CHAPTER 1

INTRODUCTION:A bank is an institution that deals with money and

credit.Different people understand the meaning of a bank in
different ways.For a common man bank means a storehouse
where money is stored;for a businessman it is a financial
institution and for day to day customer it is an institution where
he can deposit his savings.

In reality banks are service organization selling banking

service.
Banks play an important role in the economy of any
country as they hold the saving of the public.provide means of
payment for goods and services and provide necessary finace for
the development of business and trade.
Thus bank is a link in the flow of funds from savers to
the user.Hence they should render an efficient customer service in
order to retain the present customers and also to attract the
potential customers.

DEFINITION :Oxford Dictionary defines a bank as an

establishment for custody of money,which it pays out on
customers order.

Indian Banking Regulation Act,1949 defines banking

company as a company which transacts the business of
banking in India.

Functions of bank:The function of bank are as follows;

Primary functions:Commercial banks perform various functions:

Commercial banks accept various types of deposits from public especially

from its clients, including saving account deposits, recurring account deposits,
and fixed deposits. These deposits are payable after a certain time period

Commercial banks provide loans and advances of various forms, including

an overdraft facility, cash credit, bill discounting, money at call etc. They

also give demand and demand and term loans to all types of clients against
proper security.

Credit creation is the most significant function of commercial banks. While

sanctioning a loan to a customer, they do not provide cash to the borrower.
Instead, they open a deposit account from which the borrower can withdraw. In
other words, while sanctioning a loan, they automatically create deposits,
known as a credit creation from commercial banks.

Secondary functions:Along with primary functions, commercial banks perform several secondary
functions. The secondary functions of commercial banks can be divided into
agency functions and utility functions.
Agency functions include:

To collect and clear cheques, dividends and interest warrant.

To make payments of rent, insurance premium, etc.

To deal in foreign exchange transactions.

To purchase and sell securities.

To act as trustee, attorney, correspondent and executor.

To accept tax proceeds and tax returns.

Utility functions include:

To provide safety locker facility to customers.

To provide money transfer facility.

To issue traveller's cheque.

To act as referees.

To accept various bills for payment: phone bills, gas bills, water bills, etc.

To provide merchant banking facility.

To provide various cards: credit cards, debit cards, smart cards, etc.

What Is Loan:-

Loan contracts come in all kinds of forms and with varied terms, ranging
from simple promissory notes between friends and family members to more
complex loans like mortgage, auto, payday and student loans.
Banks, credit unions and other people lend money for significant, but
necessary items like a car, student loan or home. Other loans, like small business
loans and loans from the Department of Veterans Affairs, are only available to
select groups of people. And two atypical loans are payday loans and loans from a
retirement account.
Regardless of type, every loan and its conditions for repayment is
governed by state and federal guidelines to protect consumers from unsavory
practices like excessive interest rates. In addition, loan length and default terms
should be clearly detailed to avoid confusion or potential legal action.
In case of default, terms of collection of the outstanding debt should
clearly specify the costs involved in collecting upon the debt. This also applies to
parties of promissory notes as well.

If you are in need of money for an essential item or to help make your life
more manageable, its a good thing to familiarize yourself with the kinds of credit
and loans that might be available to you and the sorts of terms you can expect.
Here are some of the different types of loans;

Agriculture loan Agricultural loans are available for a multitude of farming purposes.

Farmers may apply for loans to buy inputs for the cultivation of food grain crops as
well as for horticulture, aquaculture, animal husbandry, floriculture and sericulture
businesses.

There are also special loans to finance the purchase of agricultural

machinery such as tractors, harvesters and trucks. Construction of biogas plants
and irrigation systems as well as the purchase of agricultural land may also be
financed through special types of agricultural finance.

Personal Loan It is the loan granted to fulfill your expenses which ranges from
buying some expensive electronic gadgets to booking your air tickets Yes
people used to use this facility for anything they can. They forget that
usually rate of interest on such loans will be higher than other types of loans.
But still to have something in advance end up them to borrower of such type
of loans.

