Roll No

PROJECT REPORT ON

Branch banking IN

Vaishya Sahakari bank, Borivali (E) Branch, Mumbai-400092 SUBMITTED BY MILIND SHASHIKANT JAHAGIRDAR (M.M.S. - II)

Roll No.:05 Rajaram shinde college of M.B.A. Pedhambe, Chiplun

[Academic Year-2007-08]

1

PROJECT REPORT ON

Branch banking IN

Vaishya Sahakari bank, Borivali (E) Branch, Mumbai-400092 SUBMITTED BY MILIND SHASHIKANT JAHAGIRDAR (M.M.S. - II)

Roll No.:05 Rajaram shinde college of M.B.A. Pedhambe, Chiplun

[Academic Year-2007-08] 2

BRANCH BANKING

Summer internship Details

Name of the student:

Mr. Milind Shashikant Jahagirdar

Specialization opted:

Finance

Name of the organization:

Vaishya bank co operative Ltd.

Period of SIP:

2 Months

Date of joining:

01-06- 2008

Date of completion:

31-07-2008

Daily working hours

8 Hours

Departments worked

clerical.

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BRANCH BANKING

CERTIFICATE BY THE FACULTY GUIDE This is to certify that Mr. Milind S. Jahagirdar, Student of MMS 3rd Semester has completed the summer training on the topic Branch Banking in a reputed bank Vaishya Bank at Borivali (E). The summer training project report is based on the work done by the candidate himself and fulfils the requirement of the project necessary for partial fulfillment of the MMS degree. The work carried out by the candidate on the above mentioned topic is up to the mark as supported by the certificate issued by the Bank where the candidate has undergone training for completion of the project work. To the best of my knowledge and belief, the work has not been submitted anywhere else for award of any degree or diploma. We wish him success in his life.

Sign of faculty

4

BRANCH BANKING

ACKNOWLEDGEMENT

I would like to place on record our sincere appreciation and deep gratitude to our project guide Prof. Mrs.Rucha Khavnekar , for her constant motivation throughout the work of this project on “branch banking”. I am also thankful to our external guide Mr.Santosh Kulkarni (CEO of Vaishya Bank) and Mrs. Gandhi (Manager of Vaishya Bank) for constant encouragement, guidance and valuable contribution towards completion of my project. I am also thankful to all the Staff members of ‘Vaishya, Borivali Branch, Mumbai’ who have helped me directly or indirectly in making this project a success.

5

BRANCH BANKING

Index

Serial no.

Particulars

Page no.

1

Objective & Scope

7

2

Research Methodology

9

3

Introduction

13

4

History & Company Profile

21

5

Analysis

30

6

Findings

63

7

Conclusion & Suggestions

65

8

Annexure

67

9

Bibliography

69

6

BRANCH BANKING

Summary: The project titled “Branch Banking” being carried out for Vaishya Bank, Borivali Branch, at Mumbai for the time duration of two months. This project is on study and analysis of different type of branch transaction. It studies different types of deposit schemes, loan schemes, cash transaction, fixed deposit and interest accrued at the end of the month. The analysis of loan schemes like housing loan scheme, vehicle loan scheme, personal loan scheme, education loan scheme was taken. The purpose of this analysis is to know the criteria required for these loans and the procedure of loan sanctioning and different deposit scheme. The main objective of this project was to find out the detail procedure of the loan scheme, the loan sanctioning procedure, interest rate calculation, and clerical work done by the bank. Also we studied the comparison between above loan schemes and other advances given by the bank, cash transaction, deposit opened by the customer in March 2008 and in July 2008.

7

BRANCH BANKING

Chapter I OBJECTIVE & SCOPE

8

BRANCH BANKING

Objective of the Study 1) To study the different loan schemes of the bank. 2) To study the different deposit schemes of the bank. 3) To analyze the process of loan sanctioning & documentation. 4) To find out the interest rate of different loan schemes. 5) To study the comparison between the studied loan scheme and other advances. 6) To study the transaction between the two parties.

Scope of the work The scope of the study refers to the job that to know about the activities of the organization. The study means that the analysis of the banks operation on which it has to focus. With respect to time frame: The project carried out in a period of two months therefore the conclusion and recommendation of this project are based on the data collected within these 60 days and restricted to the same.

9

BRANCH BANKING

With respect to customer: The bank has more number of customers for different types of loan schemes so there is chance to make analysis of comparison between the loan schemes. Try to convenience to customer for opening the saving and deposit account.

10

BRANCH BANKING

Chapter II

RESEARCH METHODOLOGY

11

BRANCH BANKING

Introduction A research design is the logical & systematic planning & direction of a piece of research. The research design attempts to integrate various aspects of the research study, such as what, where when, how why etc. the design also takes in to account the availability of time, energy & other resources at disposal. It is a master plan, a blue print that directs the entire study. The research will involve: – 1) Define the information 2) Design the type of research. Method of Research:Research method involves to the behavior & instrument used in selecting & conducting research techniques for e.g. mail questionnaire, personal interviews etc. Research methods have been planned under following three groups. 1) Collection of data. 2) Statistical techniques 3) Accurate evaluation

12

BRANCH BANKING

Research Instruments:Questionnaire is used in this research for collection of primary data. Questionnaire is structured sequence of questions designed to draw out Facts & which provide vehicle for recording data.

The Research Plan:Designing a research plan calls for decision and data Sources, research approach and instruments.

Data Sources:

(I)Primary Data: The study is mainly based on primary data for the purpose of this study oral interview of Bank Manager was taken to get relevant information or data from the Bank. (II) Secondary Data: The secondary data has been collected from relevant records of the Vaishya bank, Borivali Branch.

