INTRODUCTION OF LOANS AND ADVANCES

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 words "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a borrower needs funds for fixed assets or non-respective type of activitiesand thus seeks money from the bank that is withdrawn in one lump sum.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.

BANKS PROFILEVaishya 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.

TODAYS VAISHYA SAHAKARI BANK LTD.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.

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

Facilities RTGS ECS ATM Card

METHODOLOGYThe following methodology will be followed for the study: Secondary data sources will be used to generate this report. The secondary data sources are annual reports, manuals, and brochures of Vaishya Sahakari Bank Ltd.To identify the implementation, supervision, monitoring and repayment practice, interview with the employee and extensive study of the existing file was done.

OBJECTIVE OF THE STUDY

The basic objective of this project is to acquaint with how a banking financial list evaluate individual potential borrower- based on which sanction different credit limit to different customer and charges different interest to different borrower that is what factors determinates decisions.The specific objective are1. To know more about the credit sanctioning policy of VSBL.2. To have an adequate knowledge about which factors mostly affects the loan sanctioning decisions, what amount of loan should be sanctioned to a particular loan applicant depending on his credit worthiness.3. To furnish the possibilities that the co-operative banks can extend their expertise consultation service to control risk exposures of a loan.4. To identify and suggest scopes of improvement in loan and advance portfolio of VSBL.

SCOPE OF THE STUDY

The study would focus on the following areas of Vaishya Sahakari Bank Limited Credit evaluation system of Vaishya Sahakri Bank Limited. Procedure for different loan facilities. Credit portfolio management of Vaishya Sahakari Bank Limited. Organization structures and responsibilities of management. Each of the above areas would be critically analyzed in order to determine the efficiency of VSBLs Credit appraisal and Management system.

LIMITATION OF THE REPORT

This project has focused on the most sensitive part of the organization i.e. loan and advance. So the bank authority hesitated to disclose important information to maintain business secrecy.They can not disclose their NPA records, which is the weakness of the Bank.Only two month time is not enough to complete such a study in a lucid manner.

DATA ANALYSIS AND INTERPRETATION

FINANCIAL PERFORMANCE OF VSBL

DEPOSIT OF VSBL

ANALYSIS OF GROWTH IN LOAN AND ADVANCES

PROBLEMS OF VAISHYA SAHAKARI BANK LTD.

FINANCIAL PERFORMANCE OF VSBL

Vaishya Sahakari Bank's policy was to expand the loan portfolio moderately in consideration of economic and socio-political scenario of the country. The Bank's loans and advances increased by 1% in 2013 to 7121.63 Lakhs as against 7096.40 Lakhs in 2012.

The credit portfolio of the Bank is now very well diversified having a balanced mix covering a wide spectrum of business and industries including readymade garments, textiles and spinning, telecommunication, pharmaceuticals, steel and engineering, ship scraping, cement, edible oil, real estate, education and transport etc. The Bank also expanded its financing to the Small Enterprises and Consumers under SME Credit Scheme and Consumers Credit Scheme.

The Bank has already given continued efforts to maintain high quality of assets. Besides giving emphasis on the satisfactory business performance of the clients and collateral support, we have geared up loan monitoring and follow up activities to arrest the loans from becoming non-performing. The non-performing loans of the Bank increased to 1.30% as on March 31, 2013 from 0.97% of the year 2012.

Financial Statement of Vaishya Sahakari Bank Ltd. From 31 March;2009 to 31 March;2013Particulars31/3/201331/3/201231/3/201131/3/2010

Income

Interest Earned1180014771140411999689807382267245

Commission on Insurance Business161145243193317422442517

Other Income9120228853583867843726730962

Total12728285012282023010399986789440724

Expenditure

Interest expended81382895735195426236351152029472

Operating Expenses41776898398413513531840630626493

Provisions and Contingencies246550114855114181721410107

Total1234063431145094449910008984066072

Profit Before Tax3876507831078648997785374652

(-) Provision for Income Tax5000002200000-2157633

(-) Provision for Income Tax of Earlier Year-251402--

(+) Excess Provision of Income Tax of Earlier Year242604---

(-) Provision for Deferred Tax1950610866866465756547

Net Profit After Tax3599605575071642351213273566

Profit of previous year brought forward2645245718612295

Profit Available for Appropriation3602250575317342369823275861

Balance sheet of Vaishya Sahakari Bank Ltd. From 31 March 2010 to 2013Particulars31/3/201331/3/201231/3/201131/3/2010

Liabilities

Share Capital35615095332024253004136024216535

Reserves and surplus67617450680530636459631065243717

Deposits10696603351052587771969178139818979916

Other Liabilities & Provisions126533501150164236143425284120809577

Total1299426381130400749512072410931029249745

Assets

Cash on hand21493070188511491818587022216599

Balance with Banks34638982505914212892427128151251

Investments390888330365028847349693686329770919

Advances712163437709640373656914124530285976

Fixed Assets48996446510735595176294739315282

Other Assets9124611610882214610176019579509718

Total1299426381130400749512072410931029249745

Contingent Liabilities172267510332371130250909850

Bills for Collection - Contra-28228862046164285

DEPOSITS OF VSBL

The bank mobilized total deposits are 10696.60 Lakhs as of March 2013which is raised by 73 % as compared to 6166.73 in 31 March 2009, which is good for the bank. Competitive interest rate, attractive deposit products, deposit mobilization efforts of the bank employees and confidence reposed by the customers in the bank contributed to the notable growth in deposits. The deposits of the bank as on March 31, 2013 was as follows:

LOANS OF VAISHYA SAHAKARI BANK LTD.