Here we may find two types of loans

Secured Loans-Where you provide some collateral as a safety against loans.
Unsecured Loans-In such type of loans borrower collateral not required.

Education Loan This is actually a handy tool for parents who not planned well for
their kids higher education.

Home Loan A home loan is a secured loan wherein a bank or a financial

institution lends you money to help you purchase your dream home.

It is generally given for a longer duration compared to other loan

types because the amount borrowed is usually higher and requires a longer
repayment plan.

Gold Loan This was one of the easiest and fastest way of loan when gold rate
was at it peak. But currently lot of lenders may not feel it better collateral
due to falling in gold price, especially gold loan companies.

Recently RBI banned any gold loans against gold ETFs & gold mutual
funds. Even though it forms easiest and fastest way of getting loan but better
to look for risks involved in it, especially when you are dealing with NBFCs.

Loan against Insurance Policies

You can use your insurance investment as either collateral or take
loan from insurer itself if that policy is eligible for loan. Usually loans will
be available after 3 years of policy period. You will get loan easily on your
policy from insurer. But other method to take loan is to pledge your policy
document with banks and take loan on that. LIC will offer you loan on your
policy with the interest rate of 10%, which I think competitive pricing
compare to other type of loans.

Loan against Bank FDs

This is one form of loan where your collateral is your bank FD
itself. Suppose you have bank FD of around Rs.10,00,000 then you are
usually eligible to get loan upto Rs.8,00,000. But interest rate will 1-2%
higher than your FD rate. But still this form of loan is also fastest and best
way.

Loan from PPF or EPF

You can avail loan from PPF when one satisfies certain
conditions. For detailed view on the same visit my old post PPF-Loan and
Withdrawal. You can avail loan from EPF too. But you can avail loan from
EPF only for special purposes like purchase of plot, medical treatment,
education or marriage of children, construction or purchase of house, repayment of home loan, renovation of home or pre-retirement. But all are not
eligible to take loans. Their are certain conditions like minimum years of

completion, age or proof you need to produce. So it seems bit lengthy

procedure.

Loan against Shares or Mutual Funds

Few lenders offer loan against your investment value of shares
or mutual funds. But you will not get more value from this. Reason is, both
the investments (if mutual fund is of equity oriented) then fluctuation in
values will be high. Hence to protect their loan amount usually lenders offer
less loan.

Loan from unrecognized sector

This is one of the easiest but costliest way of fulfilling your
financial dream. Usually interest rate will be in the range of 20%-30% but
you can get it immediately. Such type of loans are useful who are running
out of time and not have any source also to fund their financial requirements.
But looking at this option is costly affair. Hence it is highly advisable to
avoid such funding.

Vehicle Loan
This is usually used to meet your financial requirement when one
is planning to have his dream car or bike. It is usually a secured loan where
collateral is your vehicle and in case of default lender may recover it by
taking back your vehicle. But some lenders offer unsecured loans where
your credit score matters more.

Meaning of Vehicle loan :Vehicle financing is the fastest and easiest way to buy a new car.
This way allows you to buy your new car by paying only a small down payment up
front and the rest in monthly installments. Therefore, instead of a one-time
immense expense which is hard to attain, the vehicle payments becomes an integral
part of your monthly expenses.

