CREDIT APPRAISAL PROCEDURES

IN

J & K BANK

A PROJECT REPORT Submitted to the

SCHOOL OF MANAGEMENT

In partial fulfillment of the requirements for the award of the degree

of MASTER OF BUSINESS ADMINISTRATION (M.B.A)

By

PARVEZ SINGH Reg. No: 35080379

Under the guidance of

Mr. R.SHANMUGAM Assistant Professor

SRM UNIVERSITY KATTANKULATHUR 603203

MAY 2010

ABSTRACT Almost all of the industrial enterprises whether they are into manufacturing, trading

or service sector need bank finance in order to run their businesses. So everyone

approaches the bank at some point of time for business loan whether it is for running

day to day business or for setting up of a new project. A banker appraises the

proposal and then decides whether to lend the money or not. Some tips on what goes

behind the credit appraisal of the proposal by the banker.

Credit Appraisal is the process of appraising the credit worthiness of a loan

applicant. Factors like age, income, number of dependents, nature of employment,

continuity of employment, repayment capacity, previous loans, credit cards, etc. are

taken into account while appraising the credit worthiness of a person. Every bank or

lending institution has its own panel of officials for this purpose.

This report deals with banks activities related to loans. It include features, history,

criteria for loan sanction, board of directors of bank, product and services of bank,

demography of customers, etc. Subject matter of this report has been elaborated with

simple words and lucid. Tables, charts, figure have been given to facilitate under-

standing. I gave my complete effort to make it valuable, useful and enrich it with my

views so that it gives complete sense and benefit to readers.

TASK ASSIGNED

I was assigned a project in J&K Bank that deals with evaluating and providing credit

assistance to applicants and consumers from business establishment to consumable

requirements, taking the prescribed norms of the RBI and J&K Bank into

consideration. The task starts with the application from the borrower. Then a checklist

is created to confirm the presence of all relevant documents and guarantees duly

certified and to the satisfaction of JK bank. These documents contain the Detailed

2

Project Report (DPR) in case of term loan, the stock reports and company’s financials

along with guarantee in case of cash credit, the salary slips in case of consumable

loans to salaried persons and securities in every case. The DPR contains the financial

outlook, projections and the assumptions in accordance to the company applying for

the loan. After initial scrutiny the borrower is requested to submit any further

documents, if required and/or for clarification and queries. For a complex and large

project, agency may also be asked to make a presentation to the team of appraisers,

where the queries and clarification are addressed to obtain the complete documents

and clarification. The Team prepares a final appraisal note in form of Report. We start

with institutional financial viability assessment first, which contains the assessment of

the net worth of the main promoters (both individuals and corporate according to the

share holding pattern), the net worth of companies giving corporate guarantee along

with the main company asking for loan. The relevant information from the audited

reports of all is taken into account for this assessment. This is how we come across to

a fine picture of financial position of the company requesting for financial aid.

Confidential reports from existing bankers and lenders to the agency are also sought

to ascertain the borrower/promoter's track record. For our regular borrowing agencies,

the past record with JK Bank is also checked for any default.

From here on the financial appraisal takes up examining the projected future Cash

Flows and Balance Sheet. The main criterions used by JK Bank are DSCR (Debt

Service Coverage Ratio) and DER (Debt Equity Ratio). The guidelines issued by JK

Bank govern the required criterion.

I was required to assess the working capital requirements of various firms applying to

JK bank for Cash Credits (Working Capital Loans). We were required to estimate

MPBF for the same. Maximum Permissible Bank Finance is the maximum limit of

credit that Bank can lend.

3

ACKNOWLEDGEMENT

My sincere thanks to our beloved chairman Mr. T. R. PACHAMUTHU for giving

me an opportunity to do this course.

I express my sincere thanks to our beloved Dean & Head of the Department, Mrs.

JAYSHREE SURESH, for providing me with the necessary facilities and endless

encouragement.

I express my deep sense of gratitude and thanks to beloved faculty guide

Mr.R.SHANMUGAM , for his guidance and invaluable suggestions for carrying out

this project. I have immense pleasure in thanking everyone who helped me to achieve

my goal.

I wish to express my sincere thanks to Mr.VIJAY DEV SINGH BILLAWARIA,

Branch Manager, J&K BANK , Lakhdata Bazaar, Jammu, who was very kind to

permit me to do my project in J&K BANK. I also extend my gratitude to all the

officers of J&K BANK for their kind help and support for the successful completion

of the work in time.

4

SCHOOL OF MANAGEMENT SRM UNIVERSITY

SRM Nagar, Kattankulathur – 603203 – GST Road – Near Chennai Phone: 044-27453901, 27455919 – Fax: 044-2745390

E-mail: info@srmuniv.ac.in Internet: www.srmuniv.ac.in _____________________________________________________________________

__

BONAFIDE CERTIFICATE

Certified that this project report entitled - CREDIT APPRAISAL PROCEDURES IN

J&K BANK , is the benafide work of Mr. Parvez Singh (35080379) who carried out

the project under my supervision. Certified further that, to the best of my knowledge

the work reported herein does not form part of any other project report or dissertation

on the basis of which any degree or award was conferred on an earlier occasion on

this or any other candidate.

Signature of the supervisor Signature of the HOD

5

LIST OF TABLES AND CHARTS TABLE NO. PARTICULARS OF THE TABLE

1. Credit / Deposit Ratio

2. Correlation of SGDP and Credit / Deposit Ratio

3. Regression of SGDP and Credit / Deposit Ratio

4. Trend percentage of Profit and Business performance

5. Distribution network of J&K Bank

6. Ratio analysis of Business per Employee

7. Demography of customers

8. Type of loans sanctioned in 1st quarter 2010

9. Reasons to use J&K Bank

10. Time taken to process the loan

6

CONTENTS

CHAPTER

NO.

TITLE

PAGE NO.

1. INTRODUCTION 2

2. STATEMENT OF THE PROBLEM 3

3. OBJECTIVES OF THE STUDY 5

4. REVIEW OF LITREATURE 6

5. METHODOLOGY AND LIMITATIONS 32

6. COMPANY PROFILE 35

7. ANALYSIS AND INTERPRETATION 49

8. FINDINGS 59

9. SUGGESTIONS 60

10. CONCLUSION 62

11. BIBLIOGRAPHY 63

12. APPENDICES 65

7

INTRODUCTION

Almost all of the industrial enterprises whether they are into manufacturing, trading

or service sector need bank finance in order to run their business. So everyone

approaches the bank at some point of time for business loan whether it is for running

day to day business or for setting up of a new project. A banker appraises the

proposal and then decides whether to lend the money or not. Some tips on what goes

behind the credit appraisal of the proposal by the banker.

Credit Appraisal is the process of appraising the credit worthiness of a loan

applicant. Factors like age, income, number of dependents, nature of employment,

continuity of employment, repayment capacity, previous loans, credit cards, etc. are

taken into account while appraising the credit worthiness of a person. Every bank or

lending institution has its own panel of officials for this purpose.

This report deals with banks activities related to loans. It include features, history,

criteria for loan sanction, board of directors of bank, product and services of bank,

demography of customers, etc. Subject matter of this report has been elaborated with

simple words and lucid. Tables, charts, figure have been given to facilitate under-

standing. I gave my complete effort to make it valuable, useful and enrich it with my

views so that it gives complete sense and benefit to readers.

8

STATEMENT OF THE PROBLEM

I was assigned a project in J&K Bank that deals with evaluating and providing credit

assistance to applicants and consumers from business establishment to consumable

requirements, taking the prescribed norms of the RBI and J&K Bank into

consideration. The task starts with the application from the borrower. Then a checklist

is created to confirm the presence of all relevant documents and guarantees duly

certified and to the satisfaction of JK bank. These documents contain the Detailed

Project Report (DPR) in case of term loan, the stock reports and company’s financials

along with guarantee in case of cash credit, the salary slips in case of consumable

loans to salaried persons and securities in every case. The DPR contains the financial

outlook, projections and the assumptions in accordance to the company applying for

the loan. After initial scrutiny the borrower is requested to submit any further

documents, if required and/or for clarification and queries. For a complex and large

project, agency may also be asked to make a presentation to the team of appraisers,

where the queries and clarification are addressed to obtain the complete documents

and clarification. The Team prepares a final appraisal note in form of Report. We start

with institutional financial viability assessment first, which contains the assessment of

the net worth of the main promoters (both individuals and corporate according to the

share holding pattern), the net worth of companies giving corporate guarantee along

with the main company asking for loan. The relevant information from the audited

reports of all is taken into account for this assessment. This is how we come across to

a fine picture of financial position of the company requesting for financial aid.

Confidential reports from existing bankers and lenders to the agency are also sought

to ascertain the borrower/promoter's track record. For our regular borrowing agencies,

the past record with JK Bank is also checked for any default. From here on the

financial appraisal takes up examining the projected future Cash Flows and Balance

Sheet. The main criterions used by JK Bank are DSCR (Debt Service Coverage

9

Ratio) and DER (Debt Equity Ratio). The guidelines issued by JK Bank govern the

required criterion.