13

BRANCH BANKING

Chapter III INTRODUCTION

14

BRANCH BANKING

Introduction In banking Regulation Act 1949 Sec.5 (1) (b & c) define banking as follows: “Banking means the accepting for the purpose of lending or investment of deposits of money from the public repayable on demand or otherwise and withdraw able by cheque, draft, and order or otherwise.” Banks play a very important role in modern economy. Their functions are increasing day to day. All banks perform the primary function of deposit collection and lending. Some of them specialize in a particular operation of helping a particular sector of the economy. Banks can be classified on the basis of specialization of their function. The details are as follows:

Structure of Indian Bank

Commercial Bank

Industrial Bank

Agriculture Bank

Foreign Bank

Co-operative Bank

RBI Bank

Fig.1: The structure of Indian Bank

15

BRANCH BANKING

Major Reform Initiatives Some of the major reform initiatives in the last decade that have changed the face of the Indian banking and financial sector are: 1) Interest rate deregulation. Interest rates on deposits and lending have been deregulated with banks enjoying greater freedom to determine their rates. 2) Adoption of prudential norms in terms of capital adequacy, asset classification, income recognition, provisioning, exposure limits investment fluctuation reserve, etc. 3) Reduction in pre-emption – lowering of reserve requirements (SLR and CRR), thus releasing more lendable resources which banks can deploy profitably Government equity in banks has been reduced and strong banks have been allowed to access the capital market for raising additional capital. 4)Banks now enjoy greater operational freedom in terms of opening and swapping of branches, and banks with a good track record of profitability have greater flexibility in recruitment. 5) New private sector banks have been set up and foreign banks permitted to expand their operations in India including through subsidiaries. Banks have also been allowed to set up Offshore Banking Units in Special Economic Zones. 6) New areas have been opened up for bank financing: insurance, credit cards, infrastructure financing, leasing, gold banking, besides of course investment banking, asset management, factoring, etc. 7) New instruments have been introduced for greater flexibility and better risk management: e.g. interest rate swaps, forward rate agreements, cross currency forward contracts, forward cover to hedge inflows under foreign direct investment, liquidity adjustment facility for meeting day-to-day liquidity mismatch . 8) Several new institutions have been set up including the National Securities Depositories Ltd., Central Depositories Services Ltd., Clearing Corporation of India Ltd., Credit Information Bureau India Ltd. 16

BRANCH BANKING

9) Limits for investment in overseas markets by banks, mutual funds and corporate have been liberalized. The overseas investment limit for corporate has been raised to 100% of net worth and the ceiling of $100 million on prepayment of external commercial borrowings has been removed. MFs and corporate can now undertake FRAs with banks. Indians allowed maintaining resident foreign currency (domestic) accounts. Full convertibility for deposit schemes of NRIs introduced. 10) Universal Banking has been introduced. With banks permitted to diversify into long-term finance and DFIs into working capital, guidelines have been put in place for the evolution of universal banks in an orderly fashion. 11) Technology infrastructure for the payments and settlement system in the country has been strengthened with electronic funds transfer, Centralized Funds Management System, Structured Financial Messaging Solution, Negotiated Dealing System and move towards Real Time Gross Settlement. 12) Adoption of global standards. Prudential norms for capital adequacy, asset classification, income recognition and provisioning are now close to global standards. RBI has introduced Risk Based Supervision of banks (against the Traditional transaction based approach). Best international practices in accounting systems, corporate governance, payment and settlement systems, etc. are being adopted. 13) Credit delivery mechanism has been reinforced to increase the flow of credit to priority sectors through focus on micro credit and Self Help Groups. The definition of priority sector has been widened to include food processing and cold storage, software up to Rs 1 crore, housing above Rs 10 lakh, selected lending through NBFCs, etc . 14) RBI guidelines have been issued for putting in place risk management systems in banks. Risk Management Committees in banks address credit risk, market risk and operational risk. Banks have specialized committees to measure and monitor various risks and have been upgrading their risk management skills and systems.

17

BRANCH BANKING

15) The limit for foreign direct investment in private banks has been increased from 49% to 74% and the 10% cap on voting rights has been removed. In addition, the limit for foreign institutional investment in private banks is 49%. 16) Wide ranging reforms have been carried out in the area of capital markets. Fresh investment in CPs, CDs are allowed only in dematerialized form. SEBI has reduced the settlement cycle from T+3 to T+2 from April 1, 2003 i.e. settlement of stock deals will be completed in two trading days after the trade is executed, taking the Indian stock trading system ahead of some of the developed equity markets. Stock exchanges will set up trade guarantee funds. Retail trading in Government securities has been introduced on NSE and BSE from January 16, 2003. A Serious Frauds Office is proposed to be set up.

18

BRANCH BANKING

BRANCH BANKING

The landscape of financial institutions has changed dramatically over the past 10 years. Financial institutions are looking to improve their delivery of product and service through the most cost-effective means. Traditional brick and mortar offices are being replaced with convenience centers or in-store outlets, ATM, telephone banking, Internet and other less expensive options. Additionally, mergers and acquisitions within the industry have, in some cases, resulted in branch closures and consolidation efforts. Branch, the data base included bank name, address, city, state, zip code, and holding company name and deposit dollars. All branch data was geo coded at the street address and assigned a latitude and longitude coordinate and tract ID. By geo coding to the street address the study was not only able to identify the census tract in which the branch is located, it is also possible to identify how many other census tracts that branch can service based on various search radii or density calculations. This allows us to calculate and analyze the number of branches serving any on census tract based on the proximity of the branch to the tract. Consistent with the CRA regulation, income classifications for the census tracts were based on the CRA regulation defined on page 4 footnote 2.

19

BRANCH BANKING

As of 1998 there are 62 discrete financial institutions with 497 offices in San Diego County. There were 51 Commercial Banks with 340 offices and 11 Savings Institutions with 141 Offices in 1998. From 1991 through 1998, there was a 24.5 percent decline in the number of FDIC insured Deposit offices in San Diego County. Banking facilities declined from 681 offices in 1991 to 514 offices in 1998. Population per office has grown from 3,668 persons per branch in 1991 to 5,437 persons per branch in 1998. The following table summarizes the bank branching changes in San Diego from 1991 to 1998, by the income classification of the tracts. Low and moderate income defined tracts experienced 42 branch closures from 1991 – 1998. The following map, Exhibit VI-1, shows the change in the banking industry branch distribution, by census tract, throughout the County. Red and green highlighted tracts with a net loss of bank branches. Yellow highlighted tracts with a net gain in branches. The following table highlights the change in branches by the income classification of the tracts. From 1997-1998, moderate income defined tracts experienced new growth in branches. As note din Section V, San Diego experienced a net decline in the number of small business loans from 1997 to1998. Moderate income defined census tracts experienced the smallest decline in number of small business loans from '97-'98. Low-

20

BRANCH BANKING

income tracts, which have the fewest number of branches, had the sharpest decline in number of loans from '97-'98. Branches serve areas other than just census tracts. One way to assess access to banking services is to measure the number of branches which intersect census tracts, based on a radius around the branch. For example, if one measures the number of banks which intersect all the tracts within a 3-mile radius around the branch, it appears that low and moderate-income defined tracts have access to a rather large base of banks within 3 miles to serve them. · Low and Moderate income defined census tracts receive fewer loans per branch than middle or high income defined tracts. Branch density and the relative areas being served by branches can be visualized utilizing a density map. In this scenario, the density of branches is based on a search radius of 3 miles. Calculating density allows us to distribute the number of bank branches across the census tract base and produce a continuous surface. Density is calculated for each cell by summing a value for each point found in the Search Radius and dividing by the area of the circle in Area Units. Area units in this analysis are square miles. The output density, shown on the following map, illustrates the density of – branches, per square mile.

