SUMMER PROJECT REPORT ON RETAIL BANKING OBLIGATIONS BANK OF MAHARASHTRA

In partial fulfillment of award of Post graduate Diploma in Business Management

By Vishrant Singh Under the Guidance of: (prof. AVK Murthy)

PGDM (BM) Entrepreneurship and Management Processes International New Delhi -74 July 2011

ENTREPRENEURSHIP AND MANAGEMENT PROCESSESS INTERNATIONAL

DECLARATION

I, Vishrant Singh here by declare that the project report entitled BANK

OF MAHARASHTRA

is based on my own work and my indebtedness to other work/ publications, if any have been duly acknowledged at the relevant place.

PLACE: NEW DELHI DATE:

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ACKNOWLEDGEMENT

To acknowledge is very great way to show your gratitude towards the persons who have contributed in your success in one or other way. I find words inadequate to express my gratitude to Mr. Ranjeet singh sahota for providing me an opportunity to carry out my summer project as such a well reputed and leading nationalized bank BANK OF MAHARASHTRA.

At the very outset of the training I deem it is my pious duty to express my sincere thanks also to Mr. Javed for his continuous guidance and supervision and support during the project. I would like to thank, Prof. AVK Murthy who has guided me for my project work and provided encouragement through out my training period. This study could not have been successful without the valuable input of the customers of BANK OF MAHARASHTRA.

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TABLE OF CONTENT

CHAPTER ONE: INTRODUCTION CHAPTER TWO: EXECUTIVE SUMMARY CHAPTER THREE: METHODOLOGY CHAPTER FOUR: FINDINGS AND ANALYSIS CHAPTER FIVE: CONCLUSIONS AND RECOMMENDATIONS CHAPTER SIX: BIBLIOGRAPHY APPENDIX

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CHAPTER ONE: INTRODUCTION

The Beginning Maharashtra has a long history of commercial activity since ages because of its strategic location in Indian sub continent and its large natural resources. Maharashtra has been a progressive region and the Banking activity was also started in this region quite early. Historically speaking, the Bank of Bombay established in 1840 was the first Commercial Bank in Maharashtra. However, the first commercial bank set up in Maharashtra outside Mumbai was The Poona Bank established in 1889 at Pune followed by The Deccan Bank in 1890 and the Bombay Banking Company in 1898. Outbreak of the First World War leading to great depression took a heavy toll on banks in India. Between 1914 and 1935 as many as 380 banks failed in the country out of which 54 were based in Bombay province. The impact of these failures was felt more in Maharashtra region because certain banks known for a long time were also closed down. The effects of great depression started fading and new enterprises began emerging with new hopes in all spheres of economy, including banking. Need felt for an Independent Bank for Maharashtra The Mahratta Chamber of Commerce (MCC) was established in Poona in 1934 and its Founder Secretary Shri A.R.Bhat was a great visionary. Shri Bhat initiated for a comprehensive review of banking services available in the region through the special issue of Kesari news paper released in memory of Lokmanya Tilak within a few months of establishment of MCC. He ensured that his friend, Shri V. P.Varde, considered as a doyen of co-operative movement, wrote an 1

article on the necessity of a separate bank for Maharashtra, thus launching a public discussion on the subject. While there was no noticeable response to the article of Shri Varde, Shri A R Bhat kept on discussing the subject with leaders in Trade and Industry. Shri Bhat ensured that Mahratta Chamber and its Directors took up the issue and held a Conference on Business and Industry in Poona on behalf of the MCC in February1935. Shri Bhat pushed the proposal for formation of a bank and succeeded in getting the following resolution adopted by the conference: "For providing capital to the trade and industry in Maharashtra, it is essential to establish a Joint Stock commercial bank. The Mahratta Chamber is, therefore, requested to make all the necessary enquiries in that behalf and take appropriate steps for floating such a bank. The business community in Maharashtra is urged to support such an effort. " The Swadeshi movement of the first decade of the 20th Century gave stimulus to the establishment of a number of commercial banks under Indian Management in Maharashtra. The MCC formed a sub-committee consisting of Sarvashri V.G.Kale, D.K. Sathe, N.G. Pawar, G.D. Apte and A.R.Bhat to work out the details. The first meeting of the committee was held on 19 May 1935 in the conference room of the Kesari Mahratta office and besides the committee members, prominent personalities from the City like Shri Babasaheb Kamat, the then President of the MCCI, J S.Karandikar, Rajabhau Godbole, Govindrao Pandit, Damuanna Potdar, S.R.Sardesai, Baburao Gokhale, and N.N. Kshirsagar among others participated in deliberations. Another meeting of the sub committee with wider public representation was followed on 27 May 1935 in the meeting hall of Kesari Mahratta office and decisions on matters like the number of Directors on the Board of the proposed bank (maximum to be 11 members), Amount of each share (to be Rs.50/-) and primary condition for becoming a Director (to hold a minimum of 500 shares) were taken.

The Bank was formally registered under the Indian Companies Act, on the auspicious day of 16 September 1935. The Memorandum and Articles of the Bank were signed by following 19 promoters (Sarvashri) Board of Directors 1. Prof.V G Kale 2. D K Sathe 3. B M Gupte 4. N. G. Pawar 5. V T Ranade 6. V P Varde 7. M R Joshi 8. S G Marathe 9. Raghunathrao Sohoni 10. D V Potdar Witness Signatory: Shri G D Apte Others 1. A R Bhat 2. S M Joshi 3. B S Kamat 4. S R Rajguru 5. R N Abhyankar 6. T V Sane 7. D G Bapat 8. G S Marathe 9. D D Chitale

The first Board of Directors of The Bank of Maharashtra Ltd was constituted with following members. 1. Prof.V G Kale, an ex-member of Indian Tariff Board and a reputed economist and educationist of old generation. 2. Shri D K Sathe, a businessman and a prominent social worker and had experience of Co-operative banking. 3. Shri B M Gupte, Chairman of the Poona Central Co-operative Bank. 4. Shri N. G. Pawar, Engineer and Contractor 5. Shri V T Ranade, of M/s. V R Ranade and Sons a leading firm of Engineers and Contractors 6. Shri V P Varde, a leading figure in the co-operative movement and who provided major impetus to the move. 7. Shri M R Joshi, a leading paper merchant from Pune. 8. Shri S G alias Annasaheb Marathe of M/s.V R Ranade and Sons. 9. Shri Raghunathrao Sohoni, a leading merchant who had initially moved the resolution of formation of the Bank for Maharashtra.

MILESTONES Registered on 16-09-1935 Commitment stated in the prospectus issued on 21-10-1935: Steadily to spread its business operations all over Maharashtra and as opportunity allows, outside that area offering varied services to the general public while trying to be useful to trade, commerce and industry consistently with high standards of safety and efficiency 1936 : Commenced operations on 08-02-1936 in Pune 1938 : Second branch of the bank was opened in 1938 at Fort, Bombay. 1940 : Third branch came up at Deccan Gymkhana, Pune 1944 : Status as Scheduled Bank obtained 1946 : Deposits crossed Rs One crore mark Formed fully owned subsidiary, The Maharashtra Executor & Trustee Company First branch outside Maharashtra opened in Hubli (Mysore Starte, Now Karnataka) 1949 : Expansion to AP: Hyderabad branch opened 1963 : Expansion to Goa: Panjim Branch opened 1966 : Expansion to Madhya Pradesh: Indore branch opened Entered in Gujarat: Baroda branch opened 1969 : Nationalised alongwith 13 other Banks Entry in Delhi by opening Karolbagh branch on 19-12-69 1974 : Deposit base crossed Rs. 100 Crore mark 1976 : Marathwada Grameena Bank, first RRB established on 26-08-1976

1978 : New Head Office building inaugurated by Hon'ble Prime Minister of India Shri. Morarji Desai Deposits crossed the figure of Rs.500 Crores 1979 : Mahabank Agricultural Research and Rural Development Foundation, registered as a public trust, was established for undertaking research and extension work and to provide more extensive services to farmers. 1985 : 500th branch in Maharashtra state was opened at the hands of the then Prime Minister, Mrs. Indira Gandhi at Nariman Point, Mumbai. First Advanced Ledger Posting Machine (ALPM) was installed at the branch. Golden Jubilee Year Celebrations launched at the hands of Dr. Manmohan Singh, Governor Reserve Bank of India 1986 : Thane Grameena Bank sponsored 1987 : The 1000th branch of the Bank was inaugurated at Indira vasahat, Bibwewadi, Pune at the auspicious hands of Dr.Shankar Dayal Sharma, the Honourable Vice President of India 1991 : "Mahabank Farmer Credit Card " was launched Entered in to Domestic Credit Card Business Main Frame Computer installed Became member of the SWIFT 1995 : Diamond Jubilee Celebrations - Dr C Rangarajan the RBI Governor was the Chief Guest Deposits crossed Rs 5000 crore mark 1996 : Moved into A category from the earlier C category. Autonomy obtained 2000 : Deposits crossed Rs 10000 crore mark

2004 : Public Issue of Shares 24% owned by Public Listed in BSE and NSE 2005 : Bancassurance and Mutual Fund distribution business started 2006 : Crossed total business level of Rs.50,000 Crore Branch CBS Project started 2009 : Entered in to 75th year of dedicated service to the Nation Adopted 75 underdeveloped villages for integrated overall development 2010 : 100% CBS of branches achieved Total Business crossed Rs One lakh crore Opened 76 branches in the Platinum Year taking the total to 1506

VISION 2010 To be a vibrant, forward looking, techno-savvy, customer centric bank serving diverse sections of the society, enhancing shareholders and employees value while moving towards global presence. MISSION To ensure quick and efficient response to customer expectations. To innovate products and services to cater to diverse sections of society. To adopt latest technology on a continuous basis. To build proactive, professional and involved workforce. To enhance the shareholders wealth through best practices and corporate governance. LOGO To enter international arena through branch network.

The Deepmal With its many lights rising to greater heights.

The Pillar

Our institution- Symbolising strength.

The Diyas Our Branches- Symbolising service.

The 3 M's symbolising Mobilisation of Money Modernisation of Methods and Motivation of Staff.

Services

Term Loans, Overdrafts, Letters of Credit, Guarantees and many more such products are included in the credit basket. Recognising individual customer needs Bank Of Maharashtra has identified Customer segments. For the individual we have finance schemes that translate your dreams into reality.

INFORMATION ON EDUCATION LOAN Purpose Eligibility For Studies in India and Abroad Studies in India: Graduation courses/Colleges under Universities approved by UGC. Other courses leading to diploma / degree etc. conducted by colleges / universities approved by UGC / Govt. / AICTE / AIBMS / ICMR etc.