I was required to assess the working capital requirements of various firms applying to

JK bank for Cash Credits (Working Capital Loans). We were required to estimate

MPBF for the same. Maximum Permissible Bank Finance is the maximum limit of

credit that Bank can lend. It is calculated as follows:

Maximum Permissible Bank Finance (MPBF)

Current Assets ( All Current Assets)

Less: Current Liabilities ( Crs. + Other Current Liabilities)

Working Capital Gap

Less: 25% of the Total Current Assets or NWC whichever is

higher of the two amounts

MPBF

Assessment Of Working Capital Fund Based : under Mortgage Loan Scheme

Sales for last financial year

Projected Sales for next financial year

Accepted Sales

(Maximum 125% of the achieved turnover)

Permissible Limit

(20% of the accepted sales)

A

Forced Sale value of Property

Permissible Limit

(75% of the forced Sale Value)

B

Maximum Permissible Limit

(Lower of A or B)

C

10

Available Limit

Limit Recommended by the branch

OBJECTIVES OF THE STUDY

Scope of study: The scope of study is that it gives the structure of how banks usually sanction loans.

The study helps to know the various procedures, terms, conditions, criteria and

formalities required during the processing of loan sanctioning. It has been done for

the entire customer who takes interest in banking.

Objectives: The objectives of my report are below:

a. To analyze the types of loan sanctioning by J&K Bank .

b. To study the procedure for sanctioning different types of loan (Term loan, Mortgage

loan, Cash credit etc).

c. To generate the demographic profile of customers.

d. To map the satisfaction levels of customer regarding the services offered by J & K

Bank.

11

 

REVIEW OF LITERATURE

Banking in India

Structure of the organised banking sector in India. Number of banks are in brackets.

Banking in India originated in the last decades of the 18th century. The oldest bank in

existence in India is the State Bank of India, a government-owned bank that traces its

origins back to June 1806 and that is the largest commercial bank in the country.

Central banking is the responsibility of the Reserve Bank of India, which in 1935

formally took over these responsibilities from the then Imperial Bank of India,

relegating it to commercial banking functions. After India's independence in 1947, the

12

Reserve Bank was nationalized and given broader powers. In 1969 the government

nationalized the 14 largest commercial banks; the government nationalized the six next

largest in 1980.

Currently, India has 96 scheduled commercial banks (SCBs) - 27 public sector banks

(that is with the Government of India holding a stake), 31 private banks (these do not

have government stake; they may be publicly listed and traded on stock exchanges) and

38 foreign banks. They have a combined network of over 53,000 branches and 17,000

ATMs. According to a report by ICRA Limited, a rating agency, the public sector

banks hold over 75 percent of total assets of the banking industry, with the private and

foreign banks holding 18.2% and 6.5% respectively.

Without a sound and effective banking system in India it cannot have a healthy

economy. The banking system of India should not only be hassle free but it should be

able to meet new challenges posed by the technology and any other external and

internal factors. For the past three decades India's banking system has several

outstanding achievements to its credit. The most striking is its extensive reach. It is no

longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking

system has reached even to the remote corners of the country. This is one of the main

reason of India's growth process.

The government's regular policy for Indian bank since 1969 has paid rich dividends

with the nationalisation of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for getting a

draft or for withdrawing his own money. Today, he has a choice. Gone are days when

the most efficient bank transferred money from one branch to other in two days. Now it

is simple as instant messaging or dial a pizza. Money have become the order of the day.

The first bank in India, though conservative, was established in 1786. From 1786 till

today, the journey of Indian Banking System can be segregated into three distinct

phases. They are as mentioned below:

13

• Early phase from 1786 to 1969 of Indian Banks

• Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector

Reforms.

• New phase of Indian Banking System with the advent of Indian Financial &

Banking Sector Reforms after 1991.

TYPES OF BANKS IN INDIA

All types of Banks in India are regulated and the activities monitored by a standard bank

called the Reserve Bank of India that stands at the apex of the banking structure. It is also

called the Central Bank, as major banking decisions are taken at this level. The other

types of banks in India are placed below this bank in the hierarchy. The major types of

banks in India are as follows:

Public sector banks in India - All government owned banks fall in this variety. Besides

the Reserve Bank of India, the State Bank of India and its associate banks and about 20

nationalized banks, all comprise of the public sector banks. Many of the regional rural

banks that are funded by the government banks can also be clubbed in this genre.

Private sector banks in India - A new wave in the banking industry came about with the

private sector banks in India. With policies on liberalization being generously taken up,

these private banks were established in the country that also contributed heavily towards

the growth of the economy and also offering numerous services to its customers. Some of

the most popular banks in this genre are: Axis Bank, Bank of Rajasthan, Catholic Syrian

Bank, Federal Bank, HDFC Bank, ICICI Bank, ING Vysya Bank, Kotak Mahindra Bank

and SBI Commercial and International Bank. The Foreign Banks in India like HSBC,

Citibank, and Standard Chartered bank etc can also be clubbed here. Old generation

private banks

14

Cooperative banks in India - With the aim to specifically cater to the rural population,

the cooperative banks in India were set up through the country. Issues like agricultural

credit and the likes are taken care of by these banks.

Development Banks/Financial Institutions

• IFCI

• IDBI

• ICICI

• IIBI

• SCICI Ltd.

• NABARD

• Export-Import Bank of India

• National Housing Bank

• Small Industries Development Bank of India

ROLE OF BANKS IN DEVELOPING ECONOMY

Banks play a very useful and dynamic role in the economic life of every modern state. A

study of the economic history of western country shows that without the evolution of

commercial banks in the 18th and 19th centuries, the industrial revolution would not have

taken place in Europe. The economic importance of commercial banka to the developing

countries may be viewed thus:

• Promoting capital formation

• Encouraging innovation

• Monetisation

• Influence economic activity

• Facilitator of monetary policy

15

FORMS OF BANK FINANCE

A firm can draw funds from its bank within the maximum credit limit sanctioned. It can

draw funds in the following forms:

Overdraft

Under the overdraft facility, the borrower is allowed to withdraw funds in excess of the

balance in his current account up to a certain specified limit during a stipulated period.

Though overdrawn amount is repayable on demand, they generally continue for a long

period by annual renewals of the limits. It is a very flexible arrangement from the

borrower’s point of view since he can withdraw and repay funds whenever he desires

within the overall stipulations. Interest is charged on daily balances- on the amount

withdrawn-subject to some minimum charges. The borrower operates the account

through cheques.

Cash Credit

It is the most popular method of bank finance for working capital in India. Under this

method a borrower is allowed to withdraw funds from the bank up to the sanctioned

credit limit. Borrower is not required to borrow the entire sanctioned credit once, rather,

he can draw periodically to the extent of his requirements and repay by depositing surplus

funds in his cash credit account. There is no commitment charge; therefore, interest is

payable on the amount actually utilized by the borrower. Cash credit limits are sanctioned

against the security of current assets. Though funds borrowed are repayable on demand,

banks usually do not recall such advances unless they are compelled by adverse

16

circumstances. Cash credit is the most flexible arrangement from borrower’s point of

view. It is more often than not used for working capital.

Purchase of Discounting Bills

Under the purchase or discounting of bills, a borrower can obtain credit from bank

against its bills. The bank purchases or discounts the borrower’s bills. The provided

under this agreement is covered within the overall cash credit or overdraft limit. Before

purchasing or discounting the bills, the bank satisfies itself as to the creditworthiness of

the drawer. Though the term bills purchased implies that the bank becomes owner of the

bills, in practice, bank holds bills as security for the credit. When a bill is discounted, the

borrower is paid the discounted amount of the bill.

Letter of Credit

Suppliers, particularly the foreign suppliers, insist that the buyer should ensure that his

bank will make the payment if he fails to honor its obligation. This is ensured through a

letter of credit arrangement. A Bank opens a Letter of Credit in favor of a customer to

facilitate his purchase goods. If the customer does not pay to the supplier within the credit

period, the bank makes the payment under the L/C arrangements. This arrangement

passes the risk of the supplier to the bank. Bank charges the customer for opening the

L/C. The Bank extends such facility to the financially sound customers. Unlike cash

credit or overdraft facility, the L/C arrangement is an indirect financing; the bank makes

payment to the suppliers on behalf of the customer only when he fails to meet the

obligation.

There are two banks involved in L/C arrangements. The L/C opener Bank on behalf of

the applicant or purchaser and the advisory bank on behalf of the beneficiary or supplier.

The L/C opener Bank issues L/C after taking required security. The beneficiary or

supplier gives the goods invoice & bill of exchange to the advisory bank. The advisory

17

bank sends the same to the Opener Bank for acceptance, the opener bank take an

acceptance from the applicant and sends back the same to the advisory bank. Now the

L/C opener Bank makes payment to the beneficiary or supplier in case of purchaser

default. The bank charges the customer for opening the L/C.

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.

A bank guarantee is more risky for the merchant and less risky for the bank.

A letter from a bank guaranteeing that a buyer's payment to a seller will be received on

time and for the correct amount. In the event that the buyer is unable to make payment on

the purchase, the bank will be required to cover the full or remaining amount of the

purchase.

With a bank guarantee, a client can default and the bank assumes the liability.

Thus it can be said that Bank Guarantee is a commitment made by a bank to a foreign

buyer that the bank will pay an exporter for goods shipped if the buyer defaults.

