Analysis of loans and advances

Page 4
MEANING OF BANK
Banking is one of the most important sectors of business and finance that assists
the world of commerce tokeep on running.
W
ithout banks and the banking services that they provide, commerce and trade
wouldcollapse and credit would become virtually extinct. As the decades progress
many new concepts are beingintroduced into banking. At their most basic, banks
hold money on behalf of customers, which is payable tothe customer on demand,
either by appearing at the bank for a withdrawal or by writing a check to a
third party. Banks use the money they hold to finance loans, which they make
to businesses and individuals to payfor operations, mortgages, education expenses,
and any number of other things. Many banks also performother services for a fee;
for instance they offer certified checks to customers guaranteeing payment to
third parties. In some countries they may provide investment and insurance
services.
W
ith the exception of Islamic banks, they pay interest on deposits and receive interest
on their loans. Banks are regulated by thelaws and central banks of their home
countries; normally they must receive a charter to engage in business.Banks are
usually organized as corporations.
DEFINATION OF BANK
An organization, usually a corporation, chartered by a state or federal government,
which does most or all of the following: receives demand deposits and time
deposits, honours instruments drawn on them, and paysinterest on them; discounts
notes, makes loans, and invests in securities; collects checks, drafts, and
notes;certifies depositor's checks; and issues drafts and cashier's checks.
CLASSIFICATION OF BANK
Banks are classified into various types based on the function they perform. They
are as follows:
1.
COMMERCIAL BANK:
C

ommercial banks perform all the business transactions of a typical bank. They
accept saving bank deposits, fixed deposits and current deposits which are
repayable on demand or on short notice.
Analysis of loans and advances
Page 5
Likewise, they lend or invest only for short durations. They provide funds only for
short term needsof trade and commerce. These banks cannot invest credits and
overdrafts as they are expected to meetthe immediate requirement of depositors.
The commercial banks provide a vital service to itscustomers, a simple means of
medium of exchange called cheques. They also perform a large number of agency functions
to their customers for which they charge a commission.
2.
INDUSTRIAL/ INVESTMENTS BANKS:
Investment banks, also called industrial banks, are those banks which provide
funds on a longfor industries. They are specialized in providing long term loans to
industries with a view to buy plant, machineries, etc. These banks obtain funds
through share capital, debenture and long termdeposits from the public. The bank floats
bonds for the sake of mobilizing funds to provide funds for big industrial corporations. They
also underwrite or issue new shares and debenture of industrialcompanies. They also
purchase entire issue of new securities of company and later sell them to publicat
higher prices.
3.
EXCHANGE BANKS:
E
xchange banks are known as foreign banks or foreign exchange banks. These
banks also provide foreign exchange for import trade. Their main function is to
make international paymentthrough the purchase and sale of exchange bills. The
exchange bank provides assistance in theconversion of currencies. They discount foreign
exchange bills which are used in foreign trade
.
4
.
CO-OPERATIVE BANKS:
C

o-operative banks are performed to meet the meet the banking requirements of
consumers.They are established in urban as well as rural areas. In rural areas, the
bank provides finance toagriculture and in urban area it provides finance to buy
consumer goods. These banks function likecommercial banks receiving deposits
and lending money. They provide short and medium term loans.As they are formed
on cooperative principles, they are more service oriented rather than profit.
The bank provides credit at lower rates of interest to people of small means like
small cultivators
Analysis of loans and advances
Page 6
artisans, petty shop-keepers etc. They have been classified into land development
banks or landmortgage banks and urban credit-oriented banks.
5.
SAVINGS BANK:
Savings banks are specialized financial institution establishment to mobilize
savings fromthe people. They pool the savings of the small incomes of the
community. The savings banksaccounts have been provided by all commercial
and co-operative banks and even post offices. Saving bank business has become
more prominent than others forms of accounts as it provide variousfacilities like
frequent withdrawals, attractive rate of interest, the use of cheques etc.
6.
CENTRAL BANK (RBI):
C
entral bank is an apex bank in the country. It brings the entire banking system
unified,controlled and regulated. It is the main source of an efficient banking
system in the country. Themonetary policy of a country is formulated and enforced by the
central bank. It is responsible for monetary stability in the country. The expansion and
contraction of note issue are managed by thecentral bank. It functions as a banker to the
government and commercial banks. It assists thegovernment in the implementation of
various economies policies.

