“TITLE OF THE PROJECT”

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS

FOR

MASTER IN MANAGEMENT STUDIES (MMS)

2013-2015

STUDENT NAME: MANALI ASHOK GAIKAR

ROLL NO.: C-21

SUBMITTED TO:

DR. V. N. BEDEKAR INSTITUTE OF MANAGEMENT STUDIES, THANE

STATEMENT BY THE CANDIDATE

I wish to state that the work embodied in this Project Report titled STUDY OF THE

LOANS OFFERED BY THE VAISHYA SAHAKRI BANK forms my contribution to field of

business management. Wherever references have been made to intellectual properties of any

individual / Institution / Government / Private / Public Bodies / Universities, research paper, text

books, reference books, research monographs, archives of newspapers, corporate, individuals,

business / Government and any other source of intellectual properties viz., speeches, quotations,

conference proceedings, extracts from the website, working paper, seminal work et al, they

have been clearly indicated, duly acknowledged and included in the Bibliography.

_____________________________________

Date: Signature of Student

CERTIFICATE

(SCAN COPY OF CERTIFICATE ISSUED BY COMPANY)

CERTIFICATE OF INTERNSHIP

This is to certify that Mr./Ms. ________________________ has successfully completed his

internship with us.

His/Her internship term was between  May___, 2014 to June___, 2014

As part of the internship program, He/She was placed with the ------------------

department.

He/She was actively involved with various projects related to -------------------------------

During the summer internship, he/she was found to be punctual, positive and performance

oriented.

We wish success in his/her career.

For (company Name):_____________________________________

GS

Manager- Human Resources and Administration

ACKNOWLEDGEMENT

I express my sincere thanks to Dr. / Mr. /Ms./Mr. Prakash M. Dhamnaskar , Designation Branch

Manager , Bank name Vaishya Sahakari Bank Ltd., for guiding me right from the inception till

the successful completion of the project. I sincerely acknowledge him/her/them for extending

their valuable guidance, support for literature, critical reviews of project and the report and above

all the moral support he/she/they had provided to me with all stages of this project.

I would also like to thank the supporting staff Mr. Kudtadkar , Cashier and Mrs. Rajeshree

Mulgaonkar, Officer.

Department, for their help and cooperation throughout our project.

Table Of Contents

Executive Summary

My topic for the summer internship is ‘The Study Of The Loans Offered By Vaishya Sahakari Bank Ltd.’ In this commercial Bank, their are many types of loan offered to the customer.

Looking towards the today’s scenario, Everyone have their own dreams like to buy their own house, to have their own vehicle, to learn in the big college etc. For completing all these kind of dreams it needs money. Most of people don’t have that much willing capacity to buy, that’s why people borrow some amount of money from the banks on some conditions, this is called as Loan. Loan are promises for future payment, they have to be repaid in periods beyond a year and are, therefore long term liabilities. The topic loan is vast in nature, because for every single loan there is major process for sanctioning the loan to the customer. For every type of loan bank needs to know the repayment capacity of the customer and various types of documents, which helps the bank to take the decision about how much the loan amount will be sanctioned. Even there are different ROI, repayment period for different types of loans.

In loan, after sanctioning the loan many customers were not able to pay the installment amount on time, which is called as Non-Performing Assets (NPA). Here many rules and regulations take place.

In loan topic, there are many things which Bank have to take under consideration that I have studied in my Summer Internship (SIP). In this project I have focus on the Loan topic, which is more demanded by the people to complete their dreams or to repay their debts. And what is the procedure of the loan disbursement, what kind of loans are offered by Vaishya Sahakari Bank Ltd.

Introduction Of Loan

Any amount borrowed or lent is called loan. If money is borrowed it is debt of business and if loan is given, it is receivable for the business. Loan is a method of lending under which bank gives credit to a borrower for a fixed period and for a specific purpose. Loan are promises for future payment, they have to be repaid in periods beyond a year and are, therefore long term liabilities. In other wards "when a banker makes an advances in a lump sum which cannot be paid wholly or partly and which the customer has permission to withdraw subsequently, it is called a loan. "Profit is the pivot on which the entire business activity rates. Banking is essentially a business dealing with money and credit. Like every other business activity. Bank share profit oriented. A bank invests its funds in many ways to earn income. The bulk of its income is derived from loans and advances. Banks make loans and advances to traders, businessman and industrialist against the security of some assets or on the basis of the personal security of the borrower. In either case, the banks run the risk of default in repayment. Therefore, banks have to follow a cautions policy and sound lending principles in the matter of lending. Banks in India have to consider the national interest along with their own interest while determining the lending policy.Many a time a borrower needs funds for fixed assets or non-respective type of activitiesand thus seeks money from the bank that is withdrawn in one lump sum. The loan amount isnormally repaid in installments. Loan may be short-term, medium-term or long-term.

