“STUDY ON THE LOANS OFFERED AT THE VAISHYA SAHAKARI BANK LTD.

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR

Master of Management Studies
(University of Mumbai)

2017-2019

ROLL NO. – C60

SUBMITTED TO:

DR. V. N. BEDEKAR INSTITUTE OF MANAGEMENT STUDIES, THANE

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 DECLARATION BY THE CANDIDATE

This is to certify project report entitle “STUDY ON THE LOANS OFFERED AT THE
VAISHYA SAHAKARI BANK LTD.” which is submitted by me in partial fulfillment of the
requirement for the award of Master of Management Studies,(University of Mumbai) Dr. V.N.
Bedekar Institute of Management Studies, comprises of my original work and due
acknowledgment has been made in the text to all other material used.

Wherever references have been made to intellectual properties of any individual /

Institution / Government / Private / Public Bodies / Universities, research paper, text books,
reference books, research monographs, archives of newspapers, corporate, individuals,
business / Government and any other source of intellectual properties viz., speeches,
quotations, conference proceedings, extracts from the website, working paper, seminal work et
al, they have been clearly indicated, duly acknowledged and included in the Bibliography.

Date & Signature of Candidate

 CERTIFICATE BY THE GUIDE

This is to certify that project report entitled “STUDY ON THE LOANS OFFERED AT THE
VAISHYA SAHAKARI BANK LTD.” which is submitted BY “SONALI ASHOK GAIKAR” in
partial fulfillment of the requirement for the award of Master of Management Studies,
(University of Mumbai) Dr. V.N. Bedekar Institute of Management Studies, is a record of the
candidate's own work carried out by him under my guidance. The matter embodied in this
report is original and due acknowledgment has been made in the text to all other material
used.

Guide's Name: MRS. SMITA JAPE

GuidSign: Date:

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CERTIFICATE
 ACKNOWLEDGEMENT

A summer internship project is a great opportunity for us to get to know the banking sector and gather
some experience on that. I would first of all like to thank our Director Dr.Nitin Joshi for giving me this
opportunity by allowing me to work in Vaishya Sahakari Bank Ltd. and

making a project report on “STUDY ON THE LOANS OFFERED AT THE VAISHYA SAHAKARI
BANK LTD.”. I would also like to thank the head Mr.Prakash M. Dhamnaskar for giving me this
opportunity to work in his branch and provide all the help I needed for completion of my project. I
would like to thank my internal mentor Mrs. Smita Jape for providing with all the help I needed in
completing my project. I would also like to thank the supporting staff Mr. Pradeep Devlekar (Officer),
Mr. Kudtadkar (Cashier), Miss. Pranita Gandhi (clerk)

It is me at most pleasure to express deep sense of gratitude to everyone to help me with all the
information I needed to complete my project

I would also like to thank my family & friends for the support throughout the entire project though it is
not possible to give my token of thanks to all those people who have helped me in this project
individually within the given space available. I have tried to subsume everyone that has made this
projectsuccessful.

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 Table of content

Sr. No. Topics Page no.

1. Executive Summary

2. Litrature review

3. Bank’s Profile

4. Methodology

5. Objective of project

6. Scope of the study

7. Limitations of the project

8. Loans and advances offered by

Vaishya Bank Ltd.

9. Loan and Advances at Vaishya bank

ltd.

10. Data interpretation

 EXECUTIVE SUMMARY

My topic for the summer internship is ‘The Study Of The Loans Offered By Vaishya
Sahakari Bank Ltd.’ In this commercial Bank, their are many types of loan offered to the
customer.

Looking towards the today’s scenario, Everyone have their own dreams like to buy their
own house, to have their own vehicle, to learn in the big college etc. For completing all
these kind of dreams it needs money. Most of people don’t have that much willing
capacity to buy, that’s why people borrow some amount of money from the banks on
some conditions, this is called as Loan. Loan are promises for future payment, they have
to be repaid in periods beyond a year and are, therefore long term liabilities. The topic
loan is vast in nature, because for every single loan there is major process for sanctioning
the loan to the customer. For every type of loan bank needs to know the repayment
capacity of the customer and various types of documents, which helps the bank to take
the decision about how much the loan amount will be sanctioned. Even there are
different ROI, repayment period for different types of loans.

In loan, after sanctioning the loan many customers were not able to pay the installment
amount on time, which is called as Non-Performing Assets (NPA). Here many rules and
regulations take place.

In loan topic, there are many things which Bank have to take under consideration that I
have studied in my Summer Internship (SIP). In this project I have focus on the Loan
topic, which is more demanded by the people to complete their dreams or to repay their
debts. And what is the procedure of the loan disbursement, what kind of loans are offered
by Vaishya Sahakari Bank Ltd.

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 Literature review

The review committee on NPE 1986 recommended introduction of institutional loans,

while raising fees in higher education sector, as a strategy for releasing pressure on the
government kitty. Though it agreed that such an arrangement is the need of the hour, yet
it mentioned that educational loans do involve certain problems in India. They were
mentioned as- Psychologically, people are against loans.

Tilak (1996) found many of the arguments made against student loans to be valid in
India; and therefore, he did not lend support in favour of student loans. Student loans,
without any carefully formulated policy, may affect the access and equity adversely.

The reserve bank of india advised urban co-oprative bank against giving big ticket loans
to public sector companies on grounds that it is not in line with the co0oprative principles
and dilutes the cooperative character of UCB’s.

In a Notification the RBI said that UCBs should focus onn providing small value loans to
middles and lower income groups Farmers and small businessman.

UCBs are advised as a metter of principle. Generally not to grant large value loans to
public sector or government undertaking. RBI said in a letter to CEOs of UCB. The RBI
has not Defined large Value loans.
 1. BANK’S PROFILE

Vaishya Sahakari Bank is a small Co-Operative Bank in our Mumbai. Established in

1945 Vaishya Sahakari Bank has successfully completed 72 years on 12th Nov. 2017
serving the best to society VSB believes that "customer delight" is the ultimate goal and
has a strong belief that Customers & all Stakeholders wholehearted support, absolute
faith and their patronage has largely been responsible for its enviable growth.