21

BRANCH BANKING

Chapter IV HISTORY & COMPANY PROFILE

22

BRANCH BANKING

History Bank Nationalization: The social control measures outlined were not considered adequate to achieve the desired social and economic objectives. The Government of India, therefore, with effect from 19th July, 1969 (by an Ordinance issued on that date) nationalized fourteen major Indian Commercial Banks with aggregate deposits of Rs. 2741.75 crores as on 31-12-1968, which constituted 87.5 per cent of the total deposits of the scheduled banks in the private sector. The bill nationalizing these banks was passed by the Parliament as Banking Companies (Acquisition & Transfer of Undertakings) Act, 1969 which received the President's assent on 9th August, 1969. The names of the nationalized banks were: The Central Bank of India Ltd., The Bank of India Ltd., The Punjab National Bank Ltd., The Bank of Baroda Ltd., The United Commercial Bank Ltd., The Canara Bank Ltd., The United Bank of India Ltd., The Dena Bank Ltd., The Syndicate Bank Ltd., The Union Bank of India Ltd., The Allahabad Bank Ltd., The Indian Bank Ltd., The Bank of Maharashtra Ltd., and The Indian Overseas Bank Ltd. The other scheduled banks including foreign banks and the non-scheduled banks were not nationalized and continued to be in the private sector.

23

BRANCH BANKING

Co operative bank: A co-operative is a business, but more than this, it acts together to meet the common needs and aspirations of its members, sharing ownership and making decisions democratically. Co-operatives are not about making big profits for shareholders, but creating value for their members. Their top priority is to provide the best possible services for their members and to invest in the communities where they live. This gives co-operatives a unique character and influences what they stand for. In this instance, the Co-operative Bank is wholly-owned by Co-operative Financial Services Ltd, whose sole shareholder is the (member-owned) Cooperative Group. Members of The Co-operative Group are also entitled to earn dividend on their account holdings and borrowing with the Bank.

24

BRANCH BANKING

VAISHYA BANK AT A GLANCE

MISSION STATEMENT "To emerge as one of the premier and most preferred banks in the country by adopting highest standards of professionalism and excellence in all the areas of working!!!" Vaishya-op. Bank Ltd., one of the leading Urban Co-operative Banks in India, in its outlook and approach, has the objective of progress and prosperity of all. From a humble beginning in 12-11- 1945 as a Co-operative Credit society with a share capital of a merely Rs.5,000/- held by 83 members, today Vaishya Co-op bank has become one of the large Urban Co-operative Banks with a "Scheduled Bank" status. The area of operation which was restricted to the State of Maharashtra. Currently, the capital base of the bank stands at Rs. 32.32 crores and Reserves and surpluses at Rs. 619.93 crores. The bank has more than 1lakh depositors. The Bank has seen a tremendous growth in deposits. The deposits of the bank are over Rs. 21 crores as on 31.03.2007, which were Rs. 18 crores as at 25

BRANCH BANKING

the end of the financial year 2005-2006. The loans and advances stood at Rs. 12 crores as on 31.03.2007. The bank had posted a net income of Rs. 18.75 lakh as on 31.03.2007. The growth rate of the bank compares well with that of others in the sector. The Bank has maintained a steady growth. The bank has been paying dividend @ 15% to its members which is maximum permissible as per the MNCs

act. The Bank has launched different loan schemes tailor-made to suit

the needs of various customers. The schemes aim at providing loans for purchase or construction of residential premises, repair/renovation of house property, purchase of car, seeking higher education and for purchase of household consumer durable. One of the loan schemes, viz. "Udyog Vikas Yojana" is specially designed for the benefit of small entrepreneurs and businessmen. The procedure for sanctioning of loans under the schemes has been simplified and relaxed with a view to attract new customers and facilitating speedy sanction of loans. The Bank has total 5 Branches in Mumbai. Bank is committed to spread network of branches throughout the State and provide much needed banking services to the population, which has been deprived of the banking facilities. Innovative Banking is another area of operation that Vaishya is currently focusing on for a sustainable long term growth. The Bank has always endeavored for providing satisfactory customer service with the help of the latest technology. The Bank has provided fully computerized services to its valued clients. Bank is offering 12 Hours fully computerized services at 5 branches. With a view to meet the challenges of technologically advanced banking system and to upgrade its existing technology, the bank has decided to introduce "Total Bank Automation" 26

BRANCH BANKING

to provide the facility of inter-branch connectivity for any time and any branch banking transactions.

Company Profile Vaishya Bank:

Shri Santosh Kulkarni

CEO

Shri Sandesh S. Narkar

Managing director

Shri Santosh Sardal

Additional General Manager

Shri Vijay S. Kamrekar

Deputy General Manager

Shri Dilip S. Pathre

Executive officer

Shri Ramkrishana H.Kolwankar

Deputy EO

Shri Pandurang D. J.

Active member of samaj (Development Department) active member (Development Department) Union leader

Shri Jaywant R.Pathre Shri A. Adsul Smt.A.A.Gandhi Shri Suhas C. Shetye Smt Vedhangi V. Mhatre

Branch Manager (Borivali) Officer (Borivali) Officer (Borivali)

27

BRANCH BANKING

BRANCHES Head office Address: 1/2, Shyam bhuvan, J.B.Bhantankar marg Parel T.T., Mumbai - 400 012 Telephone No.: 24704331, 24718345 Timing: Monday-Friday 09.15 a.m. to 1.30 p.m. 02.00 p.m. to 03.15 p.m. Saturday-Sunday 09.00 a.m. to 12.30 p.m.