INTRODUCTION TO LOANS
One of the primary functions of the commercial bank is lending. Through lending
commercial banks meettheir objective of making profits. The deposits collected from
the public cannot be kept idle. It has to beutilized in order to derive benefits out of it. The
bank collects deposits with the objective of lending andmakes profit out of the interest
received and paid. Their main aim is to deal in money and provide for thosewho
need it. The banker performs the job of lending within the framework of statues
governing the banking business, the government policy and guidelines issued by the
authorities of the country (RBI in India).The basic objective of nationalization of
commercial banks was to provide funds to the neglected sectors likeagriculture,
tiny industries and other weaker sections of the society. Today nearly 40% of the
totalcommercial bank advances are the priority sectors. Greater part of the
commercial bank funds are employedin the form of loans and advances. Loans
bring good money to the bank in the form of profit by charginginterest. Lending
function of a commercial bank benefits
the bank in the form of profit and the one whotakes loans enjoy the benefit of money
required for their activities. The wheels of industry cannot runwithout the bank
advances. The bank needs to assess the condition of industry or trade or any
businessenterprise while making advances
.
SHORT TERMS LOANS FINANCED BY COMMERCIAL BANKS
C
ommercial banks are the most important source of short-term capital. The major portion of
working capitalloans are provided by commercial banks. They provide a wide
variety of loans tailored to meet the specificrequirements of a concern. The
different forms in which the banks normally provide loans and advances areloans
and advances are loans, cash credit, overdrafts, purchasing and discounting of bills.
LOANS:
W
hen a bank makes an advance in lump-sum against some security it is called a loan. Here, a
specifiedamount is sanctioned by the bank to the customers. The loan amount so
sanctioned is paid to the borrower either in cash or by credit to his account. A
certain amount of interest has to be paid by the borrower for theloan that has to be
borrowed. A loan can be repaid in lump-sum or in installements.
C

ommercial banksgenerally provide short term loans up to one year for meeting the
working capital requirements. But thesedays, term loans exceeding one year are
also provided by banks. The term loans may be either medium termor long term
loans
General lending policy
General Lending Policy in Relation to the business of the borrowers and the
purposes for which the advanceis required. In handing a proposal relating to a
particular nature of facility, apart from the general guidelinesthat have given, the
branches should refer to the detailed instruction as contained in the respective
instructioncirculars so as to ensure that all instructions relating to a particular type
of advance are compiled with. The bank sanctions various kinds of clean /
unsecured credit facilities as well as secured credit loans, details of which the
security there for and the security documents to be obtained are elaborately
explained in thesecurity documents to be obtained are elaborately explained in the
guide documentation.It is the nature of the business of the borrowers. In handling a
proposal relating to a particular nature of , apart from the generalguideline that
have been given, the branches should refer to the detailed instructions as contained
in therespective instruction circulars so as to ensure that all instruction relating to a
particular type of advances arecomplied with.
1
)
4
) Industries (other than small scale):To establishing a new industrial unit or for expansion of the existing unit or for
modernization, a detailed project feasibility report should be obtained. Industrial
concerns are usually limited companies or publicsector undertakings, although
individuals or partnerships owning small and medium industries cannot beriled out.
An industrial concern may be engaged in more than one industrial activity and may
also beengaged in other activities such as trade, import, export etc. if the borrower
is engaged in more than one typeof activity for which finance is required.
C
redit facilities may be extended by way of cash credit/billsdiscounting for working
capital and by way of term loans for acquiring capital assets namely, construction
of factory building purchase and installation of machinery, replacement of
machinery etc. If the advance isrequired for establishing a new industrial unit or for
expansion of the existing unit or for modernization, adetailed project feasibility report
should be obtained. The feasibility plan and how advances are proposed to be used
to get with a view to satisfy about the technical feasibility, commercial viability,
financial stabilityand management competency

TITLE OF THE
STUDY:
Analysis of loans
and advances of
United Bank of
India.

INTRODUCTI
ON:

Research design
here refers to the
methods used to
collect the required
data for the survey.
It is the outline
of the total project.
It contains the
information stating

the objectives of the

study, scope of the
studymethodology
of the study, tools
and techniques used
for the survey,
methods of data
collection, limitation
of the study etc. in

short research design

is the chapter in
which the blue print
of the whole project
is explained.The
research design
includes an outline
of the study which
was conducted at

United Bank of
India. Thereare
various types of
products and a
service offered by
UBI, and providing
loans to people are
one of theimportant
functions of the

bank does. As this

research study is
mainly based on
these schemes, we
willdiscuss more on
the loan schemes
provided by United
Bank of India.

OBJECTIVES
OF THE
STUDY
1.
To understand the
terms and conditions
of various loan
schemes provided.2.

To study and
evaluate the
performance of each
loan scheme.3.
To study about the
respondent and their
varying interest.4.

.To makes
suggestion based on
findings.

