Loans and Advances INTRODUCTION 1.

1Finance
In modern money using economyfinancial is consider to be the life blood of every business. it is the foundation of every economy activity and is the pivot around which every business activity rotates money (or) finance has acquired so much importance that the modern economy is descried as money as effectively ,efficient and smoothly as a money economy.

In business, finance is defined as the provision of money when it is wanted; finance is the art of rising and spending of money. every business concern required money(or)finance to commerce its operation to continue its operation to continue its operation and for expansion 9or)growth, so there must be a continuous flow of money (or)finance in and out of every business enterprise for its success and survival. Finance is the master key which provides access to all and merchandising activities. Financial management is that managerial activity which is concerned with planning and controlling of the firms financial resources, it is of recent origin as a separate activity of discipline; it was a branch of economic till 1890 still today, it has no unique body of knowledge of its own and grows heavily in economics for its theoretical concepts.

DEFINTION OF BUSINESS FINANCE

Business financial can be broadly defined as the activity concerned with planning, raising,

controlling and administering of funds in the business.

-Gathman & dougall Business financial deals primarily with rising administering and disturbing funds by privately owned business units operating in non financial field of industry.

1 Prather and wert

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Loans and Advances DEFINITION OF FINANCIAL MANAGEMENT

Financial managent is the operational activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operation.

1 Joseph and massie Financial management is the application of the planning and control functions to the finance function. Financial management is the area of business management devoted to a judicious use of capital and careful selection and careful selection to move in the direction of reaching its goal . 1 j .f Bridler

SOURCES OF FINANCE.
The source of finance through which a company meets its financial requirement is broadly divided as:1. Long term sources 2. Short term sources The long term sources are: 1. 2. 3. 4. 5. Shares Debentures Preference shares Leasing Public deposits

The short term sources are 1. 2. 3. 4. Trade credit Bank credit Factoring Bank financing of accounts receivables

1.2 origin of bank

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Authorities on banking are divide in their opinions regarding the origin of the term bank is derived from the Italian world bank used as a counter for banking activitities viz. Money changing and money lending in the market place , as such the word bank should be associated with the Italian word bank.

HISTORY OF BANKING
According to ancient European history, the Babylonians were the earliest people to develop a systematized banking and the priest played the role of financial agent. In 12 the century, some bank were simply receiving deposit and lending money to the people. The bank of England started its business in 1694 with a view to finance the government to carry on its work with France.

What is banking?
A bank is profit seeing business firm, dealing in money and credit,it is a financial institution dealing in money in the sense that it accepts deposited of money from the public to keep them in its custody for safely , so also it deals in credit , by making advance out of the funds received as deposited to needy people it , the thus function as a mobilise in the economy. A bank is therefore, like a reservoir into which flow the saving ,the idle surplus money of households and from which loans are given on interest to business and other who need them for investment (or) productive.

Definition of bank:
A person (or) corporation who holds itself out to receive from public deposit payable on demand (or)by cheque. -WALTER LEAF

IMPORTANCE OF BANK
Banks plays a significant role in economic development of a country. The importance of bank in the modern economy cannot be denied. 1) Banks mobilize the small and scattered ideal savings of people and make them available for productive purpose. This in turn helps in capital formation.

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2) By offering attractive interest on the of the people deposited in bank, they bank, hey promote the habit of saving among the people. 3) By accepting the saving, bank provides safety and security to the surplus money of the depositors. 4) Bank provides a convenient and economical means of payment through cheques and demand drafts. 5) Bank provides convenient and economical means of transfer of funds from one place to another through bank draft or demand draft, mail transfers and telegraphic transfers. 6) They influence the rate of interest in the money market by the supply of money. 7) They help trade, commerce and agriculture by meeting their financial needs. 8) The bank serve as the best financial intermediaries between he savers and the investors 9) Banks direct the flow of funds into productive channel by concentrating on essential activities.

TYPES OF BANKS
1. COMMERCIAL BANK 2. INDUSTRIAL BANK 3. AGRICULTURAL BANK 4. EXCHANGE BANK 5. CENTRAL BANK

1) COMMERCIAL BANK Commercial bank is the oldest banking institutions in the organized sector. They constitute the predominant segment of him banking system in India. They cater to the needs of trade, commerce, industries, agriculture, small business, transport and other activities with a wide network of branches throughout the country. Commercial bank command a major share in the

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total banking operations. They are called commercial banks as they mainly finance commerce. They are also called deposit bank, as they accept deposits from publicly

2) INDUSTRIAL BANK OR INVESTMENT BANK

Industrial bank are banks, which provide long-term finance to industries. They are also called investment banks, as they invest heir funds in subscribing o shar4es and debentures of industrial banks. Instead, special industrial finance corporations have been se up for providing long term finance to industries.

3) AGRIULTURAL BANK
Agricultural banks are banks which provide financial to agriculture. These banks are organized on co-operative basis. They extend loans to the members at a relatively reasonable rate of interest. Agricultural bank, in India are of two types, such as:A) Agricultural co-operative societies. B) Land mortgage or land development banks.

4) EXCHANCGE BANK S
Exchange banks specialize in financing the foreign trade .they supply the necessary foreign exchange for the importers and exporters. in many countries, commercial bank themselves undertaken foreign exchange business.

5) CENTRAL BANKS
Central bank is a special institution, which regulates the entire banking structure and monetary stability. it regulates the notes issue . It functions in close co-operation with the government . It maintains internal and external values of currency . In short, central bank is apex bank of the country.