Studies Abroad : Job oriented Prof./Technical / PG courses/ Post Graduation: - MCA, MBA, MS etc Age Student should be Indian national, have secured admission by Entrance test / Merit bases selection. Maximum amount In India : Rs. 10.00 lac Abroad : Rs. 20.00 lac

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Security Guarantor

Up to Rs. 4.00 lac - Clean Above Rs.4.00 lac to Rs.7.50 lac Satisfactory third party Guarantee Above Rs. 7.50 lac Value of collateral security after providing requisite margin as below should be equal to the quantum of finance plus 2 acceptable guarantor. Computers purchased out of loan be hypothecated.

Margin

Up to Rs. 4.00 lac Nil Above Rs.4.00 lac 5% for studies in India 15% for studies abroad

Deduction Limit Rate of Interest

N.A.

Loans up to Rs. 4.00 lac (Base Rate + 2.00%) Loans above Rs. 4.00 lac (Base Rate + 2.75%)

Simple interest during moratorium period, there after compounded monthly

1% interest concession may be provided to the loanees if the interest is serviced regularly as and when applied during the study period when repayment holiday is specified for interest/ repayment under the scheme. Interest concession is available only for moratorium period.

Repayment

EMI

60

Months

(Loan

plus

int.

accrued

together)

Moratorium: Course Period + 1 year OR 6 months after getting job whichever is earlier Processing Fee Nil

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Insurance Others

N.A.

Loan will be granted to student with parent as Co-borrower/s Loan will be disbursed in stages as per requirement directly to Institute / College.

Other Facility

Student can apply education loan in online mode through our website. This Facility is presently available only in selected 75 branches (shortly it will be increased to handsome number)

INTEREST SUBSIDY ON EDUCATION LOANS TO STUDENTS FROM ECONOMICALLY WEAKER SECTIONS Central Scheme to provide Interest Subsidy for the period of moratorium on Educational Loans taken by students from economically weaker sections. Government of India has approved a Scheme to provide full interest subsidy during the period of moratorium on loans taken by students belonging to economically weaker sections under the Educational Loan Scheme, for pursuing any of the approved courses of studies in technical and professional streams, from recognized institutions in India. We are providing hereunder guidelines of the scheme:1. Applicability of the scheme The Scheme would be applicable only for studies in recognized technical and professional courses in India. The interest subsidy shall be linked with the existing Model Educational Loan Scheme of our bank and restricted to students enrolled in recognized technical/ professional courses (after Class XII) in India in Educational Institutions established by Acts of Parliament, other Institutions recognized by the concerned Statutory Bodies, Indian Institutes of Management (IIMs) and other institutions set up by the Central/ State Government. 2. Eligibility for Interest Subsidy

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The interest subsidy under the Scheme shall be available to the eligible students only once, either for the first undergraduate degree course or the post graduate degrees/diplomas in India. Interest subsidy shall, however, be admissible for integrated courses (graduate + post graduate). Interest Subsidy under this scheme shall not be available to those students who discontinue the course midstream, or for those who are expelled from the Institutions on disciplinary or academic grounds. However, the interest subsidy will be available if the discontinuation was due to medical grounds for which necessary documentation to the satisfaction of the Head of educational institution will have to be given. 3. Subsidy Applicable Period Under the Scheme, interest payable by the student belonging to economically weaker section for availing of the Educational Loan for Technical/ Professional courses in India for the period of moratorium i.e., course period, plus one year or six months after getting job, whichever is earlier, as prescribed under Model Educational Loan Scheme of the bank, shall be borne by the Government of India. After the period of moratorium is over, the interest on the outstanding loan amount shall be paid by the student, in accordance with the provisions of the existing Model Educational Loan Scheme and as may be amended from time to time. 4. Applicable Academic Year The Scheme shall be applicable from the academic year 2009-10 starting 1st April, 2009. The loan amount taken starting from the Academic year 2009-10 (irrespective of the date of sanction) shall only be covered under the scheme of Interest subsidy. Note: Interest on any amount disbursed for courses starting before the academic year 2009-10 would not be considered for subsidy. 5. Income Limit The benefits under the Scheme would be applicable to those students belonging to economically weaker sections, with an annual gross parental/ family income upper limit of Rs. 4.5 lac per year (from all sources). The scheme is intended to cater to the needs of students belonging to economically weaker sections with the above

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prescribed upper parental gross income limit of the family from all sources which is based on economic index and not on social background. 6. Competent Authority for Issuing Income Certificate Income proof shall be required from the students from such public authorities as are authorized by the State Governments for certification of income status for this scheme, including Central and State Sector Schemes. For the State of Maharashtra, the Tahsildar is the competent authority for issuing the income certificate. For other States, student borrowers are requested to approach our branch officials for knowing the details of competent authority who are authorized to issue such income certificate. 7. Others Interest subsidy should be claimed under the scheme only if subsidy was not being claimed against any other State Government scheme. All the eligible student borrowers are requested to visit the concerned branches (where they have availed education loan) for enrolling to avail Interest subsidy during moratorium period under the scheme. It is requested to go through the above contents carefully before approaching the branch officials for submitting the application for interest subsidy claim. The scheme is applicable only for those who have availed educational loan on or subsequent to 01.04.2009. Steps to be followed by the student borrowers for availing the benefit of interest subsidy under the scheme:a. Procure income certificate as discussed in the point no. 5 as above. b. Ensure having taken all requisite certificates and approach the respective branch. c. Submit the application for claiming subsidy (Application/ Agreement will be supplied by the branch officials) LOAN FOR AGRICULTURISTS

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Mahabank Kisan Credit Card Purpose Cultivation of crops Meeting the short-term credit needs of farmers for crop production and allied activities etc. Maintenance of farm equipments etc. Eligibility Amount Agriculturist who owns agricultural land As decided by District Technical committee & limit worked out for the purpose. Security Mortgage of land. Hypothecation of crop/Assets. Repayment Revolving credit facility for 3 years. Coinciding with harvesting of crops-season/marketing of produce. Other Terms & Assured and timely availability of working capital for crop cultivation. Borrowers are covered under personal accident insurance scheme. Insurance for notified crops is available. Minor Irrigation for Agriculturists Purpose Digging of new wells, revitalization of existing well, purchase of oil engine, electric motor, pump set installation of pipe line, sprinkler, irrigation, drip irrigation, tube well, bore well, etc. Eligibility Amount Agriculturist who owns agricultural land. For new dug wells as per the NABARD Unit costs for equipments/estimates. Security Mortgage of land,

Conditions

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Hypothecation of movable assets and guarantors. Repayment Other Terms Depending upon the repaying capacity 7 to 11 years. & Proposed well should be located in white watershed area. It should not be in dark watershed area.

Conditions

Farm Mechanisation for Agriculturists Purpose Purchase of Tractors/Power tillers Purchase of Harvesters Purchase of Threshers & other farm implements Eligibility Agriculturist who owns at least 8 acres of Irrigated land. The Tractor should get at least 1500 hrs of work in a year. Amount Security As per cost of machinery Hypothecation Mortgage of land. Repayment Other Terms 7 to 9 years. & Comprehensive insurance of machinery with bank clause. of Tractor/trolley and accessories,

Conditions Animal Husbandry Purpose Purchase of Cows/Buffaloes Poultry- Broiler Farm, Layers Farm, Hatchery Sheep/Goat Rearing Construction of Byre, Purchase of Machinery

Working Capital Requirements. Eligibility Agriculturist, agri. Labour and / or those who have necessary expertise. Amount Animal cost As per NABARD unit costs

Others- as per the project. Security Hypothecation of Animals/Plant Machinery to be purchased 16

Mortgage of land. Repayment Other Terms 4 to 5 years with suitable installments. & Insurance of all animals is essential.

Conditions Horticulture Purpose Eligibility Amount Security Cultivation of fruit crops-mango, Pomegranate, Grapes etc. Agriculturist with adequate provision of irrigation As per NABARD Unit costs/ Project Mortgage of land. Hypothecation of crops. Repayment Within 15 years.

Scheme for Financing Setting Up of Agri-Clinics and Agri-Business Centres for Agriculture Graduates Purpose Setting up of Agriclinics Setting up of Agribusiness Centers. Eligibility Amount Security Agriculture graduates Individiuals Max. Rs 10 lakh, Group Rs 50 lakh Hypothecation of Assets created out of bank loan Mortgage of land. Repayment 5 to 10 years.

Scheme for Financing Farmers for Purchase of Land Purpose Eligibility Amount Security Purchase of land Small & Marginal farmers, share croppers/Tenant farmers. Maximum Rs 15,00,000/Mortgage of land. Hypothecation of crop/Assets. 17

Repayment Other Terms

As per the repaying capacity & incremental income. & Total land holding including proposed land should not exceed 5 acres.

Conditions

Scheme for Financing Two Wheelers to Farmers Purpose Eligibility Purchase of two wheeler. Net annual Agril. Income above Rs 50,000/- or 5 acres of irrigated land. Amount Security Max. Rs 50,000/Hypothecation of Asset. Guarantors. Repayment 3 to 5 years.

Consumer Loans to Farmers Purpose Eligibility Purchase of consumer durables. Net annual Agril. Income above Rs 50,000/- or 5 acres of irrigated/10 acres seasonally irrigated land. Amount Margin Security Repayment Hi-tech Projects Purpose Eligibility Hi-tech projects. Agriculturist with knowledge of advance techniques in the farming. Amount Security As per the project cost. Hypothecation of goods Other collateral security. Max. Rs 50,000/-, for four wheelers Max. Rs 2 lakh. 10% Hypothecation of assets. 3 to 5 years.

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Repayment

Within 6 to 8 years.

LOAN SCHEME FOR CORPORATES The Bank finances the corporate sector for its business activity and for setting up units, modernisation, diversification and upgradation. Such finance is extended in the form of Funded facilities Non Funded facilities Funded facilities 1. Term Loans : Repayment in instalments over a fixed time. Purpose : For acquisition of fixed assets / machinery or for financing projects. Amount of Loan : Generally 75% of the cost of maintaining a margin of 25%. Security : Charge on assets. 2. Cash Credit : Running account facility. Purpose :To meet working capital requirements. Amount of facility : Based upon the Bank's assessment of the working capital requirement. Security : Charge on current assets, collaterals if required. 3. Bill Discounting : In the nature of post sales limit. Amount of facility : Generally upto a specified percentage of the value of the bill. Discounting under : L/C or firm order. Security : Charge on the Bill, Collateral if required. Non Funded facilities

Letter of Credit facility to facilitate purchase of material / goods.

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Letter of Guarantor facility for the issuance of Guarantee in the nature of bid bonds, performance bonds, etc.

For finance of International trade, the Bank provides Working Capital facility to Exporters Importers For Exporters Working Capital finance can be availed at

Pre-shipment stage Post shipment stage At the pre-shipment stage finance is provided in the form of Packing Credit Purpose : For procuring / manufacturing of goods meant for export. Amount of Packing Credit : Upto 90% of FOB value of goods. Security : Charge on assets created out of finance. Repayment: From Export proceeds, Proceeds of negotiation / Discounting of Export Bills.

