Professional Documents
Culture Documents
Project Report
Submitted in partial fulfillment of the requirements
For the award of the Degree of
MASTER OF BUSINESS ADMINISTRATION of University of Calicut
By
SREEJITH K
Reg.No: HGAHMBA045
I hereby declare that this Project Report titled “Study on the performance
of retails loans of Federal Bank Ltd” submitted by me to the Department
of Commerce & Management Studies of University of Calicut is based on
the project work undertaken by me, under the guidance of Prof. Subakaran
Pathmanaman and it is not submitted to any other University or Institution
for the award of any degree, diploma, certificate or title earlier.
Sreejith k
3RD SEM, M.B.A
CONTENTS
1 Introduction 01-03
5 Findings 53
6 Suggestions 54
7 Conclusion 55
8 Bibliography 56-57
LIST OF CHARTS
multiple income families, low NPAs, high returns, low interest rates,
growing consumersim, etc., that affects retail advances. Hence the study on
the growth of retail finance is very significant in the era of globalisation and
country.
The Federal Bank Ltd. is one of the strongest Indian banks in the
influence the banking habits and needs of the people of Kerala. The Bank
has a wide range of retail loan products catering to almost all financial
portfolio of the Bank is expected to give an insight into the credit aptitude of
the people
SCOPE OF STUDY
The study on the performance of retail loans of federal bank for the years
2005, 2006, 2007& 2008. The scope of the study is limited to four years.
This study has been undertaken with the specific objectives in view –
Lending in particular.
Source of data
The data for the study is secondary data. The secondary data is collected
from the financial statements, and other internal records of the company and
further clarifications are made through discussion with the officers of the
company
Period of study
A period of four years from 2005, 2006, 2007&2008 is taken for the study.
REVIEW OF LITERATURE
INTRODUCTION
Finance is the foundation stone of every business in the present day set
up. The success of every business depends upon adequate source of finance.
Finance management is the managerial activity that is associated with
planning and controlling of companies financial resources. The financial
resources are always scarce and limited which need proper planning and
control in order to achieve the best result out of the complex situation of risk
and uncertainty prevailing in the business world. The financial management
has to take decisions in various fields involving financial implications such
as new financing – whether through shares or debentures or temporary
borrowing through banks and other sources, inventory management and
capital budgeting. These decisions to be correct should be based on some
reliable information. Therefore, for analyzing the overall performance of a
concern and for studying the past and present position, the financial records
are essential in taking various decisions.
RETAIL BANKING
The issue of retail banking is extremely important and topical. Across the globe,
retail lending has been a spectacular innovation in the commercial banking sector in
India too experienced a surge in retail banking. There are various pointers towards
this. Retail loan is estimated to have accounted for nearly one-fifth of all bank credit.
Housing sector is experiencing a boom in its credit. The retail loan market has decisively
got transformed from a sellers’ market to a buyers’ market. Gone are the days where
getting a retail loan was somewhat cumbersome. All these emphasise the momentum that
banks with individual customers, both on liabilities and assets sides of the balance sheet.
Fixed, current / savings accounts on the liabilities side; and mortgages, loans (e.g.,
personal, housing, auto, and educational) on the assets side, are the more important of the
products offered by banks. Related ancillary services include credit cards, or depository
• multiple channels of distribution (call centre, branch, Internet and kiosk); and
India has a well developed banking system. Most of the banks in India were founded by
Indian entrepreneurs and visionaries in the pre-independence era to provide financial
assistance to traders, agriculturists and budding Indian industrialists. Indian banks have
played a significant role in the development of Indian economy by inculcating the habit
of saving in Indians and by lending finance to Indian industry.
India’s Banking dates back to 1786; the first bank was established in India in that year.
From 1786 till today, the journey of Indian Banking System can be segregated into three
distinct phases. They are as mentioned below.
The entire banking scenario has been divided as Phase I, Phase II and Phase III.
Phase I
The General Bank of India was set up in the year 1786. Next came Bank of Hindustan
and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of
Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency
Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was
established which started as private share holders’ Banks, mostly Europeans share
holders.
In 1865, Allahabad Bank was established and first time exclusively by Indians, Punjab
National Bank Ltd, was set up in 1894 with head quarters at Lahore. Between 1906 and
1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank
and Bank of Mysore were set up. Reserve Bank of India came in 1935.