Profile

Vaishya Sahakari Bank is a small Co-Operative Bank in our Mumbai. It is established in 1945. It has Completed 68 years as on 12th November 2013. It has total 6 branches in Mumbai. It has acquired Tier II status by crossing Rs.100 Cr. Deposit mark. Now the Bank can open branches anywhere in Maharashtra.

Today’s Vaishya Sahakari Bank

Today, Vaishya Sahakari Bank is spreading its arms around the Mumbai and has a network of branches spanning all time zones. Now the Bank is continuous ‘A’ Grade by Statutory Auditors appointed by Co operative Department Government of Maharashtra Since F.y. 2008-09. The Bank has started paying dividend from F.y. 2008-09 after a lapse of seven years. Even they have facilities like anywhere banking through CBS Package. All their branches have high level security arrangements. They have cross deposit milestone of Rs.100 Cr. On 31st March 2012.

They have many competitors co-operative Banks like Abhuday Bank, Saraswat Bank, Dombivali Nagari Sahakari Bank etc.

Our Vision

• To install ATM at all our branches.• To seek membership of NFS for making available ATM facility to our customer throughout India.• To expand beyond Mumbai & Thane Districts in Maharashtra. • To triple the business-mix in next three years from present Rs. 178.00 Cr. to   Rs. 534 Cr. by 2015-16

Products offered by Vaishya Sahakari Bank:

Deposits

Saving Account

Current Account

Term Deposit

Loans

Vehicle Loan Education Loan Housing Loan Gold Loan Mortgage Loan Personal Loan Secured Loan

Vehicle Loan :

Vehicle Loan means the sum amount of money taken from the bank for the purchase of new or 2nd hand vehicle for personal use or for commercial use.

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.

Purchase of new Vehicle:

Eligiblity:

Any Individual, group of individual, proprietor, partnership firm, private or public limited company from the area of operation of the Bank is eligible to apply for the loan.

Rate of interest:

The ROI for the loan taken for purchasing the new vehicle is 12.5%. and the minimum margin is 15%.

Purpose

The loan should be granted for purchase of new vehicle either for personal use or for commercial use.

Limit of loan:

Maximum 10 lakhs.

Repayment Period :

Purpose of Loan Minimum Period Maximum PeriodPersonal Use 36 Months 60 MonthsCommercial Use 36 Months 48 Months

Security:

Prime- Hypothecation of vehicle

Collateral – The borrower should have his/her Life Insurance Policy to cover the amount of loan.

Guarantor- One guarantor

Personal Loan

Funds readily available whenever desire or need, be it a sudden vacation that you plan with your

family or urgent funds required for medical treatment? Vaishya Sahakari Bank’s - Personal Loan

is the answer for those questions.

Advantage of saral personal loan 

Low interest rates. Further, we charge interest on a daily reducing balance!!

Low processing charges; only 1%-2% of loan amount

No hidden costs or administrative charges.

Not much security required ……which means minimal documentation…something

that you had always wanted.

Long repayment period of up to 48 months.

The Scheme

Purpose

The loan will be granted for any legitimate purpose whatsoever (e.g. expenses for domestic or

foreign travel, medical treatment of self or a family member, meeting any financial liability, such

as marriage of son/daughter, defraying educational expenses of wards, meeting margins for

purchase of assets etc.)

Eligibility

you are eligible if you are a Resident Indian of National having capability to repay a loan, except

agriculturists.

Loan Amount

Your personal loan limit would be determined by your income and repayment capacity.

Maximum: 1,00,000/- only.

Documents Required

Important documents to be furnished while opening a Personal Loan Account:

For existing bank customers

Passport size photograph

From salaried individuals

Latest salary slip and Form 16

From Self-employed individuals and Professionals

IT returns for the last two financial years,

Proof of Professional Qualification

Copy of highest professional degree held

Original Life Insurance Policy

Proof of official address. This can include shop and establishment certificate/Lease

deed/Telephone Bill.

Margin

Vaishya Co-op Bank does not insist on any margin amount.

Interest Rates

Repayment

The loan is repayable in EMI. You are allowed to pay more than the EMI if you wish to,

without attracting any prepayment penalty.

