixed deposit the interest calculated is on face value of the receipt.

From 15 days to 12 months are considered

as SDR, while from 13 months and above it

is treated as CRD

Once the FD matures bank waits for 14 days

and after that bank provides the interest rate

of 4% if that particular person renews his

FD else no interest.

If the person withdraws within the specified

time than the penalty would be charged i.e.

1% will be deducted from the interest.

4. Recurring deposits

The Recurring deposit account is an account in the bank where an investor

deposits a fixed amount of money every month for a fixed tenure (mostly

ranging from one year to five years). This scheme is meant for investors who

want to deposit a fixed amount every month, in order to get a lump sum

after some years. The small monthly savings in the Recurring Deposit scheme

enable the depositor to accumulate a handsome amount on maturity.

Interest at term deposit rates is computable on quarterly compounded basis


31

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

2008-2009 2009-2010 2010-2011 2011-2012

AM

OU

NT

YEARS

Recurring deposit

Recurring deposit

Recurring account is a deposit which is intended to inculcate the saving .If the

person pays the first installment in one denomination then till last date he has

to pay the same denomination of installments. And it must be in multiples of

100.

For instance: if a person pays the installments of ` 5000 then till last date he

has to make the payment of 5000 and his installment will be calculated

accordingly.

Recurring deposits Amount

2008-2009 ` 1,27,88,269/-

2009-2010 ` 1,17,04,907/-

2010-2011 ` 1,00,07,146/-

2011-2012 ` 1,19,45,001/-


32

Period

Interest Rate %

Previous General Senior citizen Trust,

Associations &

Societies

15 Days to 29 Days 4% 3.5% 3.5% 3.5%

30 Days to 90 Days 5% 4.5% 4.5% 4.5%

91 Days to 180

Days

6% 6% 6% 6%

181 Days to 12

Months

6.5% 7.5% 7.5% 7.5%

13 Months to 24

Months

7.5% 11% 11.5% 11.5%

25 Months and

above

7.5% 9.5% 10% 10%

TERM DEPOSIT WILL BE ACCEPTED FOR MAXIMUM PERIOD OF 72

MONTHS

Note: Our Bank has decided to waive 1% penalty if any Term Deposit is Premature

and reinvested for better rate of interest till further revision in Term Deposit Rate of

interest from 23/05/2011

Higher Interest Rate for Senior Citizens

Higher Interest in Saving Bank Account

Nominal Account Opening Amount for Saving And Current Account

Quarterly Compounded Interest on Medium and Long Term Deposits

Monthly / Quarterly / Half yearly interest payment facility available (Non-

Cumulative)


33

20%

15%

1%

63%

1%

Saving Account

Current Account

Recurring Account

Term Account

Advance credit balance

Smart kid:

This scheme is especially for minor. The minor is a person who had not attained

the age of 18. A guardian is to be appointed for such amount and the proof of

guardian is required. A special amount is deposited every year by his parents and

a deposits receipt is made every year and given as a gift on the minor‘s birthday

with a greeting card attached to it. The interest rate applicable is same as in other

term deposits with bank.

Unknown deposits:

Bank keeps this type of account when the person has forgotten to enter the

account number or has not written the name so all these type of transaction are

added to this type of account.

Amount in ` % of total

deposits

Saving deposits 355409887 20%

Current deposits 259222271 15%

Recurring deposits 11945001 1%

Term deposits 1097918106 63%

Advance credit balance 9367654 1%

Total 1733862919 100%


34

Cash

Cash & payment department

In order to take the benefit of the service like against

clearing and late timing allowance for deposits most of

the traders in Gandhidham are having their amount

over here. At the end of the day GMC Bank is having

the insurance up to ` 4 crore for keeping the cash as

deposit with themselves any cash above Rs.4 crore will

be deposited with SBI bank.

Everyday a person with higher authority averagely bring amount for payment say ` 2

crore where they make a note of all the amount with denominations how much notes

of `1000 or that of Rs.500.

Payment department is divided into 2 parts below `40000 and above ` 40000. In

above `40000 department instant check takes place of the cheques here one person

verifies the sign at the back and amount and writes the scroll number and passes those

cheque for the verification where a person verifies the signature from the computer

and insert the scroll number, unless the person with authority inserts the scroll number

the transaction will not proceed further after verification of the cheque amount is

payable to the person.

In case of department below Rs.40000 is quite different here that person has the

whole authority where the person is having the responsibility of verifying the

signature and amount to be payable. In the meantime the higher authority person in

order to check the transaction verifies with the voucher in order to know if there is

any mistake or not.

In case of receipt department the person verifier the slip whether of saving or current

account the name and the amount. While calculating the amount they see to it whether

there is any forged note of `500 or 1000, they are also having a particular machine

which helps to identify the forged notes.


35

Many times it so happens that the payment exceeds the amount which they have kept

in the morning of so in order avoid going back to locker room they internally manages

the cash the receipt counter will provide the cash to the payment counter where

receipt person makes the outward entry. Through this way they manage the payment

counter.

OPENING BALANCE

(+) RECEIVED TODAY

TOTAL

(-) PAID TODAY

CLOSING BALANCE

PARTICULAR OF COINS PARTICULAR OF CURRENCY

NO. OF

COINS

DENOMINATION AMOUNT NO.

OF

NOTE

S

DENOMINATION AMOUNT

500 np `1000

200 np ` 500

100 np `100

50 np `50

25 np `20

20 np `10

10 np `5

`2

`1

COINS

TOTAL

CLOSING BALANCE IN WORDS in `

CASHIER/ACCOUNTANT


36

Remittance

Demand Drafts, RTGS & NEFT

Demand drafts and Pay order both are used by individuals to make transfer payments

from one bank account to another. The main difference between them is that while

demand draft is the written order directing the payment to be made to the third party

outside your city while pay order is drawn for the third party within your city. They

both are quite different from cheques in that they don‘t require a signature in order to

be cashed.

Here GMCB bank has got the authority to issue the demand draft of HDFC bank and

Indusind bank where the draft for HDFC is divided into 3 parts below 1 lakh of

denomination above 1 lakh and transfer of balance

Since GMC bank is not nationalized this bank in order to help its customers provide

the facility of RTGS(Real time gross settlement) & NEFT(National electronic fund

transfer). when the amount is Rs 2 lakh then the funds gets transferred through

NEFT, while when amount exceeds Rs2 lakh than the funds gets transferred through

RTGS.

In RTGS, person have to fill the RTGS slip of GMCB and the cheque where his

account number is taken note of .As this bank is not nationalized they provide this

facility through Indusind bank, after filling the RTGS slip of GMCB bank the

customer have to fill the form for the Indusind bank in which amount and account is

being mentioned in the meantime the bank issues the banker‘s cheque in favour of the

Indusind bank. The form along with the cheque is sent to Indusind bank where further

process of the RTGS is done.


37

Sr. no. Details Proposed Charges Charges (`)

1.

DEMAND

DRAFT

CHARGES

Current Saving & OD A/C Unclear

Balance Per `1000/-

Minimum

1.00

10.00

Clear Balance all Gujarat & Mumbai as

per Instrument

10.00

Current Saving & OD A/C clear/unclear

balance as per `1000/-(Places other than

Gujarat & Mumbai)

Minimum

1.00

10.00

DD by cash per `1000/-

Minimum

1.50

10.00

Nationalised bank DD charges (Only of

Indusind Bank)

Payable at GIM per ` 1000/- 0.50 P

Other Station per ` 1000/- 1.50

Minimum Charges 35.00

2. PAY- ORDER

(Gandhidham)

CHARGES

Cash Per ` 1000/- 1.50

Clear/Unclear balance per `1000/- 1.00

Minimum (Even if clear Balance) 10.00

Maximum 100.00

3. RTGS

CHARGES

RTGS ` 2 LAKH TO ` 5 LAKH 25.00

` 5 LAKH AND ABOVE 50.00

4. DD

BY

CASH

MAXIMUM (ADDRESS PROOF

MUST) ONLY ONE DD ON THE ONE

ADDRESS PROOF FOR THE SAME

DATE

49000

NO ADDRESS PROOF REQUIRES ON

DD up to ` 5000

20000


38

RTGS NEFT

Basis Based on gross settlement Based on net settlement

Criteria

Gross settlement is where a

transaction is completed on a

one-to-one basis without

bunching with other

transactions

Deferred Net Basis (DNS), or

net-settlement, this is where

transactions are completed in

batches at specific times

Timing

RTGS, transactions are

processed continuously

throughout the RTGS business

hours.

NEFT settlement takes place 6

times a day during the week days

(9.30 am, 10.30 am, 12.00 noon.

1.00 pm, 3.00 pm and 4.00 pm)

and 3 times during Saturdays

(9.30 am, 10.30 am and 12.00

noon). Any transaction initiated

after a designated settlement

time would have to wait till the

next designated settlement time.

Amount limit Above `2 lakhs then transfer is

done through RTGS.

Up to `2lakhs transfer is done

through NEFT.


39

CHEQUE

Transfer

Stamp & make entry in

software

Authorise by officer & pass

the entry

Local Clearing

Stamp & make entry in

software

present all cheques at SBI clearing house

In return receive

cheques from clearing house

make entry of received

cheques or return

In second clearing present in SBI clearing

house

OBC

Kotak

make entry in OBC sending

print one advise

fill kotak bank's IBC Slip

& send it

Kotak bank a/c Dr.

To party's a/c

BCCB

make entry in OBC sendi ng

print one advise

pay slip & attach with cheques & send it for

clearing

BCCB a/c Dr.

To party's a/c

Direct


print one advise

cheque & advice send

to bank

OBC Adjusment

a/c Dr.

To Party's a/c

Through other co-operative

bank under MA scheme


print one advise

cheque & advice send

to bank

GSC a/c Dr.

To Party's a/c

Clearing department


40

Bank receives all cheques for credit. As soon as cheques are being stamped the

cheques which are of other banks are transferred to the clearing department where

entry of those particular cheques is being done. As soon as entry is being made they

print the report for the same in order to present in the clearing. Since all banks are

having their own individual software so it becomes difficult for the SBI to deal with

them so SBI have the particular software where all bank have to convert their file

according to their formats and then they carry those file in pen drive to SBI at 1‘o

clock if any bank comes late then on that particular day that bank can‘t receive any of

their cheques.

In clearing, all banks have been allotted particular place where regularly they have to

conduct their transactions. Then they exchange the cheques with each other and on a

particular sheet they write about the number of cheques received with the amount in

order to know the amount which they have to pay or receive at the end of the day.