Vehicle loan
A car loan is a special type ofpersonal loan, which allows you to spread the cost of a car over an
extended period of time, rather than paying the entire sum all at once. In return for this loan, you
must payinterest to the bank or building society from which you have borrowed the money, which
means that the total amount you repay will be greater than the amount borrowed. Generally, you pay
back a small percentage of the loan each month, plus the interest charge: this is referred to as your
monthly repayment.
oan: secured and unsecured. A secured car loan provides the lender with a specified item
of security; in the event that you are unable to repay the debt, the lender has the right to take
possession of this item, which in the case of a secured car loan is usually your car itself.
An unsecured loan does not require you to provide an item of security, but as a result, this type of
loan
usually
costs
you more.
Before you take out a car loan, you should familiarise yourself with your credit report. A credit report
is a document which records how you have gained and used credit, such
as loans, mortgages and credit cards, in the past. This document can help you to consider whether
or not your application for a car loan is likely to be accepted, and will assist you in choosing the
loan that
best
meets
your
needs.
Remember that a loan requires good financial management. If your personal circumstances change,
you may find that you are no longer able to meet the monthly repayments, see Missing Payments.
Many lenders will offerPayment Protection Insurance (PPI) when you take out a car loan. PPI covers
the cost of your loan if you are unable to make repayments due to redundancy, or an accident or
illness that affects your ability to work. Alternatively, you may wish to consolidate a range of
debts, contact a debt management company or visit your local Citizens Advice Bureau.

A car loan is an amount of money taken from a lending provider to purchase a new or used car.
The individuals agree to repay the total amount of the loan along with the lending interest rate
amount to the lender (often banks) as and when required.
Individuals can choose a car from a list of models and manufacturers in India according to their
annual income and budget. Presently, a common man can fulfill his dreams of purchasing a car
by getting an auto loan. According to your requirements and financial situations, you can get
auto loans from a variety of auto financing services such as Mahindra Finance, Tata Finance,
Bajaj Finance and State Bank of India loans.

For example, if you are thinking about financing options with Bajaj Finance, you must first give
your information regarding the type of loan to the company. The Bajaj Finance associates will
then get in touch with you to assist with the loan eligibility amount and the different offers and
schmes available with their bank.
These days, almost everyone has the desire to buy a car which best suits them according to
their requirements. If you are one that has the desire to have a car, then simply fill out our form
on BankandFinance.com to get free car loan quotes. You may also want to apply for car
insurance through our site.

Types Of Auto Loans

There are several different types of auto loans so that every individual will find at least one auto
loan that is able to meet their requirements.

Understand Your Options for Your Bad Credit Auto Loan

Auto loans are helpful for people who need to purchase an automobile (or more), but cannot
make the full payment right away. Many lending agencies offer such loans for the purchase of
used cars, lease buyouts, or can help refinance a pre-existing car loan.
Auto Loan Types: Simple Definitions to Help You Understand the Different Ways Your
Car can be Financed

If you enter "Auto loans types" into Google, you will be overwhelmed by the different kinds of
auto loans out there. Let us examine some of the most common types of auto loans available.
Note that there will be commonalities among some of them.
A pre-computed loan is a basic principal and interest loan. In this, the interest and principal
payments are pre-calculated before a borrower and lender agree and sign the financial
paperwork. A big disadvantage of this loan type is that you cannot make car-payments in
advance and expect to forego interest payments.
A simple interest loan is similar to the pre-computed loan, but with one major difference. Here,
interest is charged every day on the basis of the balance you currently owe. Therefore, the faster
you pay you balance off, the less interest you'll pay overall. Thus, a simple interest loan with no
prepayment penalties will be beneficial for those people who pay in advance.
A secured loan is a loan in which you offer collateral against the loan. The collateral is usually
another vehicle (and in many instances, the house of the borrower). Note that if you don't pay off
the loan, the lender can take possession of the property you put up as collateral.

Unsecured loans are usually the most preferred type of auto-loans. Here, the lender provides the
loan on mere faith that you will keep your word. Given the risk involved, these loans are
accompanied with high interest rates.
A lease buyout loan is a viable option for those borrowers who are not going to be able to buy
out the remaining amount on their car (lease). Here, a commercial lender will pay out the
remainder of the balance on their lease. After that, the borrower will need to make regular
payments to the lender.
Car refinance loan, simply put, can be considered as a loan upon a loan. This type of auto loan
will be helpful for borrowers who may end up unable to afford pay the high instalment amount.
Note that while a car refinance loan may lower the instalment amount, the lender may slightly
raise the borrower's interest rate