Vikram Sahu.docx

A Project Report On “Impact of Demonetisation on Loan Rates in India”

Submitted by:

Guided by:

Bikram K. Sahu

Prof. Jainish Bhagat

T.Y. B.B.A. Finance Roll No. 156

In the partial Fulfilment of the Requirement For the Degree of BACHLOR OF BUSINESS ADMINISTRATION (B.B.A)

Submitted to:

Shri Shambhubhai V. Patel College Of Computer Science & Business Management. Affiliated to VNSGU, Surat Academic Year 2016-17

DECLARATION I hereby declare that the project work entitled “Impact of

Demonetisation

on

Loan Rates

in India” submitted to the S.V Patel

College of C.S & B.M, Surat, is a record of an original work done by me under the guidance of Professor Jainish Bhagat and this project work is submitted in the partial fulfilment of the requirements for the award of the degree of Bachelor of Business Administration. The results embodied in this thesis have not been submitted to any other University or Institute for the award of any degree.

Signature of the student: Date: Place:

Table of Contents S.R No.

Topic

Page No.

1.

Introduction

1

2.

Research Methodology

7

3.

Data Analysis & Interpretation  Nationalised Banks  Private Banks  T-test on Loan rates

10 11 13 16

4.

Conclusion

29

5.

Bibliography

31

6.

Annexure

33

IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

CHAPTER: - 1

INTRODUCTION

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

Demonetization:‘Demonetization is the act of stripping a currency unit of its status as legal tender. It occurs whenever there is a change of national currency: The current form or forms of money is pulled from circulation and retired, often to be replaced with new notes or coins.

Bank A bank is a financial institution licensed to receive deposits and make loans. Banks may also provide financial services such as wealth management, currency exchange and safe deposits boxes. Types of Bank

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA Commercial Bank: A commercial bank is a financial institution that provides various financial service, such as accepting deposits and issuing loans. Commercial bank customers can take advantage of a range of investment products that commercial banks offer like savings accounts and certificates of deposit.

Regional Banks: A regional bank is a depository institution, i.e. a bank, savings and loan, or credit union, which is larger than a community bank, which operates below the state level, but smaller than a money centre bank, which operates either nationally or internationally. A bank that operates in a limited area of the country, rather than nationwide or internationally. Cooperative Banks: A bank that holds deposits, makes loans and provides other financial services to cooperatives and member-owned organizations. Also known as Banks for Cooperatives. A cooperative savings institution, chartered and regulated by a state or the federal government, that receives deposits in exchange for shares of ownership and invests its funds chiefly in loans secured by first mortgages on homes. Also called building and loan association, cooperative bank; British, building society. Scheduled Banks: Scheduled Banks in India constitute those banks which have been included in the Second Schedule of Reserve Bank of India (RBI) Act, 1934. Non- Scheduled Banks: Those banks which not comes in Scheduled banks Indian Banks: Indian Bank refers to hose banks which is situated in India & providing banking service to the peoples Foreign Banks: Those Banks which is situated in foreign and providing banking services

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA Public Sector Banks: Public Sector Banks (PSBs) are banks where a majority stake (i.e. more than 50%) is held by a government. The shares of these banks are listed on stock exchanges. There are a total of 27 PSBs in India Private Sector Banks: The private-sector banks in India represent part of the Indian banking sector that is made up of both private and public sector banks. The "private-sector banks" are banks where greater parts of state or equity are held by the private shareholders and not by government.

Types of loans

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

Types of Loan 1. Secured Loan 2. Unsecured Loan Secured Loan A secured loan, is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan.

Types of Secured Loan A. Housing Loan A sum of money borrowed from a financial institution or bank to purchase a house.

B. Auto Loan An auto loan is basically a loan that you take out in order to purchase a vehicle. C. Equity line of Credit A loan in which the lender agrees to lend a maximum amount within an agreed period. D. Equity Loan A home equity loan is a type of loan in which the borrower uses the equity of his or her home as collateral. E. Small Medium Business Loan SME finance is the funding of small and medium-sized enterprises, and represents a major function of the general business finance market – in which capital for different types of firms are supplied, acquired, and costed or priced.

Unsecured Loan An unsecured loan is a loan that is issued and supported only by the borrower's creditworthiness, rather than by any type of collateral. An unsecured loan is one that is obtained without the use of property as collateral for the loan, and it is also called a signature loan or a personal loan.