At the post shipment stage export finance is provided by way of

Negotiation / Discounting of Export Bills, Rupee advances against collection bills, Advance against Export incentive.

The advances are repayable from Export proceeds or receivable and carry interest rate in conformity with RBI guidelines. Export finance is also provided in foreign currency at internationally competitive interest rates. Interest Rates is linked to LIBOR and is subject to maximum LIBOR + 1.5% . Finance in foreign currency is extended by way of Pre shipment Credit in foreign currency at the preshipment stage and Discounting of Export Bill in foreign currency at the post shipment stage. For Importers 20

For Importers Funded Working Capital finance by way of cash credit facility and non funded Working Capital finance by way of Import Letter of Credit facility is provided to corporates who are importers. Foreign Currency Lending The Bank also extends short term foreign currency loans to importers / Resident Constituents. This enables accessing of finance at internationally competitive interest rate linked to LIBOR. LOAN SCHEME FOR ENTREPRENEURS For the endeavouring entrepreneur who dreams of setting up an enterprise, the Bank has a number of financial schemes. To service the industrial sector the Bank has Industrial Finance branches at Mumbai and Pune. SSI branches at Pune, Mumbai, Krishnanagar Satara, Piraman Gujarat, Satpur Nasik and I.E. Thane. Finance can also be availed at any other branch of the bank. The Bank finances the Industrial Sector for setting up a unit for modernization, diversification, upgradation, expansion. Bank finance can be availed in the form of :

Term Loan for acquisition of machinery and fixed assets. Working capital by way of funded Cash Credit limit . Non fund facilities in the form of Letters of Credit / Letters of Guarantee.

The Bank finances Industrial Ventures under its own scheme as well as under the National Equity Fund Scheme (NFE) and Other Government Sponsored Schemes (GSS). LOAN SCHEME FOR EXPORTERS Annexure - A

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Objective of the Scheme : To provide better terms of credit including rates of interest to all eligible exporters, including those under small and medium sector, compared to those extended to other exporters by the Bank. Eligibility: All exporters, including those under small and medium sectors, would be covered under the scheme provided: 1. Their accounts are classified as "STANDARD" continuously for 3 immediately preceding years. 2. Their names do not figure in RBI's defaulter list / caution list and they have not been blacklisted by ECGC. 3. There are no overdue in pre-shipment export credit. 4. They have not run up losses continuously for 3 immediately preceding years. 5. They do not have overdue export bills in excess of 10% of the current year's turnover. Benefits to Exporters : 1. Limits will be sanctioned in-principle for 3 years, with a provision for renewal, subject to satisfactory compliance with the terms and conditions of sanction stipulated by the Bank. 2. A standby limit to the extent of 20% of the assessed limit will be made available to the Gold Card holders for meeting urgent credit needs for executing sudden orders. 3. Requests for Packing Credit in Foreign Currency (PCFC) from Gold Card holders will be given priority. 4. PCFC will be extended at a rate not exceeding LIBOR + 75 basis points. 5. Rate of interest will be 0.25% lower than the rate applicable for normal exporters. (The extant interest rate of the Bank for pre-shipment credit up to 180 days and post-shipment credit up to 90 days is 8 %. Gold Card holders shall be charged an interest rate of 7.75 % for these credit facilities for a like tenor.)

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6. Rate of interest applicable for up to 90 days on post-shipment export credit, (in the extant case 8 %, 7.75 % for Gold Card holders), will be extended for a maximum period of 365 days. 7. In case of unanticipated export orders, norms for inventory will be relaxed taking into account the size and nature of export order. 8. Service charges stipulated for Gold Card holders will be 25% lower than the charges recovered from other exporters. Tenure : The Gold Card will be issued for a period of 3 years and will be automatically renewed for a further period of 3 years provided no adverse features, irregularities are noticed in the account. In case of any misuse of the card or observance of any violation of terms and conditions, the Bank shall have the right to recall the Card any time. Time frame for disposal of applications received under the scheme : Sanction of fresh / enhanced credit limit Renewal of existing credit limits Sanction of ad-hoc credit facilities Documents 25 Days 15 Days 7 Days :

Requests for credit under Gold Card Scheme is to be made as per the simplified loan application form for export credit (please see Annexure B in Downloads) along with Annexure I to IV as applicable, together with further details if necessary, for assessment of credit limit under Gold Card Scheme.

LOAN SCHEME FOR INDIVIDUALS

We have finance schemes that translate your dreams into reality. Loans against deposits If you have any term deposit with us you can in emergencies always avail of this facility which we offer. Persons eligible Margin : Anyone who has a deposit with us. As low as 10%

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As high as 25% Repayment Guarantee In easy installments or date of maturity of the receipt. No guarantors required.

LOAN SCHEME FOR PROFESSIONALS AND SELF-EMPLOYED We have finance schemes that translate your dreams into reality. Purpose To purchase equipment/ repairs/renovation to existing equipment, purchase of tools, working capital requirements, acquiring/repairing business premises. Eligibility Doctors, Dentists, Chartered Accountants, Cost accountants, Lawyers, Solicitors, Engineers, Architects, Surveyors, Construction contractors or Management Consultants or to a person trained/qualified/skilled in the chosen vocation/field in which employed, "the bank extends finance under its own facilities and even under the Govt. sponsored schemes. Amount Depending upon the assessed requirement considering financial viability, repayment capacity etc. Margin : Generally 25%, which can vary according to requirement and assessment. Security Assets created by the Loan to be charged to the bank and other collateral security. Repayment by From short term to period generally ranging up to 5 years. EMI Processing fee 1% of the loan for amount above Rs 25,000/-.

HOUSING LOAN SCHEME Purpose

Build your own house

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Purchase new house/Flat (Old or New) Repairs/Renovation of existing house

Eligibility

Salaried Persons, Professionals, Businessmen with sufficient disposable income. Farmers having min five acres of irrigated land holding. Non Resident Indians are also eligible.

Age

Minimum 21 years - Maximum 50 yrs. for salaried persons. Maximum 55 years for other than salaried persons

Quantum Loan:

of For salaried class: 50 times of Gross Salary or 60 times of Net Monthly salary which ever is higher subject to applicable margin For Businessmen: Equal to avg annual income (Net profit + Depreciation) of last 3 yrs X 4 times (B/S, IT returns) Also note repayment of any other term liabilities. For Farmers: 4 times of avg annual net income. Cross check Gross income, land holding, cropping pattern, Sugar Factory/APMC/ other agencies bills etc. Ensure for repayment capacity & repayment experience. If jointly owned, consider joint holders income

Maximum Loan Quantum: Deductions

No maximum limit for Metro/Urban area Rs.15 lakh in Semi Urban/Rural area Rs.5 lakh for repairs/renovation in all areas Total deductions including proposed EMI should not exceed 65% of gross monthly salary / annual income.

Security

Upto Rs 25000/- One Guarantor with sufficient income/networth Above Rs 25000/- Equitable/Regd. Mortgage of property or Equal amount of paper security (NSCs, FDRs of our Bank etc. excluding shares) guarantee of the spouse, guarantee of relatives whose income is considered for quantum

Insurance

For full value against fire/ Earthquake etc with Banks clause.

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1. Actual search & title verification charges to be borne by the borrower, to be paid to the empanelled Advocate. 2. Valuation charges to be borne by borrower, to be paid to empanelled valuer 3. Stamp duty on various document to be executed by the borrower applicable as per State Stamp Act. 4. Documentation charges as given below : Loan amount For credit facilities Upto Rs. 2.00 Lakh Rs.2,00,001/- to Rs.10,00,000/Rs.10,00,001/- to Rs.50,00,000/Rs.50,00,001/ and above 5. Processing Fees: Loan Slab Loan upto Rs.5.00 lakh Loan above Rs.5.00 lakh and upto Rs.15.00 lakh Loan above Rs.15.00 lakh 6. Prepayment Penalty: For closure of account from own source no prepayment penalty is to be charged. However, in case of takeover of housing finance by other Banks/FIs prepayment penalty at 2% on outstanding balance be charged and recovered before releasing the charge/paper(s). Life Insurance: NA MAHABANK PERSONAL LOAN SCHEME Purpose Eligibility To meet personal Expenses Permanent salaried / Professionals (must be IT assesses) Processing fees Rs.1000/Rs.2500/Rs.5000/Charges Nil Rs.500/Rs.1,500/Rs.5,000/-

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Age Minimum Employment

21yrs 60yrs at Loan Maturity For Service Persons Total 5 Yrs Current 2 yrs Professionals -3 years

Minimum Annual Income Maximum amount

Salaried persons, permanent in service / professionals -minimum income Rs. 3.00 lakh p.a. (Teachers having salary a/c Rs.2.00 lac) Rs.1.50 lac Salaried - 6 times Gross Pay Professionals - 50% of Gross Avg. Income of last 3 yrs IT return or last yrs inc. which ever is less

Margin : Deduction Limit Security Guarantor Repayment Processing fee Insurance Group Finance Others

Nil 60% of Gross Pay CLEAN One Guarantor acceptable to Bank EMI 36 mts (Max) or residual service whichever is less 1% of Loan Amt. Min. Rs.500.00 N.A. No Group Finance N.A.

SME CHARTER

To provide professional, efficient, courteous, diligent and speedy services in the matter of SME lending.

Credit facilities considered: Term Loan, Cash Credit, Bank Guarantee and Letter of Credit

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Simplified and bilingual applications for Credit Facilities to SME Units are made available

Loan Application complete in all respect duly receipted and acknowledged. Time Norms for disposal of loan applications: a. Upto Rs.25,000 b. Over Rs.25,000 and upto Rs.5.00 lakhs c. Over Rs.5.00 lakhs : 2weeks : 4weeks : 8 - 9 weeks

Collateral free loans upto Rs.5.00 lakh to SME units is mandatory. Loans sanctioned without collateral security / third party guarantee upto Rs. 100.00 lakh and having good track record and financial position are covered under Credit Guarantee Fund Scheme for SME i.e. Credit Guarantee Trust Fund Scheme for Micro & Small Enterprises (CGTMSE)

For covering the advances under Credit Guarantee Funds Scheme, a Guarantee Fee @ 1.50% of credit facility sanctioned for a period of 5 years (borne by bank) and Annual Service Fee @0.75% of outstanding amount as on 31st March every year is payable (50% of the annual service fee borne by the Bank). The Trust shall provide guarantee as under: Category Maximum extent of Guarantee where credit facility is Upto Rs.5 lakh Above Rs.5 lakh upto Above Rs.50 lakh upto Rs.50 lakh Rs.100 lakh Rs.37.50 lakh plus 50% of amount in default above Rs.50 lakh subject to overall ceiling of Rs.62.50 lakh

85% of the amount 75% of the amount in Micro Enterprises in default subject to default maximum Rs.4.25 lakh Women Units located 28 of: maximum Rs.37.50 lakh subject to of:

80% of the amount in default subject to Rs.40 lakh plus 50% of amount in default above Rs.50 lakh subject to

entrepreneurs/ maximum of: Rs.40 lakh

in North East Region (incl. Sikkim)

overall ceiling of Rs.65 lakh Rs.37.50 lakh plus 50%

All category

other of

75% of the amount in default subject to maximum of: Rs.37.50 lakh

of amount in default above Rs.50 lakh subject to overall ceiling of Rs.62.50 lakh

borrowers

To reduce the Entrepreneurs dependence on Term lending Institutions, composite loan upto Rs.100.00 lakhs is sanctioned to SME Units.

