Consumer Loans Offered By Urban Co-Operative Banks

Executive summary The project has been prepared not only because it involves and is the requirement of the university but I can understand the underlying intention of the board which definitely imparts priceless knowledge and I believe that practical exposure is equally important for every student. Desires have slowly metamorphosed into needs and loans have come out as a potent solution to fulfill these needs. The country's banks are offering multiple choices of loans for the multiple purposes. The Urban Indian class is witnessing rapid change in lifestyle. Their desires of yesterday have become needs of today. These rapidly growing Indian middle class is serving as the main customers of the urban co-operative banks. CONSUMER LOANS provided by any of the URBAN CO-OPERATIVE BANKS have turned out to be a boon for fulfilling the dreams of every person from every walk of life. Be it marrying off your daughter or sending your child for higher studies to abroad, purchasing or constructing your dream house, making your life go on wheels(i.e. vehicle loan),etc is no more hustle as gone are the days, when one has to stand for many hours in queues, running here and there to avail the loans. Now, it is just a call away.
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In this project of mine I have tried to analyze the various types of consumer loans provided by the urban co-operative banks. I have explained the extent to which co-operative banks are participating to fulfill the needs of its customers through its various loans which are designed for the said purpose. I have put my sincere efforts in the project and in order to get a practical knowledge I have visited some urban cooperative banks and I hope I have done a decent job.

PUBLIC SECTOR BANKS (27) COMMERCIAL BANKS

PRIVATE

Consumer Loans Offered By BANK (30) SECTOR Urban Co-Operative Banks

CO-OPERATIVE BANKS

1. Introduction: OLD (22)

NEW (8)

RESERVE BANK OF INDIA. CENTRAL BANK AND SUPREME MONETARY AUTHORITY

SCHEDULED BANKS

FOREI GN BANKS (40)

REGION AL RURAL

URBAN COOPERATIV E (52)

STATE COOPERATIV E (16)

STATE BANK OF INDIA & ASSOSCIAT E BANK (18)

OTHER NATIONALIZED BANKS (19)

Structure of the organized banking sector in India. Numbers of banks are in brackets.

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Consumer Loans Offered By Urban Co-Operative Banks

Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India, a government-owned bank that traces its origins back to June 1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to commercial banking functions. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the six next largest in 1980. Currently, India has 88 scheduled commercial banks (SCBs) - 27 public

sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.

The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi movement. The Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, of Baroda, Canara Bank and Central Bank of India.
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Bank

Consumer Loans Offered By Urban Co-Operative Banks

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2. History of co-operative movement: Co-operative movement is quite well established in India. The first legislation on co-operation was passed in 1904. In 1914 the Maclagen committee envisaged a three tier structure for co-operative banking viz. Primary Agricultural Credit Societies (PACs) at the grass root level, Central Co-operative Banks at the district level and State Co-operative Banks at state level or Apex Level. The first urban co-operative bank in India was formed nearly 100 years back in Baroda. Co-operative Institutions are engaged in all kinds of activities namely production, processing, marketing, distribution, servicing, and banking in India and have vast and powerful superstructure. Co-operative Banks are important cogs in this structure. In the beginning of 20th century, availability of credit in India, more particularly in rural areas, was almost absent. Agricultural and related activities were starved of organized, institutional credit. The rural folk had to depend entirely on the money lenders, who lent often at usurious Rates of interest. The co-operative banks arrived in India in the beginning of 20th Century as an official effort to create a new type of institution based on the principles of co-operative organization and management, suitable for problems peculiar to Indian conditions. These banks were conceived as

Consumer Loans Offered By Urban Co-Operative Banks

substitutes for money lenders, to provide timely and adequate short-term

and long term institutional credit at reasonable rates of interest. In the formative stage Co-operative Banks were Urban Co-operative Societies run on community basis and their lending activities were restricted to meeting the credit requirements of their members. The concept of Urban Co-operative Bank was first spelt out by Mehta Bhansali Committee in 1939 which defined on Urban Co-operative Bank. Provisions of Section 5 (CCV) of Banking Regulation Act, 1949 (as applicable to Co-operative Societies) defined an Urban Co-operative Bank as a Primary Co-operative Bank other than a Primary Co-operative Society was made applicable in 1966. With gradual growth and also given Philip with the economic boom, urban banking sector received tremendous boost and started diversifying its credit portfolio. Besides giving traditional lending activity meeting the credit requirements of their customers they started catering to various sorts of customers viz.self-employed, small businessmen / industries, house finance, consumer finance, personal finance etc.