The bank mobilized total Loans are 7121.63 Lakhs as of March 2013 which is raised by 65% as compared to 4328.94 in 31 March 2009, which is good for tha bank. Competitive interest rate, attractive deposit products, deposit mobilization efforts of the bank employees and confidence reposed by the customers in the bank contributed to the notable growth in Loan Accounts. The deposits of the bank as on March 31, 2013 was as follows:

ANALYSIS OF GROWTH OF LOANS AND ADVANCES

Here we can observe that the Deposits have been increased by 75% from 2009 to 2013 and the loans are increased by 65 % from 2009 to 2013, which is lesser than the deposits. It shows that the performance of the Vaishya Sahakri Bank Ltd. Is good but it will be better if they will attract more customers towards the loan facility which is offered by the bank.

The NPA percentage is increased in 2013 as compare to the previous year i.e. 2012, which is not good for the bank. It will affect to the financial performance of the Bank. Even in NPAs Graph we can notice that in 2012 they have recovered most of the loan amount as compare to 2011.But in 2013 there is increase in the NPA percentage, so here they have to more focus in the recovery procedure of their loan amount from the customer.

LOANS AND ADVANCES AT VAISHYA SAHAKARI BANK LTD.

TYPES OF LOAN IN VAISHYA SAHAKARI BANK LTD.

RATE OF INTERAST ON LOAN

DOCUMANTATION OF LOAN

PROCESS OF DISBURSMENT

Types of Loan In Vaishya Sahakari Bank Ltd.

Vehicle Loan

Education Loan

Housing Loan

Mortgage Loan

Personal Loan

Secured Loan

Gold 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%.PurposeThe 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 LoanMinimum PeriodMaximum Period

Personal Use36 Months60 Months

Commercial Use36 Months48 Months

Security:Prime- Hypothecation of vehicleCollateral The borrower should have his/her Life Insurance Policy to cover the amount of loan.Guarantor- One guarantor

Personal LoanFunds 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 Banks - Personal Loan is the answer for those questions. Advantage of 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 documentationsomething that you had always wanted. Long repayment period of up to 48 months.

PurposeThe 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.)

Eligibilityyou are eligible if you are a Resident Indian of National having capability to repay a loan. Loan AmountYour 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 customersPassport size photographFrom salaried individuals Latest salary slip and Form 16From Self-employed individuals and Professionals IT returns for the last two financial years, Proof of Professional QualificationCopy of highest professional degree heldOriginal Life Insurance PolicyProof of official address. This can include shop and establishment certificate/Lease deed/Telephone Bill.

MarginVaishya 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.

SecurityBorrowers Original 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 LOANHome 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 LoansUnique features: No cap on maximum loan amount for purchase/ construction of house/ flat Option to club income of your spouse or children to compute eligible loan amount. Provision to finance cost of furnishing and consumer durables as part of project cost. Interest applied on daily diminishing balance basis In-principle approval issued to give you flexibility while negotiating purchase of a propertyPurpose 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 CompaniesEligibilityMinimum age18 years as on the date of sanctionSteady 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) in case of employee or 5 times Net Annual Income (NAI) in case of Businessman, 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/ NAITo enhance loan eligibility you have option to add:1. Income of your spouse1. Income of your son/ daughter living with you, provided they have a steady income and his/ her salary account is maintained with Vaishya Sahakari Bank Ltd.1. Expected rent accruals (less taxes, cess, etc.) if the house/ flat being purchased is proposed to be rented out1. Regular income from all sourcesMarginPurchase/ 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 Penalty2% of the loan prepaid if the loan is preclosed before expiry of half the original tenure.SecurityEquitable mortgage of the property other tangible security of adequate value like NSCs, LIC policies etc., if the property cannot be mortgagedMaximum Repayment Period For applicants upto 45 years of age: 20 years For applicants over 45 years of age: 15 yearsMoratoriumUpto 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. Salary slip of last 3 months in case of employee or Form No.16 in case of businessman 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 LOANA 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 coursesapproved 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. 5 lacs, Studies abroad, maximum Rs. 10 lacsInterest RateFor loans upto Rs.5 lacs - 11.00% p.a. FloatingFor loans above Rs.5 lacs - 12.00% p.a. FloatingProcessing Fees No processing fee/ upfront charges Deposit of Rs. 5000/- for education loan for studies abroad which will be adjusted in the margin moneyRepayment TenureRepayment will commence one year after completion of course or 6 months after securing a job, whichever is earlier. Place of StudyLoan AmountRepayment Period in Years