During the first phase, the growth was very slow and banks also experienced periodic
failures between 1913 and 1948. There were approximately 1100 banks, mostly small.
To streamline the functioning and activities of commercial banks, the Government of
India came up with the Banking Companies Act 1949 which was later changed to
Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965).
Reserve Bank of India was vested with extensive powers for the supervision of banking
in India as the Central Banking Authority.
During those days, public has lesser confidence in the banks. As an aftermath deposit
mobilization was slow. Abreast of it the savings bank facility provided by the Postal
department was comparatively safer. Moreover, funds were largely given to traders.
Phase II
Government took major steps in this Indian Banking Sector Reform after Independence.
In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a
large scale especially in rural and semi-urban areas. It formed State Bank of India to act
as the principal agent of RBI and to handle banking transactions of the Union and Sate
Governments all over the Country.
Seven banks forming subsidiary of State Bank of India was nationalized in 1960. On 19th
July, 1969, major process of nationalization was carried out. It was the effort of the then
Prime Minister of India, Mrs. Indira Gandhi that 14 major commercial banks in the
Country was nationalized.
The following are the steps taken by the Government of India to Regulate Banking
Institutions in the Country.
• 1949: Enactment of Banking Regulation Act.
• 1955: Nationalization of State Bank of India.
• 1959: Nationalization of SBI subsidiaries.
• 1961: Insurance cover extended to deposits.
• 1969: Nationalization of 14 major banks.
• 1971: Creation of credit guarantee corporation.
• 1975: Creation of regional rural banks.
• 1980: Nationalization of seven banks with deposits over 200 crores.
Phase III
This phase has introduced many more products and facilities in the banking sector on its
reforms measure in 1991 under the chairmanship of Mr. Narasimham. A committee was
set up by his name which worked for the liberalization of banking practices.
The Country today is flooded with foreign banks and their ATM stations. Efforts are
being put to give a satisfactory service to customers. Phone banking and net banking was
introduced. The entire system had become more convenient and swift. Time is given
more importance than money.
The financial system of India has shown a great deal of resilience. It was sheltered from
any crises triggered by any external macroeconomics shock as other East Asian Countries
suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high,
the capital account is not yet fully convertible, and banks and their customers have
limited foreign exchange exposure.
COMPANY PROFILE
COMPANY PROFILE
Business Philosophy
The Bank has also the distinction of being one of the first banks in the
country to deploy most of these technology enabled services at the
smaller branches including rural and semi-urban areas.
AnyTime-AnyWhere-AnyWay Banking
The Bank has the full range of delivery channels including, Internet
Banking, Mobile Banking and Alerts, Any Where (Branch) Banking,
Interconnected Visa enabled ATM network, E-mail Alerts, Telephone
Banking and a Centralized customer Call Centre with toll free
number. Customers thus have the ability to avail 24 hour banking
service from the channel of his choice, according to his convenience.
Federal Bank already has the largest number of ATMs in Kerala,
taking round-the-clock banking convenience to even many rural
areas. The Bank's ATM card also doubles as a International Visa
Debit Card enabling the Bank's customers to use the card at any of
the over 8,40,000 networked ATMs round the world and pay for
shopping at over 12 million retail establishments across the state.
The Bank has launched its anywhere banking service, enabling
customers to bank at any branch of his / her choice regardless of the
place where the account is maintained
The Bank has now emerged into a financial supermarket giving the
customers a range of products and services. Apart from the entire
slew of Banking products and delivery channels we also provide the
following facilities:
• Depository Services
• Credit Cards
• Life Insurance Products in association with IDBI Fortis
• General Insurance Products in association with United India
Insurance
• Export Credit Insurance Products in association with ECGC
• Express Remittance Facility from Abroad - FEDFAST
• Cash -On- Line Express Cash Remittance
• Lock Box Service for NRI's in the US
• Cash Management Services
• Merchant Banking Services
• E-shopping Payment gateway
• BSNL Bill Payment
• Online LIC Insurance Payment
• Easy Pay- On-line fee payment system
• Online Railway Reservation System
• Online Kiosks for customers
Unique Technology driven services
Milestones
1931: The Federal Bank Limited (the erstwhile
Travancore Federal Bank Limited) was incorporated with an
authorised capital of rupees five thousand at Nedumpuram, a place
near Tiruvalla in Central Travancore on 28/4/1931 under the
Travancore Company's Act. It started business of auction -chitty and
other banking transactions connected with agriculture and
industry.The bank though successful in the earlier periods, suffered
set backs and was on the verge of liquidation.
1973 to 1977: During the period, the bank adopted a massive branch
expansion and growth oriented programmes.To reflect the bank's
approach towards the Industrial finance it adopted a new emblem
-Farmer in action encircled by an industrial wheel.A few hallmarks of
the period: In the year 1973,there was a quantum jump in deposits to
the tune of 67% and in advances to the tune of 56% over that of the
previous year. The deposits grew by 52% while the advances
registered an increase of 45% .Increase in Priority sector advances
was by 63%.
1980: Mr.V Verghese took over the reigns of the bank as Chairman
and Chief Executive Officer on 2/7/1980.Having worked long years in
State Bank of Travancore with well established traditions, systems
and methods ,he placed his faith in introducing time tested and well
proven methods of organisation into the Bank.
2002 : All the 412 branches of the Bank were fully computerised
(using FedSoft) as on 31.03.2002.
February 2006 : Federal Bank wins two prestigius awards for BEST
USE OF IT IN RETAIL BANKING & BEST PAYMENTS INITATIVE
from IBA and TFCI. This is the second consecutive time that the Bank
has won the award for best use of IT in Retail Banking.
Product profile
The Federal Bank has a wide range of products catering to almost all
financial requirements of retail customers, viz. individuals and small
businesses. The retail loan portfolio of the Federal Bank comprises of a
bouquet of 20 products as follows -
Federal Housing Loan
Federal Gold Loan
Federal Personal Car Loan
Federal Mortgage Loan
Federal Personal Loan
Federal Agri Mobile Loan
Federal Demat Loan
Federal Consumer Loan
Federal Vidya Loan
Federal Rent Securitisation Loan
Loan for Medical Practitioners
Federal Subha Yatra Loan
Federal Vanijya Loan
Federal Equity Subscription Loan
Loan against Warehouse Receipts
Federal Easy Cash
Bon Voyage Loan
Federal Home Over Draft
Federal Aashray
Federal Health Credit
Purchase/Construction of House/flat
Eligibility
Proof of income
Loan Amount
Period
Residents – Up to 20 years
Non-residents – Up to 15 years
Interest Rate
Fixed rates (with 2-year reset clause) – ranges between 12% - 12.25%
Purpose
Business/Personal/Agriculture
Eligibility
Loan Amount
Up to Rs.75 Lacs
Period
3 months to 36 months
Sub Products
Easy Gold
Interest
To purchase all personal vehicles – New & Used, including two wheelers
Eligibility
organizations
Loan amount
Period
Interest Rate
Security
Purpose
Eligibility
Period
Up to 60 Months
Interest
15.75% - 16%
Security
Purpose
Eligibility
Loan amount
Period
Up to 60 months
Interest Rate
15.75%
Security
Co-obligancy / Collateral security
6. Agri-Mobile Loan
Purpose
For acquiring all types of vehicles / farm machinery for agricultural purpose /
allied activities
Eligibility
Should be engaged and earning income from basic agricultural activities, allied
Security
Period
Up to Nine years.
Interest Rate
7. Demat Loan
Purpose
Business/Personal needs
Eligibility
Loan Amount
Up to 50% of the share value (Average of last 52 weeks price or current price
whichever is lower)
Interest
13.75%
Type of Loan
Overdraft facility
8. Consumer Loan
Purpose
Eligibility
Period
Up to 60 months
Security
Co-obligant/Collateral security
Interest
14.75%
9. Vidya Loan
Purpose
Eligibility
Loan Amount
Up to Rs. 15 Lakhs
Period
Maximum 11 years
Interest
Purpose
Business/personal purpose of the owner (Lessor) of the buildings
Eligibility
Lessors receiving rent for their buildings from reputed lessees or a corporate
Loan Amount
Interest
13.75%
Period
Up to 84 months
Security
Eligibility
Purpose
fittings, medicines etc. for starting/ smooth operation of the existing practice.
Nature of Limit
Cash Credit / Overdraft / Term Loan depending upon the purpose of the loan.