Consumer Loans Offered By Urban Co-Operative Banks

3. Definition of Consumer Loans: Definition: Loan is a form of debt, often with interest. There are several reasons why people apply for loans. Usually they borrow money to purchase a house, buy a car, or start a business. Often, applying for a loan is necessary because most do not have available financial resources they need to make a purchase. Other forms of loans, like the student loans have helped a lot of students get through school. Those who use student loan debt consolidation clearly have multiple student loans. They do this to manage their obligations better. Since loan is borrowed, the lender expects to receive payment with the interest specified. In addition, borrowers should make the payments at the specified due date for a certain period. This is where most people have problems. Most problems start when people cannot make the monthly payments required due to different circumstance. Some finds it difficult to pay their loan because of the many other debts they have. Some encounter additional problems such as medical emergencies and job loss. Since getting a loan is a commitment, you have to be very careful with your decisions. Choose the right lender. There is more to picking a lender than just looking for one with the least interest. Keep in mind that those with low interest require longer period. Remember, when choosing a lender, check its stability, its flexibility, repayment schemes, and

interest rates. Consumer Loans Offered By Urban Co-Operative Banks

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Personal loans are probably the fastest and most easily available of retail loan products. They are, however, costlier than other loans, such as home loans, loans against property, or loans against shares. Money loaned to individuals (usually on non-secured basis) for personal, family, or household purposes; as opposed to business or commercial lending. Consumer loans are monitored by government regulatory agencies for their compliance with consumer protection regulations such as the 'truth in lending' law. Also called consumer credit or consumer lending.

4. Merits And Disadvantages Of Consumer Loans Benefits of a Consumer loans in India are: I.. No questions asked about the end use of the money:

Banks will simply give the cash and it's up to the borrower, where to use it and how to use it. So, it is a very convenient monetary help.

II.2. No collateral, security or guarantor requirements: Personal loans are solely granted on the basis of an individual's creditworthiness. Banks do take into account the income, employment, continuity of business and other factors so as to establish the fact that the borrower will be able to repay the personal loan with interest in due time. No collateral or security requirements are put forth by the banks for issuing a personal loan. Consumer Loans Offered By Urban Co-Operative Banks
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III.Total confidentiality: Since there are no security or collateral requirements, personal loans can remain a secret between you and the bank. Moreover every bank has some privacy policies, which ensures adequate confidentiality.

0.Easy repayment: Banks provide personal loans for 12 to 60 months. Varying from bank to bank, these tenures allow easy repayment options to the borrower. The borrowed amount along with the interest rate is calculated for the entire tenure of the loan and an EMI is calculated which the borrower has to pay every month. Personal loans also come with a prepayment clause.

I.Low cost: Individual borrowers, while choosing a particular finance method, emphasize on the cost of the loan. You might have heard of borrowers who had to pay huge sums as interest on loans. Nowadays, there are no such borrowers to be found. Borrowers today come with sufficient groundwork on the rate of interest prevailing in the loan market. Lenders who want to sell their personal loans have to be reasonable in fixing the rate of interest or APR. Personal loans are cheaper provided the personal loan sports the lowest available rate of interest. Since personal loans cater to individual requirements, they ought to be cheaper than the other loans.

Consumer Loans Offered By Urban Co-Operative Banks

For getting this benefit, individuals will have to decide whether or not they are prepared to offer collateral. Collateral has the effect of reducing the risk involved in personal loans. Classification on the basis of collateral can be made in personal loans. A secured personal loan for instance will be cheaper than an unsecured personal loan. While collateral lessens interest rate, the loan provider gets a direct charge on the collateral. This may be repossessed if loan is not repaid in full. VI.Varied uses: The uses of the personal loan are varied. Since individuals have the key to the loan, there will be no end to the number of uses invented by the individuals. Debt consolidation, home improvement, car purchase and holidaying are some of the most popular uses that the personal loan proceeds will be used in. There is no restriction from the loan provider on the usage of the loan proceeds. Borrowers will have to decide beforehand if the use is prominent enough to be satisfied through a personal loan. If the task on hand can be safely postponed to a later date or sufficed through any other source of finance, then an extra obligation in the form of personal loans will be deferred. VII.Source of finance: For certain groups of people personal loans are a source of finance. Individuals who do not have a high income or who do not have much income left after paying off the expenses will find personal loans very handy. Personal loans for some people are meant to save their own
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Consumer Loans Offered By Urban Co-Operative Banks