Then all those cheques are brought in our bank and their entry is being passed

(debited to parties account)

1. Before all cheques are taken to SBI clearing house.

SBI a/c Dr.

To Customers/Parties A/c

2. After receiving our cheques

Customers/Parties A/c Dr.

SBI a/c Dr. (cheques return)

To SBI a/c

3. Cheque return charges charged to accounts

Customers/Parties a/c Dr.

To cheques return charges


41

At 4‘o clock again all bank have to meet in order to know if cheques is returned due

to insufficient balance or forged signature etc. Then bank passes the reverse entry all

those cheques returned and bank collect charges for the cheque returned and then they

stick the slip which specifies the reason for the cheque returned and bank calls those

customers whose cheques are being returned.

After second clearing process

1. Cheques returns from other banks

Customer a/c Dr. (cheques return from bank)

To SBI a/c

2. Cheque return charges charged to accounts

Customer a/c Dr.

To cheques return charges

Difference between transfer & clearing

Transfer Clearing

Transfer means same bank‘s instrument Clearing means different bank‘s

instrument

It is deposited into customer a/c within

few minutes It is deposited once in a day.

This is continuous or whole day process This process occurs once in a day

Withdrawal can be done same day Withdrawal can be done next day.

Return of cheques is charged `50/- Return of cheque is charged `100/-


42

Account Type Colour

Saving Green

Current White

Loan/Overdraft Pink

Recurring Light Blue

Demand Draft White with orange

Fixed Deposits White with pink

Franking Machine Yellow

Code Credit/Debit Entries

1 Credit Cash Receipt

2 Credit Clearing Receipt

3 Credit Transfer Receipt

4 Debit Cash Receipt

5 Debit Clearing Receipt

6 Debit Transfer Receipt

Cheques

Transfer Clearing OBC

Bearer

Cheque

Open

Cheque

Stale

Cheque

Postdated

Cheque

Crossed

Cheque

Order

Cheque

Anti-dated

Cheque


43

Bearer Cheque

When the words "or bearer" appearing on the face of the cheque, the

cheque is called a bearer cheque.

The bearer cheque is payable to the person specified therein or to any other

else who presents it to the bank for payment.

However, such cheques are risky; this is because if such cheques are lost,

the finder of the cheque can collect payment from the bank.

Generally bank takes the signature and contact detail of withdrawing

person.

In bearer cheques drawer 2 signatures is required because it indicate that

drawer had given power to withdraw the bearer cheque amount to a cheque

holder.

Order cheque

The word "or order" is written on the face of the cheque, the cheque is

called an order cheque.

Such a cheque is payable to the person specified therein as the payee, or to

any one else to whom it is endorsed (transferred).

Open cheque

When a cheque is not crossed, it is known as an "Open Cheque" or an

"Uncrossed Cheque".

The payment of such a cheque can be obtained at the counter of the bank.

An open cheque may be a bearer cheque or an order one.

The particular name is written on a cheque and it is paid to particular

person only.

Crossed cheque

Crossing of cheque means drawing two parallel lines on the face of the

cheque with or without additional words like "& CO." or "Account Payee"

or "Not Negotiable".


44

A crossed cheque cannot be enchased at the cash counter of a bank but it

can only be credited to the payee's account.

Anti-dated cheque

If a cheque bears a date earlier than the date on which it is presented to the

bank, it is called as "anti-dated cheque".

Such a cheque is valid up to six months from the date of the cheque.

Post-dated cheque

If a cheque bears a date which is yet to come (future date) then it is known

as post-dated cheque.

A post-dated cheque cannot be honored earlier than the date on the cheque.

Stale cheque

If a cheque is presented for payment after six months from the date of the

cheque it is called stale cheque.

A stale cheque is not honored by the bank.


45

MASCODE (Mutual Arrangement Scheme)

MASCODE is an agreement between co-operative banks in Gujarat that they will not

collect commission from member banks. Membership is not compulsory for the

banks. In this arrangement all the banks have to keep their accounts in Gujarat state

co-operative (GSC) bank which is situated at Ahmadabad. All the Banks are given

special account numbers for their recognition and transaction. This arrangement is

specially done for collecting cheques of village area.

Reason for return of cheques

1. Effects not yet cleared, please present

again tomorrow

2. Not arranged for.

3. Drawer‘s signature required.

4. Drawer‘s joint signature required.

5. Refer to drawer.

6. Drawer‘s signature differs.

7. Endorsements required bank‘s guarantee.

8. Alteration requires full signatures of drawer.

9. Cheque is post-dated.

10. Cheque is out of date.

11. Amount in words and figures differs.

12. Crossed cheque is out of date.

13. Amount in words and figures differs.

14. Crossed cheque must be presented through a bank.

15. Advice not received, please present again.

16. Payment stopped by the drawer.

17. Payees separate discharge to the bank required.

18. Date incomplete.

19. Insufficient funds.

20. Account closed.

21. Today clearing stamp required.

22. Not drawn on us.

23. Exceeds arrangement

24. Fund expected, please present

again tomorrow

25. Cheque is incomplete.

26. Cheques are mutilated.

27. Thumb impression authentication

required.

28. Account is frozen.

29. Cheque is crossed by two banks.

30. Any others.


46

Inward bills collection (IBC)

It is a facility given to customers to clear outside cheque in GMCB bank and it

is bank to bank transactions.

In the IBC process GMCB bank clears the cheque given by the local party to

opposite Party. There is no branch of GMCB bank. For Ex: party A is in

Gandhidham given the cheque of GMCB bank to party B in Ahmedabad

.Party B‗s account in AMCB bank then party B send this cheque for clearing

to Gandhidham then its known as IBC for GMCB bank.

When IBC received and entry made and when IBC realised the DD made and

sent to respected bank accordingly.

If the bank is in the MASCODE then we can‘t take commission charges for

DD sent by bank.

When IBC came its entry made manually in the IBC register.in the register

details filled like IBC no. bills received date ,name of draw on(purchaser),bill

no.name of bills sent by(written by), Place bill amount, bill realized date,

details of draft is send, sign and remarks.

When cheque is return it is written in the register.

A charge for returning IBC is same as in the OBC.

Outward bills collection

Once cheques are received and if it is not local then OBC stamped is on the

cheque.

Entries are made in the computer, details like: banks name, city name, banks

code, commission charges, postage charges, document number, document

amount etc.

After entries are made then endorsement stamps are stamped behind the

cheque.

Authorization of cheques is done by officer.

The GMCB is having tie up with Kotak Mahindra, Bhuj Mercantile Co-

operative Bank, etc.


47

OBC number is on the cheque and on the voucher so that whenever customer

needs any information then with the help of that number information is

provided.

According to the tie-up with banks, cheques and statement are sent.

If cheques are passed then payments are made in 3 ways:

Advised

Account payee

Demand Draft.

Gujarat state co-operative

If cheque is of co-operative bank and having tie-up with Gujarat state co-

operative (mutual arrangement scheme code) then advised is received from

Gujarat state co-operative and no commission and postage is charged.

OBC cheque amount (`) Postal

Charges

UPTO `10,000/- 50

ABOVE `10,000/- AND UPTO

`1,00,000/-

100

ABOVE `1,00,000 150


48

Billty

It is a one kind of service provided by bank to its customers for safeguard in the

transaction with outside party at different place(it just like guarantee) given to

outside party on behalf of customers.

Steps in BILLTY

When BILLTY comes entry is made in the computer and details filled like

party name, lorry no., transporters name, interest rate/discount, drawee name,

sender part name, address, place and date etc.

Bank given intimate to buyers.

When buyer comes to bank and make the payment then BILLTY is realized.

After payment is made all the documents given to them.

As per supplier‘s convenience bank sends the payment.

If payment is not made, within the period then BILLTY is send back to

supplier.

Charges for BILTY

Up to ` 10,000 – not exceeding ` 50 per instrument

` 10,000 to ` 1 lakh – not exceeding ` 100 per instrument

` 1,00,000 and above – not exceeding ` 150 per instrument

Under ‗The Payment and Settlement Systems Act, 2007’ (the Act, in short)

which has come into force with effect from August 2008. Under the said Act, RBI

is required to provide regulations and supervision as stated in Section 10 of the

Act. Further, under Section 18 of the Act, the RBI may, if it is satisfied that for the

purpose of enabling it to regulate the payment systems or in the interest of

management or operation of any of the payment systems or in public interest.

RBI recently benchmarked the collection charges for outstation cheque. The all-

inclusive charges4 recommended by RBI are (as mentioned above in 2007 act): –

o Up to ` 10,000 – not exceeding ` 50 per instrument.

o ` 10,000 to ` 1 lakh – not exceeding ̀ 100 per instrument.

o ` 1,00,000 and above – not exceeding ` 150 per instrument.


49

Franking

It is an ancillary service given by bank to its customers.

It is process of stamping approved by government and bank works on

behalf of government. It is used on an option of stamp paper.

It is done on various documents such as special power of attorney, share

transfer, various agreement, foreign bills, broker note, insurance notaries,

customs, excise, affidavit etc.

License of franking can be issued by state registrar from Gandhinagar &

this service has been given by GMCB to its customer since last four years.

Franking machine worth of `2,00,000 & the machine were purchased from

‗Pitney Bowes‘ company. For this facility bank have installed ‘Hyper-

terminal’ software from Pitney Bowes Company.

Recharge of franking is done in multiple of `20 lakhs. Every 2-3 week

when bank recharges balance for franking, bank receives 1% as

commission from recharge and it is received from treasury office situated

at Bhuj.

On an average expense of `25,000 is incurred for the purpose of franking

(including ribbon charges, salary of clerk etc.)

Franking required renewal at every year for this physical verification done

at (deputy collector office) in Bhuj. After verification process whole detail

is submitted to state register.

If any customer required cancelling the franking after made franking to

any document. He / She has to come to bank and bank given the

cancellation letter on behalf of customer and customer has to submitted all

the document including duly stamp receipt to the collector office at Bhuj.

After submitting required document deputy office the 10% deducted from

the original amount as a cancellation charges.

Document on which franking is to be done must be blank i.e. it should not

be signed. It is mandatory for the interest of customers and to prevent the

fraud.


50

Safe deposits vault

A safe deposit box, also called a safety deposit box is an individually-secured

container, usually held within a larger safe or bank vault. Safe deposit boxes are

generally located in banks, post offices or other institutions. Safe deposit boxes are

used to store valuable possessions, such as gemstones, precious metals, currency,

marketable securities, important documents such as wills, property deeds, and birth

certificates, or computer data storage that need protection from theft, fire, flood,

tampering or other reasons. In the typical arrangement, a renter pays the bank a fee for

the use of the box, which can be opened only with production of an assigned key, the

bank's own guard key, the proper signature, and perhaps a code of some sort. Some

banks additionally use biometric dual-control security to complement the

conventional security procedures.