Dindoshi Address: A 19/19, Gokuldham shopping, centre, Goregaon (E) Mumbai - 400 063 Telephone No.: 28407595, 28415113 Timing: Monday-Friday 09.15 a.m. to 01.30 p.m. 02.00 p.m. to 03.15 p.m. Saturday-Sunday 09.15 a.m.-12.30 a.m.

Borivali Address: Sikar Mahal, Carter Rd. No.4, Borivali (E), Mumbai-400 066 Telephone No.: 28073418, 28073394 Timing: 9.15a.m. To 1.30p.m. 2.00p.m. to 3.15p.m Saturday - Sunday 9.15a.m. to 12.30p.m

Parel Address : 3/12, Abdulla building, 1st floor, DR.Ambedkar road, Parel Mumbai - 400 012 Telephone No.: 24131804, Timing: Monday-Friday 09.15a.m. To 1.30p.m. Saturday-Sunday 09.15 a.m. to 12.30 p.m.

Girgaon Address: 7, Tatya Gharpure path, Girgaon Mumbai-400004. Telephone No.: 23856502, *23850432 Timing: Monday-Friday 9.15a.m. To 3.15p.m. .

BALANCE SHEET OF VAISHYA BANK 28

BRANCH BANKING

CAPITAL AND LIABILITIES

Scheduled

As on 31-03-2007

As on 31-03-2006

1

14595115

13459265

reserve and surplus

2

46227834

42677399

Deposits

3 468682122

455352646

13306776 68373609

nil 88467342

Share capital

Borrowing

4

other liabilities and provision

5

Total

611185456

599956652

ASSETS

6

Cash on hand

7

16247892

11981661

balance with banks

8

12116558

15775821

Investment

9

253955031

270918954

Advances

10

276915051

250038882

fixed assets

11

23295815

23514380

other assets

12

28655109

27726954

611185456

599956652

Total

PROFIT AND LOSS ACCOUNT OF VAISHYA BANK

29

BRANCH BANKING

Particular

Scheduled

As on 31-032007

As on 31-032006

Income Interest earned

13

41771530

42915900

Other income

14

3686020

2663315

45457550

45579215

Interest expended 15

25795307

25915878

Operating expenses Provision and contingencies Total

18609712

17000143

557000

1795000

44962019

44711021

495531

686194

5024

5171

90920124

91160361

Total Expenditure

16

Profit or loss Net profit of the year Profit of the previous year brought forward Total

30

BRANCH BANKING

Chapter V ANALYSIS

31

BRANCH BANKING

Activities The activities of the bank are divided in two parts that is daily transaction and monthly transaction. In the daily transaction, all cash transaction that include the deposit and withdraw the cash as per the requirement and monthly transaction which include the loan and the advances. Amongst the standard services provided by Vaishya bank the special service that it provides is Multi Branch Banking. Multi Branch Banking (Anywhere Banking) service is available to customers of networked branches of the Bank. Under this service, the customer of one branch will be able to transact on his account, from any other networked branch of the Bank. The activities are classifies in to following: 1) Activities in the savings and current account 2) Deposit 3) Loan

Activities in the savings and current account: Savings account: The safest thing to do with your money is to put it into a savings account. If you carry the money around with you, you might lose it. If the money is under your mattress, your house could burn down or be robbed. However, if the money is in a bank savings account, your banking institution is responsible for the 32

BRANCH BANKING

safekeeping of that money. If the bank burns down, your money won't go with it, and any reputable bank will not just lose your savings. How to open Savings Bank Account can be opened in the name of an individual or in joint names of the depositors by filling up the appropriate forms. A minor who have completed ten years of age can also open and operate the account. At the time of opening an account one must submit the documents like photocopy of passport or Electoral card, Postal identification cards as address proof and two passport size photos. Most banks also require an introduction for opening an SB account. The introduction may be obtained either from an existing account holder or from a respectable citizen, well known to the bank, which should normally call on the bank and sign in the column specially provided for the purpose of introduction in the account opening form. Eligible: Individual ,Single Accounts, Two or more individuals in JointAccounts,Illiterate Persons, Blind persons, Minors, Associations, Clubs, Societies, etc. Trusts Institutions/Agencies specifically permitted by the RBI Initial Deposits: Rs.500/- for Cheque book operated and Rs.100/- for non cheque book a/cs, For Pensioners Rs.100/- and Rs.10/33

BRANCH BANKING

Interest Rate: 3.5% p.a applied twice in a year in Feb and August Charges of non-maintaining minimum balance: Rs.20/- per month for not maintaining min Balance

Current account: Facility available to Current Deposit Account of Corporate, Proprietorship, Partnership, Individuals, Schools, Colleges and other institutions (other than Banks).No Interest will be payable on current account. Current accounts are cheque operated accounts maintained for mainly business purposes. Unlike savings bank account no limits are fixed by banks on the number of transactions permitted in the Account. Banks generally insist on a higher minimum balance to be maintained in current account. Considering the large number of transactions in the account and volatile nature of balances maintained overnight banks generally levy certain service charges for operating a Current account. In terms of RBI directive banks are not allowed to pay any interest on the balances maintained in Current accounts. However, legal heirs of a deceased person are paid interest at the rates applicable to Savings bank deposit from the date of death of the account holder till the date of settlement. 34

BRANCH BANKING

Activities in the savings and current account: 1) Cash Deposits 2) Cash Payments 3) Internal transfer Of Funds 4) Statement of a/c for a Given Period. 5) Marking Stop Payment of a Cheque. 6) Deposits

Cash deposit: It is the daily activity done by the account holder. Account holder may deposit cash for future saving or future payment. Cash payment: It is payment made by cheque. Account holder drawn cheque to make a payment. A cross cheque will not allow to receive payment. Internal transfer of fund:

35

BRANCH BANKING

It is only possible when account holder have two or more account in the same bank Statement of a/c for a given period: Current account holder can get the monthly statement and saving account holder can get there passbook updated. Making stop payment of cheque: It is instruction given account holder to bank to stop payment of cheque. Necessary charges will debit from account.