Quantum of Assistance
Period of loan
Interest Rate
13.75%
Purpose
Eligibility:
Quantum:
Group - (Family members) Minimum Rs.0.50 lakh and maximum Rs. 3 lakh
Period
Security:
Primary : Nil
Collateral - can be in the form of land and buildings, gold ornaments, deposit
Interest Rate:
15.50%
13.Vanijya Loan
Purpose
Loan Amount
Period
30 months
Interest Rate:
Security
Purpose
For applying for Inital Public Offers of reputed Companies approved by the Bank
Eligibility
Period
45 days
Security
Shares allotted
Purpose
Business/Personal/Agriculture
Eligibility
Loan Amount
Period
3 months
Interest
Security
Optional
Loan Amount
Against Term Deposits – upto 90% of the present value of the deposits
Against NSC/KVP, etc. – margin based on the completed tenor of the instrument.
Period
Max. 72 months
Interest rate
For loan against any other type of permitted liquid securities – 11.50%
Purpose
employment
Eligibility
Any resident Indian who has got a letter of appointment or a letter from a
Loan Amount
60 months
Interest Rate
13.75%
Security
Purpose
This is a loan against own residential property, to be utilized for personal financial
Eligibility
Loan Amount
Loan amount ranging between 50-75% of the property value, depending on the
Period
Max. 10 years
Interest Rate
13.75 – 14.50%
Security
Purpose
Eligibility
Loan Amount
Rs.1 Lakh
Period
Interest Rate
18.75%
Security
Purpose
Eligibility
The property should be free from any encumbrance and should be saleable
Loan Amount
Value of security property less required margin (ranging between 10-25%), such
Period
Max. 15 years
Interest Rate
11.50%
Security
5000
4000
amt in
3000
crores
2000
1000
0
2005 2006 2007 2008
year
Inference
The above graph and table indicates the systematic growth achieved by the
Bank in absolute figure because of the introduction of market-oriented and
innovative products. In % wise there is a decline in the last year. The decline
is due to the following reasons:
1. General economic slowdown
2. Rising interest rates.
3. Inflation etc.
2000
MORTGAGE
1500 LOAN
1000 RENT
SECURITISATI
500 ON
OTHER RETAIL
0
2005 2006 2007 2008 LOANS
YEAR
GOLD LOAN
17%
3%
MORTGAGE
10% LOAN
56%
14% RENT
SECURITISATI
ON
OTHER LOAN
2%
MORTGAGE
12% LOAN
56%
13% RENT
SECURITISATI
ON
OTHER LOAN
13% MORTGAGE
59% LOAN
10%
RENT
SECURITISATI
ON
OTHER
RETAIL LOANS
INFERENCE
100
0
2005 2006 2007 2008
INFERENCE
INFERENCE
D. RENT SECURITISATION
140 121
120
100
AMT IN 79
80 71
CRORES
60
46
40
20
0
2005 2006 2007 2008
INFERENCE
INFERENCE
In case other retail loan is declining year after year. In 2008 the
decline reached to an extend of 28%.
FINDINGS, SUGGESTIONS AND CONCLUSION
FINDINGS
Retail Lending – refers to the credit facilities in the form of loans and
borrower.
Housing Loans (59%) comprise the major share of the retail loan
Other major loan products in the retail portfolio are Gold Loan (10%),
Suggestions
A humble effort has been made to provide few suggestions to the
products of Retail advances. This will help the bank to increase its
The introduction of credit cards would help the bank to maintain the
loans the banks could make an increase customer base, as the students
loans
Showing the presence in the industry would help in increasing the brand
image and there by increase the business. So the bank should conduct
campaigns and other exhibitions for attracting the public to avail the
CONCLUSION
As a part of my MBA programme, mini project undergone by me in
FEDERAL BANK during the 3rd semester was very fruitful, apart from the theoretical
knowledge. During my study I have done overall analysis of the retail loans of
organization. There is a need for constant innovation in retail banking. Bank needs to use
retail banking as a growth trigger. This requires product development and differentiation,
cost reduction and cross-selling. While retail banking offers phenomenal opportunities
for growth, the challenges are equally daunting. How far the retail banking is able to lead
growth of the banking industry in future would depend upon the capacity building of the
banks to meet the challenges and make use of the opportunities profitably.
BIBLIOGRAPHY
BIBLIOGRAPHY
BOOKS REFERRED
FINANCIAL MANAGEMENT
FEDERAL REACH
WEBSITES
WWW.FEDERALBANK.CO.IN
WWW.INDIANBANKS.COM