Documents: In GMC bank there are 2209 lockers for verification they maintain

register where signature of the particular person is there and his/her photograph is also

attached with that document. When a person comes to open his locker they verify the

signature with his/her photograph.

Slabs of lockers: her-e person has to make a deposits of different denomination

according his size of lockers as if for

Small lockers: deposits of `7000/-

Semi medium size : `12000/-

Medium size: `15000/-

Large size: `20000/-

Closing of locker: when a person wants to close his particular locker than he has to fill

the form for cancellation and the amount of the deposits will be deposited in his

account


51

About Share Capital

1. Authorized share capital:

The number of stock units that a publicly traded company can issue as stated in its

articles of incorporation, or as agreed upon by shareholder vote. Authorized share

capital is often not fully used by management in order to leave room for future

issuance of additional stock in case the company needs to raise capital quickly.

Another reason to keep shares in the company treasury is to retain a controlling

interest in the company. The Authorized capital of GMC bank is around `15 crore

i.e. 15 lakh shares of `100/- each.

2. Paid up capital:

The amount of a company's capital that has been funded by shareholders. Paid-up

capital can be less than a company's total capital because a company may not

issue all of the shares that it has been authorized to sell. Paid-up capital can also

reflect how a company depends on equity financing. Paid up capital of GMC bank

is around `11.298 crore.

3. Transfer of shares:

Shares can be transferred from members to members only. There are overall 4988

members, while transferring the shares a person can‘t transfer all his shares he has

to keep minimum single share with himself else he might lose his membership

Death case transfer:

Nominee is being given the shares if the death of the members accurse.

Totally share transfer:

If a person wants to leave his membership than he has to transfer all his share

to other old members.

Share transfer to blood relation:

o If a person transfers his share within his blood relation than he has to

‗Totally‘ transfer all his shares.


52

4. Dividend:

A cash payment financed by profits that is designed by a company‘s board of

directors to be distributed among shareholders.

GMC bank provides the dividend at the rate of 15% to their shareholders and

provides gift to the share-holders according to the shares

Few benefits enjoyed by the members:

Bank is having a tie up with ‗ALL NEW INDIA INSURANCE‖ for

accidental insurance of share members. Bank provides the sum of Rs1

Lakh to his nominee if a person dies during accident for this post-mortem

report, FIR, Death certificate are required.

‗Shradha Suman‘: If a person dies than bank provides a sum of Rs10,000

is being given to his nominee, if not claimed within six months than he

will not be entitled for the claim.

If a shareholders children secures 1st,2

nd or 3

rd rank in 10

th ,12

th,

graduation, post-graduation or sports in national or state level than he will

be awarded with the certificate ,shield or trophy.

They are having a tie-up with sterling hospital where free health check-ups

for share-holders of age 50 or above are validate.

Members are provided with the dividend at the rate of 15%, while gifts are

also distributed among the share holders.

Charges:

Duplicate share certificate charges: `10/- per certificate

Share transfer fee: `1/- per share

Membership fees: `10/- is taken at the time of allotment of shares.

`10/- for new membership fees.

Stamp-paper charges of `100/-

`25 for issuing share certificate.


53

Bank Gurantee

financial

Non-Financial

Bank Guarantee:

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

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

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

Guarantees are important instruments used to minimize the risks that are involved in

commercial contracts. For the enforcement of ordinary guarantees, as construed

dependence of the guarantee on the main contract may lead to unnecessary disputes

and litigation, arising from the main contract. These disputes may have a material

effect on the guarantee, thereby blocking funds in litigation. Hence, there was a need

for an innovative instrument which would enable the guarantee to serve its original

purpose; namely, providing a form of security.

The bank guarantee is one such innovative financial instrument whereby, if the

beneficiary perceives that there has been a breach of contract by the other party, he

can encash the guarantee and avail of the amount immediately, without having to

undergo the hassles of litigation. Thus, the relevance of a bank guarantee achieves

relevance.


54

Financial Guarantee: it‘s a contingent liability. Here bank pays the third party if a

customer of GMCB is defaulter; bank takes 100% security in form of fixed deposits

from the customer. They charge 0.65% for the transaction.

Non-financial Guarantee: here bank just assures the credit worthiness of the customer

to the third party here they are not liable to the third party.


55

Know your customer (KYC)

KYC is typically a policy and process implemented to conform to a customer

identification program mandated under the Bank Secrecy Act. Know your

customer policies are becoming increasingly important globally to prevent identity

theft, financial fraud, money laundering and terrorist financing.

Objectives:

The objective of know your company guidelines is to prevent banks from being

used, intentionally or unintentionally, by criminal elements for money laundering

activities. Know your company procedures also enable banks to know/understand

their customers and their financial dealings better which in turn help them manage

their risks prudently. Banks should frame their KYC policies incorporating the

following four key elements:

Customer Acceptance Policy;

Customer Identification Procedures;

Monitoring of Transactions; and

Risk management.

For the purpose of KYC policy, a ‗Customer‘ may be defined as :

a person or entity that maintains an account and/or has a business relationship

with the bank;

one on whose behalf the account is maintained (i.e. the beneficial owner);

beneficiaries of transactions conducted by professional intermediaries, such as

Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the

law, and

Any person or entity connected with a financial transaction which can pose

significant reputational or other risks to the bank, say, a wire transfer or issue

of a high value demand draft as a single transaction.

Customer identification:


56

The objective of the KYC framework should be two fold (a) to ensure customer

identification and (b) to monitor transaction of the suspicious nature. Banks

should obtain all information necessary to establish the identity/legal existences of

each new customer themselves. Typically easy means of establishing identify

would be documents are not available.

Documents:

1. For Individuals.

Documents Accepted as a proof of

identity

Documents accepted as proof of

residence

1 Passport 1 Credit Card Statement

2 Voter ID Card 2 Salary Slip

3 Pan Card 3 Income/Wealth tax assessment

4 Government/Defence ID Card 4 Electricity Bill

5 ID cards of reputed employers 5 Telephone Bill

6 Driving License 6 Bank account statement

7 Pension Payment Orders (Govt/PSUs) 7 Letter from reputed employer

8 Photo ID cards issued by Post Office 8 Ration card

9 Photo identity cards issued to bonafide

students of universities/institutes

approved by UGC/AICTE

9 Letter from any recognized public

authority

10 Pension Payment Orders (Govt/PSUs)

11 Voters ID cards

12 Copies of Registered Leave and License

agreement/sale deed/lease agreement

(ANY ONE OF THE ABOVE) (ANY ONE OF THE ABOVE)


57

For Companies

1 Name of the company 1 Certificate of incorporation and

Memorandum & Articles of

Association

2 Principal places of business 2 Resolution of the Board of

Directors to open an account and

identification of those who have

authority to operate the account

3 Mailing address of the company 3 Power of Attorney granted to its

managers, officers or employees

to transact business on its behalf

4 Telephone/Fax Number 4 Copy of PAN allotment letter

5 5 Copy of the telephone bill

For Partnership

1 Legal Name 1 Registration certificate, if registered

2 Address 2 Partnership deed

3 Names of all partners and their

address

3 Power of Attorney granted to a partner or

an employee of the firm to transact

business on its behalf

4 Telephone numbers of the firm and

partners

4 Any officially valid document identifying

the partners and the persons holding the

Power of Attorney and their addresses

5 5 Telephone bill in the name of

firm/partners


58

For Trust and founders

1 Names of trustees, settlers,

beneficiaries and signatories

1 Certificate of registration, if

registered

2 Name and addresses of the

founder, the managers/directors

and the beneficiaries

2 Power of Attorney granted to

transact business on its behalf

3 Telephone/fax numbers 3 Any officially valid document to

identify the trustees, settlers,

beneficiaries and their addresses

4 4 Resolution of the managing body

of the foundation/association

5 Telephone bill of directors

DICGC (Deposits insurance and credit Guarantee Corporation)

Deposit Insurance and Credit Guarantee Corporation Act 1961

DICGC is a wholly owned subsidiary of the Reserve Bank

of India.

Since 1962, it is engaged in providing deposit insurance for

depositors of banks against loss of part or all of their

deposits arising from bank failures.

Deposit Insurance is compulsory as well as automatic for

the bank and thus no bank can remain uninsured by the DICGC except those

cooperative banks where the concerned State Governments are yet to pass the

required legislation.


59

Types of Deposit Covers

The Corporation insures all bank deposits, such as savings, fixed, current, recurring,

etc. except the deposits of

Foreign Governments;

Central/ State Governments;

State Land development Banks with the State co-operative banks; as also

Inter-bank deposits

Deposits received outside India and

Deposit specifically exempted by the Corporation with the previous approval

of The Reserve Bank.

Banks insured under DICGC

Bank failures are rare, but not unknown. But what happens to the depositors

money if banks gets liquidate. The comforting part is that deposits are insured. An

organisation by the name Deposit Insurance and Credit Guarantee Corporation

(DICGC) administers this insurance scheme

As of now, all commercial banks, branches of foreign banks, regional rural banks

and co-operative banks are covered by the DICGC. The coverage is expansive as

most banks we normally deal with in our day-to-day life are covered. Bank

deposits — savings, fixed, current, recurring, etc, are all covered. However, the

DICGC only covers deposits payable in India.

The deposit insurance premium is borne by the bank. It is important to note

though that registration of an insured bank with the DICGC can be cancelled if the

bank fails to pay the premium for three consecutive half periods. In such a case, if

the DICGC withdraws the cover, it notifies the public through newspapers.

Watch out for the limit — the most important thing is that the deposits of each

depositor are insured up to a maximum amount of Rs 1 lakh. This limit includes

both the principal and accrued interest. But, if they together add up to more than

the specified amount, a maximum of Rs 1 lakh will be paid.


60

Same bank, different accounts doesn‘t help — the scheme details clearly point out

that deposits kept by one person in different branches of one bank are aggregated

and only a cumulative amount of Rs 1 lakh is payable. So, it might not help if you

have more than Rs 1 lakh in your own individual name in different branches.

This also means that your savings account and all your FD accounts in one bank

are aggregated as they are, in bank jargon, held in ‗same right and capacity‘. But,

if you hold an individual account and a joint account in the same bank, they are

considered to be in ‗different right and capacity‘ and are separately covered.