Loan Process & Credit Analysis in Banks:

Loans are the most important assets in a bank’s portfolio, sound credit analysis is the key

to making high-quality loans and managing credit risk. As very few firms have the

resources to operate their businesses on a cash basis. Most have to rely on credit just to

stay in business.

As shown in the diagram, credit analysis in integral and essential part of loan process.

Credit analysis is defined as ‘The process of evaluation an applicant’s loan request in

order to determine the likelihood that the borrower will live up to his/her obligations’. It

means basically it checks the credit worthiness of the borrower.

18

Loan Process Flow:

The concept of credit offers a business many benefits, but it always entails risk.

You’re caught between two crucial profit objectives. Within your bank’s credit

policies, you want to do as much as you can to grant credit – and facilitate sales. But

the credit manager is equally obliged to make tough judgments and determinations

concerning his/her customer’s credit-worthiness, to ensure that the bank is paid on

time and in full. The entire operations of the banking industry revolve around

obtaining deposits and granting loans and different credit facilities to its customers for

viable projects.

Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Pre-Qualifying Application Processing Underwriting Closing

>> Preliminary determination of borrowing capacity and credit history

>> Fill out loan application. >> Gathering documents from applicant.

>> Credit check. >> Appraisal of property. >> Title search. >> Employment & residential history complied. >> Verification of financial reserves.

>> Loan goes to underwriter for approval. >> All conditions requested by underwriter are met. >> Loan is approved.

>> Signing documents drawn. >> Documents sent to title company. >> Buyers bring in money and sign documents. >> Title company records deed. >> Escrow is now closed. >> Buyers get keys to property.

Figure 2

19

The above diagram shows various stages involved in the standard loan process flow.

DETAILS OF LOANS OFFERED BY J&K BANK

The J&K Bank sanction following types of loans:

1. Housing loan: Quantum for loan:

For construction, purchase 60 month, net salary or 75.00 lacs whichever is lower for

repairs/ renovation 20 months net salary subject to a maximum of Rs 10.00 lac for

purchase of land 20 months net salary/ income subject to maximum of Rs 5 lac with in

J&K Bank and Rs 10.00 lac outside J&K Bank ,also as an incentives for small borrower

the renovations of existing houses would now be secured by third party guarantee of two

persons such other security as is deemed appropriate by the Bank.

Eligibility:

- Employee of Government, Semi Government, Civics Bodies, and PSU’s with minimum

five years service.

-Repute Businessmen with minimum five years standing.

-Professionals and Self employed like doctors & engineers, CA’s, Advocates with

minimum five years standing.

Security:

• Primary: Mortgage of house property to be purchased/ constructed.

• Collateral: Third Party Guarantee of one person, or assignment of LIC policies, Pledge of

Government, Securities, etc.

Margin:

• 15% for construction/purchase of built house flat.

• 20% for renovation/purchase of land.

20

Rate of Interest:

Housing Loans

Repayment Period of loans

Floating Rate of Interest(% p. a.) for loans

Fixed Rate of Interest(% p. a.) for loans

Up to Rs.20.00 lacs

Above Rs.20.00 lacs

Up to Rs.20.00 lacs

Above Rs.20.00 lacs

Repayment up to 5 years.

PLR-3.25 PLR-2.50 10.25 11.00

Above 5 years & up to 10 years

PLR-2.75 PLR-2.00 11.00 11.75

Above 10 years & up to 15 years

PLR-2.00 PLR-1.25 XXX XXX

Above 15 years & up to 20 years

PLR-1.25 PLR-0.50 XXX XXX

2. Education Loan:

Scale of finance:

• Rs 10.00 lacs for studies in India.

• Rs 20.00 lacs for studies abroad.

Courses financed in India:

• Post Graduate courses.

• Professional courses.

• Courses like ICWA, CA, CFA, etc.

21

• Courses conducted by IIM, IIT, IISC, XLRI, NIFT, etc.

• Regular degree /Diploma courses.

• Courses offered by reputed foreign universities.

• Distance education and regular courses in diploma degree –Courses conducted by

AICTE/AIBMS/ICMR, etc.

• Teacher training courses/nursing courses conducted by institution approved by

Central Government/State Government provided the said courses lead to degree or

diploma & not to certificate courses.

Courses financed (Abroad):

• Graduation for job oriented professional/technical courses offered by reputed

universities.

• PG Courses MCA, MBA, MS, etc.

• Courses conducted by CIMA-London, CPA in USA, etc.

Eligibility:

• Should be an Indian National.

• Should have secured admission to professional/technical courses through entrance

test/selection process.

• Should have secured admission to foreign universities, institutions.

• Should have passed the qualification examination for admission to the courses.

• Employed person intending to improve their educational qualification and or

receiving training in modern technology in India or Abroad can also be assisted

under this scheme provided training offers prospects of better placement.

Security:

• Personal guarantee of borrowers.

• Collateral Security equal to amount of loans.

Margin:

• For loans upto Rs 4 lac – nil.

• For loans above Rs 4 lac studies in India - 5% studies abroad – 15%.

22

Rate of Interest:

Education Loans ( Primary & Higher Education Schemes )

a) Up to Rs 25000/= 9.50 *

b) Above Rs.0.25 lacs & up to Rs.5.00 lacs 10.50 *

c) Above Rs.5.00 lacs & up to Rs10.00lacs 11.50 *

d) Above Rs.10.00lacs & up to Rs.20.00lacs 12.50 *

Note :In case of Education Loans sanctioned for tenure of more than 5 years,

floating interest rate as per the following structure would apply :-

Loan amount Rate of Interest % p. a.

a) Up to Rs 25000/= PLR – 3.75

b) Above Rs.0.25 lacs & up to Rs.5.00 lacs PLR – 2.75

c) Above Rs.5.00 lacs & up to Rs10.00 lacs PLR – 1.75

d) Above Rs.10.00 lacs & up to Rs.20.00 lacs PLR – 0.25

a) Term Loan for B.Ed/M.Ed:

Purpose: To provide loan to students, employed persons who want to pursue B.Ed/M.Ed courses

for meeting admission/ tuition /examination/library/lab fee.

Eligibility:

• Student should be an Indian National.

• Should be a graduate in any discipline from any recognized universities.

23

• Should have a secured admission to the recognized Institute/College imparting

the B.Ed/M.Ed courses.

• Loan application should be forwarded by the principal of college.

Quantum of finance: Max- Rs 25000.

Margin: 10%

Security: Third party guarantee of one person.

Rate of interest: PLR with quarterly rests.

a.) Bud shah Primary Education Finance:

Objective: To provide opportunity to have good quality primary education.

Purpose: To finance the entire cost of education of children including

school/fees/uniforms/books/etc.

Eligibility: All children above the age of 3 years. The finance granted in the name of guardian.

Quantum of finance:

Class School Max. Amount Primary education Private 30,000

Primary education Govt 2,000

Secondary education Private 25,000

Secondary education Govt 5,000

Margin: 10%

Security:

• Personal guarantee of parents/guardians.

• Third party guarantee of one person.

24

Rate of interest: PLR quarterly

3. Automobile Loan: It includes following schemes for Loan-

• Car loans

• Car loan for used cars

• Commercial vehicles finance

• Commercial vehicles finance (used vehicles)

• Two wheelers

The schemes which are mostly used by customer are:

a) Car loan:

Eligibility:

• Permanent Employees of State/Central Govt/Employee of Govt/Semi Govt undertaking

& Autonomous Bodies.

• Reputed Establishments and Employees on control basis with Central Govt/Central

Govt/Semi Govt.

• Businessmen, professionals and self employed individuals.

Security:

• Primary: Hypothecation of vehicle to be purchased & Bank’s charge to be registered with

RTO.

• Collateral: No third party guarantee is required in respect of permanent employees of

State/Central Govt undertakings & autonomous bodies, public sector drawing salary

through J&K Bank and where letter of undertaking from the employer is available.

Guarantee of one person for all other applicants of the bank.

Margin:

• 10% of State Invoice value for employees of State/Central Govt undertaking,

Autonomous Bodies, Platinum/God current account holder.10% margin shall also apply

25

to businessmen, professionals and self employed person with yearly income of Rs

2,50,000/- and above.

• 20% of sale invoice value in case of all the other cases.

• 100% finance shall be available to application if they keep a fixed deposit with the

bank for amount equal or more than the margin money and for duration not less than the

repayment period of the loan. This deposit shall be kept under lien to the bank.

Minimum Loan: Rs 75,000/-

b) Two wheeler Loan:

Eligibility:

• Employees of Govt/Semi Govt undertaking Autonomous Bodies/PSU’s/Private

companies or Reputed Establishments/Professionals or Self Employed

Individuals/Businessmen.

• Student aged 18 years and above, with parent as co-borrower.

• Minimum age of applicant 18 years.

• Maximum age at loan maturity: 58 years or age of retirement which ever is higher for

Govt.employees & 65 years for others.

• Minimum employment: The applicant must have been in current employment for a

period not less than 1 year or must have a business standing of at least 2 years.

• Minimum Net Annual Income: 50,000.

Margin:

• 10% of the sale invoice value for employees of State/ Central Govt undertaking

/Autonomous bodies/Platinum/ Gold current account holder.10% margin shall also

apply to Business, Professionals & Self Employed persons with yearly income of

Rs 2,50,000/-above.

• 20% of sale invoice value in case of all the other eligible, individuals/entities except

employees on contractual basis.

26

• 25% of the sale invoice value in case of employees of private sector organization &

employees on contractual basis.

Rate of Interest:

Up to & including Fixed Option Floating Option 1 year 13.50 PLR

Above 1yr to 3yrs 14.50 PLR+1

Above 3yrs 15.00 PLR+1.25%

Security:

• Primary: Hypothecation of two wheeler to be purchased.

• Collateral: No third party guarantee required in respect of permanent employees of

State/Central Govt undertaking & Autonomous Bodies Public Sector drawing salary

through J&K Bank and where letter of conformation of employer for deduction of

monthly installments is available. Guarantee of one person in case of employees

drawing salary through our branches but where letter of confirmation form employer

is not available.

Guarantee of one person for loan upto Rs 50,000 & other cases. However Branches

Heads shall have the discretion on any owner of relaxing the Guarantee requirement

in case of select borrowers.

4. Other Loans:

a) Consumer loans:

Purpose:

• Loan granted for purchase of durable consumer good like.

• Desktop computer (PC)/Laptop.

27

• Motorcycle/ Scooter/Air Conditioner/Color T.V/

• DVD player/VCR/Generator/Washing Machine (automatic)/ Cooking range.

• Refrigerator /Dish antenna/DTH equipment/ Vacuums’ Cleaner/Water filter cum

purifier/CD Player/ Cassette Player/Geyser/etc.

Eligibility: Employees of Govt/Semi Govt/Civics Bodies/Self Employed.

Security:

• Primary: Hypothecation of article financed.

• Collateral: Third party guarantee of one person.

Rate of Interest: 14%(fixed)

Margin: 25%

b) Consumption Loans:

Features:

• Disbursed in cash.

• No questions asked about its end uses.

• Revolving type facility as full limit can be restored on request of the borrower subject

to the following:

Outstanding balance reduced to below 40% of the Loan Amount.

At the time of reinstatement of the limit applicant must have sufficient remaining

years of service so that loan is repaid with in the borrowers remaining yrs of service.

Fresh D.P note for full amount of loan.

Borrower does not have more than two installments in arrears on any point of time during

currency loan.

Eligibility: Permanent Employees of State/Central Govt/ Autonomous Bodies/ Corporate Public and

Private Sector undertaking having minimum of 3 yrs confirmed service.

c) Personal Loan to Pensioners:

28

Nature

of

facility:

1) Upto Rs 2.00 lacs 13.00

• Disbursed in cash.

• No question asked about it end uses.

Eligibility: Central and State Govt pensioners drawing pension through bank.

Security: Guarantee of spouse eligible for family pension or of any other family member or a third

party guarantee which is considered good for the amount of advance.

Rate of Interest: PLR+1%

d) Mortgage Loan for Trade & Service Sector:

Purpose: To provide hassle free working capital finance to the borrower.

Eligibility: Retail and wholesale traders and other business enterprises with satisfactory track

record of 3 years.

Security:

• Primary: Hypothecation of stocks and book 29 epts..

• Collateral: Mortgage of unencumbered residential house/ flat/ commercial or industrial

property with a clear marketable tittles in the name and possession of the

borrowers/proprietors/partners/directors either self occupied or vacant.

Rate of interest:

29

Condition Rate of Interest for all Ltd Xxx

Upto Rs 2.00 lacs PLR

Above Rs 2.00 lacs & Upto Rs 20.00 lacs PLR+1%

Above Rs2.00 lacs PLR+1.50%

2) Above Rs 2.00 lacs & Upto Rs 20.00 lacs 14.50

3) Above Rs 20.00 lacs & Upto Rs 50.00 lacs 15.00

Some of other loans include in Mortgage are:

• Fair price shop scheme.

• Travel & Tourist Taxi operators.

• Mortgage loans against immovable property.

5. Specialized Loans:

• These loans are sanctioned for special purpose like Tour, Agriculture, Crafting, etc.

• Some of the special schemes for special purpose are below:

Help Tourism (for Kashmir valley only).

All purpose Agriculture Term Loan.

Upto Rs 0.50 lacs 10%

Above Rs 0.50 lacs 11%

Fruit Advances Scheme (Apple)

Zafran Finance.

Roshni Financing Scheme.

Craft Development Scheme.

Dastkar Finance.

Giri Finance Scheme.

Khalamband craftsmen Finance.

30

Commercial Premises Finance.

Laptop/ PC Finance.

Nature of Loans Sanctioning of loan comes under the category of Bank Advances or Loans/Advances.

There are various kinds of Loans having difference in nature, which are discussed below:

1. Term Loans: These loans are basically given for the purchase of plant and machinery to the concerned

party against hypothecation of books-debts and stock. This is given for a period of 5

years i.e. the repayment has to be made by the party with in 5 years.

Eligibility: Individuals and Business entrepreneurs engaged in trading & service activity having a

minimum standing of 3 years with a satisfactory track record of cash profits and net profit

during the last one year.

2. Working Capital Finance: It is also known as Cash Credit Limit. This is basically given to finance to working

capital i.e. the amount needed to run the business-capital. It is too given against

hypothecation of books-debts and stock. It is renewed after calculation, the drawing

power of the party through its stock statement, sundry debtors and sundry creditor’s

statement.

Eligibility: Individuals and Business Entrepreneurs engaged in trading service activity having a

minimum standing of 3 years with a satisfactory track record of cash profit and net profit

during the last one year.

31

3. Mortgage Loans: For providing hassle free loan to individuals, trade and services sector.

Eligibility: Individuals and Business Entrepreneurs engaged in trading and service activity having a

minimum standing 3 years with a satisfactory track record if cash profits and net during

the last one year.

 

Compulsory Document Some document which are needed to be put in record by Bank:

D.P Note

Affidavit

Irrecoverable power of Attorney (Borrower)

Letter of wavier

Deed of Guarantee

Letter of undertaking

Letter of consent by borrower

Letter of additional undertaking

Letter of consent by guarantor

Letter of deposit title deeds

Loan agreement

There are different types of forms filled and put as record: Proposal form for fresh/renewal/enhancement.

Personal statement of borrower.

Personal statement of first guarantor.

Personal statement of second guarantor.

Credit report of first guarantor.

Credit report of second guarantor.

32

Loan application form.

Factors to be taken into consideration while determining

requirements for working capital:

Production Policies

A sugar factory which belongs to a seasonal industry would obviously have its working

capital need affected by the length of the crushing season. The production schedule i.e.

the plan for production, has great influence on the level of inventories. In some cases raw

material can be procured only in a particular season and have to be stocked for the

production of the whole year. In many others, the production cycle is limited to a part of

the year and raw materials have to be accumulated throughout the year. In all such cases

the need for working capital will vary according to the production plans. Similarly, the

decision of the management regarding automation, etc, also affects working capital

requirements. In a labor- intensive process, the requirements of working capital will be

higher. In the case of highly automatic plant, the requirements of long-term funds would

be greater.

Nature of the business

The shorter the manufacturing process, the lower is the requirements of working capital.

This is because, in such a case, inventories have to be maintained at a low level. Longer

the manufacturing process, higher will be the requirements of working capital. This is the

33

reason why highly capital-intensive industries require large amount of working capital to

run their sophisticated and long production process. Similarly, a trading concern requires

lower working capital than a manufacturing concern.

Credit policy

The credit policy of the company also determines the requirements of working capital. A

company, which allows liberal credit to its customers, may have higher sales but

consequently will have large amount of funds tied up in sundry debtors. Similarly a

company, which has very efficient debt collection machinery and offers strict credit

terms, may require lesser amount of working capital than the one where debt collection

system is not so efficient or where the credit terms are liberal. The credibility of a

company in the market also has an effect on the working capital requirements. Reputed

and established concerns can purchase raw material on credit and enjoy many other

services also like door delivery, after sales service etc. This would mean that they could

easily have large current liabilities; therefore the required working capital may not be

very high.

Inventory policy

The inventory policy of a company also has an impact on the working capital

requirements since a large amount of funds is normally locked up in inventories. An

efficient firm may stock material for a smaller period and may, therefore, require lesser

amount of working capital.

Abnormal factors

Abnormal factors like strikes and lockouts also require additional working capital.

Recessionary conditions necessitate a higher amount of stock of finished goods

remaining in stock. Similarly, inflationary conditions necessitate more funds for working

capital to maintain same amount of current assets.

34

Market conditions

Working capital requirements are also affected by market conditions like degree of

competition. Large inventory is essential as delivery has to be off the shelf or credit has

to be extended on liberal terms when market competition is fierce or market is not very

strong is a buyer’s market.

Conditions of supply

If prompt and adequate supply of raw materials, spares, stores etc. is available it is

possible to manage with small investments in inventory or work on the just in time (JIT)

principle. However if the supply is erratic, scant seasonal, channel zed through

government agencies etc., it is essential to keep large stocks increasing working capital

requirements.

Business Cycle

Business fluctuations lead to cyclical and seasonal changes in production and sales and

affect the working capital requirements.

Growth and expansion

The growth in volume and growth in working capital go hand in hand. However, the

change may not be proportionate and the increased need for working capital is felt right

from the initial stages of growth.