36

BRANCH BANKING

Fixed deposit: Time deposits are deposits accepted by banks for a specified period of time. In terms of RBI directives the minimum period for which term deposits can be accepted is 15 days. The banks generally do not accept deposits for periods longer than 10 years. 1) Banks pay interest on term deposits based on the period of deposits and normally pay higher interest for longer term deposits. 2) Banks have full discretion to fix their interest rates on deposits and these rates are varied from time to time depending on market conditions. 3) Changes made in interest rates from time to time do not alter the interest paid on the existing deposits. 4) When banks quote a certain percentage of interest per annum for a given period it is understood that interest payments are made on a quarterly basis (see IBA Master Charts). 5) The depositor can collect interest on every quarter or its discounted value at monthly rests or avail quarterly compounding benefits and receive principal and interest on maturity. 6) RBI has now permitted banks to quote a higher rate of interest for individual deposits more than Rs.15 lacs. 37

BRANCH BANKING

7) Banks are allowed to levy a penalty for premature encashment of deposits at their discretion. Banks generally pay interest on such deposits as applicable for the period which deposit has been kept with the bank (less penalty if levied). 8) Bank allows loans against the fixed deposits on demand. Margin retained over the deposit outstanding and interest rates charged thereon are decided by the bank and may vary from bank to bank. Opening of a time deposit Account: normally the requirements as given under savings bank account apply to time deposits also. However, photographs are not insisted for deposits below Rs.10,000/-. Also the requirements regarding furnishing of PAN number applies only to time deposits over Rs.50,000/- made in cash.

Advantage of fixed deposit: 1) If we once deposited into FD (Fixed Deposit) its very safety. 2) Its interest % is high when compare with other deposits like SB (Saving Bank A/C) & Current A/C. 3) If a senior citizen, the FD gives them the highest rate of interest. Its vary depends upon the banks. 4) Anybody can keep FD with "Time base and Money base" schemes. 38

BRANCH BANKING

For example. 2 years deposits or 5 years deposits / up to Rs.50,00,000/- or Rs.10,00,00,000/-. Disadvantage of fixed deposit: We can't withdraw the deposited money back until the terms of deposit completes. For example. We deposit your money into the FD for 5 years up to Rs.50,00,000/-. After 2 years of deposit, we need the deposited money in FD, nobody can't withdraw back without completion of the deposit amount reached. If the FD reach Rs.50,00,000/- then it is possible for withdraw the amount. Until we can't do anything against the FD. The Only one chance is, "CLOSE THE FD A/C" and then it may get our money back.......!

39

BRANCH BANKING

Attractive deposit scheme of Vaishya bank w.e.f.14-07-2008

Period

Gen.Public Co-operative including Societies Regd. Trust Co-op. Societies Senior Citizens

Senior Citizens

Current Deposits

NIL

NIL

NIL

Saving Deposits

3.50%

3.50%

3.50%

15 days to 45 days

4.25%

4.50%

4.75%

46 days to 180 days

4.50%

4.75%

5.00%

181 days to 1 years

7.00%

7.25%

7.50%

13 months to 15 Months

10.00%

10.25%

10.50%

16 Months to 2 years 9.50%

9.75%

10.00%

25 Months to 3 years 9.00%

9.25%

9.50%

Above 3 years

8.75%

9.00%

Term Deposits

8.50%

40

BRANCH BANKING

Loans and Advances: Banks finance industries for meeting their day to day requirements as well as for purchasing or renovating their fixed assets. Similarly, bank grant advances to farmers for raising crops, for purchasing implements, tractors, seeds and pesticides as also for irrigational facilities, etc. The advances granted by commercial banks are expected to develop all sectors of the national economy. The Sources from which banks get funds may be broadly stated as under (a) Paid-up capital: Funds paid towards the capital. (b) Reserves and Surplus: Reserves comprise accumulated profits retained by the bank from year to year. (c) Deposits: These are moneys placed by depositors with banks in savings, current and time deposits. (d) Borrowings from other banks: Commercial banks borrow moneys from Reserve Bank of India and State Bank of India against Government & other securities.

41

BRANCH BANKING

Methods of Granting Advances: The main methods of granting advances may be classified as: 1) Cash Credits 2) Overdrafts 3) Bills Discounting 4) Loans Cash credit:

CASH CREDIT

Purpose: Finance required for day to day functioning of the business Maximum Amount, Eligibility: (a) 75% of working capital gap (b) 20% of Realistic Projected Turnover in case of manufacturing units with limits above Rs.50 lacs

42

Repayment: Up to one year subject to enhancement of limit Rate of Interest: Up to Rs.10 lacs (Priority Sector 12%) (Non Priority Sector 13%)

Sureties: (A) Up to Rs. 5 lacs: Business / salaried surety (salaried person can be considered with monthly gross salary of Rs.15, 000/- and net salary Rs.10, 000/- p.m. and above) (B) Above Rs. 5 lacs: Two sureties One Business surety if collateral is more than 50% of the facility (C) For CC limit up to Rs.10 lacs: One salaried surety if collateral is more than 50% of the facility Two salaried sureties with monthly gross salary of Rs.15, 000/- and net salary Rs.10, 000/- p.m. and above Service Charges: 1.2% of amount sanctioned

43

BRANCH BANKING

Loans:

The term 'loan' is popularly used to denote the granting of an advance in lump sum, generally on the basis of securities acceptable to the banker. The distinguishing feature of a loan is that interest on it is payable on the entire amount, whether it is fully utilized or not. It is granted for a definite period and the borrower is given the facility to repay it in one lump sum or in installments. As far as a banker is concerned, the operating cost of a loan is lower as compared to a cash credit or an overdraft. This method of granting an advance has the advantage of strengthening the financial discipline in the use of bank credit. Follow up, supervision and control of end-use of bank credit could be made more effective in the case of loans as compared to cash credits and overdrafts.