Spread over different banks - Thus, with what has been mentioned above, if you

are going to have more than Rs 1 lakh cumulatively in your name, it may be better

to spread it over different banks. Deposit insurance coverage applies separately to

deposits in each bank.


61

CREDIT CONTROL

Credit Control is an important tool used by the Reserve Bank of India, a major

weapon of the monetary policy used to control the demand and supply of money

(liquidity) in the economy. Central Bank administers control over the credit that the

commercial banks grant. Such a method is used by RBI to bring ―Economic

Development with Stability‖. It means that banks will not only control inflationary

trends in the economy but also boost economic growth which would ultimately lead to

increase in real national income with stability. In view of its functions such as issuing

notes and custodian of cash reserves, credit not being controlled by RBI would lead to

Social and Economic instability in the country.

Objectives of Credit Control

Credit control policy is just an arm of Economic Policy which comes under the

purview of Reserve Bank of India, hence, its main objective being attainment of high

growth rate while maintaining reasonable stability of the internal purchasing power of

money. The broad objectives of Credit Control Policy in India have been to

Ensure an adequate level of liquidity enough to attain high economic

growth rate along with maximum utilization of resource but without

generating high inflationary pressure.

Attain stability in exchange rate and money market of the country.

Meeting the financial requirement during slump in the economy and in the

normal times as well.

Control business cycle and meet business needs.

The four letters comprising of the word RISK define its features.

R = Rare (unexpected)

I = Incident (outcome)

S = Selection (identification)

K = Knocking (measuring, monitoring, controlling)


62

Credit risk

It is an investor's risk of loss arising from a borrower who does not make payments as

promised. Such an event is called a default. Investor losses include lost principal and

interest, decreased cash flow, and increased collection costs, which arise in a number

of circumstances.

Market risk

It is the risk that the value of a portfolio, either an investment portfolio or a trading

portfolio, will decrease due to the change in value of the market risk factors. The four

standard market risk factors are stock prices, interest rates, foreign exchange rates,

and commodity prices. The associated market risks are:

Interest Rate Risk

It‘s the potential loss from the unexpected changes in the interest rate which can

significantly alter the profitability of the bank

Operational risk

―The risk of loss resulting from inadequate or failed internal processes, people and

systems or from external events‖

This definition includes legal risk, but excludes strategic and reputational risk.

Operational risk indicators attempt to identify potential losses before they happen.

Some indicators are applicable to specific organizational units (for example,

transaction volumes and processing errors)


63

CRAR: BASEL 2 mandates capital to risk weighted assets ratio(CRAR) of 8% and

TIER 1 capital of 6%. The RBI has stated that Indian banks must have a CRAR of

minimum 9%, effective march 31, 2009. All private sector banks are already in

compliance with BASEL 2 guidelines as regards their CRAR as well as TIER 1

capital. Further, the government of India has stated that public sector banks must have

a capital cushion with a CRAR of at least 12% higher than the threshold of 9%

prescribed by RBI.

Capital to risk weighted assets ratio (CRAR) is also known as capital adequacy ratio

which indicates a bank‘s risk taking ability. The RBI uses CRAR to track whether a

bank is meeting its statuary capital requirements and is capable of absorbing a

reasonable amount of loss.

CRAR= (TIER 1 Capital +TIER 2 Capital)/Risk Weighted Assets.

Capital funds are broadly classified as TIER1 and TIER2 capital. Two types of capital

are measured: tire 1 capital, which absorbs losses without a bank required to cease

trading, and TIER 2 capital, which absorbs losses in the event of winding up and so

provides a lesser degree of protection to depositors.

TIER 1 capital is the most reliable form of capital the major components of TIER 1

capital are paid up equity share capital and disclosed reserves viz. statuary reserves,

general reserves, capital reserves(other than revaluation reserve) and any other type of

instruments notified by the RBI as and when for inclusion in TIER 1 capital. Example

of TIRE1 capital is common stock, preferred stock that is irredeemable and non-

cumulative, retained earnings.

Tire2 capital is a major of bank‘s financial strength with regards to second most

reliable forms of financial capital. It consists mainly of undisclosed reserves,

revaluation reserves, general provision, subordinated debt, and hybrid instruments.

This capital is less permanent in nature.


64

Capital AMT Risk Weightage Amt(in lakhs)

Tire 1

Capital 1129.85

Statuary reserve 900.45

Other reserves 358.65

Surplus(profit & loss) 50.62

Total 2439.67

Tire 2

Investment fluctuation

fund

34.50

Provision against risk

(total risk 1.25%)

160.84

Revaluation Reserve 277.02

Total 472.36

Add: Guarantee

issued

240.24

Less: FD Lien

240.20

- -

Total 2912.03

Particulars Amount in lakh

Other reserves

Charity reserve 8.32

Building reserve fund 323

Staff Reserve fund 6.57

Member welfare fund 12.09

General reserve fund 8.67

Total 358.65


65

Risk Amt (in ` lakh) Risk weightage

(in %)

Amt (in ` lakh)

Cash in hand 281.91 0.00 0.00

Current A/C

balance

457.69 20 91.54

Govt. security 4411.43 2.50 110.28

Other deposits 3173.82 20 634.76

Non SLR Bonds 503.55 102.5 516.14

Other investments 0 20 0

Staff loan 60.79 20 12.16

General housing

loan

77.34 50 38.67

Other advance-

BDDR provision

10557.48 100 10576.82

Premises 785.35 100 785.35

Furniture 82.35 100 82.35

Other assets 19.19 100 19.19

Total 12867.26

Particulars Amount (`)

Total advances 1203999968

Less

BRRD 30752825

FDO 86496974

KDO 864

OGS 114904

LFD 16786549

LGS 281604

GHL 5800986

Staff 6083532

Total 1057681731


66

Statement submitted to State & District registrar

Monthly & Quarterly

Loan and Advances given to the director(section 115-c to j)

About investment done by bank( in any other banks and government

securities section 115-c to j)

Statement showing security under Securitization Act under Section 159-

160

Statement of NPA Account

Statement showing recovery done by recovery officer

Details regarding recovery under one time settlement scheme

Details about deposit set off

Golden Goal

Statement showing the filling of case to the police for any fraud in the

bank

Target particular

Statement showing details regarding insurance paid on deposit.


67

Non-Performing Assets

Non-performing assets: Non-performing assets can be identified as a loan where the

lender has some or is experiencing difficulties in obtaining repayment irrespective of

time frame. The outcome could be the loss of the capital. In other terms NPA is

defined as:

Interest and or installments of principal remains overdue for a period of more

than 90 days in respect of term loan.

The account remains out of order in respect of an overdraft/cash credit.

The bill remains overdue for a period of more than 90 days in the bills

purchased and discounted.

Impact of NPA:

They require provision.

Borrowing cost of resources locked in NPAs

Enhance administrative, legal, and recovery cost.

Reduces profitability substantially

Affects the morale of the employees and decision making for fresh loan

suffer.

Types of assets and their provision:

1. Standard assets: these are the assets which do not have any problem are less

risky.

2. Sub-standard assets: These are the assets which come under the category of

NPA for the period of les

3. Less than 12 months.

4. Doubtful assets: these are NPA exceeding 12 months.

5. Loss Assets: these NPA which are identified as unreliable by internal

inspectors of bank or by the RBI and chances of recovery are NIL.


68

Standard assets: the assets which can be realized to its full value and does not

disclose any problem and do not carry more than the normal risk attached to the

business.

o Sub-standard assets: With effect from March 31, 2005 an asset would be

classified as sub-standard if it remained NPA for a period less than or equal to

12 months. In such cases, the current net worth of the borrowers/ guarantors or

the current market value of the security charged is not enough to ensure

recovery of the dues regularly to the banks. In other words, such assets will

have well defined credit weaknesses that jeopardise the liquidation of the debt

and are characterized by the distinct possibility that the banks may sustain

some loss, if deficiencies are not corrected.

An asset where the terms of the loan agreement regarding interest and principal have

been re-negotiated or rescheduled after commencement of production, should be

Satisfactory performance under the re-negotiated or rescheduled terms. In other

words, the classification of an asset should not be upgraded merely as a result of

rescheduling, unless there is satisfactory compliance of this condition

Provision for NPA:

Assets classification % of provision to be made

Standard Assets 0.40%

Sub Standard assets 10%

Doubtful assets

1. On liability covered by ECGS

2. On second liability

Doubtful up to 1 year

Doubtful for above 1 year

but less than 3 year

Doubtful above 3 years

3. On unsecured liability

NIL.

20%

30%

50%

100%

Loss 100%


69

Doubtful Assets

With effect from 31.03.2004, an Assets is required to be classified as doubtful, if

it remains in the sub-standard category for 18 months. As in the case of sub-

standard assets, rescheduling does not entitle the bank to upgrade the quality of an

advance automatically

A loan classified as doubtful has all the weakness inherent as that classified as

sub-standard, with the added characteristics that the weakness make collection or

liquidation in full, on the basis of currently knows n facts, condition and values,

highly questionable and improbable

Note: with the effects from 31 march 2005, an assets would be classified as

doubtful if it remained in the sub-standard category for 12 months. Banks are

permitted to phase the consequent additional provisioning over a four-year period

commencing from the year ended 31 march 2005, with a minimum of 20 per cent

each year.

Loss Assets

A loss assets is one where loss has been identified by the bank or internal or

external auditors or by the co-operative department or by the Reserve Bank of

India inspection but the amount has not been written off, wholly or partly. In other

words, such an assets is considered un-collectible and of such little value that its

continuous as a bankable assets is not warranted although there may be some

salvage or recovery value.


70

CRR (Cash Reserve Ratio)

Banks in India are required to hold a certain proportion of their deposits in the form of

cash. However, actually Banks don‘t hold these as cash with themselves, but deposit

with Reserve Bank of India (RBI), which is considered as equivalent to holding cash

with RBI. This minimum ratio (that is the part of the total deposits to be held as cash)

is stipulated by the RBI and is known as the CRR or Cash Reserve Ratio.

Thus, when a bank‘s deposits increase by Rs100, and if the cash reserve ratio is 6%,

the banks will have to hold additional Rs.6 with RBI and Bank will be able to use

only Rs.94 for investments and lending / credit purpose. Therefore, higher the ratio

(i.e. CRR), the lower is the amount that banks will be able to use for lending and

investment. This power of RBI to reduce the lendable amount by increasing the CRR

makes it an instrument in the hands of a central bank through which it can control the

amount that banks lend. Thus, it is a tool used by RBI to control liquidity in the

banking system. The main purpose to maintain CRR is to protect the depositors.