Loan quantum: Minimum 20% of projected annual sales turnover (Nayak Committee norms)

Comfortable Margin option is available as under: Upto Rs.25,000 Above Rs.25,000 : NIL :25%

Laghu Udhyami Credit Card: Hassle free credit upto Rs.10.00 lakhs is provided through this Card.

Mahabank Artisan Credit Card: Credit upto Rs.2.00 lakhs - to Artisans. Considering the nature of the activity, Cash disbursement is allowed.

Finance is made available at most attractive rate of interest. The same are as under:

I] Advances to Micro & Small Enterprises having total limits (Fund + Non fund) upto Rs. 25.00 lakhs: Category a) For all new accounts Rate of interest Base Rate + 1.25% (at present 9.50%)

b) For existing MSME accounts a) Fixed ROI as per earlier guidelines will be which are yet to complete the first applicable till expiry of the first year of

29

year of advance as per earlier advance guidelines** b) on expiry of the first year of advance at Base Rate + 1.25% (at present 9.50%) c) In respect of advances having total limits above Rs. 2.00 lakhs, credit rating will have to be done as per extant guidelines. Henceforth, ROI will not be linked to Credit Rating for advances to Micro & small Enterprises having total limits upto Rs. 25.00 lakhs. However, Credit rating will continue to be done for risk perception in respect of advances having total limits above Rs. 2.00 lakhs and upto Rs. 25.00 lakhs.

II] Advances to Micro, Small and Medium Enterprises having total limits (Fund + Non fund) above Rs. 25.00 lakhs: Rate of interest in respect of all the new MSME advances having total limits above Rs. 25.00 lakhs will be decided as per the Credit Risk Rating. Fixed ROI for the first year as per earlier guidelines will not be applicable for new advances hereafter. In respect of existing advances, stipulated interest rates for the first year of advance will continue as per earlier guidelines. On completion of first year of advance, new rates will be applicable as per their Credit Risk rating as given hereunder. The following structure of interest rates will be applicable from entry level point for all the new accounts having total limits above Rs. 25.00 lakhs and existing accounts having total limits above Rs. 25.00 lakhs, which have completed first year of advance. The same interest rates are applicable to all the advances availing working capital facilities and / or term loan facilities. INTEREST RATES BPLR of the Bank : 14.25% ( With effect from 5. 05. 2011 ) Base Rate : 10% (With effect from 5. 05. 2011 ) Mahabank Jewel Loan Scheme:

30

Particulars For Agriculture loans Rate of Interest

(i) For loans eligible under interest subvention 7% scheme: 7% (ii) For other Agricultural loans: As per applicable rate of interest for Agri loans For loans other than Agriculture (i) For Senior citizens (ii) For others Mahabank Top-up Loan Scheme: Particulars For Repair / Renovation / extension of house For other purpose Rate of Interest Base Rate + 1.00% Base Rate + 2.25% Base Rate + 2.25 % Base Rate + 3.00 %

Advances granted against security of NSC / KVP / LIC Policy / RBI Relief Bonds: Existing Rate under BPLR System BPLR - 1.00% Rate of Interest under Base Rate System Base Rate + 3.00%

A) Advances granted against security of Units of Mutual funds / Shares and Debentures/ Other approved Govt. Securities / Gold Ornaments: Existing Rate under BPLR System BPLR + 4% Rate of Interest under Base Rate System Base Rate + 7.50%

Mahabank Housing Loan Scheme: BPLR System Floating Option Tenor/ Amount Up to Rs. 30 31 Above Rs. 30 Rs. 75.00 Lakh

lakh

lakh & less than Rs. 75.00 lakh

& above

Up to and inclusive of 5 years Above 5 years and up to and inclusive of 10 years Above 10 years but below & inclusive of 20 years For repair/ renovation

BPLR 3.50% BPLR 3.25%

BPLR 3.00% BPLR 2.50% BPLR 2.25% (11.25%)

BPLR 2.75% BPLR 2.25%

BPLR 3.00% BPLR 2.25%

BPLR 2.00%

Mahabank Housing Loan Scheme: Base Rate System Floating Option Tenor/ Amount Up to Rs. 30 lakh Above Rs. 30 lakh & less than Rs 75.00 lakh Up to and inclusive of 5 years Above 5 years and Base Rate + 0.25% Base Rate + 0.50% Base Rate Base Rate + 0.50% Base Rate + 1.00% Base Rate + 1.25% Fixed Option Up to Rs. 30 lakh Above Rs. 30 lakh & less than Rs 75.00 lakh Up to and inclusive of 5 years Above 5 years and 10.75% 32 11.50% 11.75% 10.25% 11.25% 11.50% Rs 75.00 Lakh & above Base Rate + 0.75% Base Rate + 1.25% Base Rate + 1.50% Rs 75.00 Lakh & above

up to and inclusive of 10 years Above 10 years but below & inclusive of 20 years

up to and inclusive of 10 years Above 10 years but below & inclusive of 20 years For Repair/ Renevoation Base Rate + 1.25% ----

Mahabank Consumer Loan Scheme: Rate of Interest under BPLR System BPLR + 1.50% Mahabank Vehicle Loan Scheme: Tenor Rate of Interest under BPLR System Repayment up to 3 years Repayment above 3 years Second hand Vehicles BPLR 2.25% BPLR 1.25% BPLR + 1.25% Rate of Interest under Base Rate System Base Rate + 1.25% Base Rate + 2.25%. Base Rate + 5.00% Rate of Interest under Base Rate System Base Rate + 5.50%

irrespective of Tenor Model Education Loan Scheme Loan Slab Existing Rate under BPLR System Loan amount upto and inclusive of Rs.4.00 lakh Loan amount above BPLR-1.25% Base Rate + 2.75% BPLR-2.00% Rate of Interest under Base Rate System Base Rate + 1.75%

Rs.4.00 lakh Mahabank Adhar Loan Scheme: Existing Rate under BPLR System BPLR-0.75% Personal loan: Rate of Interest under Base Rate System Base Rate + 3.00%

33

Existing Rate under BPLR System BPLR + 2.00% Mahabank Salary Gain Scheme: Existing Rate under BPLR System BPLR+2%

Rate of Interest under Base Rate System Base Rate + 6.00%

Rate of Interest under Base Rate System Base Rate + 6.00%

Mahabank Financing to Trade & Service Scheme: Secured against collateral security equal to 100% of sanctioned limit) Existing Rate under BPLR System Up to and inclusive of Rs. 5.00 lakh Over Rs. 5.00 lakh and up to Rs. 25 lakh Over Rs. 25 lakh Secured against collateral security equal to 125% / 150% of sanctioned limit) Up to and inclusive of Rs. 5.00 lakh Over Rs. 5.00 lakh and up to Rs. 30 lakh BPLR BPLR + 0.50% BPLR + 1.50% Existing Rate under BPLR System BPLR BPLR + 0.50% Rate of Interest under Base Rate System Base Rate + 4.00% Base Rate + 4.50% Base Rate + 5.50% Rate of Interest under Base Rate System Base Rate + 4.00% Base Rate + 4.50%

Solar Water Heating Systems: Particulars Existing Rate under BPLR System Domestic users Institutional users Industrial / commercial users BPLR + 0.25% BPLR + 0.25% BPLR + 0.25% Rate of Interest under Base Rate System Base Rate + 4.00% Base Rate + 4.00% Base Rate + 4.00%

34

However, interest subsidy should be claimed as per extant rules. Agricultural Advances: Size of Advance Cash Credit / Working Capital Limits* / Term Loans BPLR Up to Rs. 50000/Above Rs. 50000/-& up to Rs. 1 lakh Above Rs. 1 lakh & up to Rs. 2 lakh Above Rs. 2 lakh & up to Rs. 10 lakh Above Rs. 10 lakh *Short term production BPLR 0.50% 7.00% (Fixed). If loan Base Rate+3.50% 7.00% (Fixed). If loan remains stipulated as per Interest BPLR 1.00% Base Rate+2.50% BPLR 2.25% Base Rate+1.75% BPLR 3.25% BPLR 2.75% Base Rate Base Rate+0.75% Base Rate+1.25%

credit up to Rs. 3.00 lakh remains unpaid after cut- unpaid after cut-off date/period to Farmers where interest off date/period stipulated subvention is available as per Interest Subvention Subvention Scheme, applicable Scheme, applicable rate of rate of interest will be applicable interest will be applicable as per above slabs. Advances Yojana The above rates applicable to Agricultural Advances will also apply to following categories of advances: i) Scheme for financing setting up of Agri. Clinics and Agri. Business Centre by Agricultural Graduates ii) Mahabank Kisan Gold Credit Card under Base Rate + 1.25% as per above slabs.