Security

Original Life Insurance Policy

Borrower’s Life Insurance Policy that covers the loan amount.

Processing Fee

Processing charges are 1-2% of the loan amount. This is amongst the lowest fees in the industry.

Processing fees have to be paid upfront. There are no hidden costs or other administrative

charges.

HOUSING LOAN

Home is where the heart is! At Vaishya Sahakari Bank, they understand this better than most – the toil

and sweat that goes into building/ buying a house and the subsequent pride and joy of owning one. This

is why Housing loan schemes are designed to make it simple for you to make a choice at least as far as

financing goes!

‘Home Loans’

Unique features:

No cap on maximum loan amount for purchase/ construction of house/ flat

Option to club income of your spouse and children to compute eligible loan amount

Provision to club expected rent accruals from property proposed to compute eligible

loan amount

Provision to finance cost of furnishing and consumer durables as part of project cost

Repayment permitted upto 70 years of age

Free personal accident insurance cover

Optional Group Insurance from SBI Life at concessional premium (Upfront premium financed as

part of project cost)

Interest applied on daily diminishing balance basis

‘Plus’ schemes which offer attractive packages with concessional interest rates to Govt.

Employees, Teachers, Employees in Public Sector Oil Companies.

Provision for downward refixation of EMI in respect of floating rate borrowers who avail

Housing Loans of Rs.5 lacs and above, to avail the benefit of downward revision of interest rate

by 1% or more

In-principle approval issued to give you flexibility while negotiating purchase of a property

Option to avail loan at the place of employment or at the place of construction

.Complimentary international ATM-Debit card

Complimentary SBI Classic/ International Credit Card with waiver of joining and first year’s fees

Option for E-banking

Concessional package under ‘Credit Khazana’ for prospective car loan borrowers whose accounts are

conducted satisfactorily

50% concession in charges in respect of all personal remittances/ collection of outstation cheques

Purpose

Purchase/ Construction of new House/ Flat

Purchase of an existing House/ Flat

Purchase of a plot of land for construction of House

Extension/ repair/ renovation/ alteration of an existing House/ Flat

Purchase of Furnishings and Consumer Durables as a part of the project cost

Takeover of an existing loan from other Banks/ Housing Finance Companies

Eligibility

Minimum age 18 years as on the date of sanction

Steady source of income

Loan Amount

Applicant/ any one of the applicants are aged over 21 years and upto 45 years – 60 times

Net Monthly Income (NMI) or 5 times Net Annual Income (NAI), subject to aggregate

repayment obligations not exceeding 57.50% of NMI/ NAI

Applicant(s) aged over 45 years of age– 48 times NMI or 4 times NAI, subject to aggregate

repayment obligations not exceeding 50%of NMI/ NAI

To enhance loan eligibility you have option to add:

Income of your spouse

Income of your son/ daughter living with you, provided they have a steady income and his/ her

salary account is maintained with SBI

Expected rent accruals (less taxes, cess, etc.) if the house/ flat being purchased is proposed to

be rented out

Regular income from all sources

Margin

Purchase/ Construction of a new House/ Flat/ Plot of land: 15%

Purchase of an existing House/ Flat: 15%

Repairs/ Renovation of an existing House/ Flat: 20%

Processing Fee

0.50% of Loan amount with a cap of Rs.10, 000/-(including Service Tax)

Prepayment Penalty

2% of the loan prepaid if the loan is preclosed before expiry of half the original tenure.

Security

Equitable mortgage of the property other tangible security of adequate value like NSCs, LIC

policies etc., if the property cannot be mortgaged

Maximum Repayment Period

For applicant’s upto 45 years of age: 20 years

For applicants over 45 years of age: 15 years

Moratorium

Upto 18 months from the date of disbursement of first installment or 2 months after final

disbursement in respect of loans for construction of new house/ flat (moratorium period will be

included in the maximum repayment period)

Disbursement

In lump sum direct in favour of the builder/ seller in respect of outright purchase

In stages depending upon the actual progress of work in respect of construction of

house/ flat etc.

Documents

Completed application form

Passport size photograph

Proof of Identity – PAN Card/ Voters ID/ Passport/ Driving License

Proof of Residence – Recent Telephone Bill/ Electricity Bill/ Property tax receipt/ Passport/

Voters ID

Proof of business address in respect of businessmen/ industrialists

Sale Deed, Agreement of Sale, Letter of Allotment, Non encumbrance certificate, Land/ Building

Tax paid receipt etc. (as applicable and subject to satisfaction report from our empanelled

lawyer)

Copy of approved plan and approval from the Local Body

Statement of Bank Account/ Pass Book for last 6 months

EDUCATION LOAN

A term loan granted to Indian Nationals for pursuing higher education in India or abroad where

admission has been secured.