Every co-operative bank has to maintain CRR as a percentage (as mentioned by RBI)

of Net demand & Time liability of last Friday of the second preceding fortnight and

SLR.

Currently, Co-operative banks have to hold 3% of Net demand & Time liabilities as

on last Friday of the second preceding fortnight. So, every urban co-operative bank is

required to maintain daily and if such Friday is a public holiday then calculate NDTL

(Net Demand & Time Liabilities) for preceding d ay.

Non-scheduled banks should ensure to maintain the required cash reserve and submit

the prescribed return along with Appendix I within the stipulated time to the

concerned Regional Offices. Failure to submit the Return in time attracts the

provisions of section 46(4) of the BR Act, 1949 (AACS), and the banks are liable to

imposition of penalties as indicated therein. The banks should, therefore, in their own

interest ensure that the stipulations of the section 18 of the BR Act, 1949 (AACS)

referred to above are strictly adhered to.


71

Demand Liabilities:

It include all liabilities which are payable on demand and they include current

deposits, demand liabilities portion of savings bank deposits, margins held against

letters of credit/guarantees, balances in overdue fixed deposits, cash certificates

and cumulative/recurring deposits, outstanding Telegraphic Transfers (TTs), Mail

Transfer (MTs), Demand Drafts (DDs), unclaimed deposits, credit balances in the

Cash Credit account and deposits held as security for advances which are payable

on demand. Money at Call and Short Notice from outside the Banking system

should be shown against liability to others.

Time Liabilities:

Time Liabilities are those which are payable otherwise than on demand and they

include fixed deposits, cash certificates, cumulative and recurring deposits, time

liabilities portion of savings bank deposits, staff security deposits, margin held

against letters of credit if not payable on demand, deposits held as securities for

advances which are not payable on demand.

Bank calculates & manages CRR reports as per following.

LIABILITIES

(a)Demand liabilities

I. Current deposits

II. Saving deposits (60%)

III. Borrowings

IV. Other demand liabilities

Total

(b)Time liabilities

V. Current deposits

VI. Saving deposits (40%)

VII. Borrowings

VIII. Other demand liabilities

Total

Total Liabilities

ASSETS


72

(a)Total of credit balances in current accounts maintained

with SBI, Subsidiary bank, & new banks.

(b) total of other assets with the banking system

I. Balances in all accounts other than those included in

total assets

II. Money at call and short notices

III. Advances

IV. Any other assets

Total Assets

Total of demand and time liabilities for the purpose of

section 18 & 24.

Cash in hand.

Balance in current A/C

(a) RBI

(b) State co-op bank of India

(c) District central co-op Bank

Total

(vii) Balances of all other bank of state.

(a) state Co-op bank of the state

(b) District central co-op of bank

Total of (vii)

(viii) Net balance in current account(iiia-i.a.i)

Part B and C

(IX) CRR required to be maintained (prescribed % of iv as on

last Friday of the preceding fortnight)

(X) Cash reserve actually maintained

(XI) SLR required to be maintained (prescribed % of iv as on

last Friday of the preceding fortnight)


73

(XII) SLR Actually Maintained

(a)cash and other balance maintained(x-ix+vii)

(b)Gold

(c)unencumbered approved securities

Total (XII)

Cash reserve to be maintained

Cash in hand

(a)Balances in accounts

I. RBI

II. SBI

III. Central cooperative bank

Total of credit balances in current accounts maintained with

SBI, Subsidiary bank, & new banks

SLR to be maintained

Gold

Cash and other balances maintained in India

Approved securities

Notes:

Demand Deposits:

Current deposits: current deposits + advances credit balance.

Borrowings: it does not include those borrowings against which any fixed

deposits is kept.

Saving Deposits: 60% of saving deposits.

Time deposits:

Fixed deposits: it includes all the deposits related to SDR, CDR, KUBER

DEPOSITS, and FDR.

Other time liabilities: includes interest payable for SDR.

Saving deposits: 40% of saving deposits.

Gold: since they are not having gold so they take the amount of government

securities. Cash and other balance: Amount with bank + the balance of CDR.


74

Appendix 1

Monthly statement showing the daily position of maintenance of

Cash Reserve under Section 18 of the Banking Regulation Act, 1949

(As applicable to Co-operative Societies) during the Month of _________

[Applicable to Non-Scheduled Primary (Urban) Co-operative Banks]

[Vide paragraph 4.3]

Name of the Bank :

(Rupees rounded off to the nearest Thousand)

Date

Amount of Cash Reserve

Deficit Surplus Remarks Required to be

maintained

Actually

maintained

1 2 3 4 5 6 7

1

2

3

4

….

…..

27

28

29

30

31

Signature of CEO :

Name :

Designation :


75

Statutory Liquidity Ratio (SLR)

Every Bank has to maintain, at the end of the day, minimum portion of their net

demand & Time liabilities as liquid assets in form of

a) Cash maintained in India,

b) Gold or government securities &

c) Unencumbered approved securities.

The ratio of liquid assets to demand & time liabilities is called statutory liquidity

ratio. The ratio should not be less than 25 percent of NDTL & greater than 40 percent

of NDTL.

Cash maintained in India includes any excess balance maintained over and above

CRR requirement, any cash or balances maintained in India by a co-operative bank,

with itself or with the state co-operative bank of the state concerned, or by way of net

balance in the current accounts and, also any balances maintained with central co-

operative bank of the district concerned.

As per RBI rules banks have to submit following statement every fortnight.


76

Statement of Valuation of SLR Securities

(Fortnight ended Friday ________)

[Vide paragraph 5.7]

Name of the Bank :________________________________________________

( ` in Lakhs up to two Decimals)

Particulars Face Value Book Value Depreciation

Held

Net Value for

SLR Purpose (2-

3)

Part I 1. 2. 3. 4.

Government Securities

Opening Balance

Addition during the fortnight (+)

Deduction during the fortnight (-)

Closing Balance (a)

Part II

Other Approved Securities

Opening Balance

Addition during the fortnight (+)

Deduction during the fortnight (-)

Closing balance (b)

Total (a+b)


77

Loan Department

What is Loan? – It is an arrangement in which a lender gives

money or property to a borrower and the borrower agrees to

return the property or repay the money, usually along with

interest, at some future point in time.

Bank is the main source to provide loan to their customers but

in case of co-operative banks, they provide loans to only their

members (Shareholders)

Following are the documents that members have to present

along with application form to bank to get a loan.

1. Application form

a. Copies of registration Certificate of Firm & Partnership Deed

b. Audited Balance sheets of last three years

c. Income Tax Assessment orders of last year with copy of individual

income tax return

d. In case of private limited company or limited company, Memorandum

of Association or Articles & Registration Certificate

e. Certificate of immovable properties of Individual partners & Directors

f. Stock Statements / List of Debtors / List of machineries

g. Copies of Small Scale Industries Certificate

h. Particular of firm‘s business place (License etc. )

i. Share Certificates

j. Passport size photographs

k. Copy of Pan Card / Ration Card / Driving License

Types of OD

1. Cash Credit against Hypothecation:

2. Cash Credit against Book Debts

3. OD against fixed deposit

4. OD against general housing


78

5. OD to staff

6. Clean cash credit

7. OD against Real Estate

Types of Loan

1. Loan against Fixed Deposit (LFD)

2. Machinery Loan

3. Consumer Loan

4. Social Loan

5. Clean cash loan

6. Vehicle loan

7. Staff housing Loan

8. General Housing Loan

Application form contains information regarding a firm or a company who has

borrowed loan & also purpose for borrowing loan, nature of advance, information

about collateral security (if loan amount is above Rs.2 lakh), guarantors.

If a member has taken a loan from any other bank then he/she has to declare in

application form from where & of what amount of loan has been granted to him. In

case of hypothecation loan, a member has mention complete detail of purchase &

sales.

To cheque the credit worthiness of customers bank has verifies 7 C

Character: You must be comfortable with the borrower's integrity and confidence in

his willingness to repay you. Have you met the customer? What is his reputation in

the community? Is he an upstanding guy or is he a dead beat? You may consider

checking references with other business-owners with which the customer does

business.

9. Real Estate Loan

10. Education Loan

11. Festival Advances


79

Credit History: No financial institution would ever loan money to an applicant

without first checking his or her credit history. As a potential creditor, you also have

the legal right to obtain the borrower's credit report and examine it in determining

whether or not you can risk extending the credit. Always tell the customer you will be

checking his credit report and get written permission before actually doing so.

Career History: Ask about the borrower's business. Is it a successful business

venture? Has he been in it for a while? Has he had failed business ventures in the

past? His past successes or failures may be determinative of his future business

success.

Capacity: In what capacity is your credit going to be used in his business? Is it part of

his inventory? Will the use of your goods enable him to generate sufficient funds to

repay you and any other creditors? You may consider going over his inventory

records with him. The faster he moves his inventory, the more likely his business is a

success. And the more likely he will be coming back to order from you again soon.

Capital: What is the borrower's financial net worth? A customer with a positive net

worth can survive low cash flow times in his business and still pay your invoices.

Collateral: You may consider extending only "secured credit." This usually means

having the customer pledge real estate or his inventory on a UCC in exchange for

your providing the credit. If he defaults on the loan, you get the pledged property. Just

make sure the property hasn't been pledged before, or you'll have to get in line if the

customer defaults.

Conditions: Always make sure the conditions of the sale are clear and in writing,

signed by the borrower.


80

Types of Loan

Unsecured Loans & Advances

SOL

COM

TOD

CCL

CSL

EDL

Secured Loans & Advances

LOAN

EDL

LFD

GHL

LGS

REL

VHL

MSL

SHL

OVERDRAFT & CASH CREDIT

SOD

HYP

BKD

FDO

CCC

GHO

REO


81

This includes payment dates and amounts. If he defaults on any of the conditions,

your collection efforts will go much more smoothly if the conditions of the credit are

clear.

Collections. Bear in mind your own receivables. If your cash flow isn't what it needs

to be, you may not be able to afford extending more credit at this time. Remember

that your customers' overdue accounts with you significantly impact your own

company's creditworthiness.