In IndiaUp to Rs. 5 lacs5-7

Above Rs. 5 lacs5-10

AbroadUp to Rs. 10 lacs5-7

Above Rs. 10 lacs5-10

Margin For loans up to Rs.4.0 lacs : No Margin For loans above Rs.4.0 lacs: Studies in India: 5% Studies Abroad: 15%Documentation Required Completed Education Loan Application Form. Mark sheets of last qualifying examination and 2 passport size photographs Proof of admission scholarship, studentship etc Schedule of expenses for the specified course Borrower's Bank account statement for the last six months Brief statement of assets and liabilities, of the Co-borrower Proof of Income (i.e. Salary slips/ Form 16 )Mortgage LoanA 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. 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 AmountMinimum: Rs.25, 000/- Maximum: Rs.25 Lakhs. 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. FloatingCurrent 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.

PROCESS OF DISBURSMENT

Pre-disbursement Compliance:

When the credit proposal are approved the credit officer must have to be ensured that the disbursement of the credit facilities must comply with the directions written in the credit policy and circular made by time to time along with checking all the following terms and conditions.The officer of Loan Administration must collect the acceptance of the customers of the terms and conditions on the duplicate copy of the sanctioned advice.They will thoroughly examine and ensure that the subject credit facility does not contradict to any law, rules and regulation of the country, Bangladesh Bank and deed of the Mortgage and power of the Attorney to be drafted and executed under the Supervision of the Banks Legal Advisor.Lawyers certificate to the effect that all the legal formalities (Equitable/ Registered Mortgaged) has been properly created on the land and building in favor of the bank and bank has acquired the effective title of the property.Registered power of attorney has been collected from the borrower (contractor) assigning the work order favoring the bank and the power of attorney has been registered with the work order given agency and they have agreed that they will issue all the cheques favoring bank.The legal documents of the vehicle have been obtained.Collection of the satisfaction certificate in respect of all the documents both legal and banking from the lawyer.Even after checking documents the bank gives the rating to the borrowers through which the benk decides that how much the loan amount to be sanction to the borrower and what will be the rate of interest must be charged to the borrower.After being satisfied all the above terms and conditions the credit in-charge will disburse the loan amount to the client.

Mode of Disbursement:After sanctioning of loan under the Scheme, Branch will disburse the loan amounts only when all security documentation is in place, CIB report is obtained, as appropriate, and clean, the loan amount will be disbursed and credited (against Quotation(s) to be produced/submitted by the customers) directly to the respective account of the customers to be maintained with the Branch and payment thereof (sanctioned amount plus clients equity) as per quotation(s) shall be made directly to suppliers/ shopkeepers through Pay order or Demand Draft. Disbursement will be made in all cases after having acknowledgement of receipt of the goods.However for minor purposes disbursement may be made by clients choice at the discretion of banking authority.

LEARNING FROM PROJECT At the time of SIP, I get to know about the banking system of Vaishya Sahakari Bank Ltd. Even I get the more practical knowledge about the loans and advances, like how the price of gold calculated for the gold loan and how much the bank sanction the loan amount as per the rules and regulations recommended by RBI to the co-operative Banks.Even I get more knowldge about the computer base banking system, how it works and how it connects all the Branches of Vaishya Sahakari Bank Ltd. On first day of my SIP ,they created my own new account on their bankinf system through which I learn the below functions: Passbook printing Outward clearing cheque entry Voucher entry Cheque book entry To Open an accounts like FD/SB/CA/RD/loan account etc.

Apart from the computer system I get to learn about:What kind of documents are required for the which specific purpose.How to maintain the customer relationship.How the bank keeps an observing each and every account.Even I observed the consumer behaviour.

RECOMMENDATIONS

The following important activities need to be performed by the bank to become more efficient and effective in near future

0. SEBL should establish new/updated financial products to attract potential depositors.

0. Customers credit scheme should ameliorate by various modern banking systems.

0. Current portfolio should be exaggerated. Not to give weight only in working capital financing.

0. They should create other type of deposit to attract more customers.

0. The loan officer must determine that borrower for responsible attitude toward using borrowed funds, is truthful in answering the banks question and will make every effort to repay what is owed.0. The loan officer must be reviewed all types of loan on a periodic basis.

CONCLUSION

In his modern world like all other sectors banking sector is also changing. Vaishya Sahakari bank Ltd. is operating its business facing various barriers like deregulation, telecommunication and globalization successfully. Vaishya Sahakari bank limited has been trying to operate its business successfully since 1945. The bank has already developed good image and goodwill among its clients by offering excellent services to its customers. Through VSBL is facing both external and internal problems, it can achieve dynamic leadership by taking implementing marketing strategies. Within a few years of its operation, the bank has captured a position in the banking sector and it is looking forward.

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