Mahabank Krishi Shakti

35

Advances to FSCS / PACS /LAMPS: Size of Advance Existing Rate under BPLR System Up to Rs. 25000/Above Rs. 25000/BPLR 3.00% BPLR 2.50% Rate of Interest under Base Rate System Base Rate+1.00% Base Rate+1.50%

Advances to Self Help Groups (SHGs): Particulars Existing Rate under BPLR System For single borrower Federation / Group BPLR 2.50% BPLR 3.00% Rate of Interest under Base Rate System Base Rate+1.50% Base Rate+1.00%

Bills Discounted Under LC (Inland): Applicable for fresh bills of Rs. 1.00 lakh and above Residual Tenor of Bill Existing Rate under PLR System Up to and inclusive of 90 days Above 90 days but up to and inclusive of 180 days 7.25% 7.50% Rate of Interest under Base Rate System Base Rate Base Rate

Powers delegated to various authorities for considering deviation in interest rates on bill discounting under Inland L/C stand withdrawn as the rate of interest can not below the Base Rate Rupee Export Credit: A] Interest Rates on Rupee Export Credit for categories covered under RBI's Interest subvention scheme under Base Rate system:

36

Existing Rate under BPLR System Pre Shipment Credit Up to 180 days Above 180 days and up to 270 days Extended to Exporters BPLR 4.75% BPLR 4.50%

Rate of Interest under Base Rate System Up to 180 days Above 180 days and up to 270 days Base Rate 0.75% Base Rate 0.50%

engaged in the export of: ( i ) Handicrafts ( ii ) Carpets ( iii ) Handlooms (iv ) Small & Medium Enterprises Gold exporters export Card Holder in of:

BPLR 4.75%

BPLR 4.50%

Base Rate 0.75%

Base Rate 0.50%

engaged

( I ) Handicrafts ( ii ) Carpets ( iii ) Handlooms (iv) Small & Medium Enterprises

Existing Rate under Post Shipment Credit BPLR System Up to 90 Above 90 days days and up to 180 Extended to Exporters BPLR 4.75% days BPLR 4.50%

Rate of Interest under Base Rate System Up to 90 Above 90 days days and up to 180 days Base Rate 0.75% Base Rate 0.50%

engaged in the export of: ( i ) Handicrafts ( ii ) Carpets ( iii ) Handlooms (iv ) Small & Medium Enterprises

37

Up to 90 days

Above 90 days and up to 365 days BPLR 4.50%

Up to 90 days

Above 90 days and up to 365 days

Gold exporters

Card

Holder in

BPLR 4.75%

Base Rate 0.75%

Base Rate 0.50%

engaged

export of: (i) Handicrafts (ii) Carpets (iii) Handlooms (iv) Small & Medium Enterprises

B] Normal Interest Rates on Rupee Export Credit applicable to all exporters other than those mentioned above where interest subvention is available under Base Rate System: Existing Rate under BPLR Rate of Interest under Base System Rate System Above 180 days and up to 270 days Base Rate + 1.50% Base Rate + 1.50%

Up to 180 Above 180 days Up to 180 days and up to 270 days Pre Shipment Credit BPLR 2.75% Pre Shipment Credit BPLR extended to Gold Card Holder exporters Up to 90 days Above 90 days and up to 180 days Post Shipment Credit BPLR BPLR 2.50% Base Rate + Up to 90 days 2.75% BPLR 2.50% Base Rate + 1.25% BPLR 2.50% Base Rate + 1.25% days

Above 90 days and up to 180 days Base Rate +

38

2.75% Up to 90 days Above 90 days and up to 365 days Post Shipment Credit BPLR extended to Gold Card Holder exporters 2.75%

1.25% Up to 90 days

1.50% Above 90 days and up to 365 days Base Rate + 1.50%

BPLR 2.50% Base Rate + 1.25%

Micro, Small & Medium Enterprises (MSME): A) Advances to Micro & Small Enterprises having total limits (Fund + Non fund) upto Rs. 25.00 lakhs: Category a) For all new accounts Rate of interest Base Rate + 0.50%

b) For existing MSME accounts a) Fixed ROI as per earlier guidelines will be which are yet to complete the first applicable till expiry of the first year of advance year of advance as per earlier b) on expiry of the first year of advance at Base guidelines Rate + 0.50%

c) In respect of advances having total limits above Rs. 2.00 lakhs, credit rating will have to be done as per extant guidelines. Henceforth, ROI will not be linked to Credit Rating for advances to Micro & small Enterprises having total limits upto Rs. 25.00 lakhs. However, Credit rating will continue to be done for risk perception in respect of advances having total limits above Rs. 2.00 lakhs and upto Rs. 25.00 lakhs. B) Advances to Micro, Small and Medium Enterprises having total limits (Fund + Non fund) above Rs. 25.00 lakhs: - Revised Rate of Interest w.e.f. 10.01.2011: REVISED RATE OF INTEREST UNDER BASE RATE STRUCTURE

39

ROI for total limits Rs.25 upto crore AAA above lakhs Rs. 1

ROI for total limits above Rs. 1 crore upto Rs.5.00 crore Base Rate +2.00%

ROI for total limits above Rs. 5.00 crore upto Rs.10.00 crore Base Rate +3.00% Base Rate +3.50% Base Rate +4.25% Base Rate +5.00% Base Rate +6.50% Base Rate +7.00%

ROI for total limits above Rs.10.00 crore

Base Rate +3.25% Base Rate +3.75% Base Rate +4.50% Base Rate +5.25% Base Rate+6.75% Base Rate +7.25%

Base Rate +3.50% Base Rate +4.00% Base Rate +4.75% Base Rate +5.50% Base Rate +7.00% Base Rate +7.50%

AA

Base Rate +2.50%

Base Rate +2.75%

BBB

Base Rate + 3.50%

BB

Base Rate +4.00%

B&C

Base Rate + 4.50%

Credit Risk Rating REVISED

RATE

OF

INTEREST

UNDER

BPLR

STRUCTURE ROI for total limits ROI for total ROI for total ROI for total above Rs.25 lakhs limits above upto Rs. 1 crore Rs. 1 crore upto Rs.5.00 crore AAA AA A limits above Rs. 5.00 crore upto Rs.10.00 crore BPLR % limits above Rs. Rs.10.00 crore

BPLR 1.75% BPLR 0.50% BPLR 0.25% BPLR 1.00% BPLR %

BPLR + 0.25% BPLR + 0.50%

BPLR 0.75% BPLR + 0.75% BPLR + 1.00% BPLR + 1.25% 40

BBB BB B&C

BPLR %

BPLR + 1.50% BPLR + 1.75% BPLR + 2.00%

BPLR + 0.50% BPLR + 3.00% BPLR + 3.25% BPLR + 3.50% BPLR + 1.00% BPLR + 3.50% BPLR + 3.75% BPLR + 4.00%

Commercial Loans & Advances above Rs. 2.00 lakh (excluding the categories from Sr. No. 1 to 19) where it is essential to undertake internal credit risk rating (CRR) as per Risk Management Policy prescription and interest rate is linked to CRR. Existing Rate under BPLR System AAA AA A BBB BB B&C BPLR BPLR+0.50% BPLR+1.25% BPLR+2.00% BPLR+3.50% BPLR+4.00% Rate of Interest under Base Rate System Base Rate+4.00 Base Rate + 4.50% Base Rate +5.25% Base Rate +6.00% Base Rate +7.50% Base Rate +8.00%

In case of Term Loans, additional Load factor (Tenor premium) as under is to be added to the above rates. Additional load factor (on Term Loans only and not on working capital facilities) as per residual tenor of term loan is as under: Under BPLR System Residual Tenor of the Additional Load Factor loan Above 1 year and up to 3 25 bps years Above 3 years and up to 50 bps 5 years 50 bps 25 bps Under Base Rate System Additional Load Factor

41

Above 5 years and up to 75 bps 7 years Above 7 years 100 bps

75 bps

100 bps

This is subject to that the This is subject to that the final rate of interest after final rate of interest after additional load factor as additional load factor as above should not exceed above should not exceed the ceiling of BPLR + 16.25%. 4.00% as at present.

DOMESTIC TERM DEPOSITS Interest Rate on Domestic Term Deposits: [Interest rate in % p.a.] For amount less than Rs 1 Cr. Duration Existing rates w.e.f. 10.01.11 7 days to 14 days 15 days to 30 days 31 days to 45 days 46 days to 60 days 61 days to 90 days 91 days to 180 days 2.50 3.50 4.00 5.00 5.00 6.50 Revised rates w.e.f. 16.05.11 4.00 4.00 4.00 5.00 5.00 6.50 For amount Rs 1 Cr. to Rs 5 Cr. Existing rates w.e.f. 10.01.11 2.50 3.50 4.00 5.00 5.00 6.50 Revised rates w.e.f. 16.05.11 6.25 6.25 6.25 6.50 6.75 7.00

42

181 days to 270 days 271 days to less than 1 year One Year Over 1 year to less than 3 years 3 years (Mahalaxmi Term Deposit) Over 3 years to 5 years Over 5 years 1.

7.25 7.25 8.55 8.55 8.60 8.30 8.00

7.25 7.25 8.55 8.55 9.00 8.60 8.00

7.25 7.25 9.00 8.30 8.30 8.30 8.00

7.25 7.25 9.00 8.30 8.30 8.30 8.00

The revised rates are applicable for both fresh deposits and renewal of

existing deposits. 2. The rate of interest on Bank Term Deposit Scheme, 2006 (Tax Saving

Scheme for 5 year term deposit) up to investment limit of Rs 1.00 lakh only will be 8.60%. 3. In case of premature withdrawal of deposit, the applicable rate would

be 1% below the interest rate of the period for which deposit has been actually held. However, if premature withdrawal of deposit is taken for reinvestment in the Bank for a period longer than residual maturity period of existing deposit there will be no penalty on applicable rate. 4. 5. Deposits to be accepted for a maximum period of 10 years. Senior citizens will be offered an additional rate of 0.50% only for

maturity slabs of 91 days to less than One Year and 0.75% for maturity slabs of One Year and above. The additional interest rate for senior citizens will be offered for an amount of less than Rupees One crore only. 6. 7. The revised rates would be applicable for all NRO term deposits. The revised interest rates are applicable to renewals and fresh (new)

term deposits only.

43

8.

Accepting of multiple receipts from a single depositor on a single day

for interest differential be discouraged. 9. 10. CO. All rates are subject to change from time to time. Bank can revise interest rate for Rs 15 lakh and above at any time and

Branch/Regional Office must keep themselves apprised of revised rates from

44

BANKS INITIATIVES FOR COUNSELING TO FARMERS: The Bank has set up three Farmers Counseling Centers in Pune and Satara districts of Maharashtra. These Counseling Centers provide: Credit counseling services through face-to-face interaction as well as through telephone / Mobiles. Counseling on their debts and financial planning. Awareness on general banking opening of Savings (no frill) and deposit accounts. A van fitted with Touch Screen visits branches / villages in Pune, and adjoining districts namely Solapur, Ahmednagar and Satara, which gives information on the agricultural practices of important crops / deposit schemes of the bank. The Agricultural Assistant accompanying the vehicle explains the details to the farmers. The addresses of the Counseling Centers are as under:1) The In-charge, Farmers Counseling Center C/o Rural Development Center Bank of Maharashtra At & Post Bhigwan, Tal. Indapur, Dist. Pune Phone No. 02118 243251 2) The Coordinator Rural Development Center Bank of Maharashtra Janmangal Building Survey No.7A/2, Opp. Kirloskar Pneumatic Industrial Estate-Hadapsar Pune 411 013. Phone No. 020-26870815

45

Fax No. 020-26818787 The third Centre is established in the Regional Office of our Bank at Satara, the address of which is as under:3) The Lead District Manager Bank of Maharashtra Satara Region Jeevan Tara, L.I.C. Regional Office Building Opp.Collector Office, Koregaon Road, Satara 415 001 Phone No. 02162 239680 Fax No. 02162 233519

46

RETAIL BANKING PRODUCTS & SERVICES ATM CARD Mahabank Visa Debit card gives you the freedom to access your savings at This card allows you to purchase goods at retail outlets and withdraw cash Direct on line debit to your savings account. Round the clock cash withdrawal facility up to Rs 20000/No joining fees. Completely safe and secure.

any Visa accredited Merchant Establishment or ATM. from ATMs in India and abroad.

MAHA-MOBILE

Balance Enquiry Mini Statement - Last 3 Transactions Cheque Status Enquiry Add Beneficiary Modify & Delete Beneficiary Funds Transfer - Within Customer's own Accounts Funds Transfer - To any other Account within BOM Interbank Funds Transfer Request for Issuance of Cheque Book Request for Physical Statement of Account View of Mobile Banking Transaction Log Synchronization of Accounts and Beneficiaries Change MPIN Change Application Password Upgrade Application Deactivate Application

47

INTRODUCTION TO THE STUDY

Banking system occupies an important place in a nation's economy. A Banking institution is indispensable in a modern society. It plays a pivotal role in the economic development of a country and forms the core of the money market in an advanced country. In India, though the money market is still characterized by the, existence of both the organized and the unorganized segments. Institutions in the organized money market have grown significantly and are playing an increasingly important role. The unorganized sector, comprising the moneylenders and indigenous bankers caters to the credit reeds of a large number of persons especially in the countryside. Amongst the institutions in the organized sector of the money market; commercial banks and co-operative banks have been in existence for the past several decades. The Regional Rural Banks came into existence since the middle of seventies. Thus, with the phenomenal geographical expansion of the commercial banks and the setting up of the Regional Rural Banks during the recent past, the organized sector of money market has penetrated into rural areas as well. Besides the aforesaid institutions. Which mainly serve as sources of short-term credit to industry, trade, commerce and agriculture; variety of specialized financial institutions have been set up in the country to cater to the specific needs of industry, Agriculture and Foreign trade. Among the banking institutions in the organized sector, the commercial banks are the oldest institutions having a wide network of branches, commanding utmost public confidence and having the lion's share in the total banking operations. Initially, private individuals established them as corporate bodies with share-holdings, but subsequently there has been a drift towards State ownership arid control.

OBJECTIVE OF THE PROJECT OBJECTIVES OF THE STUDY

The objectives of this project are a study of retail banking in India. - A case study on Bank of Maharashtra. Some of the key issues are as follows: To study the market penetration of Bank of Maharashtra among the customers.

48

 To identify and analyze the Consumer Buying Behavior with respect to Bank of Maharashtra Personal Loans with the help of questionnaires on the basis of different dimensions. Study the entire process of loan disbursement and suggest improvements to improve the efficiency and reduce the turnaround time. To understand the Consumer Finance Market in India and its future prospects. To make a comparative financial study between the major players in the Banking sector thereby making suggestions on the areas of improvement. To study the reasons of rejections of loans by the customers.

SCOPE OF THE PROJECT

The study was limited to the analysis of loan products of the bank in New Delhi region.

49

CHAPTER TWO: EXECUTIVE SUMMARY

Bank of Maharashtra is the premier bank of Maharashtra, operating in the country of India. Registered on 16th Sept 1935 with an authorized capital of Rs 10.00 lakh and commenced business on 8th Feb 1936. Known as a common man's bank since inception, its initial help to small units has given birth to many of today's industrial houses. After nationalization in 1969, the bank expanded rapidly. It now has 1375 branches (as of 31 March 2008) all over India. The Bank has the largest network of branches by any Public sector bank in the state of Maharashtra. The Bank was founded by a group of visionaries led by the Late V. G. Kale and the Late D. K. Sathe and registered as a Banking Company on 16th September, 1935 at Pune. The vision was to reach out and serve the common man and meet all their banking needs. Successive leadership of the Bank and the employees have endeavoured to fulfill their vision. Today, Bank of Maharashtra has over 12 million customers across the length and breadth of the country served through 1506 branches in 23 states and 2 union territories - a truly pan India bank.

50

CHAPTER THREE: METHODOLOGY

The project has been divided into four stages. The first stage included gathering information about the banks profile, the various schemes launched by the bank and getting acquainted with the working of the bank. The second stage involved determining the objective of the study, knowing the target audience and drafting a questionnaire. The questionnaire was designed keeping in mind the target audience and objectives of the study. It was a non-disguised in nature and included a few openended questions. Visits to different branches of the bank were made to get the questionnaire filled. RESEARCH PLAN The research was exploratory in nature and the goal was to gather preliminary data to shed light on the real nature of problems and to suggest possible solutions or new ideas. It involved getting a feel of the situation and lay emphasis on the discovery of ideas and possible insights. DATA SOURCES The research called for gathering secondary data, primary data or both. Secondary data is the data that is collected from another purpose and already exists somewhere. Primary data is gathered for a specific purpose and is collected by the researcher himself. Primary data was collected from the employees and existing customers of the Banks. The primary information was collected through Questionnaire and interviews presented to the bank staff and the customers.

51

Secondary Data was collected from: a) Circulars and Instructions received from Head Office/Zonal. Office and Regional Office in regards to Quality Management. b) Annual audit report of the Bank. c) Product and Service Brochures of the Bank. DATA COLLECTION FORM For the purpose of this project, a questionnaire was designed to collect data. The questionnaire was a non-disguised because the objective and purpose were conveyed to the respondents before asking for their responses. The questions were structured open for general information and closed for collecting specific information. SAMPLING PLAN The sampling unit comprised of the people present in the various branches of the Bank of Maharashtra. The sample size taken for the study was hundred fifty. The samples were chosen on the basis of random sampling and these respondents belonged to middle and upper class salaried and self-employed people, students, professionals and housewives. The respondents belonged to the age of 18 years and above. The research was carried out in the Delhi branches of the bank. DATA ANALYSIS TECHNIQUE Simple averages Tabulation

PROBABLE FINDINGS: This research lead me to the reasons that why customers are not satisfied with the services provided by the bank and what are the ways in which the Bank of Maharashtra can improve upon the working and the services.

52

LIMITATIONS 1. The survey was conducted in selective areas because of constraints of time and resources. Therefore the findings cannot be generalized or claimed until further research has been carried out. 2. The sample size taken was 150, which may not reflect a true picture of the consumers mind. Because of these constraints the analysis may not be accurate and may vary when tested in different places and time.

53

CHAPTER FOUR: FINDINGS AND ANALYSIS

Age group 25 -35 36-45 46-50 >50 Total Frequency 12 24 52 12 100 Percent 12.0 24.0 52.0 12.0 100.0

54

Occupation Frequency Pvt Service Govt service Self employed/Business Others Total 12 26 50 12 100 Percent 12.0 26.0 50.0 12.0 100.0

55

Loan applied versus loan sanctioned (Occupation wise)

Pvt. Service (n=12) Loan Applied Freq < 5 Lakh 5-10 Lakh 10-15 Lakh > 15 Lakh Total 0(0) 6(50) 6(50) 0(0) 12(100) Loan Sanctioned Freq 0(0) 1(8.3) 4(33.3) 0(0) 5(41.7) Govt. Service (n=26) Loan Applied Freq 5(19.2) 3(11.5) 18(69.2) 0(0) 26(100) Loan Sanctioned Freq 4(15.4) 7(26.9) 9(34.6) 0(0) 20(76.9) Self Employed (n=50) Loan Applied Freq 5(10) 14(28) 19(38) 12(24) 50(100) Loan Others (n=12) Loan Loan Sanctioned Freq 3(25) 4(33.3) 3(25) 0(0) 10(83.3) Total (n=100) Loan Loan

Sanctioned Applied Freq 8(16) 4(8) 18(36) 3(6) 33(66) Freq 1(8.3) 4(33.3) 7(58.3) 0(0) 12(100)

Applied Sanctioned Freq 11(11) 27(27) 50(50) 12(12) 100(100) Freq 15(15) 16(16) 34(34) 3(3) 68(68)

(Note: Figures in parentheses indicate percentages) Loan Term Occupation Pvt. Service (n=5) Govt. Service(n=20) Self Employed (n=33) Others(n=10) Total(n=68) < 5 Year 0(0) 0(0) 0(0) 1(10) 1(1.5) 5-10 Yr 1(20) 7(35) 16(48.5) 4(40) 28(41.2) 10-15 Yr 3(60) 12(60) 16(48.5) 4(40) 35(51.5) > 15 yrs 1(20) 1(5) 1(3) 1(10) 4(5.9) Total 5(100) 20(100) 33(100) 10(100) 68(100)

(Note: Figures in parentheses indicate percentages and Figures computed for those who have received loans)

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Factors influencing satisfaction level of clients towards documentation of Personal loans (occupation versus documentation process) by taking mean scores
Checklist of Documents (Terms & conditions) 3.25 12 .965 3.35 26 .689 3.20 50 .857 3.25 12 .622 3.25 100 .796 Time taken for the Loan processing 2.92 12 .515 3.08 26 .744 3.52 50 .677 3.50 12 .522 3.33 100 .697

Pvt. Service(n=12)

Mean N Std. Deviation Mean N Std. Deviation Mean N Std. Deviation Mean N Std. Deviation Mean N Std. Deviation

Processing Knowledge Communicatio Reliabilit Charges of the Banker n from bank y 2.75 3.58 3.33 3.08 12 .866 3.19 26 .634 3.56 50 .644 3.50 12 .522 3.36 100 .704 12 1.165 3.35 26 .629 3.20 50 .452 3.25 12 .452 3.29 100 .624 12 .888 3.54 26 .811 3.42 50 .609 3.17 12 .577 3.41 100 .698 12 .793 3.27 26 .874 3.40 50 .639 3.25 12 .452 3.31 100 .706

Govt. Service(n=26)

Self Employed (n=50) Other(n=12)

Total

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Factors influencing satisfaction level of clients towards documentation of Personal loans (Age Versus. documentation process) by taking mean scores
Total(n= 100) Mean Std. Deviation

Age

25-35(n=12)

36-45(N=24) Std. Deviation

46-50(n=52)

>50(n=12)

Std. Mean Deviation Mean Checklist of Documents (Terms & conditions) Time taken for the Loan processing Processing Charges Knowledge of the Banker Communicati on from bank Reliability