82

Loan Application

Below upto 10 lakh

Present to commitee

Proposal form

Sanction loan

Get credit in his account

Above 10 Lakh

Present to BOD

Proposal form

Sanction the loan

Get credit in his accounta


83

Here loan department is mainly divided into two parts 10 lakh and above when a

person applies for the loan below 10 lakh then the application for the loan will be

submitted to the loan committee and if the amount of the loan exceeds 10 lakhs than

the form will be submitted to the board of directors. If the board or the loan

committee gets satisfied with the application then committee sanction the loan & does

the further process of filling the proposal form where the terms and conditions is

being mentioned, where the person signs the promissory note i.e. person is liable to

pay all said amount along with the interest & the person will be liable to tell to bank

any changes being made either in the partnership firm or any changes made within the

company or firm. Here a party or the person has to mention about the amount of loan

or money borrowed from different financial institute and the security mortgage for the

same, bank also verifies the person‘s credit worthiness and defaults of loan through

CIBIL(credit information bureau India Ltd).

After sectioning loan, Member has to fill following types of documents.

Types of Documents

Demand Promissory Notes: A promissory note is a negotiable instrument,

wherein one party makes an unconditional promise in writing to pay a

determinate sum of money to the other (the payee), either at a fixed or

determinable future time or on demand of the payee, under specific terms.

Bank takes a signature from its customer for assurance that he will pay the

amount within a specified period.

Letter of Lien & Set off: This letter at a time of sanctioning loan.By this

letter bank can recover the amount by selling lien property, book debt, F.D,

stock etc. Bank can recover from other a/c or a/c having in other bank. Bank

sends application and can recover. This letter is taken from all types of loan &

advances.

Agreement for Hypothecation:

In case of loan or advances hypothecation of stocks/book debts/ hypothecation

is taken


84

Letter of Guarantee:

Over here the signature of guarantor is taken. Here it is written that of what

amount the person is himself liable and they have to pay to bank as soon as the

customer defaults.

Form DD:

This form states that the person has not taken Loan from any other financial

institute (sharif mandli) nor they are the members of any of these financial

institutes. The person has to take the NOC from continuing bank.

Letter of Continuing Security:

For the renewal of the OD continuing form is filled every year again the

process starts from the beginning here if the guarantor or if some changes

made can be altered. Moreover if the guarantor wants to withdraw his name

than first he has to submit the same application to the bank.

Bearer DD Letter: On this document customer agree upon ‗particular

amount‘ of loan, he confess agreement for the amount

Sanction Letter: the letter is given by bank to customer showing sanction &

one letter is kept with bank also.

Charge from ROC. For limited and private limited company charges from

ROC (Registration of companies) is compulsory which is executed by

advocate by ROC. By executing ROC registration bank gets ‗SEARCH

REPORT‘ from advocate or at ROC. Under search report, each & every

details regarding loan taken by companies is available.

Documents are required to know following information:-

Purpose of Loan

Nature of Loan

Eligibility

Quantum of Loan

Margin by borrower

Rate of Interest

Description of Security/charges

Maximum Limit of Advances


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Periodicity of Loan/Advances

Mode of Repayment

Conditions regarding renewal

Access of goods / Property for Inspection

Circumstances as to coercive actions

Other Special conditions

1. Cash Credit against Hypothecation (HYP):

Over here stocks are being kept for security and if the bank requires than

they can also ask for call for security which can be property against which

60% of loan is being provided.

The goods have to be insured by the customer and the insurance paper are

under the mark of the bank lein.

The inspection of the stock is done quite frequently

Moreover every month the company has to send the balance to the bank

showing that they are keeping the stock with themselves

The stock is valued at cost price or market price whichever is lower for the

sake of the security purpose.

Balance Sheet of three years is asked to be submitted and the income tax

returns is also to be submitted.

3 month stock is not treated as good stock

Hypothecation is renewed every year.

Here bank goes for voluntary inspection of goods and if they found any

sort of misconduct of laws than they can change the limits of HYP

2. Cash Credit against Book debts:

Sales are made on credit or service is provided on credit basis.

Maximum 50% of loan is being provided against and customer has to send

monthly report to bank.

Debtors above 90 days are not considered in book debt.

It‘s renewed every year.


86

3. Cash Credit Clean:

It is type of overdraft which is given to the professionals like doctors, CA,

Lawyers, professionals etc.

The maximum amount of OD given in this is ` 50000

The customer requires submitting certain proof which specifies his

assurance of monthly income of ` 5000.

The repayment has to be done within 3 years

Copy of income tax return file & certificate of professionals degree is

required

4. Overdraft against fixed deposits

This OD is given against fixed deposits so it‘s not necessary to be

shareholder also for this purpose.

It is generally granted to the fixed deposits holder. In the case of the

minor‘s deposits a declaration from the guardian may be obtained that the

amount is utilized for the benefits of the minor

When the overdraft is granted to the third party other than the deposits

holder the application from along the third party form-signed by deposit

holder & third party would be submitted to the bank.

The receipt of the deposit is transferred to bank

90% amount is granted as overdraft against the deposits amount

5. Overdraft against General Housing (GHO):

The overdraft is granted against the value of the property of the customers

For this purpose valuation is done by valuation authority. This committee

is decided by the bank which includes government approved engineers.

The valuation document is prepared by the engineer and the legal

document of the mortgaged is prepared by advocate.

The customer has to issue documents sanctioned by SRC & KPT, property

be in their names & possessions only

The customer should also submit a declaration that the same property is

not given as mortgage to any other bank.


87

The bank grants 50% of the value of property as overdraft

After one year during the time of the renewal again the valuation is done

and if the value is increased the customer‘s overdraft limit can be

increased by the bank

6. Real estate overdraft (REO)

This loan is provided for speculative business such as purchase of land,

building, agricultural land etc.

This loan is provided to investors, who have good creditability.

This overdraft and loan facility should not exceed 10% of the exposure

limit.

There is high risk in this type of overdraft facility.

0.25% stamp duty is to be paid for mortgage of property as security.

Every year it is renewed.

Types of loans:

1. Loan against fixed (LFD):

This loan is provided against fixed deposits.

Bank lien that F.D and provide 90% loan against that F.D.

If customer gives loan to third party he has filled application form along

with surety of FD holder signature on the form to avoid the default risk in

case of non-payment of loan.

If this type of loan is taken with mortgage then 50% of total amount is

provided as loan.

2. Machinery loan

This loan is provided against purchase of new machinery for the factory

purpose.

Customer has to submit details about the machinery and the quotation of

that machinery.

75% loan is provided & 25% down payment is to be done.

This loan is medium & long term loan.

This loan is provided only to shareholders only.


88

Bank provides DD of full amount to the company from where machinery

is purchased.

All necessary documents should be in favor of bank until loan is not fully

paid.

Consumer loan:

3. Consumer loan (CSL)

This was loan provided to customer for purchasing air condition, washing

machine, fridge etc.

Customer has to submit details about the machinery and the quotation of

that machinery

25 % down payment was to be done i.e. 75% margin is to be given.

Limit was `50,000/-

Only bill required as document.

This loan may complete within 3 to 4 years.

Now bank doesn‘t provide such loan but some a/c exist there.

4. General housing loan (GHL):

It is provided to required customers who want to construct house for

personal purpose.

It is medium term loan.

Every year it gets renewed because generally house construction takes

maximum 2years.

Property or house that is constructed is to be mortgaged with bank.

There can be withdrawal of two types:-

o At a time whole amount is withdrawal.

In this whole amount is withdrawal at time of construction or it

may be withdrawal at time of completion of construction.

o Partial amount is withdrawal.

There is withdrawal in parts as construction work gets completed.


89

5. Educational loan (EDL)

This scheme is for students who want to pursue higher studies in India or

abroad. Bank provides 75% as amount as loan of the total amount of the

tuition fees.

Student has to submit letter of their college or institute and detail about

their fees structure.

When the study is completed the bank gives the student time of 6 months

to search for the job and then he has to repay this amount within 3 to 5

years.

The interest is calculated monthly and it has to be paid by the guardian

of the student even at the time when the student is pursuing his studies.

This loan comes under secured and unsecured because of following

reasons:-

o Up to ` 2,00,000/- nothing is given as security.

o Above ` 2,00,000/- security is provided.

This scheme is provided for only shareholder‘s children for his/her

education.

Up to ` 2,00,000 Interest rate 12% p.a.

Above ` 2,00,000 Interest rate 13% p.a.

75% loan is provided, but the DD is issued is of full amount.

6. Social loan:

Social loan is given to share holder only for the purpose of marriages,

festivals etc.

This is short term loan.

It is given for any festival, occasion or medical purpose.

Its limit of giving loan is ` 50,000/-

The main objective is to fulfill the social objective of the bank.


90

7. Computer loan (COM)

This was loan provided by UBC federation.

This is short term loan.

This loan was provided to only members of bank.

Negotiation was done with companies.

It was interest free loan.

Bank got commission @13% p.a. for each installment paid.

Bank earned ` 100/- for sanction of loan.

At a time 30 % down payment was to be done & 70% was loan granted.

Now this facility is not provided at bank.

8. Clean cash loan (CCL)

This loan facility is provided to only professionals such as doctor, lawyer

etc.

The limit of providing loan is `50,000/-

Certificate of degree is to be provided as an occupation proof.

9. Vehicle loan (VHL)

This is provided against purchase of vehicle to customer.

It is medium term loan.

Vehicle is lien in name of bank.

75% loan is provided against the quotation price i.e. 25% of amount is

down payment done.

All the documents related to vehicle are provided to bank.

Bank provides the facility of refinancing.

Refinancing means to purchase the second hand vehicle.

For refinance of loan vehicles should be 5 years old and it should be paid

within 3 years.

In case of heavy and big vehicles the second hand vehicle becomes

cheaper as context to purchase new vehicle.

New vehicle Interest @ 12% p.a. check

Refinance Interest @18 % p.a.

Staff Interest @6 % p.a.


91

10. Staff overdraft facility:

GMCB provides facility of loan to their staff on the basis of following

limits:

a) service of 3 years & above but less than 5 years

Officer `1, 00,000/-

Clerk-cum- cashier `75,000/-

Sub staff `35,000/-

b) Service of 5 years & above

Officer `2, 00,000/-

Clerk-cum-cahier `1, 50,000/-

Sub staff `75,000/-

Interest will be charged and recovered monthly @ 10% p.a.

The salary will be credited in the said clean overdraft account.

It will be mandatory for the employee to designate the overdraft account

for credit of his/ her monthly salary.

Being a facility to staff member, there will not be any incidence of service

charge, cheque book charge etc. however, if the account remains

overdrawn for any reason, panel interest @ 2% p.a. would be levied on

the irregular portion for the period applicable.

11. Staff housing loan (SHL/SHO)

This loan is given for staff members of bank to construct house.

Eligibility: 3 years of continuous service in bank.

There is two category in this loan are:

o If staff renovates old house then 80% loan is granted against the value

of house

o If staff purchases the new house or construct it then 80 % of loan is

granted against full estimated amount given to bank.

6% simple interest is charged on loan for staff only.


92

Loan given to staff members Amount of loan

Officers ` 10,00,000

Clerk ` 6,00,000

Peon ` 4,00,000

Staffs are provided loan/ overdraft for a various purpose and can be

received as & when required.

Loan & advances are provided to staff and installment is deducted from

monthly salary.

Against OD staff‘s P.F, gratuity fund is kept as mortgage. Staff cannot

withdraw above 60% from mentioned funds.

12. Staff Consumer Loan (SCL -Vehicle Loan)

The bank will provide housing loan to employees who have completed 5

years of confirmed service.

The vehicle loan will be given to staff for New/ Second Hand (not more

than 5 years old) four wheelers.

Maximum limit for the same is `2,50,000/- or 80% of the cost of four-

wheeler- whichever is less.

The repayment of vehicle loan will be made maximum in 60 equal

installments towards principal amount and maximum 24 equal monthly

installments towards interest amount.

The vehicle should be insured comprehensively. This loan will carry 7%

p.a. (simple) interest.

13. Festival loan

The festival advance equivalent to one month salary will be given to

employees upon their written request once in a year.

The festival advance will be recovered in 10 equal monthly installments,

without interest.


93

14. Real estate loan (REL)

Real estate means to trade in property or in agriculture land by investor in

city.

As by RBI norms any bank cannot provide more than 10% of its exposure

limit. If the excess is provided then there is violation of rules and penalty

is to be paid.

Exposure limit is total capital fund mentioned in CRAR.

It is risky endeavor to provide loan to this type of customer because if the

rate of property goes down due to various reasons then the loan provided

for the purpose fails and sometimes recovery is not possible.

Particulars Rate of Interest

Education loan

Up to 200,000

Above 200,000

12%

13%

Up to 25,000 13.5%

25,000 to 200,000 14%

Above 200,000 14.5%

REO 14.5%

REL 14.5%

Vehicle loan 12.5%

Vehicle refinance loan 18%


94

TYPES OF LOAN /

OD

NO OF

ACCOUNTS

SOL 20

CCL 1

CSL 5

EDL 8

LFD 71

GHL 9

REL 5

LGS 3

VHL 184

MSL 44

SHL 21

SOD 24

HYP 153

BKD 103

FDO 321

OGS 5

CCC 4

GHO 64

REO 16

OVERDRAFT LOAN

Meaning Overdraft is a facility to over draw the

amount from current a/c.

Loan is a borrowed amount

from bank.

Usage This facility can be availed from

current a/c.

It has its separate a/c.

Sanction of

limit

Full or partial limit can be utilized Full amount is withdrawal

at a time.


95

Security Property or stock or book debt is kept

mortgage.

Particulars is kept lien with

bank. For e.g. Vehicle is

purchased on loan then that

vehicle is kept under bank‘s

name.

Purpose Requirement of working capital, high

rate investment

To acquire fixed assets.

Period It may be medium term or short term It may be medium or long

term

Interest rate Interest rate can be changed at a time

of renewal or prior notice.

Interest rate remains same

during the period of loan.

Renewal It is renewed every year There is no renewal.

Issuance of

cheque book

Cheque book is issued because there is

continuous transaction by customer

Once the amount is

withdrawn then there is

only need of repayment.

C.D Ratio = Total of Credit / Total Deposits

= (12040 / 17195.15) x 100

= 70.01%

Particulars Amount (`)

Deposits

Total Deposits 17101.48

Advances Cr. Bal. 93.67

Total 17195.15

Loans & Advances

Loans 2281.6

Advances 9758.4

Total 12040


96

Recovery process

From the next day due date of instalment bank starts recovery process.

In case of NPA bank has to undergo proper channel.

Two notices are to be send after 90 days.

If these notices doesn‘t affect customer then FIR is to be done.

Then notice is to be send with FIR copy.

Then case is done in court.

Court sends the notices, if it fails then for acquiring the assets notice is

send and date is mentioned of auction.

Then one time settlement can be done if customer is unable to pay debt. In

case of liquidation bank can call off its liability to set off deposit.


97

Functions of RBI

The Reserve Bank of India Act of 1934 entrust all the important functions of a central

bank the Reserve Bank of India.

Bank of Issue

Under section 22 of the Reserve Bank of India Act, the Bank has the sole right to

issue bank notes of all denominations.

The reserve bank has a separate Issue Department which entrusted with the issue of

currency notes. The assets and liabilities of the Issue Department are kept separate

from those of banking department. Originally, the assets of the Issue Department were

to consist of not less than two fifths of gold coin, Gold bullion or sterling securities

provided the amount of gold was not less than Rs.40 crores in value. The remaining

three fifths of the assets might be held in rupee coins, Government of India is required

to maintain Gold & Foreign exchange reserves of Rs.200 crores, of which at least

Rs.115 crores should be in gold. The system as it exist today is known as the

minimum reserve system.

Banker to Government

The second important function of the reserve bank of India is to act as government

banker, agent and advisor. The Reserve Bank of India is act as Government banker,

agent and adviser. The Reserve bank is agent of Central Government in India

excepting that of Jammu & Kashmir. The Reserve Bank has the obligation to transact

Government business, via. to keep the cash balances as deposits free of interest, to

receive and to make payments on behalf of the Government and to carry their

exchange remittances and other banking operations. The reserve bank of India helps

the Government – both the union & the states to float new loans and to manage public

debt. It makes loans & advances to the states and local authorities. It acts as adviser to

the government on all monetary and banking matters.


98

Bankers’ Bank and Lender of the Last Resort

The Reserve Bank of India acts as a bankers‘ bank. According to provision of the

Banking Companies Act 1949, every schedule bank was required to maintain with the

reserve bank a cash equivalent to 5% of its demand liabilities and 2% of its time

liabilities in India. By and amendment of 1962, the distinction between demand and

time liabilities was abolished and bank have been asked to keep cash reserve equal to

3 per cent of their aggregate deposit liabilities. The minimum cash requirements can

be changed by the Reserve Bank of India.

The Reserve Bank can borrow from reserve bank of India on the basis of eligible

securities or get financial accommodation in times of need or stringency by

rediscounting bills of exchange. Since commercial banks can always expect the

Reserve Bank of India to come to their help in times of banking crisis the Reserve

Bank becomes not only the banker‘s bank but also the lender of the last resort.

Controller of Credit

The Reserve Bank of India is the controller of credit i.e. it has the power to influence

the volume of credit created by banks in India. It can do so through changing the bank

rate through open market operations. According to banking regulation act of 1949, the

Reserve Bank of India can ask any particular bank or the whole banking system not to

lend to particular groups or persons on the basis of certain types of securities. Since

1956, selective controls of credit are increasingly being used by the Reserve Bank.

The Reserve Bank of India is armed with many more powers to control Indian money

market. Every Bank has to get a license from Reserve Bank of India to do banking

business within India; the license can be cancelled by the Reserve Bank of India if

certain stipulated conditions are not fulfilled. Every Bank will have to get the

permission of the Reserve Bank before it can open new branch. Each schedule bank

must send a weekly return to the reserve bank showing, in detail, its assets and

liabilities. This power of the bank to call for information is also intended to give it

effective control of the credit system. The Reserve Bank has also the power to inspect

the accounts of any commercial bank.

As supreme banking authority in the country, the Reserve Bank of India, therefor, has


99

the following powers.

It holds the cash reserves of all the scheduled banks.

It controls the credit operations of banks through quantitative & qualitative

controls.

It controls the banking system through the system of licensing, inspection, and

calling for information.

It acts as the leader of the last resort by providing rediscount facilities to

schedule banks.

Custodian of Foreign Reserves

The Reserve Bank of India has the responsibility to maintain official rate of exchange.

According to the Reserve Bank of India Act of 1934, the bank was required to buy

and sell at fixed rates any amount of sterling in lots of not less than Rs.10, 000. After

India became a member of the international monetary Fund in 1946, the Reserve Bank

has the responsibility of maintaining fixed exchange rates with other member

countries of the IMF.

Besides maintaining the rate of exchange of the rupee, the Reserve Bank has to acts as

the custodian of India‘s reserve of international currencies. Further, the RBI has the

responsibility of administering the exchange controls of the country.

Supervisory Function

In addition to its transactional central banking functions, the Reserve Bank has certain

non-monetary functions of the nature of supervision of banks and promotion of sound

banking in India. The Reserve Bank Act, 1934, and Banking Regulation act, 1949,

have given RBI wide powers of supervision and control over commercial & co-

operative banks, relating to incensing & establishments, branch expansion, liquidity

of their assets, management and methods of working, amalgamation, reconstruction,

and liquidation.

Promotional Functions

RBI performs a variety of development and promotional functions, which, at one

time, were regarded as outside the normal scope of central banking. The Reserve


100

Bank was asked to promote banking habit, extend banking facilities to rural & semi-

urban areas, and establish and promote new specialized financing agencies.

Accordingly, the Reserve Bank has helped in the setting up of the IFCI and the SFC;

it set up the Deposit Insurance Corporation in 1962, the Unit Trust of India in 1964,

the Industrial Development Bank of India also in 1964, the Agriculture Refinance

Corporation of India in 1963 and Industrial Reconstruction Corporation of India in

1972. These Institutions were set up directly or indirectly by the Reserve Bank to

promote saving habit and to mobilize savings, and to provide Industrial finance as

well as agricultural finance.

Central Banking Functions

The monetary functions also known as the central banking functions of the RBI are

related to control and regulation of money and credit, i.e., issue of currency, control of

bank credit, control of foreign exchange operations, banker to the government and to

the money market. Monetary functions of RBI are significant as they control regulate

the volume of money and credit in the country.


101

FINDINGS & ANALYSIS

Particulars 31.03.2011

31.03.2012

Increase (+) or

decrease (-)

Deposit ( ` In

lakhs)

Saving 3326.14 3554.09 (+) 6.80%

Current 2065.86 2409.01 (+) 16.61%

Recurring 100.07 119.45 (+) 19.36%

Term 7222.65 10859.73 (+) 50.36%

Loans &

Advances

(` In lakhs)

12039.99 9589.59 (-) 25.55%

C.D.Ratio 73.5% 69.92% (-) 4.87%

Net profit (` in

lakhs)

382.11 202.48 (-) 47.01%

Bank‘s deposits has increased from last year but credit decreased against

deposit.

In the year 2011-12, ` 4227.56 lakhs has arrived through different deposits but

bank has provided loans & advances around ` 2450 lakhs which is less than

70% of total deposits due to which banks loans & advances reduced by

25.55% & also many last year loans recovered in the year therefore bank‘s

loans & advances reduced.

Bank‘s net profit reduced 47% just due to provision made for MMCB deposit.

Bank has made provision of ` 323 lakhs due to which bank‘s profit reduced

from last year.


102

SUGGESTIONS

Bank should open branches so that more customers can avail service.

Bank should make contract with VISA or MASTERCARD so that customer

can withdraw their money from any other ATM & also can use as debit card.

Bank should star Net banking as well as mobile banking facility that will

influence customer for making more transactions.


103

APPENDIX

THE GANDHIDHAM MERCANTILE CO-OP.BANK LTD.

BALANCE SHEET AS ON

31st March, 2012

Liability Amount ` Total `

Share Capital

Paid up share capital 11,29,85,200.00 11,29,85,200.00

Reserve Funds & Other Reserves

Statutory Reserve Fund 9,00,54,517.00

Charity Reserve Fund 8,32,284.00

Educational Reserve Fund 9,00,000.00

Bad Debt Reserve Fund 3,07,52,825.00

Building Reserve Fund 3,23,00,000.00

Dividend Equilisation Reserve 1,45,54,817.46

Staff Welfare Fund 6,57,356.75

Member Welfare Fund 12,09,995.56

Investment Depri.Reserve Fund 57,57,000.00

General Reserve Fund 8,67,447.54

UBC Equilisation Fund 17,15,520.00

Provision For Standard Assets 49,65,000.00

Provision For Housing Loan 7,16,000.00

Provision For Fraud Case 1,25,000.00

Investment Fluctuation Fund 34,50,000.00

The M.M.C.B Ltd. (FD) 8,69,46,469.00

Revaluation Reserve Land 5,03,87,095.00

Revaluation Reserve Building 1,11,74,553.00 33,73,65,880.31


104

Deposits & Other Accounts

SDR (Below 1 Year) 73,31,726.00

SDR Matured 12,71,358.00

FDR (Above 1 Year non-cumulative) 12,03,55,325.55

FDR Matured 3,21,591.00

FDI Matured 8,09,827.00

RD (Recurring Deposit) 1,19,45,001.00

CDR (Fixed Deposit Double) 92,93,46,004.68

CDR Matured 2,61,50,836.00

KDR (Kuber Deposit) 3,86,438.00

Saving Deposit 35,54,09,887.91

Current Deposit 24,09,01,292.55

Unknown Deposits 89,979.23

SDV Security Deposit 1,82,31,000.00 1,71,25,50,266.92

Advances Credit Balance

HYP 27,25,443.12

BKD 18,70,230.35

CCC 10,406.39

FDO 37,74,265.37

OGS 9,921.00

GHO 9,27,250.39

SOD 49,026.09

REO 1,112.00 93,67,654.71

Borrowings -

Bills For Collection Being Bills

Liability for Outward bill for collection 16,20,590.00

Liability for Inward bill for collection 21,94,164.00

Bank's Liability for Guarantee Issue 2,40,24,000.00


105

Overdue Interest Reserve 1,85,92,082.62 4,64,30,836.62

Branch Adjustment -

Interest Payable

Interest Payable on SDR 1,70,379.00 1,70,379.00

Other Liabilities

Dividend Payable 22,77,892.00

Pay slip Issued (Bankers Cheque) 32,20,718.90

Staff Group Insurance 2,66,770.00

Staff Provident Fund 83,74,288.00

Staff Gratuity Fund 33,66,910.00 1,75,06,578.90

Sundry Credits

Sundry Creditors 11,39,508.00

Cash Found Excess 1,72,425.00

Service Tax Payable 78,767.29

Provision For Expense Incurred 2,46,500.00

Staff Bonus & Incentive 15,83,457.00

Provision For Income Tax (10-11) 2,13,85,920.00



Provision For Income Tax (11-12) 2,49,85,500.00 7,79,19,750.29

Profit & Loss 2,02,47,860.66 2,02,47,860.66

Profit & Loss

T O T A L 2,33,45,44,407.41


106

Assets Amount

Cash

Cash In Hand 2,44,79,611.00

ATM Cash 37,11,800.00 2,81,91,411.00

Balance with Other Bank

The K.D.C.C. Bank Ltd 20,000.00

State Bank of India 2,22,24,623.01

The G.S.C Bank Ltd 6,91,508.26

Bank of India 3,50,965.36

Central Bank of India 1,49,35,813.00

Bank of Baroda 12,61,615.00

Allahabad Bank 5,03,873.00

Union Bank of India 3,57,879.00 4,03,46,276.63

Current Deposit

TheBCCB Ltd (Bhuj) 59,055.24

HDFC Bank Ltd (Rajkot) 3,31,598.67

HDFC Bank Ltd (BCP A/C) 44,565.28

Axis Bank Ltd 30,45,576.95

Kotak Mahindra Bank 11,97,092.73

Indusind Bank Ltd 7,44,892.33 54,22,781.20

Saving Deposits -

Fixed Deposit (with S.L.R)

The GSC Bank Ltd - A'BAD 3,03,20,000.00

Government Securities 44,69,00,169.00

Bank of India 75,00,000.00

Allahabad Bank Ltd 5,00,00,000.00

Central Bank of India 3,00,00,000.00


107

Union Bank of India 5,00,00,000.00

State Bank of Patiala 99,00,000.00

Andhra Bank 1,00,00,000.00

Bank of Baroda 1,60,00,000.00 65,06,20,169.00

Fixed Deposits (without S.L.R)

The MMCB Ltd (A'BAD) 8,69,46,469.00

Indusind Bank Ltd 17,15,217.51

Non SLR Bonds 5,03,50,000.00

Bank of Baroda 2,50,00,000.00 16,40,11,686.51

Money at Call & Short Notice

Other Investment

The GSC Bank (Share Deposit) 5,000.00

The KDCC Bank (Share Deposit)

50.00

Investment Staff Gratuity Fund 33,66,910.00

Investment Staff Group Insurance 2,66,770.00

Investment Staff Provident Fund 83,74,288.00 1,20,13,018.00

Investment Out of Subsidiaries -

Loans and Advances

Advances

Cash Credit Hypothecation 11,36,43,683.98

Cash Credit Book Debt 51,92,48,895.43

Cash Credit Clean 1,35,616.39

Overdraft Against Fixed Deposit 8,64,96,974.18

Overdraft Against Kuber Deposit 864.00

Overdraft Against Govt. Securities Deposit 1,14,903.99

Overdraft Against General Housing 14,34,58,032.39

Overdraft to Staff members 20,04,499.68

Temporary Overdraft in Current Accounts -


108

Real Estate Overdraft 11,07,36,530.51 97,58,40,000.55

Loans

Loan Against Fixed Deposit 1,67,86,549.00

Loan Against Govt. Securities 2,81,604.00

Machinery Loans 4,49,67,400.74

Vehicle Loans 9,71,03,819.33

Consumer Loans 1,40,750.00

General Housing Loans 77,34,648.65

Real Estate Loan 5,43,46,975.00

Educational Loans 21,37,044.72

Social Loans 5,72,154.00

Staff Consumer Loans 7,94,449.00

Staff Housing Loans 31,10,583.78

Clean Cash Loan 9,989.00

Festival Loan 1,74,000.00 22,81,59,967.22

Bills Rec. Being Bills for Collect

(As per Contra)

Outward Bills for Collection 16,20,590.00

Inward Bills for Collection 21,94,164.00

Customer's Liability For Guarantee Issue 2,40,24,000.00

Interest Receivable on NPA a/c 1,85,92,082.62 4,64,30,836.62

Premises less Depreciation

Plot Purchase a/c 5,90,30,975.00

Building Construction a/c 1,95,03,621.00 7,85,34,596.00

Fixed Assets

Furniture & Fixtures 82,35,706.00 82,35,706.00

Interest Receivable

Interest Receivable on Investment 1,82,57,864.00


109

Accrued Investment on Government Security 1,50,423.61 1,84,08,287.61

Other Assets

Stamps & Stamped Document on

300.00

Stock of stationery 3,00,019.00

Franking Machine Stamp a/c 16,19,055.00 19,19,374.00

Suspense Debits

Telephone Deposit 23,550.00

GEB Security Deposit 85,000.00

Tax Deduction at Source 15,00,888.07

Sundry Debtors 1,15,209.00

Advance Income Tax Paid (2009-10) 1,50,81,670.00



Advance Income Tax Paid (2011-12) 2,50,00,000.00 7,64,10,297.07

T O T A L 2,33,45,44,407.41


110

THE GANDHIDHAM MERCANTILE CO-OP.BANK LTD.

PROFIT & LOSS FROM

1st April, 2011 TO 31ST March, 2011

EXPENDITURE Amount ` INCOME Amount `

Interest On Deposits,

Borrowings Etc.

9,72,08,682.00 Interest And Discount 20,13,94,787.45

Salaries & Allow. & Provident

Fund

1,26,04,997.60 Commission, Exchange,

Brokerage & Bank

Guarantee Comm.

12,77,924.40

Director's & Local Committee

Member's Fees Allowances

- Subsidies And Donations --

Rent, Taxes, Insurance,

Lighting, Etc

17,62,332.83 Income From Non-Banking

Assets & Profit

21,60,000.00

Postage, Telegrams &

Telephone Chgs.

1,96,921.57 From Sale Of Or Dealing

With Such Assets,

Stationery

Auditor's Fees (Including Tax

Audit)

2,43,000.00 Other Receipts

23,49,536.15

Depreciation On Property 22,65,537.13 Loss ( If Any) -

Stationery, Printing &

Advertisement

20,50,318.00

Loss From Sale Of Or Dealing

With

-

Non-Banking Assets

Provision Against Risks 6,76,56,994.00

Other Expenditure 29,45,604.21

Balance Of Profit 2,02,47,860.66

T O T A L 20,71,82,248.00 T O T A L 20,71,82,248.00


111

BIBLIOGRAPHY

Websites

http://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=6544


http://www.gmcbank.org

http://www.rbi.org.in/scripts/BS_ViewMasterCirculardetails.aspx

Books

RBI Master Circular

RBI Hand Book

GMC Bank Annual Report,2011

Principles & Practices of Banking

(Publisher : Indian Institute of Banking & Finance)



http://www.gmcbank.org/

http://www.rbi.org.in/scripts/BS_ViewMasterCirculardetails.aspx

gmcb

Documents

employees of gmcb

bank cheques

way bank

operation of gmcb

banking transactions

operational banking

history of gmc bank

staff members of gmc