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Loans and Advances FUNCTIONS OF COMMERCIAL BANK

Commercial bank perform a variety of crucial functions which are as follows :-

PRIMARY FUNCTIONS
1) Acceptance of deposits 2) Creation of credit 3) Lending of funds 4) Investment of funds on securities

PRIMARY FUNCTIONS: 1) Acceptance of deposits:

Accepting deposits in one of the primary functions of commercial banks. Deposits serve as the major source of supply of deposits from all types of income earners. They are: a) Fixed deposits. b) Savings deposits c) Current deposits d) Recurring deposits

2) creation of credit
Commercial banks receive deposit from the public and also lend funds to the needy but also create money. In the process of lending funds, they lend money more then their cash deposits which they actually received from the public. This way it creates or money in the market.

3) Lending of funds:
The basic purpose of commercial banking is to do the business of lending. banks earn income in the from of interest through granting loans and advances . Banks lend funds to public by way of :A) Secured advances B) Unsecured advances M.H.I.M.S Page 6

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4) Investment of funds on securities: Investment of funds on securities is one of the important function of the commercial banks. hey invest a considerable amount of their funds in government and industrial securities.

Definition of banker: A dealer in debt . his own and there peoples according to this definition the essential function of a bank s dealing in debt and lending of the needy, this definition makes mention of onely the main function of a bank, but not its subsidiary services. -CROWTHER Definition given by Indian banking regulation act: Section 5(1) of the Indian regulation act of 1949 defines the term banking companies as any company which transact the business of the banking in Indian. Section 5(1)9(b)of the same act defines the term bankig as accepting for the purpose f lending (or) investment of deposits of money from the public, repayable on section 5(1)of the Indian banking regulation act of 1949 defines the term banking companies as any company which transact the business of banking in Indian. Section 5(1)(b) of the same demand (or) other wise and withdrawal by cheque, draft order(or) otherwise. This act, beasties starting the main banking activities also enumerates , in section 6 the various subsidiary service such as the collection of cheque draft and bill remittance of funds, acceptance of safe custody deposits etc ,that are performed by a bank . this act also stipulates that banking , business should be the main business of the bank, again section 1 of this act required that every banking company should use as part of its name, the bank bankers9or) banking company .

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Loans and Advances 1.3 MEANINGS OF LOAN

Loans are financial arrangement, under which the bank to a borrower on a serrate account grants an advance. When the loan is sanctioned to a barrower and it is paid to the borrower are once in lump sum either in cash or transfer to the credit of his current account. The repayment of the loan also is made in one lump sum or in instalments.

1.4 TYPES OF LOANS: Short term loan Medium term loan Long term loan

A loan is generally , granted for a short period of one year or less than one year, such a loan is called short term loan or demand loan. Loan may also be granted for period of more than one year like , 2 year ,3 year ,4year,7 year etc. Such a loan is called term loan. The loan is given for a period raining from more than one year usually for three to five year it is called a medium term loans. The loan is given for still longer period; it is called a long term loan. A loan once repaid in full r part cannot be drawn again by the borrower unless the banker sanctions a fresh loan. A loan is granted either against collateral securities or against the person security of the borrower. The rate of interest is changed on a loan is comparatively lower than changed on an over draft and a cash credit. A banker prefers to make an advance in the form of a loan for two reasons. he can collect interest on the entire amount of the loan sanctioned .
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A loan involves him with very little. Accounting work, as the granted &repayment of the loan are done in a lump sum. However the barrower does not prefer this form of advance, as he is required to pay interest on the full amount of loan sanctioned to him irrespective of the amount actually with drawn by him.

ADVANCES
Advances are granted on the mere personal security of the borrowers, therefore , in the event of the default of the borrower, the banker as only personal rights of action against the borrower these advance are very risk , as they should be given only to highly credit worthy borrower further they should be given only for short periods.

SECURED ADVANCES
According to sec 5(a0 of the banking regulation act of 1949 a secured advances means loan or advances made on the security of assets, the market value of which is not, at any time less than the amount of such advances granting advances against collateral-securities a banker should bear in mind The following points . 1. Ready reliability 2. Stability of prices 3. Yield 4. Absence of disability 5. Validity of title 6. Absence of prior charge 7. Cos of supervision 8. Right method of creating charge 9. Documentation

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I. Advancing money against tangible securities is the margin for advance. 1. Degree of sale ability of securities. 2. Fluctuations in prices of securities. 3. Interest and other change. 4. Credit worthiness of borrowers. 5. Reserve banks directives. II. III. Advancing against stock exchange securities. advances against government securities. A government security includes securities issued by central and state government. 1. Bearer bonds 2. Inscribed stocks 3. Government promissory notes 4. Saving deposit certificates

IV. V. VI. VII. VIII. IX. X. XI. XII. XIII.

advances against shares of public companies Advances against shares of private companies. Advances against be dentures of joint stock companies. Advances against documents of title to goods. Advances against plant and machinery. Advances against real estates, immovable properties or land and buildings. Advances against gold ornaments. Advances against life insurance policies. Advances against fixed deposit receipts. Advances against supply bills.

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Loans and Advances UNSECURED ADVANCES

Wherever the borrower does not have sufficient security to offer and if he has exchange all securities he can required the banker to accept the surety of the party. The banker has no collateral or tangible security they may take the forms of:a) advances on the mere personal security of the barrower (O.D) b) Advances against guarantees.

a) advances on the mere personal security:In this case advances are granted on the mere personal security of he barrower. In the event of the default of the borrower and as such there are very risky. Advances should be given only to highly credit worthy borrowers and they should be given only for short period. b) advances against guarantees:The personal who gives security for the loan raised by the principle debtor is called guarantee. Section 126 of the Indian contract to perform he promise or discharge the liability of a third person in case of his default. it means a third person agrees to discharge the liability of the principle debtor ID he principal debtor fails to clear the money due to creditor. TYPES OF ADVANCES The various types of advances given by the bank are as follows: I. Loans II. overdraft III. cash credit IV. discounting of bills V. clean loans VI. letter of credit.