Types of Secured Loan A. P2P Lending SHRI SHAMBHUBHAI V PATEL COLLEGE OF COMPUTER SCIENCE & BUSINESS MANAGEMENT

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA Peer-to-peer lending, sometimes abbreviated P2P lending, is the practice of lending money to individuals or businesses through online services that match lenders with borrowers. B. Pay day Lending A payday loan is a type of short-term borrowing where an individual borrows a small amount at a very high rate of interest. The borrower typically writes a post-dated personal check in the amount they wish to borrow plus a fee in exchange for cash.

C. Credit Card Credit Card Debt' A type of unsecured liability which is incurred through a short-term revolving loan facility. While, technically, all purchases made by credit card create a debt to the user, these debts typically do not incur interest until the grace period has expired.

D. Personal Loan Personal Loan is an unsecured loan to meet your current financial needs such as financing a wedding, a vacation, medical emergencies and many more.

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

CHAPTER: - 2

Research methodology

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA Title: Impact of demonetization on loan rate in India – a survey

Objectives: 

To know the effect of demonetization on loan rate.



To investigate the expectations of customers after demonetisation.

Research design: There are three basic types of research design 

Exploratory research



Descriptive research



Causal research Here exploratory research design will be used.

Types of data: Primary Data & secondary data will be used to know the impact on loan rates.

Sources of data: Questionnaire will be used to gather primary data and various websites will be used to get the secondary data i.e. loan rates etc.

Sample Size:100 respondents

Sampling Method: Simple Random Sampling method will be employed. A simple random sample is a subset of a statistical population in which each member of the subset has an equal probability of being chosen.

Data collection tools: Structured Questionnaire.

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA Tools used for data analysis: T- Test and graphical presentation.

Duration:Time duration for study is for 2 Months.

Limitation:

High cost require to research



Inadequate knowledge to do research



Lower time duration to do research

Importance:

Helps to get maximum efficiency and reliability.



Helps to give direction.



Helps in decision making.

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

CHAPTER: - 3

Data analysis & Interpretation

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

There is two basic types of bank 1. Nationalized banks 2. Private banks

Nationalized banks 1. Bank of India: BOI has over 4500 branches and makes a profit of 400 million USD. Base

Before Demonetisation (Crore)

After Demonetisation (Crore)

Gross Non-Performing Assets

49879.13

52261.94

Net Non-Performing Assets

27996.40

27467.03

Net Profit / Loss

2012.90

-6204.46

Earnings Per Share

30

-76

2. Bank of Baroda: BOB is the fourth largest bank in India when it comes to managing assets. According to market cap the bank is undervalued/priced. The bank has over 4200 branches and has a net profit of 840 million USD. The assets managed by this bank are valued at 73 billion USD. Bank of Baroda is another large PSU banking company in India with a market capitalization of about INR 38601.08 crore. The bank is estimated to have over 5193 branches and 38,737 employees. With a significant presence in about 25 countries, the Bank of Baroda balances out NRI services with rural and agricultural finance. The bank is one of the major banking operators in India’s rural sectors. Base

After Demonetisation (Crore)

Gross Non-Performing Assets

Before Demonetisation (Crore) 16261.44

Net Non-Performing Assets

8069.49

19046.46

Net Profit / Loss

3398.44

-5395.54

Earnings Per Share

15.83

-23.89

40521.04

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA 3. Canara Bank Canara Bank is another PSU that has made its mark in the Indian banking sector with a market capitalization of about INR 18630.10 crore. Nationalised in 1976, the bank has a network of about 3600 branches spread across the country. With 7599 ATMs, the bank is among the first PSUs in the country to emphasise on e-banking and online services. Apart from commercial banking, Canara Bank has also become a strong provider of corporate banking services in India. The bank has about 3200 branches with over 4000 ATM’s. The bank employees about 44,000 people. Assets managed by the bank are valued at 61 billion USD. Base

Before Demonetisation (Crore)

Gross Non-Performing Assets

13039.96

After Demonetisation (Crore) 31637.83

Net Non-Performing Assets

8740.09

20832.91

Net Profit / Loss

2702.62

-2812.82

Earnings Per Share

58.59

-53.61

4. Central Bank of India Among the Nationalised Banks, Central Bank of India can be truly described as an All India Bank, due to distribution of its large network in all 29 States as also in 6 out of 7 Union Territories in India. Central Bank of India holds a very prominent place among the Public Sector Banks on account of its network of 4730 Branches, 1 Extension counters, along with 10 Satellite Offices (as on February 2017) at various centres throughout the length and breadth of the country Base

Before Demonetisation (Crore)

After Demonetisation (Crore)

Gross Non-Performing Assets

11873

22721

Net Non-Performing Assets

6807

13242

Net Profit / Loss

606.45

-1117.67

Earnings Per Share

4.27

-8.55

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA 5. Industrial Development Bank of India The bank has about 1150 branches with about 2000 ATM’s. The bank employees about 15000 people. It manages assets worth 42 billion USD. Base Gross Non-Performing Assets

Before Demonetisation (Crore) 12684.97

After Demonetisation (Crore) 24875.07

Net Non-Performing Assets

5992.52

14643.39

Net Profit / Loss

873.39

-3664.80

Earnings Per Share

5.45

-21.77

Private Banks

1. ICICI Bank ICICI Bank is the third largest entity in the Indian banking space, with a market capitalization of INR 184,547.26 crore.ICICI Bank has a customer base of over 2.5 million and boasts of an extensive network of 4050 branches across the country. With 12,475 ATMs and assets worth USD 99 billion, the bank is currently celebrating 60 years of existence. ICICI was formed as a World Bank initiative in 1955.The bank is headquartered in Vadodara, Gujarat and has an international presence in 19 countries. The bank’s employee strength was estimated at over 72,000 last year when it overtook HDFC Bank in terms of people employed. Base

Gross Non-Performing Assets

Before Demonetisation (Crore) 15094.69

After Demonetisation (Crore) 26221.25

Net Non-Performing Assets

6255.53

12963.08

Net Profit / Loss

11175.35

9726.29

Earnings Per Share

19.32

16.75

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA 2. Yes Bank Yes Bank was incorporated in the year 2004 by Mr. Rana Kapoor and Mr. Ashok Kapoor, and currently has a market capitalisation of about INR 35,169.20 crore. With a strong network of about over 630 branches in 375 cities, and with over 1150 ATMs spread across the country, Yes Bank is among the fastest growing banks of India. The bank employs about 12000 employees and has high ambitions for the years to come. Base

Before Demonetisation (Crore)

After Demonetisation (Crore)

313.40

748.98

0.00

284.47

2005.36

2539.45

49.00

60.62

Gross Non-Performing Assets Net Non-Performing Assets Net Profit / Loss Earnings Per Share

3.

Axis Bank

Axis bank comes 7th in the list and 3rd in the list of private sector bank. The bank has 2225 branches, 12000+ ATM’s, 40200 employees. The bank manages assets worth 54 billion USD. The bank’s net profit is 1.5 billion USD.

Gross Non-Performing Assets

Before Demonetisation (Crore) 4110.19

After Demonetisation (Crore) 6087.51

Net Non-Performing Assets

1316.71

2522.14

Net Profit / Loss

7357.82

8223.66

Earnings Per Share

31.18

34.59

Base

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

4. Kotak Mahindra Bank The bank has over 323 branches and a customer account base of over 2.7 million. Spread all over India, not just in the metros but in Tier II cities and rural India as well, it is redefining the reach and power of banking. Presently it is engaged in commercial banking, stock broking, mutual funds, life insurance and investment banking. It caters to the financial needs of individuals and corporates. The bank has an international presence through its subsidiaries with offices in London, New York, Dubai, Mauritius, San Francisco and Singapore that specialize in providing services to overseas investors seeking to invest into India.

Base

Before Demonetisation (Crore)

After Demonetisation (Crore)

1237.23

2838.11

609.08

1261.96

1865.98

2089.78

24.20

11.42

Gross Non-Performing Assets Net Non-Performing Assets Net Profit / Loss Earnings Per Share

5.

City Union Bank

City Union Bank Ltd was incorporated as a limited company on October 31, 1904 with the name, The Kumbakonam Bank Ltd. In January 30, 1930, the first Branch of the Bank was opened at Mannargudi in Tamil Nadu. Thereafter, branches were opened at Nagapattinam, Sannanallur, Ayyampet, Tirukattupalli, Tiruvarur, Manapparai, Mayoral and Prayer within a span of twenty five years. Base

Before Demonetisation (Crore)

After Demonetisation (Crore)

335.82

511.98

232.79

323.15

384.13

444.69

6.82

7.44

Gross Non-Performing Assets Net Non-Performing Assets Net Profit / Loss Earnings Per Share

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA T-TEST OF LOAN RATES BEFORE DEMONETISATION & AFTER DEMONETISATION H0: There is no significance difference between after and before demonetisation in loan rate H1: There is significance difference between after and before demonetisation in loan rate Weeks 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Interest Rates 8.25% 8.25% 7.75% 7.75% 7.75% 7.75% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% Demonetisation 7.00% 7.00% 7.00% 6.75% 6.75% 6.75% 6.75% 6.75% 6.75% 6.75% 6.25% 6.25% 6.25% 6.25%

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA T-cal

0.000105867

T-tab @5%

2.05

In the above case there is T-cal is lower than T-tab. So, H0 is not rejected.