resources for use in other more productive purposes. Since personal loans need to be repaid in small monthly installments, it will be much more convenient to pay immediate expenses through personal loans than through ones personal resources. The decision with regards to the benefit will be on whether or not the use justifies the personal loan. VIII. Easy availability:

Personal loans are also preferred for their easy availability. The number of loan providers dealing in personal loans has increased phenomenally over the past few decades. Almost every borrower, with whatever financial circumstances can hope to get personal loans according to their desires. Disadvantages of consumer loans: 1. The eligibility criteria are stricter in case of personal loans, since there is no security required and the paper work is minimum. 2. The bank checks on you capability to repay more than any other loan due to the same reason. 3. Since the bank has a higher risk while providing personal loans, they follow a list of approved categories of borrowers. 0. Interest rates for personal loans could range from 12 percent to 30 percent, while the service charges and prepayment penalty are also very high.

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Consumer Loans Offered By Urban Co-Operative Banks

5. Types of consumer loans: 1.Housing Loans- Housing loans are primarily taken for the sake of financing building of new houses, purchase of new houses, purchase of old houses or for repairing an existing house. 2. Personal Loans - Personal Loans can be claimed for absolutely any purpose. 3. Consumer Durable Loans- Consumer durable loans can be claimed for the purchase of consumer durables such as televisions, music systems, refrigerators, etc. 4. Vehicle Loans- Vehicle loans, as the name suggests can be claimed for the purchase of vehicles. 5. Educational Loans- Educational loans can be claimed for the purpose of either undergraduate or postgraduate education in either India or abroad. 6. Travel Loans- Travel loans can be claimed as the name suggests for the purpose of meeting travel expenditures.

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Consumer Loans Offered By Urban Co-Operative Banks

6. Case study of three co-operative banks:

6.1 Cosmos bank: (quick service with smile) History:

Established in 1906, The Cosmos Co-operative Bank Ltd (Cosmos Bank) is one of the oldest urban co-operative banks in the country, reputed for its quality services.

Today, the Cosmos Bank is one of the leading Multi-state Scheduled Co-operative banks.

The bank has carved a niche in the urban banking sector with its rich heritage, integrity, adherence to the prudent banking practices, technology savvy customer services.

Has attained multi-faceted growth not only in terms of financial indicators / standards but also in overall expansion of activities.

Setup Financial & Geographical: Financial setup of the bank as on 6th

July, 2009 was Rs. 10795.41 crs, comprising of Deposits of Rs.6931.58 crs and Advances Rs. 3863.83 Crs. Cosmos Bank operates through 94 branches and 9 Extension Counters in India spread across 5 States and in 16 Major Cities, which are as follows:
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Consumer Loans Offered By Urban Co-Operative Banks

Maharashtra: Mumbai, Pune, Nagpur, Aurangabad, Nasik, Baramati, Jalna. Madhya Pradesh: Indore, Andhra Pradesh: Hyderabad Karnataka: Banglore.

Gujarat: Surat, Ahmedabad, Baroda, Ankaleshwar, Naroda, Rajkot.

TYPES OF CONSUMER LOANS OFFERED BY COSMOS BANK 1. Home loan: Home loans are available for purchasing new/resale flat/house or for construction of bungalow/house or for taking over home loan from other institutions. Interest rate is as follows... Interest on Home Loans w.e.f. 1/04/2009 [Floating rates]

Slab (Rs. in Lakhs) Rs.1.00 Lac to Rs.10.00 Lacs Rs. 10,00,001 /- to Rs.20.00 Lacs Rs.20,00,001 /- to Rs.30.00 Lacs Rs.30,00,001 /- Onwards

Rate of Interest 9.50% 10.00% 10.50% 12.50%

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Consumer Loans Offered By Urban Co-Operative Banks

Attractive Features of Home Loan Scheme: 1. Processing fee of Rs. 1500/-. 2. Other Family members' income can be considered for enhancing eligible loan amount. 3. Interest levied on daily reducing balance. 4. No prepayment penalty if the loan is foreclosed with own funds.

2. VEHICLE LOAN 1. Loan available for purchasing new/used car or two wheeler for personal use. 2. Rate of Interest : 12.50% on daily reducing balance for two wheeler and 11 % for four wheeler for 60 Months and 11.50% for 84 Months 3. EMI: Rs. 2250/- for a Two wheeler and Rs. 2175/- for Four wheeler loan of Rs.1, 00,000/- for 60 Months and Rs. 1739/- for 84 Months. 4. Margin: 10% for new vehicles, 30-40% for used vehicles. 5. 3% foreclose penalty applicable. 3. Cosmo Personal LOAN

This is a personal loan scheme for salaried persons as well as self employed professionals / entrepreneurs. It is a handy credit line to meet the needs of a Modern Lifestyle, such as Pleasure Trips, Wedding Expenses, Jewellery Shopping, Credit-Card Payments, Education, Medical Treatment, Transfer of High Cost Debt or any other purpose.
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Consumer Loans Offered By Urban Co-Operative Banks

Attractive Features of Cosmo Credit: 1.Interest rate of 13.50% on daily reducing balance. 2.Maximum loan up to Rs. 2.00 Lakhs 3.Two Flexible options: Term Loan: Maximum repayment period is 60 months with Equated Monthly Installment for a loan of Rs. 1, 00,000/-, EMI would be Rs. 2301 /-

0.COSMOS EDUCATION LOAN Objective of the scheme: The scheme aims at providing financial support to deserving /meritorious students for pursuing higher education in India and abroad. Eligibility criteria: 1. The applicant should be regular member or nominal member of bank. 2. Applicant/parents should have banking relation with our bank. 3. The student should be an Indian Resident. 4. The student should have secured admission to professional/technical course in India or abroad through entrance test /merit based selection process. 5. Courses through Educational Institutes / Organizations of repute & recognition will be eligible for loan limit.

Consumer Loans Offered By Urban Co-Operative Banks

Quantum of Finance: Amount of loan

Studies in India Max. Upto

Rs. 10 lacs. Studies Abroad Max. Upto Rs. 20 lacs.

Expenses considered for loan:

1.Fee payable to college/ school/ hostel. 2. Examination/ Library/ Laboratory fee.

3. Purchase of books/ equipments/ instruments/ uniforms 4.Caution deposit, Building fund/refundable deposit supported by Institution bills/receipts, subject to the condition that the amount does not exceed 10% of the total tuition fees for the entire course. 5. Travel expenses (for abroad only) / passage money for studies abroad. 6. Purchase of computers essential for completion of the course. 7. Insurance premium for student borrower. 8. Any other expense required to complete the course like study tours, project work, thesis, etc. Security: A. Loan Up to Rs. 2 lacs- Co-obligation of parents is necessary. B.Above Rs.2 lacs- Co-obligation of parents together with tangible collateral security of suitable value, along with the assignment of future income of the student for payment of installments Security cover to the extent of 60 % to 70% is expected to be provided.

Period: 5-7 years

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Consumer Loans Offered By Urban Co-Operative Banks

Rate of interest: 1. Rate of Interest At present rate of interest is 10.50 % p.a. for Male Student. At present rate of interest is 10.00 % p.a. for female Student.

2. Interest rates are subject to change from time to time. Repayment holiday/ Moratorium period: Course period + 1 year or 6 months after getting job, whichever is earlier. Simple interest will be charged during the Repayment holiday/ Moratorium period the accrued interest during the repayment holiday period will be added to the principal and repayment in Equated Monthly Installments (EMI) fixed.

The option of payment of interest during moratorium is also available.

Processing Fee: Processing fee @ 0.1 % will be applicable. Guarantors: Two acceptable guarantors other than parents to be taken.

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Consumer Loans Offered By Urban Co-Operative Banks

6.2 SARASWAT CO-OPERATIVE BANK Ltd: (We believe in u)

The Bank has a very humble but a very inspiring beginning. On 14th September 1918 "The Saraswat Co-operative Banking Society" was founded. Mr. J.K. Parulkar became its first Chairman, Mr. N.B. Thakur, the first Vice-Chairman, Mr. P.N. Warde, the first Secretary and Mr. Shivram Gopal Rajadhyaksha, the first Treasurer. These were the people with deep and abiding ideals, faith, vision, optimism and entrepreneurial skills. These dedicated men in charge of the Society had a commendable sense of service and duty imbibed in them. Even today, our honorable founders inspire a sense of awe and respect in the Bank and amongst the shareholders. The Society was initially set up to help families in distress. Its objective was to provide temporary accommodation to its members in eventualities such as weddings of dependent members of the family, repayment of debt and expenses of medical treatment etc. The Society was converted into a full-fledged Urban Co-operative Bank in the year 1933.

The Bank has the unique distinction of being a witness to History. The Bank, which was originally founded in 1918, i.e. close on the heels of the Consumer Loans Offered By Urban Co-Operative Banks
Page 20 Page 19

Russian Revolution, also witnessed as a Society and as Bank-the First World War, the Second World War, India's freedom Movement and the glorious chapter of post-independence India. During this cataclysmic cavalcade of history, the Bank as a financial institution and its members could not of course remain unaffected by the economic consequences of the major events. The two wars in particular brought in their wake, paucities of all kinds and realities and stand by its members in distress as a solid bulwark of strength. The Founder Members and the later-day management's of the Bank continued to demonstrate their unwavering faith in the destiny of the common man and the co-operative movement and they encouraged the shareholders to save despite all odds. MISSION STATEMENT: "To emerge as one of the premier and most

preferred banks in the country by adopting highest standards of professionalism and excellence in all the areas of working!!!" MILESTONES : Thanks to these sustained and assiduous efforts over 25 years after its inception, the Bank had gained Strong foundation in terms of its membership, resources, assets and profits. By 1942, the Bank was fulfilling all the banking needs of its customers. During the late fifties, the Bank grew from strength to strength. The Bank had established five branches within the city of Mumbai and one each at Consumer Loans Offered By Urban Co-Operative Banks

Page 21 Pune and Belgaum. In its 50th year, the Bank chose a bee motif to

symbolize the Bank's emblem - a fitting and appropriate characteristics

of a Bank that believed in hard work, a search for all that is good, a team spirit to achieve its objectives and a selfless service to its members and customers. The Bank has grown in stature, progressed in its social and economic objectives and produced an image of what an ideal bank should be. Resultantly, in the year 1977-78, the Bank's gross income crossed the Rs.3.00 crore mark for the first time. the Bank has witnessed a steady growth in the has a network of 187 fully computerized branches viz. Maharashtra, Gujarat, Madhya Pradesh, Delhi. The Bank is providing 24- hour service Last two decades business. The bank covering six states Karnataka, Goa and through ATM at 67

locations. In 1988 the bank was conferred with "Scheduled" status by Reserve Bank of India. The Bank is the first co-operative bank to provide Merchant Banking services. The Bank got a permanent license to deal in foreign exchange in 1978. Presently the Bank is having correspondent relationship in 45 countries covering 9 currencies with over 125 banks. In 1992 Bank completed 75 years. Platinum Jubilee Celebrations were inaugurated on 14th September, 1992. Bank also crossed the business level of Rs 700 Crores

Consumer Loans Offered By Urban Co-Operative Banks

The Beginning of the 21st Century has been a giant leap forward for the Bank. Bank chose a path of organic/inorganic growth and our pace of growth accelerated .Bank's total business which was around Rs 4000 Crore in 2000 almost tripled to Rs 15295 Crore in 2007. Bank in the year 2008 launched the Branding Initiative .The purpose of such an exercise was to reconfirm the thrust of Bank on its core values, which can be summed up as "Sense of Belonging ".The name of the Bank should always inspire the Sense of Belonging in all its stakeholders and that Bank continues to fulfill the changing needs and expectations of the customer with unflinching gusto and aplomb.

Various loans offered by Saraswat bank are: 1. Multi-purpose Loan Purpose: For Consumer Durables, Computer, Pravasi, Two Wheeler, Education, House repairs Limit of Loan: Maximum up to Rs.2.00 lacs.