I.

LOAN

Loan is a financial accommodation under which bank an advance on a separate account called loan account. Interest is changed on entire amount o loan sanctioned. Loan is given to all type of persons against the personal securities of the borrower or against the movable and immovable properties.
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Loans and Advances II. OVER DRAFT

An over draft is a financial accommodation under which a current account holder is amount over drawn by the customer. It is granted against the security of the borrower. It is advantageous to the borrower because interest is charged only on the amount actually over drawn by him.

III.

CASH CREDIT:
A cash credit is a financial accommodation under which an advance is granted on a separate account called cash credit account up to a specified limit. Interest is changed on the amount made use f the borrower. it is granted against to security of goods or person security of one or more person other than borrower . Traders prefer cash credit to direct to direct loans as they need not pay interest on the entire amount.

IV.

DISCOUNTING OF BILLS:
Discounting of bill is a financial arrangement under which a customer holding a bill of exchange can get loan equivalent to the value of the bill, less discount. The discount represents interest on the money lent for the unexpired period of the bill. On maturity, the banker collects the proceeds of the bill from its acceptor.

V.

CLEAN LOANS
This is a type of advances where in the banker makes advances to the customer against his

personal security and security of one or more person. That amount is credited to the customers account immediately after sanction sand is repayable in lump sum or in instalments. The period of loans will be lightly higher compared to cash credit or over drafts. The interest is changed on the entire amount of loan. VI. LETTER OF CREDIT (LOC):

This is a sort of loan facility extended extended by a banking institution to his customer . yhis is given to customers who will be on travel and to business people . a letter f credit is undertaking
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given by an issue banker to pay the specified sum of money to the person or drawee bank which pays money to the holder of LOC. a) Traveler facility letter of personal credit letter. b) Letter for commercial credits (LC).

a) Traveler facility letter:

This is issued to a customer who will be traveling abroad for a specific period. the person who stays abroad for a given time period will have an arrangement with the issuing bank to get money where every he may be .the issuing bank to pay a certain agreed amount to the customer and opens an account and debits it with the specified sum. b) Commercial letter of credit (LC) This is also called documentary letter of credit. this is issued by the undertaking bank to pay to exporter the value of bill of exchange accompanied by shipping documents which are to be submitted the bank LC may be revocable or irrevocable or confirmed and the nature of undertaking depends upon type of LC issued by the bank.

VII.

SANCTION OF LOANS & ADVANCES

While sanctioning after security of the loan application the bank may sanction in full the loan applied for, reduced the loan amount or period of repayment, after the condition with regard security or reject the loan application. The bank is not bound to inform the applicant the reasons regarding its decision. However the applicant shall be advised about the rejection while disposing of the loan application, the decision of the bank in final.

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Loans and Advances UTILIZATION AND REPAYMENT OF LOAN

1. A member shall utilize the amount of loan sanctioned for the purpose for which it was sanctioned. In case the sanctioned amount is utilized for a purpose different from the purpose for which it was sanctioned, the bank to recall such loans together with interest up to date. 2. It shall be the duty of every borrower to repay promptly the instalment on the loans and advances as per terms and advances as per terms and conditions prevailing at the time sanction. 3. When the loans and advances are repaid by the borrower, the overdue instalment and interest towards unsecured loans and advances shall be recovered first and the balance amount shall be towards secured loans and advances.

VIII.

RATE OF INTERST
1. The rate of interest charged on various types of loans and advances shall be fixed by the bank from time to time. 2. Penal interest shall be charged above the normal interest rate on overdue loans and such interest shall be treated as income. 3. Interest on loans and advances shall be calculated on daily product basis and charged at quarterly rests. Interest so calculated on daily product basis and charged at quarter rest. interest so calculated as a 30 June, over draft accounts on the last day of the quarterly not with standing any interest in due in a loan a/c such interest shall be recovered first out of and amount realized. 4. When interest on any loan or part these of is due to the bank a member that amount shall b revoked by the bank first from any amount that may be paid in to the bank behalf of the member. 5. For the purpose of calculation interest or penal interest for fractions of a month, actual number of days shall be taken in to account.

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6. Interest and overdue interest shall be charged to all the loans and advances at the end of each calendar quarter and capitalized. However UN recovered portion of his interest shall not be taken to profit and loss account as an income unless it is fully realized.

IX.

PRINCIPLES OF LENDING LOAN &ADVANCES

As we have observe, majority of commercial bank funds are employed in the form of loan advances . Loans bring good money to the bank in the form of profit by changing interest lending activity of a commercial bank is reciprocal activity in the sense, bank gets and the loans get benefit of money required for their activities. All and sundry cannot get loan from banking institution. Before they lend, commercial banks have to follow certain guidelines or principles. These principles are discussed at length in the first part of this volume under investment policy. However as a passing reference these principles are explained n brief.

1. LIQUIDITY
Liquidity here we mean the ready convertibility of advances into meet the customer demand across the counter. This does not mean that they should hold all the deposits they receive in the from of cas.oly a portion is held to meet the demand and major portion is lend. While making such loan, the banker should bear in mind hat it is easily convertible into cash without loss. Hence he should make loans only of short team nature. The secret of banking consists in knowing the different between a mortgage and a bill of exchange. this statement clearly indicates the when a banker lends against mortgage, the bank funds will be linked against a bill of exchange , the bank funds will be locked up for a long time and liquidity concept is taken not of and the bank will be locked up for a long time and liquidity loosed ground . Whereas when it lends against a bill of exchange, the liquidity concept is taken not of and bank will be getting bank its money is short period. Even the bank balance sheet is prepared according to the liquidity concept. Cash appear as the first item in the balance sheet. But the percent of cash held of the total funds is less, as bank
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believes by experience that a major portion can be employed in lending activity. But while lending, they must keep in mind he point of liquidity i.e. ready convertibility of earning assets into cash, without loss. The bank, when get rediscounting facility form the RBI, they have to consider the cost of borrower bank. Considering all these factors, the lending activity of a bank should be governed by the liquidity principle.