Loan Schemes: The Vaishya Bank has different loan schemes. These are as follows: 1) Vehicles loan 2) Personal Loan 3) Housing Loan Scheme

44

BRANCH BANKING

Sanction, Documentation & Disbursement Application form: Wherever applicable, prescribed application form duly filled is obtained. Personal Information forms: Personal Information form of the borrower and guarantors duly completed in all respect and supported by documentary proof wherever required. Information given in the personal information form is properly scrutinized and verified, so as to assess their net worth. Net worth and income proof of the applicant(s) / guarantor(s) is cross checked with their latest Wealth tax receipts/return, Audited Financial statements and Income Tax return. Xerox copies of any documentary proof are verified from original papers. Personal Information forms are obtained every year and/or at the time of review/ enhancement of the credit facilities. Confidential report /Opinion letter: Confidential Report/opinion letter from the existing bankers is obtained in case borrowing units are having banking relationship with other banks. Confidential report of the associate is obtained from their bankers. Pre-sanction Visit: Pre sanction visit is paid to verify the facts given by the applicant borrower about his worth and his proposal. The visit report containing gist of observations during the visit is kept on record. 45

BRANCH BANKING

A visit register should be maintained and updated properly immediately after visiting the unit / account. The site of the property to be purchased in case of housing loan and the property/ assets proposed to be mortgaged / hypothecated is visited for ascertaining their realizable value. . Need based finance as per realistic projections: All relevant financial and other documents and information concerning the credit proposal is obtained from the borrower (s) /guarantors (s) before assessment

of

the

credit

needs. The

projections

submitted

by

the

borrower/applicant company are accepted only after proper study and these is critically analyzed in the proposal note. Current trends in a particular industry/sector are also being taken into consideration. Adequate scrutiny of balance sheet and comments thereon is being incorporated in the proposal note. Interview of the borrower is conducted after receipt of all the relevant papers/documents concerning the credit proposal. Important information elicited through such interviews is brought out in the credit appraisal of the borrower. Proper analysis of conduct of the account is also being carried out. Continuations of facilities are considered on their actual utilization in past and assessment as per future projections. It is ensured that the existing accounts of the borrower are regular, audit and inspection irregularities are rectified, estimates are not inordinately inflated and the vital issues are commented upon properly. The sanctioning authority is satisfying itself about the acceptability of credit 46

BRANCH BANKING

needs of the borrower and end use of funds lent with sources of repayment. At the time of mid-term review of the projects, if additional loans are to be sanctioned then proper appreciation of the market conditions and the factors, which led to time and cost over runs in the projects, should be taken into account by the sanctioning authority. At the time of take-over of accounts from other, bank/s it should be ensured that the accounts of the borrower with existing bank/s are regular and conform to the norms laid down for takeover as per Lending Policy. Stipulating suitable repayment program and adequate moratorium period: While appraising the proposal for term loans, need for granting moratorium in repayment should be assessed and decided, based on period required for completion of the project, probable date of commencement of trial and commercial production and leverage for contingencies. After considering above factors, moratorium should be fixed so that need for extending moratorium period / rescheduling / restructuring the repayment schedule at initial stage itself can be avoided. The repayment programme should be fixed as per income generation /cash flow from the activity i.e. overall repaying capacity of the borrower including his other repayment commitments. Besides, the economic life of assets created out of bank finance should also be taken into account while deciding repayment period.

47

BRANCH BANKING

EMI Stipulation: While stipulating EMI, following points need to be noted: The repayment period should be reckoned from the date of first disbursement and the EMI should be stipulated after calculating it properly by referring the EMI chart so as to ensure that entire dues are recovered within the stipulated tenor of the loan. Interest accrued during moratorium period should be either recovered separately or should be taken into account along with Principal while fixing

48

BRANCH BANKING

Application form, Note for appraisal of credit facilities, sanction letter: Application form, Note for appraisal of credit facilities, Sanction letter and other relevant papers should be held on record along with the documents concerned file of the borrower. Conveying sanction and obtaining acceptance: 1) The details of the sanction of a Loan are conveyed by Vaishya bank to the borrower by a written communication. 2) While conveying the sanction, it is ensured that terms and conditions of the sanction are specific and not vague. All the terms and conditions are clearly mentioned in the sanction letter so as to avoid the possibility of any confusion or misinterpretation. Proper description of interest rate (in relation to BPLR/Bank Rate, Fixed or Floating rate etc. and the Credit Rating of the borrower) and validity period of sanction should also be mentioned in the sanction letter. A clause stating that the interest rates are subject to change from time to time depending upon the policy of the Bank should be incorporated. Compliance of terms and conditions of sanction: Disbursements is permitted only after compliance of all the terms and conditions of the sanction including creation of the Bank's charge on assets and noting of the same with appropriate authorities in applicable cases, obtaining personal guarantees wherever stipulated. It is ensured that at least proportionate margin money is brought in / maintained by the borrower.

49

PAPERS/DOCUMENTS REQUIRED FOR LOAN PROPOSAL: From Borrower:1) Copy of PAN Card (or Voter's Card) this is required for proper identification of the Borrower 2) Last 3 years I.T. Returns (SARAL Forms) - Form No. 16 3) ------- do ------- (Latest salary slip in case of salaried person) 4) Residence Proof - Copy of Ration Card 5) Photos of Borrower Guarantor (1):1) Copy of PAN Card (or Voter's Card) 2) Last 3 year's I.T. Returns (SARAL Forms) - Form No. 16 3) ------- Do ------- (Latest salaries slip in case of salaried person) Residence Proof - Copy of Index-II of house/flat (MSD Co. Ltd. Bill/PMC /PCMC Taxes/Tele Bill) 4) Photos Guarantor (2):- same as above

50

BRANCH BANKING

Documentation: Documents are consistent with the terms and conditions of the sanction and complete in all respects prior to disbursal of facilities. It is ensured that all necessary documents are properly executed by all concerned. In case of partnership firms, copy of partnership deed and the certificate of registration of partnership firm with Registrar of Firms should be obtained. In case of fixed assets, offered as security, its valuation is got done by our empanelled valuer and the report also give distress sale value of the asset. It is ensured that the valuation reports are not older than three years and valuation of the plant & machinery, vehicles etc. In case deposit receipts issued by the Bank are taken as security, the deposit receipt should be duly discharged by the beneficiaries and our lien be noted on the receipt as well as on the respective record. The deposit receipt should be renewed on maturity. This should be observed even in case of loans granted to staff members. All assets charged to the Bank, in the form of primary or collateral security except in specified exempted categories, must be adequately insured with Bank clause. Insurance Policy in force is kept with the documents. Payment instruments (DD / pay order) issued in favour of supplier / builder is delivered to them directly and not through the borrower. Acknowledgement of the supplier/builder for having received the payment instrument/s is kept on record. All the invoices, bills and receipts for the assets created out of bank finance should be kept on record. All security documents are maintained and held on record with adequate care. 51

BRANCH BANKING

These is kept in a proper folder/plastic cover and kept under the custody of the Branch Head/ Authorized Official of the branch. Follow up for recovery: The importance of timely repayment of principal and interest is impressed upon the borrower. For better follow up suitable record of due dates of repayment is maintained. Let us we see the different loan scheme that we studied in detail. These schemes are as follows: Consumer Loan (Vehicle) Personal Loan Housing Loan

52

BRANCH BANKING

VEHICLES LOAN For purchase of a new Cars/Jeeps & 2/3 wheeler. Eligibility:

Salaried

persons,

permanent

in

service,

professional/

businessman having sufficient disposal income to meet the repayment. Person engaged in agriculture and allied activities are also to be included. Minimum Gross Income for purchase of 4 wheelers

Rs. 1.20 Lakh per annum

2/3 wheelers

Rs. 0.50 Lakh per annum

Income of spouse could be included if spouse joins as co-obligant. Income should be arrived at on the basis of I. T. Returns for the past 3 years (average) Total deductions including proposed loan installment should not exceed 65% of Gross Income. Amount of loan: (90% of the cost of vehicle subject to following ceiling.) I) For 2 wheeler - Maximum RS.1.00 lack II) For 4 wheeler - Maximum Rs.10.00lacs Margin: 10% Rate of Interest: Repayment tenor Up to 3 years: 10.75% floating Repayment tenor above 3 years: 11.75% floating 53

BRANCH BANKING

Security: Hypothecation of vehicle to be purchased 1 acceptable guarantor.

Repayment: For 2/3 wheelers - 60 months For 4 wheelers - 84 months Processing Fee: @ 0.30%, Minimum Rs.100/-. Finance for Second hand Vehicles: Finance for 4 wheelers only. The vehicles up to 4 years old. The margin will be 40% and rate of interest @ BPLR (Bench mark Prime Lending Rate). DOCUMENTS REQUIRED FOR VEHICLE LOAN PROPOSAL: 1. Quotation from showroom. 2. Receipt of cash payment (If any). 3. Charge "Hypothecation" to be registered with RTO. 4. Xerox copy of Insurance policy.

54

BRANCH BANKING

Note for Vehicle Loan Scheme: (Example) Date of application

5th July 2008

Name of the applicant Age Occupation Amount applied for

XYZ 30 years Service Rs. 30,000/-

Gross salary as per the last salary slip (G.S.) Total deductions (as per salary slip)

Rs. 8,500/-

Total deductions allowable under scheme (65% of G.S.) Maximum loan installment possible Maximum loan amount permissible Cost of vehicle to be purchased Margin 37.01%

Rs. 5,525/-

NIL

Rs. 5,525/Rs. 1,69,000/Rs. 47,627/Rs. 17,627/-

Bank finance permissible Security Name of guarantor Age Occupation Is he borrower/guarantor in any other loan account: (if yes, details) Annual income

Rs. 30,000/Hypothecation of vehicle LMN 28 years Service No Rs. 98,540/-

Rate of interest Repayment EMI First installment to be paid on/ before Amount paid within

10.75% Rs. 1,000/Aug.08 36 months i.e. July 2011

PERSONAL LOAN 55

Purpose: To meet any personal expenses. Eligibility:

Salaried

persons

with

permanent

employment,

Professional/Businessmen. Minimum income p. a. based on I. T. Returns for past 3 years should be Rs. 1.00 lakh and net take home pay after deduction of proposed loan installment is Rs. 0.40 lakh. Amount of loan: Minimum Rs.5000/-, Maximum RS.200000/- In case of salaried person 12 times net monthly salary For others: 50 % of average annual income based on the I. T. Returns for past three years. For deciding the quantum of eligible loan amount, the income of spouse should be taken into account provided spouse is taken as co-borrower.

Margin: No margin, i.e. 100% loan. Rate of Interest: BPLR + 1.25%, i.e. @ 14.50% p.a. Repayment: Maximum within 36 months by EMI

Processing Fee: Up to Rs.25000/- - Rs.50/-, Above Rs.25001/- to Rs. 1.00 lakh - RS.200/-. Above Rs. 1.00 lakh 0.25% of amount Sanctioned Security: Clean loan to be guaranteed by 1 acceptable guarantor. 56

BRANCH BANKING

DOCUMENTS REQUIRED FOR PERSONAL LOAN PROPOSAL: 1) Undertaking from employer to deduct monthly loan Installment from salary is required. 2) Standing instructions from borrower to deduct Monthly loan installment from salary account maintained with us. 3) Post dated cheque from the borrower is mandatory.

57

BRANCH BANKING

Note for Personal Loan: (Example) Date of application Name of the applicant Age Occupation Amount applied for Gross salary as per the last salary slip (G.S.) Total deductions (as per salary slip) Other loan installments existing Total existing deduction from salary Total deductions allowable under scheme (65% of G.S.) Maximum loan installment possible Maximum loan amount permissible Permissible loan amount Name of guarantor Age Occupation Is he borrower/guarantor in any other loan account: (if yes, details) Annual income Rate of interest Repayment EMI First installment to be paid on/ before Entire amount with interest to be paid in

58

16th June 2008 ABC 49 years Service Rs. 1, 00,000 Rs. 9,979/Rs. 1,153/NIL Rs. 1,153/Rs. 6,492/Rs. 5,539/Rs. 1,55,000/Rs. 1,00,000/EFG 32 years Service No Rs. 98,400/14.50% Rs. 3,450/July 2008 June 2011

BRANCH BANKING

HOUSING LOAN SCHEME

HOUSING LOAN

Purpose: Purchase of new flat and construction of house or purchase of old flat / house including extension to existing flat / house Maximum Amount: 85% of the (Agreement Value + Stamp Duty + Registration Charges) Max: Rs.25.00 Lacs Repayment : Up to 180 installments in case of salaried employee Up to 60 to 120 installments in case of others / businessmen Rate of Interest :( Effective from 01-08-2008) • 12 % (floating) in case of Loans up to Rs.20.00 lacs • 13 % (floating) in case of Loans above Rs.30.00 • In case Flat/House is given on rental basis 15 % (floating) rate of interest will 59

BRANCH BANKING

be charged.13.50 % (floating)in case of Loans above Rs.30.00 lacs up to Rs.50.00 lacs Sureties: Two sureties with net income / salary of above Rs.7,000/- per month and age below 45 years Purchase of Flats in Building more than 15 years old : For purchase of flat in Building which is more than 15 years old, loan will be considered only if it is certified by the Structural Engineer that the residual life of the building is more than 20 years and the building is in good condition.