Level of taxes

35

The amount of taxes paid depends on taxation laws. These amount usually have to be

paid in advance. Thus need for working capital varies with tax rates and advance tax

provisions.

Dividend policy

Payment of dividend utilizes cash while retaining profits acts as a source of working

capital. Thus working capital gets affected by dividend policies.

Price level changes

Inflationary trends in the economy necessitate more working capital to maintain the same

level of activity.

Operating efficiency

Efficient and coordinated utilization of capital reduces the amount required to be invested

in working capital

Securities Required in bank finance

Banks generally do not provide working capital without adequate security. The following

are the modes of security which a bank may require:

Hypothecation

Under hypothecation, the borrower is provided with working capital finance by the bank

against the security of movable property, generally inventories. The borrower does not

transfer the property to the bank; he remains in the possession of property made available

as security for the debt. Thus hypothecation is a charge against property for an amount of

36

debt where neither ownership nor possession is passed to his creditor. Banks generally

grant credit hypothecation only to first class customers with highest integrity. They do

not usually grant hypothecation facility to new borrowers.

Pledge

Under this arrangement, the borrower is required to transfer the physical possession of

the property for the payment of debt. In case of mortgage, the possession of the property

may remain with the borrower, with the lender getting the full legal title. The transferor

of interest (borrower) is called mortgager, the transferee (bank) is called mortgagee, and

the instrument of transfer is called the mortgage deed.

The credit granted against immovable property has some difficulties. They are not self

liquidating. Also, there are difficulties in ascertaining the title and assessing the value of

the property. There is limited marketability and therefore security may often b difficult to

realize. Also, without the court’s decree the property can not be sold. Usually, for

working capital finance, the mode of security is either hypothecation or pledge.

Mortgages may be taken as additional security.

Lien

Lien means right of the lender to retain property belonging to the borrower until he

repays credit. It can be either a particular lien or general lien. Particular lien is a right to

retain property until the claim associated with the property is fully paid. General lien, on

the other hand, is applicable till all dues of the lender are paid. Banks usually enjoy

general lien.

37

Research Methodology  

Research Design: 

It has been done in step by step process so as to avoid error, mistakes and to put the

matter or data in right manner so to put complete sense in front of reader.

• Steps which have been applied to report are below:

Step 1- Identify the objectives.

Step 2-Method of Data collection.

Depending upon the sources, statistical data which are classified under categories:

• Primary Data: This data obtained by a study specifically designed, it is taken or

collected by market survey, friend circle, relatives. Its is also known as First Hand Data.

A survey questionnaire was given to all the customers in J&K Bank, Lakhdata Bazaar to

be filled by them personally.

• Secondary Data: This data is collected by Magazines, Posters, Internet, Newspapers,

Reports Publication, etc. Annual report of the bank was the major source of secondary

data. Data was also collected from the J&K Bank website.

Step 3- Analysis of collection data.

(Through graphs, tables, charts, etc. Statistical tools were also used.)

Step 4- Finding & Conclusion.

38

According to above steps our report objectives has been discuss early in the chapters and

the data has been collected is of both type primary and secondary, secondary data is

collected by annual magazine published by bank ,newspapers, internet search, etc.

STATISTICAL TOOLS AND RATIOS APPLIED RATIO ANALYSIS

Accounting ratios are relationships expressed in mathematical terms between figures

which are related with each other in some manner.

• Credit deposit ratio

• Business per employee ratio

• Profit per employee ratio

TREND ANALYSIS

It helps to understand the trend relationship with various items in terms of financial

relationships.

PERCENTAGE ANALYSIS

It simplifies the comparison between different items and helps to understand it and hence

express it in an easier manner .

CORRELATION AND REGRESSION ANALYSIS

Correlation analysis is used to find the degree of relationship between two or more

variables . The main objective is to find the relationship between the dependent variable

with the provided independent variables.

SWOT ANALYSIS

It is the analysis of strength , weakness , opportunity and threat posed to any organization

in present or future which is being studied .

Limitation

• Lack of time limitation:

The major limitation was the lack of time. There were many cases of J & K bank and

different related topics which need lot of time to study and analyze but due to limited

39

time of 6 weeks it is not possible so, I took few cases to include them in my report,

otherwise I would have added few more interesting topics to my report.

• Reliability of the data used:

The data used in my report were secondary as well as primary also . Therefore the data

can be trustworthy because whatever the information has been sent on internet by the

bank and day to day events related to bank has been organized and published in

newspapers and magazines and the cases which I have included in my report are primary

which I had worked upon with my complete efforts.

• Limited geographical extend:

The Employees of J & K Bank belong to Jammu & Kashmir, so their culture and their

language is quite different. They mostly speaks Kashmiri with each other, they know

Hindi also but the pronunciation is little bit typical to understand, so it create little bit

problems in starting .

• Less Variation in customer:

Customer of J&K Bank are mostly Businessmen and government employees, so it is very

difficult to analyze our objective.

40

COMPANY PROFILE The Jammu & Kashmir bank was established on Oct. 1, 1938 while it had started

operating from July 4th, 1939 onwards. This bank is special because of being the first

state owned bank of India. The J&K Bank, owing to the extended central laws of the state

of J&K, was declared as a government bank according to the provisions of the Indian

Companies Act 1956. The year 1971 brought an important turn in the history of the

Jammu & Kashmir Bank as in this year the bank was accorded the stature of a Scheduled

Bank.

At present, the J&K Bank has around 500 branches across the country and it has recently

become a $10 billion company. It is also a listed at the Bombay Stock Exchange (BSE)

and the National Stock Exchange (NSE).

Services Rendered by J&K Bank Ltd.

Support Services Depository Services Third Party Services

Cash Management Services

Anywhere Banking Dematerialization Mutual Funds Real Time Gross Settlement (RTGS)

41

Internet Banking Stock Broking Life Insurance National Electronic Fund Transfer (NEFT)

SMS Banking Depository Participant of NSDL and CDSL

Non-life Insurance

ATM Banking Market Transaction Remittance

Debit & Credit Cards Off-market Transaction

Merchant Acquiring DP Account Opening

Mission Statement of the bank

The most important change is to move away from trying to govern to trying to serve.

The bank’s overriding mission as a corporation is to use its core competency to serve and

empower the people of the state in general and entrepreneurs in particular, rather than

serving them as an afterthought.

Future Goals of the Bank To build a global brand, the Bank feels a need to do two things – go global physically and

second, more importantly, have a unique business model, product offering and service

standards, all of which are globally recognized.

The bank has taken initial steps to achieve the first. As of today, after the state

government, the bank’s second largest shareholders are Foreign Institutional Investors,

with a combined stake of almost 36 per cent. Some of the biggest names in the world

figure in the sixty plus funds that have invested in the Bank. The list is truly international,

with funds from USA, Europe, Singapore, Japan, Sweden, Mexico and Spain, having

investments valued at more than $300 million in the Bank.

42

As a next step in this direction, the bank plans this year to raise money abroad. The bank

will offer Global Depository Receipts and list the Bank in international capital markets.

This will be a landmark in J&K bank illustrious history.

The second way to becoming a global brand is to have a unique business model, which is

a far more formidable task. The Bank has a wonderful brand in Pashmina. By and large

most global brands are products. What the bank is setting out to do is to create a global

brand in the financial services industry.

 

 

The new identity for J&K Bank is a visual representation of the Bank’s philosophy and

business strategy. The three colored squares represent the regions of Jammu, Kashmir

43

and Ladakh. The counter-form created by the interaction of the squares is a falcon with

outstretched wings – a symbol of power and empowerment. The synergy between the

three regions propels the bank towards new horizons. Green signifies growth and

renewal, blue conveys stability and unity, and red represents energy and power. All these

attributes are integrated and assimilated in the white counter-form.

Board of directors of J&K Bank Board of director or BOD means Board Members these members are those whose right

decision take the bank at top position or their one mistake make it fall. BOD provide

direction to the Bank in order to achieve its vision .A brief profile of BOD of J&K Banks

are below:

1. Haseeb A Darbu:

Haseeb A Darbu (chairman & Executive Officer) He is professional economist who has

been on the BOD of Bank since 11th July 2003. Processing a diverse skill set and wide

ranging experience, he started his professional career with the perspective planning

Division of the Planning Commission. Later he was appointed Consultant to Economic

Advisory council of Prime Minister. His final stint with policy making was with the

Tenth finance Commission. Moving from government to the field of business journalism,

he joined India’s premier financial daily, business Standard and rose to become the

national Editor of paper .in 1997 he was appointed member of the high powered

Committee on Economic Reforms for Jammu & Kashmir .At present he continues to

work as the economic Advisor to Government of Jammu & Kashmir, a position he has

held since January 2003.

2. M.S.Verma:

44

Mayashanker Verma, a career banker with 45 years experience of working in the Indian

Financial Sector has held some of the senior most and critical position in the country’s

financial system as well as its regulatory regimes .In a career spanning over more than

four decades with the State Bank of India, India’s largest commercial bank, his

experience has been multi-level and wide ranging on different facts of banking at national

and international levels. Encompassing commercial, developmental and Investment

Banking as well as assets management and capital market operations.