2. PROFITABILITY
Profitability means earning profit on the assets acquired. Assets here refer o the bank loan and advances Whenever the banks obtained deposits they have to pay interest to deposits. beside this , the shareholder of the bank Should receive some return on their investment. It is the responsibility of the bank that it should receive some return on their investment. It is the responsibility the bank management to leave some surplus to declare dividend to shareholders. Hence banks have to meet the liquidity. Hence the banker should always decide the quantum of funds to be employed in the earning assets leaving enough amounts to meet the liquidity situation. While employing the funds the bank should keep in mind the for a and steady returns on the earning assets.
3.

SAFETY

Safety is another principle to be borne in mind while employing the funds since earning assets . if the bank funds are not safely employed , bank cannot survive . whatever be the advances made by the banker should come bank to the banker within the stipulated time without resorting to legal action hence, the advances as far as possible should be made only to people who are for repaying the bank loan honesty . Insurance and dishonest should not be given the loan. They only the bank funds will be safe

4. DIVERSIFICATION
Another important principle to be followed by the banker is to see that loans and advances are spread to different categories. This means, advances should not be concentrated in only in
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sector. Every advance is a risky advance and this can be distributed. If advances are made in different categories to large number of people scattered in a wide area. Hence while lending; the banker should keep in mind the concept of diversification.

5. OBJECT
The object of advance is also another principle to be borne in mind by the banker while making advances. If he advances for productive purpose like industry agriculture or trade, the fund will come back quickly and without any difficulty. Because these organization will get back money by selling their products and this cash inflow. Thus the object of advance is also a guiding factor in lending.

6. SECURITY
Another guiding factor in bank advances is security. When the banker advances without security he will rent his risk of losing the money. If the loan is prompt in repayment then there will be no worry. But it essential that the banker should have substantial security for his advance. This thinking is gradually changing. The purpose of advances the security offered is assuming important. However the traditional thinking still prevails. The banker is not advancing without sufficient security. Because he will be managing the public money, and if the confidence of the public is lost, there will be run-on the bank. Hence the banker will not advanced, interest their o and other charges. Thus the banker should also bear in mind the security principle while lending.

7. PUBLIC POLICY
The banker should keeping mind the national policies and programmers while lending. The government takes up several welfare measures and activities relating to economic growth. The lending should fall in with these government programmers. This principle is well considered only after nationalization of commercial bank.

CHARGES ON SECURITY
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A there are different methods of creating charges on securities. The term charge refers to have a legal hold on immovable properties. The forms of legal hold are:-

1. LIEN
Lien is a term used to identify the right to retain a property belonging to a debtor till such time

until the debtor discharges the debt to the retainer of property. Lien will be lost when his possession of the property is lost. Lien is divided in to two heads such as: General lien Particular lien

2. PLEDGE
The Indian contract act defines the term pledge as a bailment of goods as a security for payment of debt or performance of a promise. the person who pledges the property is called pledger or pawner and the person in whose name the property is pledged is called pledge or Pawnee. A valid pledge has following requisites a) it is a charge on the movable property b) They should have either oral or written contract between themselves. c) The physical delivery of the pledged property is essential. d) The ownership of the goods will be retained with the pledge. e) The pledge can sell the property by giving reasonable notice to the pledged. In case pleder fails to repay the debt.
3) HYPOTHECATION:

Hypothecation is a charge against property for an amount of debt where neither ownership not possession is passed to the creditor. It is a charge against movable property. But the good will be retained with borrower. The borrower gives only a letter stating that the goods are

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hypothecated to he banker as security for the loan granted. The process of hypothecation take place by executing a letter by the borrower called letter of hypothecation. The features of hypothecation are:I. II. III. IV. Neither the possession nor the ownership f he property is transferred to the banker. It is an equitable charge created against immovable property. For the banker, hypothecation is safe as pledge. The contents in the letter of hypothecation decide the right of the banker.

5) MORTGAGE: The term mortgage is defined as the transfer of the interest in a specific movable property for the purpose of securing the payment of money advances . the person who transfers the interest of a specific property is called a mortgager. the person in whose favour the interest of the property is transferred is called the mortgagee .the principle money and interest payment are called mortgage money and he document through which the interest of the property is
transferred is called mortgage deed.

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Chapter-2 MEANING OF RESEARCH

Research is a scientific and systematic search for pertinent information on a specific concept or fact. Research is a organized enquiry designed and carried out to provide information for solving a problem and it is a careful injury or examination to discover new information or relationships and to expand to very existing knowledge for the purpose of gaining knowledge. Through each research study has its own specific purpose, we may think of research objectives as falling into a number of following broad groupings: To gain familiarity with a phenomenon or to achieve new insights into it. To portray accurately the characteristics of a particular individual situation or group. To determine the frequency with it is associated something Else. To test a hypothesis of casual relationship between variables.

MEANING OF REARCH DESIN

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Research design is the conceptual structure within which research is conducted . it is an organized enquiry. it is also referred to as a search of fact. It constitutes the blue print for the collection , measurement and analysis of data as such the design include an outline of what the researcher will do from writing the hypothesis and its operational implication to the final analysis.

2.1 TITLE OF THE STUDY OR RESEARCH:-

A project report on the Loans and advances at corporation bank, vijayanagar branch, Bangalore.

2.2 OBJECTIVES OF THE STUDY:This study is mainly aimed to cover all details of loans and advances available in corporation bank, vijayanagar branch, Bangalore, and their advantages and other details such as structure, type of loans, duration, rules and regulations and the type of deposits etc. 1. To mobilize or borrow funds. 2. To prepare and finance projects to improve the economic conditions of the member particularly those belonging to weaker sections of the society. 3. To find out the percentage of non performing assets. 4. To find out he effectiveness of various lending schemes. 5. To extend financial and technical assistance to the unemployed to start their wn industry or profession . 6. To encourage member to promote trade and industry and to do such other things as are incidental and conductive to the promotion and advancement of their objects of the business of the society. 7. To study the lending policies of corporation bank.

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8. To analyze whether the lending schemes have been implemented by the bank as per the guidelines of the RBI.

2.3research methods:The banks can give the loans advances o the customers the various metode are as follows. 1. Liquidity 2. Demand loan method 3. Recurring deposit method 4. Fixed loan method 5. S.B account method 6. insurances service 7. equipment purchase loan 8. hire purchase

2.4 TOOLS OF COLLECTING DATA

Data sources-both primary and secondary data were used.

PRIMARY DATA:For the study the data was collected by means of detailed interview schedules and questionnaires use for banking employees.

SECONDARY DATA:
The use of existing information on the topic under study was collected from the sources such as magazines, publications, circulars, annual report etc. And websites.

2.5NEED FOR STUDY:

Bangalore is the fast growing city7 it is developing in a rapid speed with economic liberalization, which has huge marketing transactions, industrial activities, financial
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transactions, banking, and money market transactions. So it is very important have a field study about loans & advances in detail.

2.6STATEMENT OF PROBLM:in the present competitive world to securing a huge funds for a business is a complicated matter, so it is necessary to study about loans and advances for obtaining loans we should consider so many matter such as rate of interest, duration, securities, rules and regulation of hypothecation, different types of loans in different type of bank and in other financial institution . Now a days, this has become more and more complicated because of lack of awareness about

the above matter. Though each research study has its own specific purpose, we may think of research objectives as falling into number of following broad grouping.

RELATES TO THE BANKER

I. The borrower cannot repay the amount banker consider the debt amount, in this case the banker as to bear the problem. II. In the golden method the gold rate is immediately down, that time the banker also fall the proems

RELAES TO THE CUSTOMER

He bank should take legal steps to recover the balance due from a borrower and his sureties. If they fail to pay i according to the terms of the loan agreement the bank will initiate legal steps to recover the dues with in 6 months from the date of loan becoming over due.

2.7INTEREST ON DEPOSITS :These include interest paid on all type of deposits from bank other institutions.

2.8SCOPE OF THE STUDY:M.H.I.M.S Page 23

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The study on lending polices of cooperation bank was conducted to study the various schemes , procedure, rules and regulations and their policy Guidelines followed while loans to the customers. The area of the study includes entire corporation bank. The data pertaining to the study is taken from annual reports of past three year [2006-07, 200708, 2008-09] and from internet.

2.9METHODOLOGY :
The study was started with a discussion with a branch manager at corroboration bank, vijayanagar branch, Bangalore. The information was collected from annual report of the bank, few text books and references books and personal visits were made to bank o collect necessary information.

2.10

LIMITATIONS OF THE STUDY:-

Study on loan & advances lacks detailed study of each entity due to limited data available. Due to time constraint study is restricted to loans and advances of a bank only. non availability of the required data in some cases like personal loans , gold loans , vehicle loans , etc become hardly to the study. Data collected are deemed to be true. The study was done only for two months.

RELATES TO THE BANK:

1. The customer shoes the irrelevant documents and improper information.

2. RELATES TO THE CUSTOMER.

a. The banker to lien their property.
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b. The banker changes high rate of interest like compound interest.

2.11 PLAN FOR ANALYSIS

The data collected from the information provided by the manager, internal guide and staff member of the corporation bank branches was prepared, tabulated and analyzed. The tabulated information is presented in the form of table and graphs by using simple percentage under different heading. The analyzed information has been explained under each heading.

CHAPTER-4

4.1OBJECTIVE OF ANALYSIS

To mobilize or borrow funds. To lend money to its member to porches on hire purchase of hypothecation of machineries equipment and motor vehincial as defined in the motor vehicles act. To create funds for the promotion of corporation education. To create or to support or to pay in the instalment of funds of net profit for the welfare of the member and their dependents subject to the rules on named by the board. To do banking business. To prepare finance project to improve the economic condition of the member particularly belonging to weaker sections of the society subject to the limits prescribed by the board.

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to create funds for promotion of education of member children subject to the limits prescribed by the board. To discount member short term bills or business bill in accordance with the rules framed by board. To possess, acquire, alter or construct site or building. To issue to accept, to sell or purchase notes, drafts warrants, Share certificates and other negotiable instrument on behalf of its customers. To give financial and technical assistance to small scale industry, transport operators and self employed professional to promote their business. To extent financial and technical assistance to the unemployed to start their own industry or profession.

To establish death relief fund of the benefit of member and extend relief to the family of the decreased members. To encourages member to promote trade and industry and to do such other things as are incidental and conductive to the promotion and advancement of there objects and of the business of the surely.

4.2ANALYSIS OF METHODOLOGY Liquidity

In this method the banker charge simple interest before 90 days after 90 days or 3 months they will charge compound interest, valuation changes in 3 rs. On 1000 and service changes is 10 rs. And insurances charge is 5 rs.

Demand loan method

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In this method the loan holders are paid immediately or instalment and the banker compound interest also the customer did not paid the amount with in 24 months the bank can lien their property it the loan holders can not repay the amount granters should pay their amount.

Recurring deposit method

The minimum amount 50 rs. To deposit RD account in a bank. The 80% of loan given to the customer on their depositing amount 9 to 13% interest given to the customer on their depositing amount and 2% extra interest should be charged as their loan.

Fixed loan method

The 80% of the loan will give to he customer on their original property.

Table showing net profit Year Amount [in crores] %change

2005-06

444.46

40.2

2006-07

536.14

44/73

2007-08

734.9

36/94

2008-09

892.77

21.52

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Analysis:
analysis the above table the net profit of corporation bank rs.444.46 crores in the year of 2005-06 , rs 536.14 crores in the year 2006-07, rs 734.99 crores in the year 2007-08 rs.892.77 in the year of 2008-09.

Inference:The net profit to its general customer or farmer by corporation bank indicates that banks financial power in last year has increased the following data represent fact &figures.

NET PROFIT
1000 900 800 700 600 500 400 300 200 100 0 2005-06 2006-07 2007-08 2008-09 444.6 536.14 NET PROFIT 734.99 892.77

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Table showing net profit

Year Amount [in crores] %change

2005-06

32877

28.24

2006-07

423456

29.44

2007-08

55424

30.85

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2008-09

73984

33.48

Analysis:
Analysis the above table that the deposits of corporation bank rs.32877 crores in the year of 2005-06, rs 42356 crores in the year 2006-07, rs 55424 crores in the year 2007-08 rs.73984 in the year of 2008-09.

Inference:Deposits formed by the largest simple source of funds of the bank the deposits of the bank was increased rs. 32877 crores in the year of 2005-06, to rs 42356 crores in the year of 2006-07 , to rs 5542 crores in the year of 2007-08, rs 73984 crores in the year of 2008-09 increasing the year to year.

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DEPOSITS
80000 70000 60000 50000 40000 30000 20000 10000 0 2005-06 2006-07 2007-08 2008-09 32877 42356 DEPOSITS 55424 73984

4.3inferences:-

1. limitation
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If the customer shows the irrelevant documents and improper information. If the customer are irregular. If the banker did not encourage the member o promote trade industry. If the banker did not give the employed opportunity to the unemployed people. If did not accept purchase promissory notes, drafts, warrants. If the bank did not prepare financial projects to improve the economic condition. If the bank did not create funds for promotion of corporation bank.

2. problems

If the customer cannot repay the amount.

If the market value of gold comes down.

If the banker charge interest that means compound interest.

If the banker should take the legal action.

Table showing total advances

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Year

Amount [in crores]

%change

2005-06

23962

20.79

2006-07

29950

24.98

2007-08

39186

30.83

2008-09

48512

23.79

Analysis:
analysis the above table the advances of corporation bank rs.23962 crores in the year of 2005-06 , rs 29950 crores in the year 2006-07, rs 39186 crores in the year 2007-08 rs.48512 in the year of 2008-09.

Inference:The advances to its general customer or farmer or farmer by corporation bank indicate that banks financial power in last four year has increased the following data represent fact & figures.

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GRAPH SHOWING TOTAL ADVANCES

50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 2005-06 2006-07 2007-08 2008-09 TOTAL ADVANCES

Table showing NET NPT% to total advances

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Year

Amount [in crores]

%change

2006-07

141.93

0.47

2007-08

126.92

0.32

2008-09

139.30

0.29

Analysis:
analysis the above table the net NPA of corporation bank rs.141.93 crores in the year 2006 07, rs 126.92 crores in the year 2007-08 rs.139.30 in the year of 2008-09.

Inference:The above reveals that the net nap to total advances varies based on the changes in the amount and also decreases the percentage changes.

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NET NAP%
145 140 135 130 125 120 115 2006-07 2007-08 2008-09 126.92 NET NAP% 141.93 139.3

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Table showing GROSS NET NPT% to total advances

Year

Amount [in crores]

%change

2006-07

624.57

2.05

2007-08

581.41

1.47

2008-09

559.21

1.14

Analysis:
analysis the above table the GROSS net NPA of corporation bank rs.624.57crores in the year 2006-07, rs 581.41 crores in the year 2007-08 rs.559.21 in the year of 2008-09.

Inference:The above graph reveals that the gross nap to total advances provided by corporation bank decreased year to year .their financial power in last three years as decreased the following data represent facts & figures.

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Graph showing GROSS NET NPT% to total advances

gross NAP%

32%

35%

2006-07 2007-08 2008-09 33%

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Table showing DIVIDEND (%)

Year Amount [in crores]

2005-06

70

2006-07

90

2007-08

105

2008-09

125

Analysis:
The above table shows that the dividend is paid by the bank are varies from one year to another year it is the simple sources of funds

Inference:The dividend to its general customers or farmer by corporation bank indicates that the bank financial power in last four years has increased the following data represent facts and figures.

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Graph showing DIVIDEND

140 120 100 80 60 90 40 20 0 2005-06 2006-07 2007-08 2008-09 70 125 105 DIVIDEND

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CHAPTER-5

5.1 CONCLUSION:

The corporation banks playing a significant role in the financial system of the country. They mobilize saving from the lower and middle income groups and lend to the relatively lower incomes and vulnerable sections of the so city. The urban corporation banking movement has shown greater vibrancy since 1993 when reserve bank of India adopted a liberated policy in licensing of new primary corporation banks. During the last six year, 530 new corporation banks have come up making a total of 1,936 banks the total branches net works has grown to 5,934 offices.

Banking regulation in India always been a key element in influencing the role of banks, it seeks to protest the depositors interest and at the same foster an efficient , competitive banking system .this is particular evident in to days environment when corporation banks are seeking to offer broader range of services . the growing incident of non performing assets and related banks problems are forcing bankers and banks regulators to increase their emphasis on the sound operation of individual banks the over all stability of the banking system.