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Consumer Loans Offered By Urban Co-Operative Banks

Eligibility: a) 100% of the cost b) 12 times of net salary in case net salary up to Rs.8000/- and 15 times of net salary in case net salary above 8000/- Or 2 times of net cash accruals a or b, whichever is less (Salaried persons: Confirmed employee of reputed organization. Minimum Net Salary of Rs.8000/- p.m.) Businessman/professional/self employed. Repayment Period: Pravasi Maximum 24 months (mentioned separately as travel scheme also) Computer Maximum 36 months Computer Maximum 36 months Security : Hypothecation of consumer durables/two wheeler/computer For salaried - recovery under Sec.60 One/Two Guarantors Share Holding : Nominal Membership for advance against consumer durable, computer, two wheeler For other: 5% of loan amount Processing Fees:
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Up to Rs.0.50 Lakhs - Rs.250/Above Rs.0.50 to 1.00 lakh - Rs.500/Above Rs.1.00 Lakhs - 1 % of loan amount Documents Required: a)Proforma Invoice from approved dealer. b)Photograph & Residence Proof of the Borrower & Guarantor c)Salaried person, latest salary slips for last 3 months d)Businessman/Professional/self employed last two years profit & loss account and balance sheet. e)Guarantors latest salary slip/latest IT return
2. Privilege Loan : Purpose

Personal Expenses

Eligibility : a)20 times of monthly net salary b)Minimum average monthly take home salary Rs. 15000/Limit of Loan : Maximum loan up to Rs.5.00 Lakhs Repayment Period : Maximum 60 months

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Consumer Loans Offered By Urban Co-Operative Banks

Security: Hypothecation of Household Articles. Valuation from approved value to be kept on record. Minimum one guarantor. Share Holding : Loan up to Rs. 2.00 Lakhs - Nominal Membership Loan above Rs. 2.00 Lakhs - 2.50% of loan amount (Maximum Rs. 25000/-) Processing Charges : Rs 1000/- irrespective of loan amount . Documents Required : a)Photograph and Residence Proof of the Borrower & Guarantor. b)Salary slips for last 3 months and Bank statement for last 6 months. c)Form No. 16 of the borrower. d)Latest salary slips of guarantor, where guarantor is taken 3. Education loan Applicant will be parent with student as co-applicant. Purpose Studies in India & Abroad Maximum Loan Amount Rs 20.00 Lakhs

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Consumer Loans Offered By Urban Co-Operative Banks

Eligibility 100% of cost of the fees and other expenses on the basis of the eligibility and income proof provided by the applicant Limit of Loan Studies in India -Maximum upto Rs 10.00 Lakhs(All IBA approved courses) Studies abroad - Maximum upto Rs 20.00 Lakhs.

Repayment Period:

Maximum 84 months inclusive of Moratorium period of Max 3 years Moratorium Period: Duration of the course plus an additional period of six months or 3 years whichever is earlier.

Security: suitable mortgage of Property or pledge of any other tangible security acceptable to the bank. Minimum two guarantors of well placed means. Tangible Investments like LIC (Surrender Value), NSC (Face

Value), KVP (Face Value), Gold (As per Banks Valuation), RBI Bonds or FDs with our Bank can be considered while assessing the proposal and for sanctioning the loans.

Consumer Loans Offered By Urban Co-Operative Banks

Processing Fees: For studies in India 0.25% for studies abroad -- 1 % of the loan amount Shareholding 2.5% of the loan amount (max Rs 25000) 3. Home Loan - Vastu Siddhi Housing Loan: Purpose For construction of house/flat Purchase of ready built house/flat/ old flat not more than 30 years in Mumbai, 15 years elsewhere. For takeover of housing loans from other banks/institutions Eligibility: Salaried Employees/Businessmen having regular source of income Applicant should be in the age group of 21 yrs - 50 yrs to avail adequate repayment period Where property is held in joint names all the joint holders should join as co-borrowers to the loan Anyone or more of the close relatives may join as co-borrowers (spouse, father, mother, son, daughter only)if the income of the applicant is not sufficient to service the loan. If the amount of loan is
Page 28 more than Rs.50 Page 27 can be disbursed in joint names with the lacs, it