• Last 12 years have been of excellent performance

• Audit Class A by Co-Operative Department in F.Y. 2016-17
• Implementation of CBS
• Introduction of ATM & Rupay Debit Card
• Introduction of SMS alerts
• Introduction of Internet Banking (Query Mode)
• The Bank proposed dividend @5% in F.Y. 2016-17
• Implimentation of Personalized Cheque Book

They have many competitors co-operative Banks like Abhuday Bank, Saraswat Bank,
Dombivali Nagari Sahakari Bank etc.

Particulars 2015-16 2016-17

Capital 4.51 4.68
Reserves & Surplus 6.46 6.69
Deposit 123.74 130.79
Advance 74.42 69.78
Profit 0.47 0.48
CRAR 13.87% 14.14%

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 VISION

• To install ATM at all our branches.

• To expand our Operations from Mumbai ,Thane, Palghar, Raigad, Ratnagiri Districts to
Sindhudurg in Maharashtra.
• To triple the business-mix in next three years from present Rs. 200.56 Cr. to Rs.601.68
Cr. by 2019-20

Some of the Important Work-ethics of the bank:

• Complete transparency
• Appointment of personnel at important position on permanent basis
• Retention of talent by offering better service conditions
• Introduction of Accountability Policy
• A proper hierarchy in recommending/sanctioning of loans.
• More weightage to collateral security while granting loans.
• Unique Loan Products for each type of client.
• Our ALCO Committee decides interest rate policy based our own Assets-Liability
maturity position

Achievements

• Successfully Launched Rupay Debit Card from 27th June 2015 onwars
• Continuous 'A' Grade by Statutory Auditors appointed by Co operative Department
Government of Maharashtra Since F.y. 2008-09 . Started paying dividend every year.
• Anywhere banking through CBS Package.
• Successfully launched partial SMS Alert from 3rd April 2012 .
• Issuance of personalised cheque books .
• All our branches have high level security arrangements.
• Cross deposit milestone of Rs.125 Cr. On 31st March 2017.
• Successfully launched Internet Banking (Query Mode) from 14th September 2016 .
• Acquired Tier II status by crossing Rs.100 Cr. Deposit mark.
• We have Acquired Direct IFS Code i.e. IFSC: (IBKL0501VSB)
• ACH Debit (ECS) facility for customer.
 3. METHODOLOGY

The following methodology will be followed for the study:

Secondary sources:;
Secondary data sources will be used to generate this report. The secondary data
sources are annual reports, manuals, and brochures of Vaishya Sahakari Bank Ltd.
To identify the implementation, supervision, monitoring and repayment practice,
interview with the employee and extensive study of the existing file was done.

Primary sources:
Primary data I have collected data from the branch of Thane Bharat Sahakari
Bank Ltd. (Cooprative Bank). I have also visited the head of credit department to
know the process of sectioning of the credit. I got various useful data and
suggestions for my project by visiting the departments.I have also got information
from their internal Annual audit report.

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 OBJECTIVE OF THE STUDY

The basic objective of this project is to acquaint with how a banking financial list
evaluate individual potential borrower- based on which sanction different credit limit to
different customer and charges different interest to different borrower that is what
factors determinates decisions.
The specific objective are
1. To know more about the credit sanctioning policy of VSBL.
2. To have an adequate knowledge about which factors mostly affects the loan
sanctioning decisions, what amount of loan should be sanctioned to a particular loan
applicant depending on his credit worthiness.
3. To furnish the possibilities that the co-operative banks can extend their expertise
consultation service to control risk exposures of a loan.
4. To identify and suggest scopes of improvement in loan and advance portfolio of
VSBL.

SCOPE OF THE STUDY

The study would focus on the following areas of Vaishya Sahakari Bank Limited

• Credit evaluation system of Vaishya Sahakri Bank Limited.

• Procedure for different loan facilities.

• Credit portfolio management of Vaishya Sahakari Bank Limited.

• Organization structures and responsibilities of management.

• Each of the above areas would be critically analyzed in order to determine the
efficiency of VSBL’s Credit appraisal and Management system.

LIMITATION OF THE REPORT

This project has focused on the most sensitive part of the organization i.e. loan and
advance. So the bank authority hesitated to disclose important information to maintain
business secrecy.
This project is only focusing on the loan and advance offered by bank
They can not disclose their NPA records, which is the weakness of the Bank.
Only two month time is not enough to complete such a study in a lucid manner.

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 1. INTRODUCTION OF LOANS AND ADVANCES

Any amount borrowed or lent is called loan. If money is borrowed it is debt of business
and if loan is given, it is receivable for the business. Loan is a method of lending under
which bank gives credit to a borrower for a fixed period and for a specific purpose. Loan
are promises for future payment, they have to be repaid in periods beyond a year and are,
therefore long term liabilities.

In other words "when a banker makes an advances in a lump sum which cannot be paid
wholly or partly and which the customer has permission to withdraw subsequently, it is
called a loan. "Profit is the pivot on which the entire business activity rates. Banking is
essentially a business dealing with money and credit. Like every other business activity.
Bank share profit oriented. A bank invests its funds in many ways to earn income. The
bulk of its income is derived from loans and advances. Banks make loans and advances to
traders, businessman and industrialist against the security of some assets or on the basis
of the personal security of the borrower. In either case, the banks run the risk of default in
repayment. Therefore, banks have to follow a cautions policy and sound lending
principles in the matter of lending. Banks in India have to consider the national interest
along with their own interest while determining the lending policy.Many a time a
borrower needs funds for fixed assets or non-respective type of activitiesand thus seeks
money from the bank that is withdrawn in one lump sum. The loan amount isnormally
repaid in installments. Loan may be short-term, medium-term or long-term.
 PRODUCTS OFFERED BY VAISHYA SAHAKARI BANK:

Deposits

➢ Saving Account
➢ Current Account
➢ Term Deposit

Loans and advances

➢ Vehicle Loan
➢ Education Loan
➢ Housing Loan
➢ Mortgage Loan
➢ Personal Loan
➢ Secured Loan
➢ Gold Loan
➢ Secured loan
➢ Loan against FD
➢ Cash Credit
➢ Overdraft (OD)
➢ Overdraft against Property (ODPRO)

Facilities
➢ RTGS
➢ ECS
➢ ATM Card
➢ Online Banking

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5. LOANS AND ADVANCES AT VAISHYA SAHAKARI BANK LTD.

o TYPES OF LOAN IN VAISHYA SAHAKARI BANK LTD.

o RATE OF INTERAST ON LOAN
o DOCUMANTATION OF LOAN
o PROCESS OF DISBURSMENT
o PROCEDURE OF RECOVERY

Types of Loan In Vaishya Sahakari Bank Ltd.

• Vehicle Loan

• Education Loan

• Housing Loan

• Mortgage Loan

• Personal Loan

• Secured Loan

• Gold Loan

• Loan for Furnishing

• Loan against LIC Policy

• Loan against FD
VEHICLE LOAN :

Vehicle Loan means the sum amount of money taken from the bank for the purchase of
new or 2nd hand vehicle for personal use or for commercial use.

In a loan, the borrower initially receives or borrows an amount of money, called the
principal, from the lender, and is obligated to pay back or repay an equal amount of
money to the lender at a later time. Typically, the money is paid back in regular
installments, or partial repayments; in an annuity, each installment is the same amount.

Purchase of new Vehicle:

Eligiblity:

Any Individual, group of individual, proprietor, partnership firm, private or public limited
company from the area of operation of the Bank is eligible to apply for the loan.

Rate of interest:

The ROI for the loan taken for purchasing the new vehicle is 10%. and the minimum
margin is 15%.

Purpose

The loan should be granted for purchase of new vehicle either for personal use or for
commercial use.

Quantum of Finance:

Maximum 10 lakhs.

Repayment Period :

Purpose of Loan Minimum Period Maximum Period

Personal Use 36 Months 60 Months
Commercial Use 36 Months 48 Months

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Security:

Prime- Hypothecation of vehicle

Collateral – The loanee should have his/her Life Insurance Policy to cover the amount of
loan or should take atleast Term Policy in his/her name to cover the loan amount

Guarantor- One guarantor acceptable to the bank irrespective of loan amount

Insurance of Vehicle- The loanee should take comprehensive insurance policyof the
vehicle to cover the purchase price of the vehicle

Purchase of Second hand vehicle-

The application for purchase for second hand vehicle can be consider for-

i) The age of vehicle should not exceed more than 3 years

ii) The comprehensive insurance is vehicle for the vehicle to be
purchased
iii) The hypothecation charge on the veicle of the institusion/bank should
also be required to delete from RC Book

PERSONAL LOAN

Funds readily available whenever desire or need, be it a sudden vacation that you plan
with your family or urgent funds required for medical treatment? Vaishya Sahakari
Bank’s - Personal Loan is the answer for those questions.
Advantage of personal loan
• Low interest rates. Further, we charge interest on a daily reducing balance!!
• Low processing charges; only 1% of loan amount
• No hidden costs or administrative charges.
• Not much security required ……which means minimal documentation…something
that you had always wanted.
• Long repayment period of up to 48 months.
Purpose
The loan will be granted for any legitimate purpose whatsoever (e.g. expenses for
domestic or foreign travel, medical treatment of self or a family member, meeting any
financial liability, such as marriage of son/daughter, defraying educational expenses of
wards, meeting margins for purchase of assets etc.)

Eligibility
you are eligible if you are a Resident Indian of National having capability to repay a loan.

Quantum of Finance
1) Ten times of monthly net involments in case of salaried employees
2) 50% of gross annual income as per last income tax return for
professional/individuals of high network
3) Pensioner Ten times of mothaly pensions or maximum limit prescribed by
the Bank

Documents Required
Important documents to be furnished while opening a Personal Loan Account:
For existing bank customers
Passport size photograph
From salaried individuals
Latest salary slip and Form 16
From Self-employed individuals and Professionals
IT returns for the last two financial years,
Proof of Professional Qualification
Copy of highest professional degree held
Original Life Insurance Policy
Proof of official address. This can include shop and establishment certificate/Lease
deed/Telephone Bill.

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Margin
Vaishya Co-op Bank does not insist on any margin amount.

Interest Rates
The ROI for the loan taken for personal reasons the is 14%.
Repayment
The loan is repayable in EMI. You are allowed to pay more than the EMI if you wish
to, without attracting any prepayment penalty.

Security
Borrower’s Original Life Insurance Policy that covers the loan amount.

Processing Fee
Processing charges are 1-2% of the loan amount. This is amongst the lowest fees in the
industry. Processing fees have to be paid upfront. There are no hidden costs or other
administrative charges.

HOUSING LOAN

Home is where the heart is! At Vaishya Sahakari Bank, they understand this better than
most – the toil and sweat that goes into building/ buying a house and the subsequent pride
and joy of owning one. This is why Housing loan schemes are designed to make it simple
for you to make a choice at least as far as financing goes!

Purpose

• Purchase/ Construction of new House/ Flat

• Purchase of an existing House/ Flat
• Purchase of a plot of land for construction of House
• Extension/ repair/ renovation/ alteration of an existing House/ Flat
• Purchase of Furnishings and Consumer Durables as a part of the project cost
• Takeover of an existing loan from other Banks/ Housing Finance Companies

Eligibility
Minimum age 18 years as on the date of sanction
Steady source of income

Loan Amount

• Applicant/ any one of the applicants are aged over 21 years and upto 45 years –
60 times Net Monthly Income (NMI) in case of employee or 5 times Net Annual Income
(NAI) in case of Businessman, subject to aggregate repayment obligations not exceeding
57.50% of NMI/ NAI

• Applicant(s) aged over 45 years of age– 48 times NMI or 4 times NAI, subject to
aggregate repayment obligations not exceeding 50%of NMI/ NAI

To enhance loan eligibility you have option to add:

• Income of your spouse

• Income of your son/ daughter living with you, provided they have a steady
income and his/ her salary account is maintained with Vaishya Sahakari Bank Ltd.
• Expected rent accruals (less taxes, cess, etc.) if the house/ flat being purchased is
proposed to be rented out
• Regular income from all sources

Margin

Processing Fee
Purchase/ Construction of a new House/ Flat/ Plot of land: 15% and
0.50% of Loan amount with a cap of Rs.10, 000/-(including Service Tax)

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Prepayment Penalty
2% of the loan prepaid if the loan is preclosed before expiry of half the original tenure.

Security

Equitable mortgage of the property other tangible security of adequate value like NSCs,
LIC policies etc., if the property cannot be mortgaged

Maximum Repayment Period

For applicant’s upto 45 years of age: 20 years

For applicants over 45 years of age: 15 years

Moratorium
Upto 18 months from the date of disbursement of first installment or 2 months after final
disbursement in respect of loans for construction of new house/ flat (moratorium period
will be included in the maximum repayment period)

Disbursement

• In lump sum direct in favour of the builder/ seller in respect of outright purchase
• In stages depending upon the actual progress of work in respect of construction
of house/ flat etc.

Quantum of Finance and Margine

Whichever is lower of following-

a) 85% of Agreement value + Registration charges + Stamp Duty

b) Four time of Gross Income
c) The propotion of net income to repayment obligation of existing loan pplus EMI
towards proposed Housing Loan should be at lest one and half times. In other
words –
 Net Income per month

-------------------------------------------------------------------------------- = 1.50

Total Repayment Burden + EMI on Proposed Housing Loan

Documents

• Completed application form

• Passport size photograph
• Proof of Identity – PAN Card/ Voters ID/ Passport/ Driving License
• Proof of Residence – Recent Telephone Bill/ Electricity Bill/ Property tax
receipt/ Passport/ Voters ID
• Proof of business address in respect of businessmen/ industrialists.
• Salary slip of last 3 months in case of employee or Form No.16 in case of
businessman
• Sale Deed, Agreement of Sale, Letter of Allotment, Non encumbrance certificate,
Land/ Building Tax paid receipt etc. (as applicable and subject to satisfaction report from
our empanelled lawyer)
• Copy of approved plan and approval from the Local Body
• Statement of Bank Account/ Pass Book for last 6 months.

EDUCATION LOAN

A term loan granted to Indian Nationals for pursuing higher education in India or abroad
where admission has been secured.

Eligible Courses
All courses having employment prospects are eligible.

• Graduation courses/ Post graduation courses/ Professional courses

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• Other courses approved by UGC/Government/AICTE etc.

Expenses considered for loan

• Fees payable to college/school/hostel

• Examination/Library/Laboratory fees
• Purchase of Books/Equipment/Instruments/Uniforms
• Travel Expenses/Passage money for studies abroad .

Amount of Loan

For studies in India, maximum Rs. 5 lacs, Studies abroad, maximum Rs. 15 lacs

Interest Rate
The ROI for the loan taken for education is 11.00%.

Processing Fees

• No processing fee/ upfront charges

• Deposit of Rs. 5000/- for education loan for studies abroad which will be adjusted
in the margin money

Margin

• For loans up to Rs.4.0 lacs : No Margin

• For loans above Rs.4.0 lacs:
o Studies in India: 5%
o Studies Abroad: 15%

Documentation Required

• Completed Education Loan Application Form.

• Mark sheets of last qualifying examination
• Proof of admission scholarship, studentship etc
• Schedule of expenses for the specified course
• 2 passport size photographs
• Borrower's Bank account statement for the last six months
• Income tax assessment order, of last 2 years
• Brief statement of assets and liabilities, of the Co-borrower Proof of Income (i.e.
Salary slips/ Form 16 )

Mortgage Loan

A dream comes true! An ALL PURPOSE LOAN for anything that life throws up at you!!
Do you need funds for a Marriage ceremony, want to take your family to a well-deserved
holiday or for a sudden medical emergency? You have some property, but would rather
not sell it? Then why not avail of this ALL PURPOSE LOAN from SBI? SBI now makes
it very much possible for you to only keep your property but also have liquid funds.

Enjoy the SBI Advantage

• Complete transparency in operations

• Access this loan from our wide network of branches
• Interest rates are levied on a monthly/daily reducing balance method
• Lowest processing charges.
• Long repayment period of 60 months, up to 120 months for salaried individuals
with check-off facility
• No Hidden costs or administrative charges.
• No prepayment penalties. You can have surplus funds at any time thereby
conveniently reducing your loan liability and interest burden.
Avail of an All-Purpose loan against mortgage of any of your property. We offer you
these loans at all our Personal Banking Branches and those branches having Personal
Banking Divisions amongst others.

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Eligibility
You are eligible if you are:

A. An individual who is;

a An Employee or
b. A Professional, self-employed or an income tax assesse or
c. Engaged in agricultural and allied activities.

B. Your Net Monthly Income (salaried) is in excess of Rs.12,000/- or Net Annual Income
(others) is in excess of Rs.1,50,000/-.
The income of the spouse may be added if he/she is a co-borrower or a guarantor.
C. Maximum age limit: 60 years.

Loan Amount

Minimum: Rs.25, 000/-

Maximum: Rs.1 crore. The amount is decided by the following calculation:

• 24 times the net monthly income of salaried persons (Net of all deductions
including TDS) OR
• 2 times the net annual income of others (income as per latest IT return less taxes
payable)

Margin
we will finance up to 75% of the market value of your property.

Interest
The ROI for the mortgage loan is 11%.

Repayment
Maximum of 60 equated monthly instalments, upto 120 months for salaried individuals
with check-off facility. The bank can decide the total repayment schedule as per the
repayment capacity of borrower but should not exceed 8 years.You could opt to divert
any surplus funds towards prepayment of the loan without attracting any penalty.

Gold Loan

Loan against gold is a very simple concept. By pledging your gold ornaments, coins,
biscuits, bars etc. the lender provides you with liquidity at a predetermined rate of
interest. Loans are sanctioned after scrutiny of basic documents and satisfactory
evaluation of the gold pledged.

Period

The period of advance against gold ornamnets should be generally restricted to six
months or 1 years.

Margine

Adequate margine on the market value should be maintained. The bankshould collect
interest on advances promptly.

Loan limit on gold

The 75% of the actual price of gold will be sanction to the loanee to borrow from bank.

Interest Rate

The ROI for the loan against gold is 11%.

Valuer

The valuer should be approved by the government, he should have the proper licence
from government.

Charges

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Bank will take charge like custody charge which is 1% of sanctioned amount and
valuation charges which is Rs.4/per grm.

Secured Loan
A secured loan, is a loan in which the borrower pledges some asset (e.g. a car or
property) as collateral for the loan, which then becomes a secured debt owed to the
creditor who gives the loan. The debt is thus secured against the collateral — in the event
that the borrower defaults, the creditor takes possession of the asset used as collateral and
may sell it to regain some or all of the amount originally loaned to the borrower, for
example, foreclosure of a home. From the creditor's perspective, this is a category of debt
in which a lender has been granted a portion of the bundle of rights to specified property.
If the sale of the collateral does not raise enough money to pay off the debt, the creditor
can often obtain a deficiency judgment against the borrower for the remaining amount.

Loan Against LIC

The borrower surrender LIC endowment plan to bank to borrow loan from them . It is
quite low in the initial years. For example, after paying premium for 10 years, surrender
value is only Rs 6 lacs and loan eligibility is Rs 4.20 lacs. Hence, do not pin hopes on
taking out a very big loan against your LIC policies.

Loan Limit on LIC policy

The 70% of the actual value of LIC Policy will be sanction to the loanee to borrow from
bank.

Interest Rate

The ROI for the loan against LIC Policy is 11%.

Types of Advances

• Cash Credit
• Overdraft
• Overdraft against property

All advances are provided by Vaishya bank, only for business expansion

1) Cash Credit

Cash credit facility is granted generally for financing of working capital needs of Traders,
Businessmen, Manufacturer, etc. In CC facility primary security is hypothecation of stock
and book debts.

Bank sanction 70% of actual stock’s amount. The borrower have to submit the details of
their stock on last day of every month. Drawing power (DP)/Maximum Purmisible Bank
Finance (MPBF) is very important, formula is: STOCK (70%) + DEBTORS(50%) –
CREDITORS (100%) = DP/MPBF. This formula is use to calculate the amount limit
should bank for CC.

For example : Mr. X have stock of Rs. 5 lakh , Debtors Rs. 3 Lakh, Creditors Rs. 2 Lakh
as per the formula (Stk + Dr. + Cr. = MPBF) 3,50,000 + 1,50,000 – 2,00,000 = 3,00,000

2) OverDraft and Overdraft against property:

Overdraft accounts are also ‘running accounts’ analogous to cash credit account operated
through cheque book facility, RTGS, etc. The difference is purpose of advance and nature
of security.

We generally grant overdraft facility against the security of our bank’s term deposits,
LIC, NSCs, KVPs, IVPs, property, etc. such facility can be granted both for WC
requirements and for personal drawings of the applicant. Drawing limit is restricted upto
80% of surrendered value of Property/LIC/etc.

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This OD/ODPRO a/c should renew every year. We recover the sanctioned amount by
starting their RD account in our bank. Borrower deposit some amount of money as an
installment in RD account.

Our bank earns maximum profit from this type as the princepal amount never get low and
also there is no time limit to repay the amount.

PROCESS OF DISBURSMENT

Pre-disbursementCompliance:

When the credit proposal are approved the credit officer must have to be ensured that
the disbursement of the credit facilities must comply with the directions written in the
credit policy and circular made by time to time along with checking all the following
terms and conditions.
• The officer of Loan Administration must collect the acceptance of the customer’s
of the terms and conditions on the duplicate copy of the sanctioned advice.
• They will thoroughly examine and ensure that the subject credit facility does not
contradict to any law, rules and regulation of the country, Reserve Bank of India
and deed of the Mortgage and power of the Attorney to be drafted and executed
under the Supervision of the Bank’s Legal Advisor.
• Lawyers certificate to the effect that all the legal formalities (Equitable/
Registered Mortgaged) has been properly created on the land and building in
favor of the bank and bank has acquired the effective title of the property.
• Registered power of attorney has been collected from the borrower (contractor)
assigning the work order favoring the bank and the power of attorney has been
registered with the work order given agency and they have agreed that they will
issue all the cheques favoring bank.
• The legal documents of the vehicle have been obtained.
• Collection of the satisfaction certificate in respect of all the documents both legal
and banking from the lawyer.
 • Even after checking documents the bank gives the rating to the borrowers through
which the bank decides that how much the loan amount to be sanction to the
borrower and what will be the rate of interest must be charged to the borrower.
• The Bank use the debt-equity ratio to see the repayment capacity of the borrower.
• After being satisfied all the above terms and conditions the credit in-charge will
disburse the loan amount to the client.

Mode of Disbursement:

After sanctioning of loan under the Scheme, Branch will disburse the loan amounts only
when all security documentation is in place, as appropriate, and clean, the loan amount
will be disbursed and credited (against Quotation(s) to be produced/submitted by the
customers) directly to the respective account of the customers to be maintained with the
Branch and payment thereof (sanctioned amount plus client’s equity) as per quotation(s)
shall be made directly to suppliers/ shopkeepers through Pay order or Demand Draft.
Disbursement will be made in all cases after having acknowledgement of receipt of the
goods.
However for minor purposes disbursement may be made by clients’ choice at the
discretion of banking authority.

Mode of Repayment:
Maximum 60 (sixty) Equal Monthly Installments depending on loan amount and
items. Residue if any shall be paid along with last installment.

Early Repayment
The borrower may repay the loan in full before the end of the loan term. In such cases,
outstanding principal & accumulated interest as on the date of payment has to be paid.

Security /collateral & Documentation:

• Duly filled in Loan Application Form Terms and conditions signed
• Demand Promissory Note.

31
 • Letter of Continuation
• Irrevocable Letter of Authority for undated cheque
• Letter of Introduction from the employer or referee (where applicable)
• Personal guarantee of two guarantors acceptable to the bank and qualified
to borrow under the scheme.
• Post dated cheques as per repayment schedule.

• Personal Net-worth statement

• Salary Certificate / Pay slip / Bank Statement of 3-12 months Proof of
Professional Certificate (when required)
• Quotations of Items to be purchased
• Copy of recent Utility bill paid in the name of borrower (for address
verification)/ Copy of Passport/Copy of Valid Trade license
• Letter of Hypothecation
• Letter of Lien
• Trust Receipt
• Cash and/ or collaterals, immovable property, assignment of interest may he
accepted if offered by the client.
• Other (if any)
• For Car Other Security/ Collateral
a) Hypothecation over the car (lien mark- Hire Purchase raised in the BRTA and blue-
book of the car).
b) First party comprehensive insurance of the car (Policy must be renewed every year and
copy of the policy must be submitted to the bank)

Other Terms & Condition Prepayment

Prepayment penalty will be charged on the outstanding amount and when decided by
the bank.
Loan Renewal
Successive loans depend on track record of previous loan; usually repayment behavior
of the borrower is the main considerations for renewal and enhancement of the loan
amount.
Recovery System
If the borrower fails to adjust the loan within validity period or to repay his
monthly installment then the responsible loan-monitoring officer of the concerned
branch will arrange for adjustment of the overdue installments from the borrower’s
savings account if there adequate balance. The Officer shall regularly follow up for
recovery and necessary measure for recovery.
Collection Steps

The goal of the collection process is to obtain payments promptly while

minimizing collection expense and write-off costs as well as maintaining the customer’s
goodwill by a high standard of service. Collection also protects the assets of the
bank. This call be achieved by identifying early signals of delinquency and thus
minimizing losses.

Past Due Collection Action

(DPD)
1-14 Letter, Follow up & Persuasion over phone
15-29 1st Reminder letter
30-44 2nd reminder letter + Single visit
 3rd reminder letter

 Group visit by team member

 Follow up over phone

45-59

 Letters
Call up loan
to Guarantor, Employer, Reference all above effort follows
Final Reminder & Serve legal
notice
Warning
Legal on legal action
proceedings by next 15 days
begin
60-89 Repossession starts

33
 Telephone calls/Legal proceedings
continue Collection effort continues by
90 and above
officer & agent

Letter to different banks/Association

To identify and manage arrears, the following aging classification is adopte
PROCEDURE OF RECOVERY:

In whatever form bank advances are, granted, they are repay-able on demand or at
the expiry of some fixed period. Sills of exchange discounted are repayable on
demand, although the bank seldom exercises the right except in circumstances
mentioned below. Loans are repayable on the expiry of the periods for which they are
granted. In case the loan is repayable in installments and default occurs in the payment
of any installment, the entire loan usually becomes immediately recoverable at the option
of the bank.

Recalling of advances

Banks conduct a regular scrutiny of all advances and ensure that timely action is taken
in each case either for the continuance of the facility on the existing terms, or with
such modifications as may be considered necessary, or for the recovery of the amount
if it is decided not to continue the facility. Advances are usually recalled under the
following circumstances:
1. Death of the borrower or the guarantor.
2. Insolvency of the borrower or the guarantor, or liquidation of the
borrowing company.
3. Dissolution of the partnership.
4. Failure to renew the documents sufficiently before the expiry of the period of
limitation. The bank cannot afford to wait till the last day when the period of
limitation expires.
5. Want of satisfactory turnover, or deterioration of the
security.
6. Failure to adhere to the terms and conditions of the sanction in spite of the
bank’s repeated requests.

7. Deterioration of the financial position of the party. If it comes to the notice of

35
 the bank that the party has committed a fraud or has heavily speculated, it will
be an adverse factor and the bank may consider recalling the advance.
8. Failure to maintain adequate margin in spite of reminders to the
borrower.

9. Change in the bank’s policy regarding certain types of advances. The bank may
at any time decide advances against certain commodities because of their over
production or the fear of an expected slump.
There may also be other reasons for withdrawing the facility e.g. the law and
order situation at a certain place is such that it may be risky to continue the advance
there.

Notice
In case, the borrower does not adjust the account as desired, the only course left open
to the bank would be to send a registered, acknowledgement due, notice to him and to
the guarantor, if any, preferably through a lawyer. This should normally be done after
obtaining the approval of the authorities concerned, unless the case is urgent and there
is no time to seek their instructions. If the advance is on a pledge basis, the notice
should state that in case the advance is not fully and finally adjusted within, say, a
fortnight, the pledged goods would be sold by private sale or public auction at the
discretion of the bank and the net sale proceeds would be applied in repayment of
the advance with interest. The notice should also state that the borrower as well as
the guarantor, if any, would be liable for any balance that might remain due, after the
security has been sold. If it is an unsecured advance, the borrower and the guarantor, if
any, should be threatened with a suit after the period mentioned in the notice has
expired.
The Post Office receipt/s for sending the registered letter/s and the acknowledgement/s
by the addressee should be carefully preserved, as it/these may have to be tendered in
the court as documentary evidence.
In case the borrower or guarantor refuses to accept the registered notice, the Post
Office would return it to the bank in due course with the remark ‘Refused’. This is
sufficient service in law. It would not be necessary, as such, to tender the evidence of
the postman in whose hand the word “refused” was written. The cover with the
remarks of the post office should be kept intact with the other relative documents.