T-cal
I.e. there is no significance difference between before and after demonetisation loan rates in India.

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

Gender

Response

1.Male

72

2.Female

28

Total

100

Survey is undertaken in Surat city SHRI SHAMBHUBHAI V PATEL COLLEGE OF COMPUTER SCIENCE & Page | 18 BUSINESS MANAGEMENT

IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

All respondents are aware about demonetisation

From above data we can understand that 96% peoples have been taken loan from banks. SHRI SHAMBHUBHAI V PATEL COLLEGE OF COMPUTER SCIENCE & Page | 19 BUSINESS MANAGEMENT

IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA Particulars

Percentage

Peoples who had taken loan

96%

Peoples who had not taken loan

4%

Total

100%

Respondents have been taken loans from multiple banks.

Name of Banks

Percentage of peoples taken loans

State Bank of India

38%

HDFC

34%

ICICI

10%

Bank of India

18%

Kotak Mahindra Bank

14%

Bank of Baroda

13%

Panjab National Bank

11%

Union Bank

6%

Others

5%

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

Respondents have been taken different types of loans.

Types of loan

Percentage

Home Loan

42%

Business Loan

8%

Gold Loan

3%

Vehicle Loan

50%

Education Loan

24%

Others

1%

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

According to 97% of People, They think demonetisation affected loan rates and others 3% are think that demonetisation does not affected to loan rates.

Particular

Percentage

(Demonetisation affect to loan rates) Yes

97%

No

3%

Total

100%

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

Particulars

Percentage

Rates are Increased

9%

Rates are Stable

16%

Rates are decreased

75%

Total

100%

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

Particulars

Percentage

Rates will Increased

17%

Rates will Stable

18%

Rates will decreased

65%

Total

100%

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

Particular

Percentage

Problem faced by person

90%

Problem does not faced by person

10%

Total

100%

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

Maximum respondents’ experience in taking loan is average i.e. 68%

Experience

Percentage

Very Bad

3%

Bad

3%

Average

68%

Good

25%

Very Good

1%

Total

100%

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

89% Peoples will recommend others to take loan and remaining others are will not recommend.

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

Name of Banks

Percentage of peoples taken loans

State Bank of India

23.7%

HDFC

37.6%

ICICI

9.7%

Bank of India

9.7%

Kotak Mahindra Bank

3.0%

Bank of Baroda

7.5%

Panjab National Bank

3.0%

Union Bank

3.0%

Others

3.0%

Total

100%

Maximum respondents’ are recommend others to take loan from HDFC than after State Bank of India.

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

CHAPTER: - 4

Conclusion

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA 

Here in this research impact of demonetisation on loan rates is studied.



In this research this has been compared some particulars like Profit & Loss, Non-performing assets and Earning per Share and there has been analysed that after demonetisation nationalized banks has incurred loss and other private banks performed well manner.



It means that the nationalised banks are more affected by demonetisation than the Private Banks.



To know the effect of demonetisation on loan rates calculated T-test.



Cause of that test it has been analysed about the T-Cal and T-tab.



In that test it resulted that that T-Cal < T-tab it means H0 is accepted.



Its result shows that there is very minor changes are occurred in loan rates.



It shows that there is no effect or stable.

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

Bibliography

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA 

http://www.moneycontrol.com/



https://www.rbi.org.in/Scripts/WSSViewDetail.aspx?TYPE=Section&PARAM1=4



https://www.thebalance.com/types-of-banks-315214



https://www.debt.org/credit/loans/



www.investopedia.com/terms/d/demonetization.asp

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

Annexure

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA

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IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA Fluctuation In Loan Rates Weeks

Before Demonetisation interest rates

After Demonetisation interest rates

1

7.00%

7.00%

2

7.00%

7.00%

3

7.00%

7.00%

4

7.00%

6.75%

5

7.00%

6.75%

6

7.00%

6.75%

7

7.00%

6.75%

8

7.75%

6.75%

9

7.75%

6.75%

10

7.75%

6.75%

11

7.75%

6.25%

12

7.75%

6.25%

13

8.25%

6.25%

14

8.25%

6.25%

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