SCOPE OF
THE STUDY:
The operational
jurisdiction of the
research is limited

to United Bank of
India. The
scopecovers all loan
schemes of UBI.1.
The study is mainly
concentrated on the
lending practises
pattern and

influence in
theorganisation
performance.2.
This project is
mainly concerned
with the lending
practises in the
nationalised bank of

issuingvarious
securities.3.
The study enables
the company to
know its current
position.
4.

To know and to set

its objectives and
goals.
5
.

The study helps in

ascertaining
peoples response
on bank lending

STATEMENT
OF THE
PROBLEM:
The financial
management of
public units has
been a grinding

issue before the

mobility
of resources.
E
ven after the
findings and
intensive industries
in the sector face
huge cash crush and

ininadequacy in the
mobility of
resources.
E
ven after the
findings and
recommendation of
so manycommittee
appointed by the

government to
enquire into the
working capital
issues of public
sector units.

REVIEW OF
LITERATURE:
It is mandatory to
scan through the

literature which has

already gone
through the
proposed
studysubject.
Various research
works on lending
practises of UBI has
been very helpful in

the
successfulconduct
of the study.
However all such
studies concentrate
on certain issues
and suggest
piecemealsolution.
Therefore, a

comprehensive
study is elusive. The
text and academics
literature
whichhelped the
study in details are:
y

A Hand Book of
Banking by N. S.
Toor
y

Ramman Finance
management.
y

Finance
management and
policies by James
C
. Van Horne.
y

Management
accounting principle

and practises by R.
K. Sharma.
y

Accounting for
managers S. P Jain
and K.L. Narang.
y

Research
methodology by
C
.R. Kothari.
y

Business Research
Methods by
Appannaiah Reddy
and Ramnath

RESEARCH
METHODOLO
GY:
This refers to the
method of data
description.
Descriptive research
includes surveys
and fact

findingsenquire of
different kinds. The
major purpose of
descriptive research
is description of the
state of affair as
itexists at present.
In business research
we quite often use

the term export

facto research for
descriptiveresearch
studies.The main
characteristics of
this method is that
the researcher has
no control over the
variable, he can

onlyreport what has

happened or what is
happening. The
method of research
utilised in
descriptive research
aresurvey methods
of all kinds

including
comparative and
correlation methods.

DATA
COLLECTION
TOOLS:
Data mainly
collected from both

primary and
secondary sources.
1.

PRIMARY DATA:
Primary data are
freshly gathered for
a specific purpose
or for a
specificresearch

project. Primary
data was collected
by way of
discussion with
company
officials.Mainly
with bank manager.
It has colled
through the interim

schedule, discussion
and byinteracting
with the officials of
the organization or
the
respondents.
2.

SECONDARY
DATA:
Secondary data that
were collected
through published
materials
like pamphlets,
company books and
from the official

website that
iswww.unitedbanko
findia.com

TOOLS AND
TECHNIQUES:
Information has to
be collected on the
basis of the question

naire distributed
to the
borrowersInternet/
prominent search
engines have been
used for collecting
the Data, market
watch isalso used to
some extent for

interpretation
analysis.All data
collected are
carefully classified,
tabulated for the
purpose of research
andinterpreted on
the basis of charts
and tables

LIMITATION
OF THE
STUDY:
1.
C
onfined to one
financial institution
i.e. United Bank of
India.2. On account

of time constraint
whole spectrum of
long term lending pr
actises was not
possible.
3.
Inaccurate and
inadequate

information might
have resulted to
wrong
interpretation.4.
Only a very few no.
of respondent were
interviewed to get
the information.5.

Accounting
information is
another constraint

OVERVIEW OF
THE REPORT
1.

INTRODUCTION
:
The first
chapter gives the
detail introduction
on the lending
.
2.

RESEARCH OF
THE STUDY:
The second chapter
states the objectives
scope, source of
data,
researchmethodolog
y.
3.

COMPANY
PROFILE OF THE
ORGANIZATION:
The third chapter
gives the profile of
theorganization
where the project is
conducted. It also
explains about the

future plans of the

company.
4
.

ANALYSIS AND
INTERPRETATIO
N:
The chapter gives
detail regarding the
analysis

andinterpretation of
data after collection.
It comprises of brief
notes regarding
analysis and various
methodsthrough
which they may be
carried out. It also
consists of the data

in form of tables,
graphs and piechartsand its
interpretation
.

5
.

SUMMARY OF
FINDINGS,

CONCLUSIONS
AND
SUGGESTIONS:
The chapter
concluded
the project report it
comprises of the
findings and
conclusion draw

from the above

analysis based on
the datacollected
and also includes
suggestion.
6.

QUESTIONAIRR
E:
7
.

ANNEXURE:
8.

BIBLIOGRAPHY: