loans and advances
DESCRIPTION
TRANSCRIPT
ByDheeraj
Presentation on
Loans & Advances
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.
In a loan, the borrower initially receives or borrows an amount of money, called the principal, from the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later time. Typically, the money is paid back in regular installments, or partial repayments; in an annuity, each installment is the same amount.
Loans & Advances
(A)loans and advances can be arranged from banks in keeping with the flexibility in business operations. Traders may borrow money for day to day financial needs availing of the facility of cash credit, bank overdraft and discounting of bills. The amount raised as loan may be repaid within a short period to suit the convenience of the borrower. Thus business may be run efficiently with borrowed funds from banks for financing its working capital requirements.
(B) loans and advances are utilized for making payment of current liabilities, wage and salaries of employees, and also the tax liability of business.
(C) loans and advances from banks are found to be 'economical' for traders and businessmen, because banks charge a reasonable rate of interest on such loans/advances.
Utility of loans and advances
Demand loan
A Demand Loan is a loan which is repayable on demand by the bank. In other words it is repayable at short-notice.
The entire amount of demand loan is disbursed at one time and the borrower has to pay interest on it.
The borrower can repay the loan either in lump sum (one time) or as agreed with the bank .
For example, if it is so agreed the amount of loan may be repaid in suitable installments. Such loans are normally granted by banks against security.
The security may include materials or goods in stock, shares of companies or any other asset.
Demand loans are raised normally for working capital purpose like purchase of raw materials, making payment of short-term liabilities.
Types of Loans
Medium and long term loans are called term loans. Term loans are
granted for more than a year and payment of such loans is spread over a
longer period. Term loan is required for the purpose of starting a new
business activity renovation, modernization, expansion of existing units,
purchase of their land for setting up a factory, construction, of factory
building or purchase of other immovable assets. These loans are generally
secured against the mortgage of land, plant and machinery, building and the
like.
Term loan
Unsecured loans are those loans which are not covered by the security of tangible assets. Such loans are granted to firms/institutions against the personal security of the owner, manager or director.
Two categories of loan
Secured loans are those which are granted against the security of tangible assets, like stock in trade and immovable property. Thus, while granting loan against the security of some assets, a charge is created over the assets of the borrower in favor of the bank. This enables the bank to recover the dues from the customer out of the sale proceeds of the assets in case the borrower fails to repay the loan.
Unsecured Secured
The advances can be classified two categories
• Loans, cash credits and overdrafts.• Bills discounted and purchased.
Forms of Advances
This account is the primary method in which banks lend money against the security of commodities and debt. It runs like a current account except that the money that can be withdrawn from this account is not restricted to the amount deposited in the account.
Cash credits
Overdrafts
The word overdraft means the act of overdrawing from a bank account. In other words, the account holder withdraws more money from a bank account than has been deposited in it..
Bills discounted and purchased
Bank takes the bill drawn by borrower on his(borrower's) customer and pay him immediately deducting some amount as discount/commission
(I) FILLING UP OF LOAN APPLICATION FORM
(II) SUBMISSION OF FORM ALONG WITH DOCUMENTS
(III) SANCTIONING OF LOAN
(IV) EXECUTING THE AGREEMENT
(V) ARRANGEMENT OF SECURITY FOR LOAN
Procedure for granting loans and advances:
DATA ANALYSIS
& INTERPRETATI
ON
Q1. Are you interested in taking loan?
Response No. of response Percentage %
Yes 65 65
No 35 35
Total 100 100
Response
YesNo
Response No. of response Percentage %
House loan 15 15
Educational loan 35 35
Personal loan 21
21
Vehicle loan 29 29
Total 100 100
Q2. What kind of loan you want to avail?
Hou
se L
oan
Educa
tiona
l loa
n
Pers
onne
l loa
n
Vehicle
loan
0
20
40No. of respondent
No. of respon-dent
Responses No. of response Percentage %
Less than 1 Year 15 15
1 to 3 Year 35 35
3 to 5 Year 21
21
More than 5 Year 29 29
Total 100 100
Q3. For how many years you want to avail loan?
No. of Response
Less than 1 Year1 to 3 year3 to 5 YearMore than 5 year
Banks CANARA Bank Other Pvt. Banks Other Nationalized Banks
No. of respondents 37 24 39
Q4. Which Bank is preferred by you for making more transactions relating to loan & advances?
No. of respondent0
10
20
30
40
CanaraOther Pvt. BankNationalised bank
Occupation Businessman Serviceman Self-employed people Others
No. of respondents 35 38 11 16
Q5. Which class avail the maximum bank -loan services?
Occupation05
10152025303540
BusinessmanServicemanSelf-employed people Others
Response No. of response Percentage %
MONTHLY 25 25
QUARTERLY 40 40
ANNUALLY 35
35
Total 100 100
Q6. How you prefer to pay your installments ?
Mon
thly
Qua
rter
ly
Annua
ly0
10
20
30
40
No. of Response
No. of Response
Response No. of response Percentage %
Public Sector 65 65
Private Sector 25 25
Co-operative Sector 10 10
TOTAL 100 100
Q7. From which sector you will be interested to avail loan ?
03060
No. of Respondent
No. of Re-spondent
Due to inflexibility in account opening it is difficult to convince customers.
No authentic evidence of customers is found.No special facilities of loans to businessman are
given in semi rural or rural area. The bank is not tapping untapped areas.Lack of communication & delivery channels.Lack of social banking.Loans are not provided without security.Loans are not provided at ease lot of paper work
& documentation is involved. The time bound period is the major limitation in
research projects.
Limitations
More customer convenienceServices for businessmenService for Self employed &
Serviceman’sRural BankingSocial Banking
Recommendations
The cutthroat competition of 21st century demands not just a satisfied but delighted customer as a key to success in a service industry.
Strength, Weakness, Opportunities, threat analysis are apply in the bank to do the work more efficiently.
Also, improved advertising efforts, embracement of latest technology, more and more awareness about internet banking thus facilitating customers while providing solutions at their convenience and easy reach.
Conclusion