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Banking laws and regulation have been extended too many aspects of banking, including how new banks an organized, what products can offered and how banks can open new branches . Because of the extensiveness of banking regulation , familiarity with the banking regulation act is essential more so in the present day contest of technological innovation in the field of banking, increased computerization and improve financial payment system , all of which have

potential of brining banking closer to its customers. It is, therefore, necessary to have a through knowledge and familiarity with objective of corporation bank regulations.

corporation societies have been established n several sectors like credit, banking ,processing ,housing, warehousing, transport and many other spheres related with agriculture and industries , these corporations are being engaged as effective tools for ensuring equal distribution of state wealth among all sections of the society by providing them with govt. loans subsidies and grants .even common people also have participated in the business of these societies by investing their hard earned money.

in order to protect the interest of public funds and to ensure that the administrative authorities use this fund, in the best interest of the organization, govt. it engaging corporation audit as a main weapon .to put it in a nut shell he department is functioning not only as friend,

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philosopher and guide to these institution but also as a watchdog of public funds as well the corporation movement its status of corporation societies.

CONCLUSION OF THE STUDY

Loans and advances have gone progress to working result of this branch. This branch has generated an income by providing finance to the development activities of entire Bangalore city.

This branch loans and advances have also increasing year by year and this shows the financial progress of the bank . However there is a great scope for improvement of facilities in the existing row. Through over night gradually the emphasis of sectional progress has been shifting from secondary to tertiary sector in the larger economic scenario.

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Accordingly this branch also needs to shift the emphasis of its credit policy towards sector other than agriculture and small scale of production. This branch also needs to adopt technological innovation in the field of banking and also the computerization and improve financial payment system, all of which brings customer loser to the bank.

This branch also needs to provide extension of the credit facility towards capital investment, transport and communication.

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To prepare financial projects to improve the condition 1 Finance projects of the member particular those belonging to weaker section of the society. To lend money to its member to purchase on hire 2 Money lending purchase or hypothecation of machineries equipment and motor vehicles. To issue, to accept to self or purchase promissory 3 Negotiable instruments notes, drafts, warrants, share certificates and other instrument on behalf of its customer. To create funds for the promotion co-operative education and to create or to support or to paid in the instalment of funds of went profit for the welfare of 4 Create funs members and their departments subject to the roles famed by the bank and to create funds for the promotion education of member children subject to limit prescribed by the bank.

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To discount member short term bill or business bill in 5 DISCOUNT accordance with rules framed by bank.

COLLECT FUNDS

Collect funds securities on behalf of its member.

The customer are must borrow or mobilize grants. 7

Mobilize

Extend financial & technical assistance to the 8

Extend

unemployed to start their own industry or profession.

Establish death relief funds for the benefit of member 9

Establish
and extend relief to the family of the deceased members.
Encourage member to promote trade and industry and to do such other things as are incident and conductive to the promotion and advances of there objects and of the

10

ENCOURAGE

business. To give financial and technical assistance to small scale industries transport operators and self employed

professional to promote their business.

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Chapter-6

6.1 SUGGESTIONS:-

Since the bank has set of principle which are greatly influences by the government. in the appreciable of loans and flows there strictly only a few suggestion can be made by me which are listed below

Except when the loan proposal if for a small and the manager is authorized to advances the amount the appreciable of a loan proposal takes considerably.

Even when the loan proposal is for small amount and manger authorized to make advance. The manager cannot act immediately until and unless he/she is very certain that the barrower is a genuine party. Hence a reliable credit countries so that a quick study of the borrower is genuine or a fraud.

The changer in the credit policies passed by the government and the RBI should be less frequent and flexible. So that the account do not fluctuate violent and the borrowed too or not eventually borrower beaten.

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A strict and rigid recovery produce should be followed in order to the borrowers who are habited in non payment of loans.

The bank itself must set up a machinery which studies all the borrows and their activities and precise, the borrower who are irregular in paying the entire borrower and their activities and prcised.

The bank should themselves hold a system by which detained credit report on customer can be communicated to each other. So that multiple lending by different banks.

The government must also assist the bank in the recovery of loans by setting up legal bodies which ill given quick and fair solutions to the problem of non payment in case of legal resorted to the borrower.

Another suggestion is the bank should attract more deposit from public and give attractive interest rates on deposit to the public.

Once of the important suggestions is that is the bank should provide some of the gift to the customers or borrower for their prompt repayment of loans and advances, by this the customers or the borrowers will be motivated and they try to return the amount as early as possible.

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OTHER RECOMMENDATIONS: The banking to do daily activities to mobilize or to borrow funds. The banks must compulsory prepare the financial projects to improve the economic condition of the member particular those belonging to weaker section of the society The banks are wished to lend money to its member to purchase on hire purchase or hypothecation of machineries equipment and motor vehicles are defending it the motor vehicles act. The banker must create funds for the promotion of co-operative education. The banker must create funds or support or to paid in the instalment of funds of net profit for the welfare of member and their departments subjects to the roles framed by the board. The banker must to issue to accept to self or purchase promissory note, draft, warrants, share certificate and other negotiable instrument on behalf of its customers. The banker is must passes, acquire, alter, or construct site or building. The bankers must create funds for promotion of education member, children subject to the limits prescribed by the board. The banker with to collect funds securities on behalf of its members. The banker must be encouraging the member to promote trade and industry and to do such other things as are incidental and conductive to the promotion and advancement of these object and of the business of the society. The banker must establish death relief funds from the benefit of members and extend relief to the family of the deceased member and also extend financial and technical assistances or profession The banker must give the financial and technical assistance to small scale industries transport operation and self employed professionals to promote their business.