He was the chairman of the State Bank of India from April 1997 to Nov 1998. He has

vast experience and understanding in total financial systems. The IDBI under the

chairmanship of Mr.Verma recorded very strong growth to become a leading private

Sector Bank in India. Mr.Verma also acted as an honorary advisor to the RBI during

which he undertook several policies related to education.

3. B.L. Dogra:

B L Dogra is a Fellow Member of the Institute of Chartered

Accountants of India and is also founder of M/s Dogra Associates, a participating

firm of Charted Accountants. Presently linked as Director with J&K Bank, he has

also served on the BOD of PNB (Punjab National Bank) and has been associated with

Social and Sports Association of state. He has rich and varied experience in the field

of Banking and Insurance which has facilated healthy rejuvenation in the Bank’s

business working.

4. Dr.Narendra Jadhav:

Dr.Narendra Jadhav is an eminent economist backed with more than 30 years

distinguished service with Reserve Bank of India, including as Principal advisor and

Chief Economist, when he played an important role in macro-economic policy

making in India. Dr Jadhav will be bringing with him a unique set of skills and

dimensions, which will add value and compliment the business objective of the bank.

A prolific writer, Dr. Jadhav has written 11 books mainly on economic and social

issues and has over 100 research papers to his credit in national and international

journals of repute. He has also served as Advisor to Executive Director for India at

the International Monetary Fund and Senior Economic Advisor to various

45

governments; including Ethopia more recently he was involved in the reconstruction

of Afghanistan Economy, as Chief Economic Counselor.

5. Ashok Kumar Mehta:

Mr.Ashok Kumar Mehta is the Executive Director of J&K Bank. Mr. Mehta has a

long standing association with the Bank, dating back to 1972 and has served Bank’s

hierarchy in various executive capacities as part of Bank’s Corporate Management.

Team, during the course of his career with the Bank, Mr. Mehta has also been

chairman of J&K Bank .A rural bank sponsored by the J&K Bank.

Mr. Mehta has been instrumental in setting up of the joint insurance venture with MetLife

.International, USA and has played key role in forgoing ties with Bajaj Allianz General

Insurance Co. And MetLife India. Insurance Co.Ltd for distribution of non life and life

insurance product. He has performed pioneering work in initiating and implementing the

new HR Package under “Nave Subha”. Which incorporates new generation include

finance and Financial Services, Planning & Development, Account and Estates.

6. Abdul Majid Mir:

Mr. Abdul Majid Mir, Executive Director of J&K Bank, has more than 36 years of

experience in banking. Mr. Abdul has held various important and senior positions in the

bank, as part of its corporate management team. He has special knowledge and practical

experience in the field of Finance, Credit, Trade and Retail Banking, Deposits & Liability

management and Risk management.

7. G.M.Dug:

Mr. Dug well known figure in the hotel industry of Kashmir. Mr.Dug has twice in the

past, held the prestigious position of President, Kashmir chamber of Commerce &

Industry and provided representation on the Board of several well known State

Government undertaking. Mr. Dug has made valuable contribution for the promotion of

various segments of J&K economy such as Tourism, Export, Handicraft and industries

and in his present association with J&K Bank will be adding value based on his

experience and knowledge.

46

Features of J&K Banks

• Private sector bank despite government holding 53% of equity.

• Sole banker and lender of last resort to the government of J&K.

• Plan and non-planed funds, taxes and non taxes revenues routed through the bank.

• Salaries of government official disbursed by the bank.

• Only private sector bank designated as agent of RBI for banking.

• Carries out banking business of central government.

• Collects taxes pertaining to Central Board of direct taxes in J&K.

SERVICES OFFERED Depository Services Scheme of J&K Bank

• Dematerialization (Demat)

• Stock Broking through INVESTMART an initiative of ILFS

• Depository

• Depository Participant

• Market transaction

• Off-market transactions

• Pledge of securities

• Rematerialisation (remat)

Insurance offered by J&K Bank

Insurance products of Jammu and Kashmir Bank are offered in association with Bajaj

Allianz General Insurance Co. Ltd.

• Motor insurance

• Hospital cash

47

• Burglary

• Shop keepers

In association with MetLife, the Bank is offering the following Life Insurance Policy to

its customers:

• Met Bhavishya- A flexible money-back plan

• Met Junior- Par Endowment

• Met Mortgage Protector SP- Single Premium Mortgage Protection Plan

• Met 100- Limited Pay Whole Life Insurance

• Met 100 Gold- Par Whole Life

• Met Platinum (Endowment)-Participating endowment assurance for face amount

above Rs. 3 lakh

• Met Riders- Customization tools for policies.

Credit Card of J&K Bank

Initially there are three types of Credit Cards issued by Jammu and Kashmir Bank:

• Gold Card

• Silver Card

• Blue Card

All the above cards are also available with photo along with a family address on Cards.

The Card is accepted by all those Merchant Establishment who honour MASTER cards.

ATMs linked with MASTER cards accept J&K Bank Credit Card.

Customer Service

The Jammu and Kashmir Bank has proved to be customer driven organization and the

people in the organization understand that innovation creates opportunity, quality creates

demand and teamwork makes it happen. The Bank, feeling the pulse of customers need

48

that they demand more for less, has endeavored to provide them better quality service,

wider choice and above all innovative products. The Bank is always ready to add value to

its customers and takes every possible step to improve quality of customer service. The

Bank proves its promises to customer quality service by establishing. ‘Customer

Advisory Foray’ at its every major branch. The number of such foray has been

consistently rising. In monthly meetings of these forays, the branch managers and

customers interact to sort out issues relating to customer service or other related

problems. The Bank has a very efficient complaint redress mechanism. It handles the

customer queries and complaints on priority. One can find ‘Customer Suggestion Card’,

at all branches of the Bank and also on its website. Customers accessing the website of

the Bank have the option to send their queries through e-mail.

Bank on Information Technology

The bank has a constant focus on application and augmentation of the information

technology in order to modernize Bank’s operations and deliver value-added services to

the customers. The Bank covers more and more branches under the computerization

programmes.The bank has extended Anywhere Banking and Tele-Banking facilities to

many new locations/branches, The number of ATMs (both off-site and on-site) installed

by the Bank has increased to 78 during the year under report, of these 51 ATMs were

networked through IST Switch. The Bank is in the process of setting up its DATA centre

at Delhi for which creation of infrastructure is in progress. With the commencing of the

said data centre the Bank will be able to introduce Internet Banking.

Customer Orientation

The Bank has come up with various value added products and services to suit customers’

expectations and requirement. Its Marketing and Research Cell has been functioning for

three years now. The market research is conducted on an ongoing basis to identify needs

and expectations of the customers and shape products / services accordingly. Even value

addition to the extant products/services is made to suit the growing needs/ demands of the

customers. Bank provides value to its customers by delivery of innovative products and

services in an effective and efficient manner. In order to reach existant and potential

49

50

customers in an effective manner creative promotional campaigns are being undertaken

to create a strong "Brand Identity" for the Bank. With multiple options available to

customer in shopping their products, more focus was laid on retail advertising during the

year and extensive promotional campaign through print and electronic media was

undertaken which showed significant results in the form of increased demand for the

Bank’s products and customer base. As a part of the advertising strategy the Bank has

sponsored weekly radio programmes named "JK Bank Dairy" which is aired from the

three stations of radio Kashmir viz., Srinagar, Jammu and Leh. It is an innovative

programme and is successfully running for last 18 months. The programme is being

produced by Bank’s own staff. The programme has gained wide popularity among the

people as it provides awareness and up-to-date information about banking in general and

products/services offered by the Bank in particular. People from all walks of life with

their responses have appreciated the usefulness of the programmes, which is evident from

hundreds of responses received every week from the listeners.

Bank’s web site is a powerful resource for customer education and information. The

website provides the visitors up-to-date information about all the products/services

offered by the Bank and other matters of interest relating to the Bank besides, providing

some on-line services. The updating of the site is done on daily basis so as to provide the

visitors latest information about the Bank. The site attracts on an average 700 visitors

weekly.

Branch Expansion

With a view to increasing its reach to potential markets and extending banking facilities

to un-banked areas coupled with catching on new business opportunities Bank has been

opening new branches selectively at centers offering highest business potential. In

keeping with this strategy the Bank opened 15 new branches/extension counters during

the period under report raising the total number of offices to 454 at the end of March

2003.

Registered Office

Jammu & Kashmir Bank

M A Road

Srinagar 190 001

Jammu & Kashmir

Corporate Headquarters

M A Road

Srinagar 190 001

Jammu & Kashmir

Official Website:

http://www.jkbank.net/

SWOT ANALYSIS OF J&K BANK

STRENGTH

• Monopoly bank with 70% plus of

market share & functions as a

universal bank in J&K state.

• Financial strength , powerful set of

brands that people trust,proven

products and services.

• Effective and integrated

distribution network that delovers.

• Bank with regional focus, national

reach and international standards

of operation.

• Only private sector bank with

majority of ownership(53.17%)

vested with government of J&K.

OPPURTUNITY

• Technological advances.

• Tremendous revenue growth

opportunity in all fields.

• New distribution channels.

• Retaining market leadership.

• Expand the research &

development department to

innovate new products and

services.