DOCUMENTS REQUIRED FOR HOUSING LOAN PROPOSAL: From Borrower 1. Copy of Agreement with Builder (original) 2. Search & Title Report of Advocate on Bank's Panel 3. Paper’s from Builder (As listed overleaf) 4. Search report Papers to be obtained From the Builder 1)The Document of the Land-lord showing his ownership such as Sale-Deed, Gift Deed, Lease- Deed, Will, Family arrangement, etc. 2) City survey 7/12 Extract 60

BRANCH BANKING

3) Development agreement with the builder 4) Power of attorney given to the builder 5) Sanctioned building plan. 6) Commencement certificates issued by the Pune Municipal Corporation / PCMC. 7) N. A. Order issued by the collector of Pune 8) Order under ULC Act 9) Completion certificate issued by PMC/PCMC 10) Title Opinion of the Advocate of the builder 11) No objection to mortgage the flat given by the builder 12) Zone certificate 13) Demarcation certificate If the conveyance is made with the Housing Society, then No objection from the said Society 15) Share certificate issued by the Society 16. If the Apartment is declared, then the certified copy of the registered declaration of the Apartment 17) Tax receipt issued by the PMC/PCMC & MSD Co. LTD., 18) N.A. receipt showing no dues 61

BRANCH BANKING

19) Agreement of sale of the flat executed between flat purchaser & builder 21) Registration receipt of the aforesaid agreement Note for Housing Loan: (Example) 10th March 2008

Date of application Name of the applicant

APK

Age

29 years

Occupation

Service

Loan amount applied for Details of the payment made & to be made Total price as per agreement

Rs. 15,00,000/-

Amount paid as per the agreement/ receipt

Rs. 5,00,000/-

Balanced to paid

Rs. 10,00,000/-

Terms of payment of the balance

Before 10/4/2008

Scheduled date of possession Cost of the purchase

Means of financing

Rs. 7,70,000/-

Immediate

Price as per agreement: Registration/ stamp expenses: Legal Mortgage expenses: Total cost of the purchase:

Rs. 15,00,000/Rs. 75,000/Rs. 25,000/-

Loan amount applied for: Own contribution:

Rs. 7,70,000/Rs. 8,30,000/-

Source of own contribution

Rs. 16,00,000/-

Savings from salary 62

BRANCH BANKING

Details of the salary income Gross salary as per the last salary slip (G.S.) Total deductions (Present) Other loan installments existing

Rs 15,500/-

Total deductions allowable under scheme (65% of G.S.) Maximum allowable loan installment per month Maximum loan available Eligible amount of loan i.e. lesser amount of the three below: a) 75% of cost b) 50 times of G.S. c) Eligibility as per deductions

Rs. 10,075/-

Repayment: Rate of interest Loan amount Interest during moratorium Total amount to be repaid Period of repayment (months) EMI per month Date of first installment Security

Rs. 860/NIL

Rs. 9,215/Rs. 9,07,000/Rs. 7,70,000/Rs. 12,00,000/Rs. 7,75,000/Rs. 9,07,000/10.75% Rs. 7,70,000/NIL Rs. 7,70,000/240 months Rs. 7,850/April 2008 Registered mortgage of the flat to be purchased SRP 35 years Service Rs. 1,92,000/-

Personal guarantor name Age Occupation Annual income

63

BRANCH BANKING

Chapter VI

FINDINGS

64

BRANCH BANKING

FINDINGS The bank provides huge amount of loans to every section of the society. From the above graphs we find that the advances of the bank vary from March 2008 to June 2008. In June 2008, the personal loan increased by 0.13%, the education loan increased by 0.18% and the housing loan increased by 0.13%. While the vehicle loan decreased by 0.31% because some accounts of vehicle loan was closed. Due to this the other advances was decreased by 0.14%. There is more demand for the saving and the current account in the bank because, the area where the bank is situated there are more number of small scale business are operating so there are number of cash transaction and the deposit transaction operating in the bank. The data give that on every day around 150 cheques are sending for clearing house. But due small scale operation bank has advantage of mouth to mouth advertising.

65

BRANCH BANKING

Chapter VII

CONCLUSION & SUGGESTIONS

66

BRANCH BANKING

CONCLUSION We studied different deposit schemes and loan schemes in the bank. For taking the loan the customer should have to complete all the legal procedure of the bank. He was to submit all the necessary documents mentioned by the bank. Then the bank prepares proposal note. If the customer is applicable then only the loan is sanctioned by the bank.

SUGGESTIONS 1) Display the instructions & require documents for loan along with application file. 2) Reduce the time of Loan Sanction procedure. 3) The bank needs to create awareness, as people are unaware about the schemes of advances available in the bank. 4) As I observe that staff is not Communicate with customer politely. 5) Keep the Suggestion box for customer’s feedback. 6) Try to work as quickly as possible. 7) Keep all required counter document along with the respective table.

67

BRANCH BANKING

Chapter VIII

ANNEXURE

68

BRANCH BANKING

Questionnaires 1) What is banking? 2) What are the reasons behind bank nationalization? 3) What are the methods of granting advances? 4) What is loan? 5) What are the loan schemes available in bank? 6) What are the criteria uses by bank to select customers for loan? 7) What are the interest rates of different loan schemes? 8) What is the process of loan sanctioning? 9) How to calculate Equated Monthly Installments (EMI)? 10) How savings account is beneficial to bank? 11) How the interest will charged at the end of the month? 12) What are the rate interests of deposit scheme?

69

BRANCH BANKING

Chapter IX BIBLIOGRAPHY

70

BRANCH BANKING

BIBLIOGRAPHY 1) Principles and Practice of Bank Management By P. Subba Rao 2) Banking Theory and Practice Nineteenth Edition By K. C. Shekhar, Lekshmy Shekhar 3) Hand Book of Vaishya Bank 4) Annual Report 2007-08 of Vaishya Bank 5) Balance sheet of Vaishya Bank

71