Std. Std. Mean Deviation Mean Deviation

3.42

0.79

3.33

0.64

3.29

0.80

2.75

0.97

3.25

0.80

3.50

0.52

3.29

0.69

3.29

0.78

3.42

0.51

3.33

0.70

3.58 3.17 3.42 3.33

0.67 0.39 0.51 0.49

3.33 3.25 3.42 3.46

0.56 0.61 0.78 0.78

3.29 3.35 3.42 3.13

0.78 0.71 0.72 0.69

3.50 3.25 3.33 3.75

0.67 0.45 0.65 0.62

3.36 3.29 3.41 3.31

0.70 0.62 0.70 0.71

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Individual satisfaction levels (As per scale) 1= not satisfied, 5= Fully satisfied Checklist of Documents (Terms & conditions) Pvt. Service Not Satisfied at all Somewhat Dissatisfied Neither Satisfied nor Dissatisfied Somewhat Satisfied Fully Satisfied Total 0(0) 3(25) 4(33.3) 4(33.3) 1(8.3) 12(100) Govt. Service 0(0) 2(7.7) 14(53.8) 9(34.6) 1(3.8) 26(100)

Occupation Self Employed 3(6) 4(8) 24(48) 18(36) 1(2) 50(100) Others 0(0) 0(0) 10(83.3) 1(8.3) 1(8.3) 12(100) Total 3(3) 9(9) 52(52) 32(32) 4(4) 100(100)

Occupation Time taken for Loan Pvt. Service Not Satisfied at all Somewhat Dissatisfied Neither Satisfied nor Dissatisfied Somewhat Satisfied Fully Satisfied Total 0(0) 2(16.7) 9(75) 1(8.3) 0(0) 12(100) Govt. Self Others Total

Service Employed 2(7.7) 0(0) 18(69.2) 6(23.1) 0(0) 26(100) 1(2) 0(0) 23(46) 24(48) 2(4) 50(100) 0(0) 0(0) 6(50) 6(50) 0(0) 3(3) 2(2) 56(56) 37(37) 2(2)

12(100) 100(100)

Occupation Processing Charges Pvt. Govt. Self Others Total

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Service Not Satisfied at all Somewhat Dissatisfied Neither Satisfied nor Dissatisfied Somewhat Satisfied Fully Satisfied Total 1(8.3) 0(0) 12(100) 2(16.7) 0(0) 9(75)

Service Employed 0(0) 2(7.7) 18(69.2) 0(0) 1(2) 23(46) 0(0) 0(0) 6(50) 2(2) 3(3) 56(56)

5(19.2) 1(3.8) 26(100)

23(46) 3(6) 50(100)

6(50) 0(0)

35(35) 4(4)

12(100) 100(100)

Occupation Knowledge of the Banker Pvt. Service Not Satisfied at all Somewhat Dissatisfied Neither Satisfied nor Dissatisfied Somewhat Satisfied Fully Satisfied Total 6(50) 2(16.7) 12(100) 11(42.3) 0(0) 26(100) 11(22) 0(0) 50(100) 3(25) 0(0) 31(31) 2(2) 1(8.3) 1(8.3) 2(16.7) Govt. Self Others Total

Service Employed 0(0) 2(7.7) 13(50) 0(0) 1(2) 38(76) 0(0) 0(0) 9(75) 1(1) 4(4) 62(62)

12(100) 100(100)

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Occupation Communication from bank Pvt. Service Not Satisfied at all Somewhat Dissatisfied Neither Satisfied nor Dissatisfied Somewhat Satisfied Fully Satisfied Total 0(0) 3(25) 2(16.7) 7(58.3) 0(0) 12(100) Govt. Self Others Total

Service Employed 1(3.8) 1(3.8) 8(30.8) 15(57.7) 1(3.8) 26(100) 0(0) 2(4) 26(52) 21(42) 1(2) 50(100) 0(0) 0(0) 1(1) 6(6)

11(91.7) 47(47) 0(0) 1(8.3) 43(43) 3(3)

12(100) 100(100)

Occupation Reliability Pvt. Service Not Satisfied at all Somewhat Dissatisfied Neither Satisfied nor Dissatisfied Somewhat Satisfied Fully Satisfied Total 4(33.3) 0(0) 12(100) 9(34.6) 1(3.8) 26(100) 20(40) 1(2) 50(100) 3(25) 0(0) 36(36) 2(2) 0(0) 3(25) 5(41.7) Govt. Self Others Total

Service Employed 2(7.7) 0(0) 14(53.8) 1(2) 0(0) 28(56) 0(0) 0(0) 9(75) 3(3) 3(3) 56(56)

12(100) 100(100)

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Pearson Chi-Square Tests

Checklist of Documents (Terms & conditions) Occupation Chisquare Df Sig. 14.880

Time taken for the Loan processing

Processing Charges

Knowledge of the Banker

Communication from bank

Reliability

28.229

28.265

34.834

29.346

27.616

12 .248(a,b)

12 .005(*,a,b)

12 .005(*,a,b)

12 .000(*,a,b)

12 .003(*,a,b)

12 .006(*,a,b)

Results are based on nonempty rows and columns in each innermost sub table. * The Chi-square statistic is significant at the 0.05 level. More than 20% of cells in this sub table have expected cell counts less than 5. Chi-square results may be invalid. The minimum expected cell count in this sub table is less than one. Chi-square results may be invalid. Do you find any gap between the services Pvt. Service Yes No Total 7(58.3) 5(41.7) 12(100 ) Govt. Service 6(23.1) 20(76.9) 26(100) Occupation Self Employed 17(34) 33(66) 50(100) Others 2(16.7) 10(83.3) 12(100) Total 32(32) 68(68) 100(100)

63

64

How would you rate the services of Bank of Maharashtra Pvt. Service Excellent Good Fair Poor Total 5(41.7) 3(25) 2(16.7) 2(16.7) 12(100) Govt. Service 13(50) 10(38.5) 2(7.7) 1(3.8) 26(100)

Occupation

Self Employed 27(54) 17(34) 3(6) 3(6) 50(100)

Others 5(41.7) 5(41.7) 1(8.3) 1(8.3) 12(100)

Total 50(50) 35(35) 8(8) 7(7) 100(100)

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FINDINGS
Bank of Maharashtra is having good brand image in the minds of

customers. Majority of the people got loans from Bank of Maharashtra only Most of the customers are not aware of the Loan products of Bank of

Maharashtra Some of the customers felt that the interest rates are some what high Most of the people directly go to bank to apply a Personal loan Some of the customer of Bank of Maharashtra already benefited through

Bank of Maharashtra Personal loan products and services Bank of Maharashtra is providing good services to their customers.

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SWOT ANALYSIS
A SWOT analysis of the bank is as follows: Strengths Threats Highly competitive market Stagnant urban demand Premiere market image Focus on quality Committed staff Satisfied customers Opportunity Convert image share into market Weaknesses Low awareness and levels of a few schemes Slow processing usage

Wide product portfolio Positive rub-off due to some unique schemes

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CHAPTER FIVE CONCLUSIONS AND RECOMMENDATIONS

BRIEF SUMMARY OF THE PROJECT
Commercial banks are the oldest, biggest, and fastest growing financial intermediaries in India. They are also the most important depositories of public saving and the most important disbursers of finance. Commercial banking in India is a unique system, the like of which exists nowhere in the world. The truth of this statement becomes clear as one studies the philosophy and approaches that have contributed to the evolution of the banking policy, programmes and operations in India, This however is too big a subject to be discussed here in detail. We will therefore confine ourselves to presenting only an outline of the said philosophy and approaches, and discussing the actual working of banks in detail. The banking system in India works under the constraints that go with social control and public ownership. The public ownership of banks has been achieved in three stages: 1955, July 1969, and April 1980. Not only the public sector banks but also the private sector and foreign banks are required to meet targets in respect of sectoral deployment of credit, regional distribution of branches, and regional credit-deposit ratios. The operations of banks have been determined by Lead Bank Scheme, Differential Rate of Interest Scheme, Credit Authorisation Scheme, inventory norms and lending systems prescribed by the authorities, the formulation of the credit plans, Balancing Profitability with Liquidity Management Commercial banks ordinarily are simple business or commercial concerns which provide various types of financial services to customers in return for payments in one form or another, such as interest, discounts, fees, commission, and so on. Their objective is to make profits. However, what distinguishes them from other business concerns (financial as well as manufacturing) is the degree to which they have to balance the principle of profit maximisation with certain other principles. In India especially, banks are required to modify their performance in profit-making if that clashes with their obligations in such areas as social welfare, social justice, and

68

promotion of regional balance in development. In any case, compared to other business concerns, banks in general have to pay much more attention to balancing profitability with liquidity. It is true that all business concerns face liquidity constraint in various areas of their decision-making and, therefore, they have to devote considerable attention to liquidity management. But with banks, the need for maintenance of liquidity is much greater because of the nature of their liabilities. Banks deal in other people's money, a substantial part of which is repayable on demand. That is why for banks, unlike other business concerns, liquidity management is as important as profitability management. This is reflected in the management and control of reserves of commercial banks. Management of Reserves: The banks are expected to hold voluntarily a part of their deposits in the form of ready cash which is known as cash reserves; and the ratio of cash reserves to deposits is known as the (cash) reserve ratio. As banks are likely to be tempted not to hold adequate amounts of reserves if they are left to guide themselves on this point, and since the temptation may have extremely destabilising effect on the economy in general, the Central Bank in every country is empowered to prescribe the reserve ratio that all banks must maintain. The Central Bank also undertakes, as the lender of last resort, to supply reserves to banks in times of genuine difficulties. It should be clear that the function of the legal reserve requirements is two-fold: (a) to make deposits safe and liquid, and (b) to enable the Central Bank to control the amount of checking deposits or bank money which the banks can create. Since the banks are required to maintain a fraction of their deposit liabilities as reserves, the modern banking system is also known as the fractional reserve banking. Creation of Credit Another distinguishing feature of banks is that while they can create as well as transfer money (funds), other financial institutions can only transfer funds. In other words, unlike other financial institutions, banks are not merely financial intermediaries. This aspect of bank operations has been variously expressed. Banks are said to create deposits or credit or money, or it can be said that every loan given by banks creates a deposit. This has given rise to the important concept of deposit multiplier or credit multiplier or money multiplier. The import of this is that banks

69

add to the money supply in the economy, and since money supply is an important determinant of prices, nominal national income, and other macro-economic variables, banks become responsible in a major way for changes in economic activity. Further, as indicated in Chapter One, since banks can create credit, they can encourage investment for some time without prior increase in saving. Basis and Process of Credit Creation: Let us briefly discuss the basis and process of creation of money by banks. In modern economies, almost all exchanges are effected by money. Money is said to be a medium of exchange, a store of value, a unit of account. There is much controversy as to what, in practice in a given year, is the measure of supply of money in any economy. We do not need to go into that controversy here. Suffice it to say that every one agrees that currency and demand deposits with banks are definitely to be included in any measure of money supply. Thus, apart from the currency issued by the government and the Central Bank, the demand or current or checkable deposits with banks are accepted by the public as money. Therefore, since the loan operations of banks lead to the creation of checkable deposits, they add to the supply of money in the economy. To recapitulate, the money-creating power of banks stems from the fact that modern banking is a fractional reserve banking, and that certain liabilities of banks are accepted (used) by the public as money. Special Role of Banks As said earlier, commercial banks have a special role in India. In fact, many financial experts even abroad have, of late, been emphasizing the special place that banks hold in their countries also. The "privileged role" of the banks is the result of their unique features. For example, the liabilities of banks are money, and, therefore, they are an important part of the payments mechanism of any country; they also have access to the discount window of the RBI, call money market (as both borrowers and lenders), and the deposit insurance. It would be difficult to eliminate such distinctive features of banks in the near future. There is also an important question as to whether they should be wiped out, and, if it is done, whether it would not have adverse consequences on the financial system.

70

For a financial system to mobilize and allocate savings of the country successfully and productively, and to facilitate day-to-day transactions, there must be a class of financial institutions that the public views as safe and convenient outlets for its savings. In virtually all countries, the single dominant class of institutions that has emerged to play this crucial role as both the repository of a large fraction of the society's liquid savings and the entity through which payments are made is the commercial banks. The structure and working of the banking system are integral to a country's financial stability and economic growth. Bank lending is specially important for companies. The theory of financial contracting under asymmetric information holds that information-intensive and informationproblematic firms submit to the tight and detailed loan covenants so as to reduce agency costs. They delegate the tasks of monitoring and renegotiating debt contracts to financial intermediaries because these tasks are costly and the intermediaries are in a better position to reduce the costs. Intermediaries are more efficient in monitoring debt contracts because they are unlikely to free-ride on information-production by others as they have a larger stake, and they can renegotiate contracts more cheaply than the dispersed debenture holders. The public bond covenants tend to set their conditions on events that are relatively easy to verify, viz., a major change in capital structure or a downgrading of credit rating. In contrast, the intermediary loan contracts are conditioned by performance measures such as working capital and net worth, which are less easily controlled by the managers. Further, the violation of a financial covenant often triggers financial distress. When this happens, banks can restructure the terms of contracts, viz., wave covenants, extend maturity, extend more loans, and require more collateral. Such flexibility reduces the cost of financial distress. Information asymmetries and free riding by bondholders, on the other hand, may force the financially distressed firms into inefficient spending cutbacks, and even bankruptcy. It has been found in the US that the firms' stock prices rise after an announcement that they have received bank loans, while they fall in response to announcement of a public bond offering. Similarly, there are reasons why loans from even other financial institutions may not be a perfect substitute for bank loans. The economies of scope between deposit taking

71

and lending give banks an information advantage over finance companies and other financial institutions. The deposit history of firms may inform banks about the credit risk involved in lending to these firms. Information on deposits activity may also make it easier for banks to monitor working capital covenants. The phenomenon of "compensating balances" can mostly exist only in the case of banks, and not other institutions. The lending and deposit-taking activities of banks are complementary, and, go to build up banking relationship which increases the availability of funds to the firms, which, in turn, enables them to partially avoid taking more expensive trade credit. Personal relationships are far less important in borrowing from other financial institutions than from banks. Moreover, significant differences in collateral requirements exist between banks and other financial institutions. All such differences effectively segment the market for business lending, and make bank loans highly unsubstitutable. The Indian banking system has a very wide reach and deep presence in metropolises, cities, semi-urban areas, and the remotest corners of the rural areas with its vast number of branches. It is one of the largest banking systems in the world. It has been rightly claimed in certain circles that the diversification and development of the Indian economy are in no small measure due to the active role banks have played in financing economic activities of different sectors they have been playing an important role in developing mutual funds, merchant banks, Primary Dealers, asset management companies, and debt markets. They operate as issuers, investors, underwriters, and guarantors in financial markets. By their participation, banks influence the growth and liquidity of debt markets. They would help in securitisation of debt market. They hold about 60 per cent of debt stock of government securities, and they account for more than 50 per cent of the issuance of bonds through public issues and private placements. Because of such considerations, the important position which banks have historically come to occupy in India should not be unwittingly destroyed or undermined in the name of promoting equity culture. Otherwise, monetary authorities would find it more and more difficult to achieve the goal of stability of the financial system and of the prices. The banking reforms, therefore, must aim not only at profitable banking but also at a viable, sound, safe, and social banking. 72

STRUCTURE OF BANKING SYSTEM IN INDIA

Indian Banking System Reserve Bank of India

Scheduled Banks

Non-Scheduled Banks

State Coop. Banks

Commercial Banks

Indian

Foreign

Public Sector Banks State Bank of India and its Subsidiaries

Private Sector Banks (Old and New)

Other Nationalised Banks

Regional Rural Banks

Marketing of Banking Services Marketing can be defined as a Social and Managerial process by which individuals & groups obtain what they need and want through creating offering and exchanging products of value with others. However, marketing in banking aspect refers to the business of forging an maintaining consumer (including corporate customer) - financial relationship. Earlier bankers had little understanding or regard for marketing Banks did not have to make a case for checking accounts, savings, loans or safe deposit vaults. The bank

73

building was created in the image of a Greek temple, calculated to impress the public with the banks importance & solidity one lending officer arranged his office, so that prospective buyers could sit across his massive desk on a lower chair. The office window was located behind the officers back and the sun would pour in on the hapless client, who tried to explain why he / she needed a loan. This was the banks posture before the age of marketing. Marketing came into banks not in the form of marketing concept, but in the form of advertising and sales promotion. The banks have learnt that while attracting people to a bank is easy, converting them into loyal customers is hard. Thus, they have begun to formulae programmes to please the customer. Bankers have learned to smile. The banks interiors have been redesigned to produce a warm and friendly atmosphere. Even the outside Greek - temple - type architecture has been changed. Banks have found a new competitive tool when they began to segment their markets and innovate new products for each target segment. Bank marketing is incomplete in the absence of marketing analysis, planning, implementation and control. The importance of these aspects can be well understood by looking at the following example :One large bank, which had achieved In each sophistication in advertising, friendliness, segmentation, innovation and positioning, nevertheless lacked good systems of marketing planning and control. financial year, they submitted their targeted goals, usually 10 % higher than the previous years goals. They also requested a budget increase of 10 %. However, no rationale / plans accompanied these submissions. The top management was satisfied with the officers who achieved their goals. One loan officer, judged to be good performer, retired and replaced by younger man who proceeded to increase the loan amount by 50%, the following year. The bank painfully learnt to conduct marketing research and measure the potentials of its various markets. Further it failed to set quota and to develop appropriate management incentive systems.

74

CHANGING TRENDS IN BANKING INDUSTRY

Stage 1: Increased competition in the industry Banks respond by increasing advtg. & sales promotion.

Stage 2 : All banks using advertising & sales promotion. Aesthetics : friendly comfortable interiors for visitors Customer contact people trained to smile and be helpful.

Stage 3: New financial services were introduced No. of specific services were increased Informal surveys used. Increased use of direct mailers

Stage 4 : Focus on creating strong image. Improving operational efficiency by automation & extensive use of IT Extensive use of mkt analysis, planning and control

75

Bank Marketing Bank marketing is the aggregate of functions, directed at providing services to satisfy customers financial (and other) needs and wants, more effectively and efficiently than the competitors. Keeping in view the organizational objectives of the bank marketing helps in achieving the organizational objectives of the bank. Indian banks have dual organizational objectives- objective to make profits and social objective, which is a developmental role particularly in the rural areas. Foreign banks do not have so much commitment towards the latter and base their efforts around their profit motive. However, the marketing concept is essentially the same for both foreign and Indian banks and its all about the following few key success factors of the banking industry: The bank cannot exist without the customers. The purpose of the bank is to create, win and keep a customer. The customer is and should be the central focus of everything the bank does. Its also a way of organizing he bank, customer is at the core of activities as pointed out earlier and service facilities should be designed around this core. Ultimate aim of a bank is to deliver total satisfaction to the customer. Customer satisfaction is affected by the performance of all the personnel of the bank. Marketing is an organizational philosophy. For a service industry like banks, it needs to be understood by the whole organisation, from the person working at the counter to the chief executive. The first and foremost step in this concept is to have a whole hearted commitment to customer orientation by all the employees.

76

RECOMMENDATIONS
The bank caters to wide segment of customers and thus segmentation based on occupation is required to each segment of customer base. This will involve devising the standard documentation process based on the clients demographic profile, which should help them in serving the client based on his profile which will ultimately lead to higher customer satisfaction leading to loyalty. The bank needs to improve on its feedback mechanism communication and follow-up to speed up the initial documentation process to speed up the loan processing. This calls for giving the customer the exact list of documents required under all kinds of occupational background. The bank has to broaden its customer base via loan disbursement across all segments keeping the risk under control. Create awareness: The Bank has to take care of awareness creation about the products and services among the customers. Charges: The Bank has to reduce the mortality and administration charges. The process is some what late in sanctioning a loan. The bank has to reduce their interest rates on home loan products and services. The bank has to identify the potential customers. Product promotion strategies should be improved. Bank should consider the present competition and should act according to the customer needs. CONCLUSION In my study we came to know that many peoples are interested to

take a loans from Bank of Maharashtra for various purposes banks. 77 The interest rates is also some what high when compare to other

Even though the interest rates are high peoples are willing to take a

loan from Bank of Maharashtra due to some reasons. The loan sanction process is slow when compared to other banks. For disbursement process is also time taking when compared to

other banks

78

CHAPTER SIX: BIBLIOGRAPHY

Information collected from the Bank. Referred to articles in Business Today Business India Business World. Economic Times

Website of Bank of Maharashtra

79

APPENDIX
CUSTOMER QUESTIONNAIRE
Preamble: I am a management student of EMPI Business School, New Delhi. I am doing project on Bank of Maharashtra. So I need your valuable co-operation in this regard. Age 25-35 Occupation Pvt. Service Loan Details > 5 lacs Loan Applied for Loan Sanctioned Loan Term > 5 years Loan Applied for To what extent the following factors influence your satisfaction level towards the documentation process of Personal Loans of Bank of Maharashtra? Not satisfied at all Checklist of Documents (Terms & conditions) Time taken for the Loan processing Processing Charges Somewhat Dissatisfied Neither satisfied nor dissatisfied Somewhat satisfied Fully Satisfied 5-10 years 10-15 years > 15 years 5-10 lacs 10-15 lacs > 15 lacs Govt. Service Self Employed Business Others 36-45 46-50 50- Above

80

Knowledge of the Banker Communication from bank Reliability

Do you find any gap between the services expected and services delivered during the documentation process of Personal Loans? Yes How would you rate the services of Bank of Maharashtra? Excellent Good Fair Poor No

What is your overall level of satisfaction with Bank of Maharashtra in their documentation process of Personal Loans? Very High High Moderate Low

---Thank you -----

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