Eligible Courses All courses having employment prospects are eligible.

Graduation courses/ Post graduation courses/ Professional courses

Other courses approved by UGC/Government/AICTE etc.

Expenses considered for loan

Fees payable to college/school/hostel

Examination/Library/Laboratory fees

Purchase of Books/Equipment/Instruments/Uniforms

Caution Deposit/Building Fund/Refundable Deposit

Travel Expenses/Passage money for studies abroad

Purchase of computers considered necessary for completion of course

Cost of a Two-wheeler upto Rs. 50,000/-

Any other expenses required to complete the course like study tours, project work etc.

Amount of Loan

For studies in India, maximum Rs. 10 lacs, Studies abroad, maximum Rs. 20 lacs

Interest RateFor loans upto Rs.4 lacs - 11.00% p.a. Floating

For loans above Rs.4 lacs - 12.00% p.a. Floating

Processing Fees

No processing fee/ upfront charges

Deposit of Rs. 5000/- for education loan for studies abroad which will be adjusted in the margin

money

Repayment Tenure

Repayment will commence one year after completion of course or  6 months after securing a job,

whichever is earlier.

Place of Study Loan AmountRepayment Period

in Years

In IndiaUp to Rs. 7.5 lacs 5-7

Above Rs. 7.5 lacs 5-10

AbroadUp to Rs. 15 lacs 5-7

Above Rs. 15 lacs 5-10

Security

Amount Studies In India Studies Abroad

Upto Rs. 4 lacs No Security No Security

Above Rs. 4 lacs to Rs.

7.50 lacs

Third Party

GuaranteeThird Party Guarantee

Above Rs. 7.50 lacs to

Rs. 10 lacs(India)/ Rs.

15 lacs(Abroad)

Tangible Collateral

security for full

value of loan

Tangible Collateral

security of suitable

value of loan or third

party guarantee

Rs 15 lacs to Rs. 20

lacs___

Tangible Collateral

security for full value of

loan

Margin

For loans up to Rs.4.0 lacs : No Margin

For loans above Rs.4.0 lacs:

o Studies in India: 5%

o Studies Abroad: 15%

Documentation Required

Completed Education Loan Application Form.

Mark sheets of last qualifying examination

Proof of admission scholarship, studentship etc

Schedule of expenses for the specified course

2 passport size photographs

Borrower's Bank account statement for the last six months

Income tax assessment order, of last 2 years

Brief statement of assets and liabilities, of the Co-borrower

Proof of Income (i.e. Salary slips/ Form 16 )

A dream comes true! An ALL PURPOSE LOAN for anything that life throws up at you!! Do you need funds

for a Marriage ceremony, want to take your family to a well-deserved holiday or for a sudden medical

emergency? You have some property, but would rather not sell it? Then why not avail of this ALL

PURPOSE LOAN from SBI? SBI now makes it very much possible for you to only keep your property but

also have liquid funds.

Enjoy the SBI Advantage

Complete transparency in operations

Access this loan from our wide network of branches

Interest rates are levied on a monthly/daily reducing balance method

Lowest processing charges.

Long repayment period of 60 months, up to 120 months for salaried individuals with check-off

facility

No Hidden costs or administrative charges.

No prepayment penalties. You can have surplus funds at any time thereby conveniently

reducing your loan liability and interest burden.

Property Loan Scheme Avail of an All-Purpose loan against mortgage of any of your property. We offer you these loans at all

our Personal Banking Branches and those branches having Personal Banking Divisions amongst others.

EligibilityYou are eligible if you are:

A. An individual who is;

a An Employee or

b. A Professional, self-employed or an income tax assesse or

c. Engaged in agricultural and allied activities.

B. Your Net Monthly Income (salaried) is in excess of Rs.12,000/- or Net Annual Income (others) is in

excess of Rs.1,50,000/-.

The income of the spouse may be added if he/she is a co-borrower or a guarantor.

C. Maximum age limit: 60 years.

Salient Features

Loan Amount

Minimum: Rs.25, 000/-

Maximum: Rs.1 crore. The amount is decided by the following calculation:

24 times the net monthly income of salaried persons (Net of all deductions including TDS) OR

2 times the net annual income of others (income as per latest IT return less taxes payable)

Marginwe will finance up to 75% of the market value of your property.