Goods under pledge

If the account is by way of pledge and the pledgor makes default in payment of the
debt, the bank as a pledgee has two alternatives. It may bring a suit 4 in the sale of the
pledged goods is the debtor himself, whose business is to deal in them. Care should,
however, be taken that the borrower does not enter into collusive transactions for his,
own benefit.

Stocks under hypothecation

If the charge is by way of hypothecation, the bank, under the relative documents, has
a right to take possession of the security and thereafter treat it as a pledge. The bank
may take over possession of goods and start selling them after giving reasonable notice
to the borrower. There may, however, be practical difficulties in obtaining possession
of the hypothecated goods from an un-cooperative borrower, when the bank requires
the possession thereof.

Mortgages
In both types of mortgage- simple and equitable- a suit will have to be filed against
the mortgagor to enforce recovery and sell the mortgaged property. A preliminary
decree is passed by the court against the mortgagor in the first instance giving him time
to redeem mortgaged property. If the mortgagor (judgment debtor) fails to pay dues to
the mortgagee (decree-holder) within the stipulated time, a final decree is passed against
him ordering the sale of the mortgaged property through the court.

Life policies

37
If the debtor fails to redeem his indebtedness and the bank holds as security a life
policy or life policies which have been assigned by the debtor, the bank will have to
consider the action it should take in the circumstances; whether to pay the future
premiums to the debit of the borrower’s account and maintain the policies in force until
they mature, or to surrender them.
When an endowment assurance does have a long period to run to maturity, the
amount expected on maturity may exceed the cost of maintaining the policy, in which
case, if the debt is not fully covered and repayment from some other source is not
likely it will obviously be worthwhile to continue payment of the premiums both
from the point of view of the gain to be realized eventually and the death-risk cover.
If the bank decides

that it would not be advantageous to maintain the policy, it may surrender the policy
and obtain from the insurance company payment of the surrender value.

Unsecured advances
It is possible that the security, if any, may not be sufficient to liquidate the
entire advance. In certain cases no security may be available. Attempts should, in such
cases, be made to secure the advance. If that is not possible and the party does not
repay the amount after the period specified in the notice, a suit may have to be filed,
after carefully assessing the chance of recovery of the debt.

Compounding with the borrower

The borrower may sometimes offer a proposal to the bank to compound the debt, in
taka full and final settlement of the debt. In this case, it will have to be considered
whether it would be in the interest of the bank to arrive at a compromise with the
borrower or to proceed legally against him and get a decree for the amount due from
him. The position of the party and the guarantor, if any, and the chances of recovery
through Court process will have to be carefully assessed before compounding the debt.
It should, however, be noted that if there is a guarantor, the settlement cannot be
arrived at without his consent unless there is an express clause to that effect in the
agreement of guarantee.

Insolvency
Insolvency of a borrower, whether he is an individual or a partner of a firm, or that of
a firm or one or more of the borrowers in a joint account, creates problems of its own
and it would be necessary to explain what is insolvency and the steps to be taken in
such a contingency.

Meanings of insolvency, insolvent: When a person is unable to pay his debts in full
and upon his adjudication as an insolvent, his property, in certain circumstances, is
taken possession of by the Official Receiver or the Official Assignee, under orders of the
Court. He realizes the debtor’s property and ratably distributes the proceeds among his
creditors. Such a proceeding is called ‘insolvency’, and the debtor is known as the
‘insolvent’.

Discharge

A debtor may, at any time after the order of adjudication but within the period
specified by the Court, apply to Court for an order of discharge. The Court may grant
or refuse an absolute order of discharge, or suspend the operation of the order for a
specified time or grant an order of discharge subject to certain conditions. A person
once adjudicated an insolvent continues to remain an undercharged insolvent until he
receives his discharge.
Stopping of account
On the insolvency of one of the borrowers in a joint account, or of a principal or
a guarantor in case of a guaranteed account, the account should be broken and any
future payments will reduce the liability of the insolvent to the bank.
It would always be advisable to take competent legal advice as
soon as it is known that a petition of insolvency is pending in court or the-borrower
has been adjudged as an insolvent.

39
 4. DATA ANALYSIS AND INTERPRETATION

• FINANCIAL PERFORMANCE OF VSBL

• DEPOSIT OF VSBL

• ANALYSIS OF GROWTH IN LOAN AND ADVANCES

FINANCIAL PERFORMANCE OF VSBL

Vaishya Sahakari Bank's policy was to expand the loan portfolio moderately in
consideration of economic and socio-political scenario of the country. The Bank's
loans and advances decreased by 6% in 2017 to 6977.54 Lakhs as against 7442.06
Lakhs in 2016.

The credit portfolio of the Bank is now very well diversified having a balanced
mix covering a wide spectrum of business and industries including readymade
garments, textiles and spinning, telecommunication, pharmaceuticals, steel and
engineering, ship scraping, cement, edible oil, real estate, education and transport
etc. The Bank also expanded its financing to the Small Enterprises and Consumers
under SME Credit Scheme and Consumers Credit Scheme.

The Bank has already given continued efforts to maintain high quality of assets.
Besides giving emphasis on the satisfactory business performance of the clients and
collateral support, we have geared up loan monitoring and follow up activities to
arrest the loans from becoming non-performing.
 Financial Statement of Vaishya Sahakari Bank Ltd.
From 31 March;2014 to 31 March;2017

Particulars 31/3/2017 31/3/2016 31/3/2015 31/3/2014

Income
Interest Earned 134,674,807 139,983,30 133,201,69 124,038,2
6 2 10
Commission on Insurance Business 202,666 377,172 341,462 252,834
Other Income 9,627,932 6,760,859 8,185,545 9,373,791
Total 144,505,405 1,47,121,33 141,728,69 133,664,8
7 9 35
Expenditure
Interest expended 88,397,734 94,042,770 90,436,224 85,151,08
1
Operating Expenses 50,382,659 48,005,532 42,787,729 41,802,60
7
Provisions and Contingencies 281,475 264,543 451,951 963,647
Total 139,061,868 142,312,84 133,67,904 127,917,3
5 35
Profit Before Tax
(-) Provision for Income Tax 5,443,537 4,808,492 8,052,795 5,747,500
(-) Provision for Income Tax of 1,440,000 730,000 2,250,000 1,337,441
Earlier Year
(+) Excess Provision of Income Tax 86,635 - 41,231 -
of Earlier Year
(-) Provision for Deferred Tax 725,000 580,836 (375,418) 387,058
Net Profit After Tax 4,815,172 4,659,328 5,468,608 4,023,001
Profit of previous year brought 2,407 2,858 3,251 1,250
forward
Profit Available for Appropriation 4,817,579 4,662,186 5,471,859 4,024,251

41
 Balance sheet of Vaishya Sahakari Bank Ltd.
From 31st March; 2014 to 31st March; 2017
Particulars 31/3/2017 31/3/2016 31/3/2015 31/3/2014
Liabilities
Share Capital 46,755,575 45,057,350 43,148,025 39,943,675
Reserves and 66,936,492 64,674,381 63,791,815 60,096,938
surplus
Deposits 1,307,857,131 1,237,386,782 1,216,756,186 114,002,225
Other 64,987,342 100,271,237 87,795,814 85,141,603
Liabilities &
Provisions
Total 1,486,536,540 1,447,389,750 1,411,491,840 1,328,184,441
Assets
Cash on hand 28,472,855 23,311,665 25,032,437 18,979,122
Balance with 125,116,916 57,931,069 54,799,821 27,591,771
Banks
Investments 535,954,832 501,245,382 430,121,425 412,629,876
Advances 697,754,084 744,206,872 791,506,490 765,043,919
Fixed Assets 38,574,632 39,970,879 37,700,282 38,961,720
Other Assets 60,663,221 80,723,883 72,331,385 64,978,033
Total 1,486,536,540 1,447,389,750 1,411,491,840 1,328,184,441
Contingent 999,005 989,577 1,000,177 912077
Liabilities
Bills for - - - -
Collection –
Contra
 ➢ DEPOSITS OF VSBL

The bank mobilized total deposits are R s . 13,078.57 Lakhs as of March

2017which is raised by 5.39 % as compared to Rs. 12,373.86 Lakhs in 31 March
2016, which is good for the bank. Competitive interest rate, attractive deposit
products, deposit mobilization efforts of the bank employees and confidence reposed
by the customers in the bank contributed to the notable growth in deposits. The
deposits of the bank as on March 31, 2017 was as follows:

Series 1
1,350,000,000

1,300,000,000

1,250,000,000

1,200,000,000

1,150,000,000

1,100,000,000

1,050,000,000

1,000,000,000
2014 2015 2016 2017

Series 1

Fig.1 : Graph of deposits

➢ LOANS OF VAISHYA SAHAKARI BANK LTD.

The bank’s total Loans are 6977.54 Lakhs as of March 2017 which is decreased by 6%
as compared to 7442.06 in 31 March 2016, which is not good for tha bank. Competitive
interest rate, attractive deposit products, deposit mobilization efforts of the bank
employees are good, but the respond from customer is not good due to the high

43
competition I cooperative banks. The Loans of the bank as on March 31, 2017 was as
follows:

Column1
800,000,000

780,000,000

760,000,000

740,000,000

720,000,000

700,000,000

680,000,000

660,000,000

640,000,000
2014 2015 2016 2017

Column1

Fig.2: Graph of loans

➢ NON PERFORMING ASSETS

A Non-performing asset (NPA) is defined as a credit facility in respect of which the

interest and/or installment of principal has remained ‘past due’ for a specified period of
time. Once the borrower has failed to make interest or principle payments for 90 days the
loan is considered to be a non-performing asset. Non-performing assets are problematic
for financial institutions since they depend on interest payments for income.

We have understood that the NPA percentage has been increased by 57.16% in 2017 as
compared to 2016, which not good for the Bank, because of more NPA percentage the
money which is invested by the the depositer has been lend to customer and that money
gots stuck with the borrower.
In following graph we have shown the Net NPA at the end of the year of 2014 to 2017:

NPA
160

140

120

100

80

60

40

20

0
2014 2015 2016 2017

NPA

Fig.3 : Graph of Non-performing assets

➢ Cash Credit Overdraft and Loans Repayble on Demand

We have analyse the whole Independent auditor’s report and as per the report of 2017
we got to know that cash credit overdraft and loans repayable on demand is Rs. 1,866.42
Lakhs it has increased as compare to the previous year that is Rs 1,715.89 Lakhs in 2016

45
 Amount

2017

2016

2015

2014

150,000,000 160,000,000 170,000,000 180,000,000 190,000,000 200,000,000

Amount

Fig.4 : Graph of CC, OD and Loans

➢ Term Loans

We have analyse the whole Independent auditor’s report and as per the report of 2017
we got to know that Term Loan has been sanctioned by bank is Rs. 5,111.11 Lakhs it
has decreased as compare to the previous year that is Rs 5,596.82 Lakhs in 2016.
 Amount

2017

2016

2015

2014

460,000,000 480,000,000 500,000,000 520,000,000 540,000,000 560,000,000 580,000,000 600,000,000

Amount

Fig.5 : Graph of Term Loans

47
 8. CONCLUSION

In his modern world like all other sectors banking sector is also changing. Vaishya
Sahakari Bank Ltd. is operating its business facing various barriers like deregulation,
telecommunication and globalization successfully. Vaishya Sahakari Bank limited has
been trying to operate its business successfully since 1945. The bank must
developed good image and goodwill among its clients by offering excellent services
to its customers. Through VSBL is facing both external and internal problems, it can
achieve dynamic leadership by taking implementing marketing strategies. Within a
few years of its operation, the bank has captured a position in the banking sector and
it is looking forward.
References

Books
• Cooperative banking handbook 2014
• Vaishya Sahakari Bank Ltd. Manual Book
• Banking System
• Annual Reports Of Vaishya Sahakari Bank Ltd.

49