WEAKNESS

• Bank only employs permanent

residents of J&K State.

• Concentration of bank network is

more in northern region of the

51

country as compared to southern

regions.

• Bank procedures are very flexible

to help the customers in best

possible way , but this is

sometimes taken into negative

sense by fraudulent customers.

THREATS

• Strong and stiff competition in

near future.

• Entry of more private banks in

J&K .

• Highly advanced technology

used by other banks

Journey of J&K Bank 1938- The J&K Bank Ltd was incorporated in 1938 to extend banking facilities in J&K

(Jammu & Kashmir) .

The bank was constituted as a government company under Companies Act 1956 and is

functioning as bankers to State Government

1993-

The bank tied up with Renter News Agency for instantaneous information about global

foreign currency rates and fluctuation there of.

1995-

Banking Om Budhsman Scheme was launched in June, with a view to provide quick and

inexpensive facility to resolve the grievances of bank’s customers.

A loan delivery system was introduced in April to instill discipline in the utilization of bank

credit especially by large borrowers.

1998-

J&K Bank Ltd came out with a public issues of 1,8500,000 equity shares of Rs 10 each for

cash at premium of Rs 28 per share aggregating Rs 70.30 crore.

52

A recovery drive was launched which include settlement of long outstanding loan account of

chronic defaulters by outside court compromises.

Bank introduced a new term deposit scheme under the title “Jana Priya Jamma Yojna”.

Housing Loan & Education Loan Scheme for general public have been introduced during the

current financial year.

1999-

The bank entered into a agreement with IBA to connect its ATMs through a shared network.

2000-

J&K Bank tied up with Infosys Technology to offer internet banking and for its E-commerce

initiatives.

J&K Bank is in talk with two foreign insurance companies for a joint venture for its

insurance subsidiary to be floated by the year end.

J&K Bank Ltd the Srinagar based listed bank in the country tied up with Infosys Technology

Ltd.

J&K Bank Ltd has tied up with American Express to launched a Co-branded Credit Card.

2001-

The bank has launched J&K Bank AMEX Co. Branded Credit Card pursuant to agreement

entered with American Express Bank.

The Bank has tied up with the US-based Insurance Based MetLife in the insurance sector.

2002-

J&K Bank has informed that following persons have ceased to be Directors of the Bank Mr.

H.S. Anand and Mr.M.I.shadad further the Company has informed that the following persons

were appointed as Director Dr.G.Allaqaband & Mr.D.S.khandari.

Further the following finance luminaries were reappointed as additional Director of the Bank

in the aforesaid Board meeting. Director A.M.Khusro, Mr.G.P.Gupta and Mr.Vipin Malik.

2003-

J&K Bank Ltd has informed the following change in the Board.

Mr.G.R.Khan and Mr.G.M.Dug have ceased to be Director of the Bank at AGM held on June

02, 2003.

Mr.Mohd.Yasir Mir and Mr.B.L.Dogra have been appointed as Director on the Board at

AGM held on June 02, 2003.

53

Dr.A.M.Khusro, Mr.G.D.Gupta & Mr.Vipin.Mlik have been appointed as Director of the

Bank on June 03, 2003.

Dr.Haseeb A Drabu consultant to Economic Advisory Council of Prime Minister and

presently the Economic Advisor to the Government of J&K has been appointed as the

Director of Bank.

J&K Bank has decided to launch Global Access Card in association with Master Card

International.

2004-

J&K Bank approves Rs 300 crores for Reliance Infocom.

J&K Bank lied up with ICICI to share the ATM network.

J&K Bank has received the Asian Banking Award 2004 in Manila for it customer

convenience programs.

J&K Bank unveils international division in Srinagar.

IDBI Bank lied up for visa transaction with J&K Bank, to launch a platform for the state is

merchant establishment.

2006-

J&K Bank receives approval from RBI for increasing the FII’s holding.

2007-

J&K Bank Ltd has appointed Mr.M.S.Verma (Executive Chairman State Bank of India) &

Mr.G.P.Gupta (Executive Chairman & MD of IDBI) as Director of the Bank in the meeting

of Board of Director held on June 09, 2007.

2008-

Mr.M.S.Verma (Ex. Chairman & State Bank of India) & Mr.G.P.Gupta (Ex. Chairman &

Managing Director of IDBI) were reappointed as Director of the Bank on the meeting of

BOD held on July 19, 2008

54

ANALYSIS OF THE DATA

 INFERENCE

The credit/deposit ratio continuously increases from 2004-07 and then it slightly decreases in

2007-08 and 2008-09. Here it is clear from the above table that both credit and deposits are

55

continuously increasing , but the rate of increase in deposits is more than the total credit of J

& K Bank and thus the CD ratio decreases in 2007-08 & 2008-09 . Thus it can be inferred

that deposits are continuously increasing as compared to the total credit of J & K Bank .

INFERENCE

56

The above table clearly shows that the credit/deposit ratio is positively correlated with the

state gross domestic product but there us no significance correlation between the state gross

domestic product and credit/deposit ratio. i.e. credit/deposit ratio of J & K Bank is positively

related to state gross domestic product of Jammu and Kashmir state.

INTERPRETATION

The regression table shows that 11.4% of variance explained the stated relationship (adjusted

r square = 0.336 , F = 1.55 , b = 0.579) i.e. credit/deposit ratio is positively related to SGDP .

Therefore regression analysis strongly supports the credit/deposit ratio of J & K Bank which

has a positive relationship with the state domestic product of Jammu and Kashmir state.

57

INFERENCE

• Profit has increased substantially. In past five years it has more than tripled . The

continuous increase of trend % of profit from 100% in 2004-05 to 365.15% in 2008-09 is

a healthy sign of very good financial performance . The J & K Bank continued to register

an impressive year on tear improvement in profit from 2004-09 and indicates the

soundness of performance of bank i.e. very good.

• Business performance has also registered a continuous increase in all the years from

2004-05 to 2008-09. The constant increase in trend percentage of business performance

from 100% in 04-05 to 162.63% in 2008-09 is quite excellent. The bank maintained its

growth momentum in all the important areas of its business operations which ultimately

lead to better expansion , growth and soundness of bank which are essential for batter

economy of the state .

58

INFERENCE

Out of the total 431 branches , 316 branches are in semi urban and rural areas. The ATM

network of the bank has increased to 300 plus. Out of 300 ATMs , 235 are in the state only and

today constitute the largest ATM network in J & K. With a view to provide greater

convenience and alternate channels to customers and in order to further its foothold to potential

markets and extend banking facilities to rural and unbanked areas coupled with catching on

new business opportunities , bank has been opening new branches selectively at centers

offering highest business potential and provide easy access to banking . During the financial

year 2008-09 , 22 new branches have been added.

59

 

INFERENCE

The business per employee as well as net profit per employee of J & K Bank are increasing

substantially. There is an increasing trend in both business per employee and net profit per

employee which indicates the productivity level has shown appreciable increase from 2004-

2008. hence the J & K Bank is showing healthy growth which is good sign for the

development of economy of the state.

FINDINGS FROM THE SURVEY CARRIED OUT IN JK

BANK, LAKHDATA BAZAAR

60

Following insights have been found out from the JK Bank , Lakhdata Bazaar branch based on

the survey carried out there . A sample size of 50 was taken into consideration . The survey

included the filling up of a questionnaire consisting of 13 odd questions . Each question had

certain options available as answers to be filled by the customer . Each answer option

provided had certain strength or weighted mean according to which the findings have been

tabulated and presented in tabular as well as pie chart format. The target customers were the

people who had in sometime of life availed loan facility from JK Bank . henceforth the

findings have been mentioned below.

DEMOGRAPHY OF CUSTOMER

GOVERNMENT EMPLOYEE 15BUSINESS MAN 13STUDENT 0TOTAL 28

INFERENCE Most of the loans are sanctioned for either government employees or business man. This

is because the bank favors government employees in providing loans as the legal

documentation and processes for them are more easier as compared to other groups. The

government policies also help small scale businessman too. In the first quarter 2010 none

of the education loan has been sanctioned through JK Bank, lakhdata bazaar branch.

61

DEMOGRAPHY OF CUSTOMER

GOVERNMENT EMPLOYEE

54%

BUSINESS MAN46%

STUDENT0%

GOVERNMENT EMPLOYEEBUSINESS MANSTUDENT

 

TYPES OF LOANS SANCTIONED IN 1ST QUARTER 2010

HOUSING LOAN 2EDUCATION LOAN 0CAR LOAN 13TWO WHEELER LOAN 2PCL 15LOAN AGAINST DEPOSIT 6MORTGAGE 0TRANSPORT LOAN 4WC FINANCE 1TOTAL 43

INFERENCE As far as type of loans being sanctioned is concerned PCL (personal consumption loan) and

car loan the highest in demand. This owes to the ease with which these loans are sanctioned .

The processing time of these loans is also very less. JK Bank also provides assistance to

transportation companies and financial assistance to small scale entrepreneurs to enhance

their scope of business.

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5% 0%

30%

5%35%

14%

0%9% 2%

HOUSING LOANEDUCATION LOANCAR LOANTWO WHEELER LOANPCLLOAN AGAINST DEPOSITMORTGAGETRANSPORT LOANWC FINANCE

REASONS TO USE JK BANK

Low interest rates 11

Easily accessible 17

Regional banking 2

Better products and services 4

High level of customer relationship

management 16

INFERENCE As far as the reasons for using the facilities of JK Bank is concerned majority of them

were highly obliged to the reception they receive at the customer dealing end. All the

customers are highly impressed by the customer relationship management protocol being

followed by the staff. JK Bank is also easily accessible to both rural and urban customer

base. The policies of the bank has helped maintain the lowest interest rates for loans in

specific areas.

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22%

34%4%

8%

32%

Low interest rates

Easily accessible

Regional banking

Better products and services

High level of customerrelationship management

TIME TAKEN TO PROCESS THE LOAN

0-5 days 28

1 week 14

1-2 weeks 7

more than 2 weeks 1

TOTAL 50

INFERENCE The time for processing the loan is the time taken by the bank to process the legal

documentation of the loan customer after the customer has submitted all the necessary

documents with the bank. The loan processing is really quick as compared to other banks in

this segment due to the well defined infrastructure and policies followed in the bank.

Customer is the king for JK Bank .

64

TIME TO PROCESS LOAN

56%28%

14%2%

0-5 days 1 week1-2 weeksmore than 2 weeks

65

FINDINGS

• J & K Bank is a very prestigious bank and has high levels of customer satisfaction. It

has got tremendous amount of support both from the government of Jammu &

Kashmir and the local people.

• It has a wide variety of loan products to choose from. This range of loan products

vary from personal loan to industrial loan.

• The majority of the customers of J & K Bank approach for loans related to

establishment of small scale businesses like Apple farmers , shawl weavers ,

dastakars etc. The other major league of loan hailer customers are government

employees , this is owing to the fact that the loan procedures followed by J & K Bank

are more suitable for government employees.

• It has the lowest percentage of NPAs amounting to 5% . This is the stand alone

indicator of the efficiency of the loan procedures followed by the bank. It also tells a

lot about the friendliness of bank policies towards its customers and high level of

customer relationship management .

• The credit/deposit ratio has shown an increasing trend , thus adding to the state gross

domestic product and improving the economy of the state.

• It has a wide network of branches and ATMs in Jammu & Kashmir that accounts to

easy accessibility for the local people . The bank has branches all over India too, now

its working on increasing the density of its network.

• PCL (personal consumption loan) is the most sort for loan in J&K Bank , Lakhdata

Bazaar branch.

66

SUGGESTIONS

J&K Bank must start by creating a fertile environment for entrepreneurship and

building a new infrastructure for innovation through making credit easily

available in all the sectors of economy in J&K State.

J&K Bank must make Jammu and Kashmir a more affordable place to do

business, by concentrating on both the priority sector as well as on sector of

economy and J&K Bank should continue fighting for these reforms.

J&K Bank also needs to recognise that if our state is to succeed , minority and

women-owned businesses must have the opportunity to compete on a level

playing field. J&K Bank need to provide not only credit but also hope,

developmental assistance and opportunity to all our young people who aspire to

own their business.

In the new economy, innovation, knowledge and entrepreneurship mean real jobs

for real people. J&K Bank can create these jobs only if they stay ahead of their

competitors. J&K Bank should provide easy credit with reasonable interest rates

to all citizens in every sector to remain competitors and play its positive pole in

economic development.

The analysis of poverty scenario in Jammu and Kashmir is a complex one. The

unemployment/underemployment, underdeveloped agricultural sector, unbalanced

development with huge regional imbalances, illiteracy, shortage of capital, lack of

entrepreneurs, etc are some of the major causes of poverty in Jammu and

Kashmir. Keeping this in view, the Bank should launch a comprehensive

programme like micro credit schemes for upliftment of poor and to raise the

living standard of masses and improve their socio-economic conditions so as to

achieve balanced economic growth with social justice.

67

The Internet (information technology) is a fundamental part of the innovation

infrastructure; they must invest in such projects which will improve information

technology and internet in the Jammu and Kashmir state in order to provide high-

speed broadband Internet service to every corner of the state.

The Bank should follow number of initiatives like providing loans and credit to

raise the standard of people and alleviate poverty in the state. The initiatives

should cover areas of agriculture, horticulture, village and cottage industries,

fisheries, tourism, handicrafts on one hand and promotion of health, sanitation,

communication and education on the other.

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CONCLUSION

From that analysis of primary and secondary data of J&K Bank it concludes that the

overall role of J&K Bank in economic development of Jammu and Kashmir State is

showing an improving trend. But the pace of improving economy of J&K state during

successive years is not increasing with satisfactory levels, because there are certain

important factors on which the economy like agriculture, horticulture, small and medium

scale industries, tourism and service sectors depends.

An important aspect highlighted during the study shows that role of J&K Bank in

economic development of J&K state is not only affected by factors which are directly

related to economic development such as total advances, total deposits, reasonable

interest rates, sound financial system and community services like social banking of J&K

Bank etc, but is also affected by factors which are positively related to economic

development of a country/state are credit/deposit ratio, efficient distribution network,

cheap and easily available loans(interest rates), business performance, profitability,

business per employee and net profit per employee, and so on.

The sectors like agriculture, horticulture, medium/small firms that play an important

role in regional economies of Jammu and Kashmir are mainly dependent on local

financial institutions in their regions. Thus J&K bank which is regional in nature and has

extensive reach in the state is thus one of the important financial institute on which these

sectors directly depend. J&K bank stresses on promoting work-life balance, gives

attention to social and environmental concerns also and host of factors that facilitate

business pursuits and accomplishment of economic goals.

69

BIBLIOGRAPHY

Websites:

• www.jkbank.org

• www.google.co.in

• http://www.wikipedia.org

• http://www.rbi.org.in

• http://www.cibil.com

• http://www.geneva-international.org/GVA3/Forum/Dossier/Technique.E.html.

• http://www.geneva-international.org/GVA3/Forum/Dossier/Communaute.E.html.

• www.jml.ch/news/maissen.html.

• http://www.bank-banque-canada.ca.

• http://www.regeringen.se/galactica/service=irnews/action=obj_show?c_obj_id=3492

2.

• www.moneycontrol.com

• http://connect.in.com/jammu-and-kashmir-bank/profile-305505.html

• www.iloveindia.com/.../bank/...banks/jammu-and-kashmir-bank.html

• http://finance.indiamart.com/...in.../jammu_and_kashmir_bank.html

• http://business-standard.com/stockpage/stock_details.php?stk_id=532209

• www.greaterkashmir.com/today/full_story.asp?Date=7_5

70

Books :

• Financial Management - By Prasanna Chandra

• Banking and law practices – S.L. Gupta

• Handbook on working capital- D.P.Sarda

• Annual report J&K Bank

• Credit Risk Management In and Out of the Financial Crisis: New Approaches to

Value at Risk and Other Paradigms-by Anthony Saunders, Linda Allen

• Risk Management in Banking Joel Bessis

• Bank Management and Financial Services by Peter S. Rose, Sylvia Conway Hudgins

• Bank Management by Timothy W. Koch, S. Scott MacDonald

71

APPENDIX J & K BANK

SURVEY QUESTIONAIRE- APRIL 2010

DEAR CUSTOMER

It has been our earnest endeavor to serve you better. You are requested to respond truly to

the questions below and guide us in developing suggestions , so that we can serve you

better in future.

THANK YOU .

Name : Address :

Occupation :

1. How long have you been banking with J & K bank ?

1.) 1 year 2.) 1-3 years 3.) 3- 5 years 4.) more than 5 years

2. Which loan product have you availed ?

1.) Agricultural loan 2.) Education loan 3.) Car loan 4.) 2 Wheeler loan

5.) Consumer loan 6.) Loan against deposit 7.) Housing loan

3. Where did you get information about the loan ?

1.) Print media 2.) Nearest branch 3.) Electronic media 4.) Any other

4. J & K Bank offers better products than other banks .

1.) Strongly agree 2.) Agree 3.) Neutral 4.) Disagree

(Mention bank and service better than J & K Bank

__________________________________________________________________)

5. J & K Bank has better network than other banks .

1.) Strongly agree 2.) Agree 3.) Neutral 4.) Disagree

72

6. How much time does it take to get a loan ?

1.) 0-5 days 2.) 1 week 3.) 1-2 weeks 4.) more than 2 weeks

7. Why are you using J & K Bank ?

1.) Low interest rates 2.) Easily accessible 3.) Regional banking

4.) Better products and services 5.) High level of customer relationship management

8. J & K Bank provides special loan arrangements for social cause from time to time .

1.) Strongly agree 2.) Agree 3.) Neutral 4.) Disagree

9. J & K Bank offers the lowest interest rates .

1.) Strongly agree 2.) Agree 3.) Neutral 4.) Disagree

10. J & K Bank offers high level of customer relationship management .

1.) Strongly agree 2.) Agree 3.) Neutral 4.) Disagree

11. J & K Bank keeps you updated about all sorts of loan information.

1.) yes 2.) No

12. Loan products provided are very rigid ?

1.) yes 2.) No

13. Wide no. of options of loan products are available to choose from .

1.) yes 2.) No

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SUGGESTIONS:

BALANCE SHEET OF JK BANK AS ON MARCH 2009

74