InterestTerm Loan 0.25% above SBAR. i.e.11% p.a. Floating

Current Account Overdraft 0.50% above SBAR. i.e.11.25% p.a. Floating

RepaymentMaximum of 60 equated monthly instalments, upto 120 months for salaried individuals with check-off

facility. You could opt to divert any surplus funds towards prepayment of the loan without attracting any

penalty.

Gold Loan

A Non-performing asset (NPA) is defined as a credit facility in respect of which the interest and/or installment of principal has remained ‘past due’ for a specified period of time. Once the borrower has failed to make interest or principle payments for 90 days the loan is considered to be a non-performing asset. Non-performing assets are problematic for financial institutions since they depend on interest payments for income.

Classification

Banks are required to classify non-performing assets further into the following three categories based on the period for which the asset has remained non-performing and the realisability of the dues:

1. Sub-standard assets: a sub standard asset is one which has been classified as NPA for a period not exceeding 12 months.

2. Doubtful Assets: a doubtful asset is one which has remained NPA for a period exceeding 12 months.

3. Loss assets: where loss has been identified by the bank, internal or external auditor or central bank inspectors. But the amount has not been written off, wholly or partly.

Sub-standard asset is the asset in which bank have to maintain 15% of its reserves. All those assets which are considered as non-performing for period of more than 12 months are called as Doubtful Assets. All those assets which cannot be recovered are called as Loss Assets

NPA = Non-Performing Asset

Loans and advances given by the banks to its customers is are an Asset to the bank.

Just for the sake of simplicity, we can understand that a loan (an asset for the bank) turns as NPA when the EMI, principal or interest component for the loan is not paid within 90 days from the due date. Thus a Bad Loan is an asset that ceases to generate any income for the bank.

Asset or Loan Classification Norms

The assets or loans are classified as:-

1. Standard Assets 2. Sub-standard Assets 3. Doubtful Assets 4. Loss Assets

Now, in order to ensure that banks are not affected due to defaults, RBI has directed the banks to make provisions or set aside money when an account turns bad. Banks should, classify an account as NPA only if the interest due and charged during any quarter is not serviced fully within 90 days from the end of the quarter.   

  

A Loss Asset is considered uncollectible and of such little value for the bank in retaining the account on its book and ideally, such loans should be written off. Thus, Loss assets should be written off. If loss assets are permitted to remain in the books for any reason, 100% of the outstanding should be provided for.

Apart from above, there are Guidelines by RBI for provisions under special circumstances.

‘Unsecured exposure’ is defined as an exposure where the realizable value of the security, as assessed by the bank/approved valuers/RBI’s inspecting officers, is not more than 10%, ab-initio, of the outstanding exposure.

‘Exposure’ includes all funded and non-funded exposures.

‘Security’ are tangible security properly discharged to the bank and do not include intangible securities like guarantees, etc.

Restructuring of assets

‘Standard Assets’ upon restructuring –> ‘Sub-Standard Assets’ . Thus, NPA upon restructuring slips into further lower asset classification categories as

per above table. Also, an NPA upon restructuring can also be up-graded to the ‘standard’ category after

observation of ‘satisfactory performance’ during the specified period i.e. on repayment of outstanding amount by the borrower.

Provisioning Coverage Ratio (PCR):

The ratio of provisioning to gross non-performing assets Indicates the extent of funds a bank has kept aside to cover loan losses. Related News: PSBs’ profits would have been wiped out were they asked to maintain

70% PCR

As per RBI guidelines, NPA is defined as under:

Non performing asset (NPA) is a loan or an advance where;

1. interest and/ or installment of principal remain overdue for a period of more than 90 days in respect of a term loan,

2. the account remains‘out of order’ in respect of an Overdraft/Cash Credit (OD/CC),3. the bill remains overdue for a period of more than 90 days in the case of bills purchased

and discounted,4. the instalment of principal or interest there on remains overdue for two crop seasons for

short duration crops,5. the instalment of principal or interest there on remains overdue for one crop season for

long duration crops,6. the amount of liquidity facility remains outstanding for more than 90 days, in respect of a

securitisation transaction undertaken in terms of guidelines on securitization dated February 1, 2006.

7. in respect of derivative transactions, the overdue receivables representing positive mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment.

Net NPA = Gross NPA – (Balance in Interest Suspense account + DICGC/ECGC claims received and held pending adjustment + Part payment received and kept in suspense account + Total provisions held).