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Loans and Advances CHAPTER -7

Corporation bank Balances sheet as on 31-march -2007
SCHEDULE no 1 2 3 4 5 Column1 31-3-2007 143,43,78 3661,30,48 42226,59,78 3021,00,72 3577,66,39 52630,01,10

particulars Capital and liability Capital and liability resave and surplus deposits borrowings other liabilities and provisions TOTAL ASSETS cash and balances with reserve bank India balances with banks an money at cell and short notice investments advance fixed assets other assets good will on consolidation TOTAL CONTIGENT LIABILITIES bills for collection significant accounting policies notes on accounts

6 2983,91,29

7 3735,22,30 8 9 10 11 14320,66,98 29949,65,01 281,40,57 1357,56,77 1,58,18 52630,01,10 12 23105,98,94 3022,12,98 17 18

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Profit and loss account for the year ended 31st march -2008
SCHEDULE particulars 1. INCOME interest earned other income TOTAL 2. expenditure 15 3073,23,57 16 891,95,51 516,15,49 4481,34,57 no Column1 31-03-2008 13 4516,55,48 14 699,77,85 5216,33,33

interest expended operating expenses provision and contingencies TOTAL 3. PROFIT net profit for the year Total ` 4.APPROPRIATION transfer to statutory reserve transfer to staff welfare reserve transfer from /to investment reserve transfer to capital reserve special reserves transfer to general resave interim dividend paid proposed dividend tax on interim dividend paid tax on dividend proposed total

734,98,76 734,98,76 200,00,00 15,00,00 9,87,49 39,72,74 25,00,00 269,17,66 64,54,82 86,06,40 10,96,40 14,62,66 734,98,76 51.24

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Corporation bank Balances sheet as on 31-march -2007

SCHEDULE no 1 2 3 4 5 Column1 31-3-2007 143,43,78 4085,07,46 55425,42,22 2137,06,43 4807,14,24 66567,68,14

particulars Capital and liability Capital and liability resave and surplus deposits borrowings other liabilities and provisions TOTAL ASSETS cash and balances with reserve bank India balances with banks an money at cell and short notice investments advance fixed assets other assets good will on consolidation TOTAL CONTIGENT LIABILITIES bills for collection significant accounting policies notes on accounts

6 7103,53,20

7 999,61,60 8 9 10 11 17325,08,78 391885,57,41 1712,11,99 1712,11,99 6659,68,14

12 27432,46,60 3731,80,03 17 18

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Profit and loss account for the year ended 31st march -2008
particulars 1. INCOME interest earned other income TOTAL 2. expenditure

SCHEDULE no 13 14 31-03-2008 6067,35,15 11707,21,47 7174,56,26

interest expended operating expenses provision and contingencies TOTAL 3. PROFIT net profit for the year Total ` 4.APPROPRIATION transfer to statutory reserve transfer to staff welfare reserve transfer from /to investment reserve transfer to capital reserve special reserves transfer to general resave interim dividend paid proposed dividend tax on interim dividend paid tax on dividend proposed total

15 16

4376,37,48 1001,57,66 903,84,50 6281,79,64

892,76,98

892,76,98 224,00,00 15,00,00 379,58,50 64,00,00 41,26 64,54,82 114,75,20 10,96,99 19,50,21 892,76,98

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particulars Capital and liability Capital and liability resave and surplus deposits borrowings other liabilities and provisions TOTAL ASSETS cash and balances with reserve bank India balances with banks an money at cell and short notice investments advance fixed assets other assets good will on consolidation TOTAL CONTIGENT LIABILITIES bills for collection significant accounting policies notes on accounts

SCHEDULE Column1 no 31-3-2007 1 2 3 4 5 143,43,78 4753,07,22 73983,91,10 2072,39,64 5952,99,28 86906,81,02

75590,06,43

7 8 9 10 11

4949,09,49 24937,76,65 48512,16,06 298,92,07 2617,26,32 86906,81,02 42230,96,65 3270,91,93

12 17 18

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AUDITORS REPORT

We have audited the attached balance sheet of corporation bank as on 31 st march 2009 and the profit and loss account annexed thereto for the year ended on that date, in which are incorporated the returns of 20 branches, audited by us, 832 branches audited by other auditore, 293 un-audited branches and 34 administrative offices, the return of which are certified by the branch managers. The branches audited by us and the branches audited by other auditors have been selected by the bank of India. The un-audited branches account for 0.53 percent of advances, 2.61 per cent of deposits, 0.27 percent of interest income and 0.45 percent of interest expense. We have also audited the cash flow statement as started in notes forming part of accounts for the year ended on that date. These financial statement are the responsibility us to express a potion o these financial statement based on our audit.

We have conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform that audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidences supporting the amounts and disclosures in the financial statements; an audit also includes assessing the accounting principles as well as evaluating the overall presentation of financial statement. We believe that our audit provides a reasonable basic for our opinion.

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The balance sheet and the profit and loss account have been drawn up in form a and b respectively of the third schedule to the banking regulation act, 1949.

Subject to the limitation of the audit. indicated in paragraph I above , and the limitation of disclosures contained in the banking companies act,1980 and subject to notes no .10 regarding inter branch transaction ,11(b) and 11(c) regarding balancing of books and 12 regarding claims for agricultural debt waiver under verification and scheme for agricultural debt relief under implementation , of schedule -18 , where adjustment are pending , the consequential effect where of on the accounts could not be ascertained;

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1. REFERENCE
BANKING THEORY AND ORACTICE - B.S.Raman Theory and practice of banking Financial management Financial management Business research method - Reddy and Appanaiah P.V.Kulkarni S.C.Kuchal

- Appanaiah, Reddy Ramanath

2. WEB SITES I.D. AND ADDRESS

A) http://corp.k B) www.corp bank.com

3. MAGZINES 1. KSHEMA YEARS:-2005 2006 2007 2008

4. ANNUAL REPORT ON CORPORATION BANK

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