Consumer Loans Offered By Urban Co-Operative Banks Page 29

other family members provided the joint income is adequate to repay. In case the loan to NRI, the local family member should join as a co-borrower irrespective of ownership and income norms. Where the property is owned by applicants spouse/ parent who do not have independent/ regular income they should join as coborrowers irrespective of their age. Salaried employees should have minimum 2 years of confirmed service with minimum net take home salary ( net off all EMIs) of Rs.8000/Loan Amount: Maximum of Rs. 50 Lakh or 60times of the net take-home salary (avg for the last 3 months) of the applicant, spouse, close relatives as stated above or 3 times of net cash accruals (avg for last 2/3 years) of applicant/ spouse/close relatives as stated above. (Whichever is lower of the above).Drawings may be added to the accruals considering the nature of drawings eg. Tax purpose, investments etc. EMI of the applied loan together with existing EMI (if any) should not be more than 60% of net take home income/ accruals. 65 times of net salary if the step up repayment option is chosen and only for salaried employees. Incase of take over loans, top up loan at 10-20%or maximum Rs.5 lacs, subject to valuation and margin stipulated below along with repayment capacity. Consumer Loans Offered By Urban Co-Operative Banks

Rate of Interest:

Loan Amount

Proposed Rate of Interest p.a. 1

st

Subseque nt Floating (Floor rate 8.50%)

years Fixed (Repricing every 3 years) 2.50% PLR below 2.25 %

year Fixed

Upto 20 lakh Upto 30 lakh Above lakh 30 8.50%

3.50 % below PLR 3.25 % below PLR 3.00 % below PLR

below PLR 2.00% below PLR

Consumer Loans Offered By Urban Co-Operative Banks

6.3 ABHYUDAYA CO(personalized OPERATIVE BANK ltd:

service

breeds prosperity )
-

ATBM W
`

C0-=O P E R A T I V E ' '

Ltd., one of the leading Urban Co-operative Abhyudaya Co-op. Bank Banks in India, in its outlook and approach, has the objective of progress and prosperity of all. From a humble beginning in January 1964 as a Co-operative Credit society with a share capital of a merely Rs.5,000/- held by 83 members, today Abhyudaya Co-op bank has become one of the large Urban Co-operative Banks with a "Scheduled Bank" status. The bank has been converted into a Multi -State Scheduled Urban Co-op. Bank w.e.f . 11th January, 2007. The area of operation which was restricted to the State of Maharashtra has now been extended to Karnataka & Gujarat State. Currently, the capital base of the bank stands at Rs. 45.77 Crores and Reserves and surpluses at Rs.682.54 Crores as on 31.03.2009. The bank has 1, 23,011 members and more than 12 lakh depositors. The Bank has seen a tremendous growth in deposits. The deposits of the bank are over Rs. 3176.81 Crores as on 31.03.2009, which were Rs. 2625 Crores as at the end of the financial year 2007-2008. The loans and advances stood at Rs. 1856.39 Crores as on 31.03.2009. The bank had posted as on 31.03.2009. The growt h rate of the bank compares
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well with that of others in the sector. The Bank has maintained a steady growth. The bank has been paying dividend @ 15% to its members which is maximum permissible as per the MCS Act. The Bank has launched different loan schemes tailor-made to suit the needs of various customers. The schemes aim at providing loans for purchase or construction of residential premises, repair/renovation of house property, purchase of car, seeking higher education and for purchase of household consumer durable. One of the loan schemes, viz. "Udyog Vikas Yojana" is specially designed for the benefit of small entrepreneurs and businessmen. The procedure for sanctioning of loans under the schemes has been simplified and relaxed with a view to attract new customers and facilitating speedy sanction of loans. The Bank has total 78 branches including a Mobile Bank at Navi Mumbai. Bank is committed to spread network of branches throughout the State and provide much needed banking services to the population, which has been deprived of the banking facilities. Innovative Banking is another area of operation that Abhyudaya is currently focusing on for a sustainable long term growth. The Bank has always endeavored for providing satisfactory customer service the help of the latest technology. The Bank has provided fully computerized services to its valued clients. Bank is offering 11 Hours fully computerized services and 7 days working at 13 branches and 24 hours ATM service at 49 branches.

Consumer Loans Offered By Urban Co-Operative Banks

Consumer Loans Offered By Abhyudaya Bank: 1. Housing loans: Purpose: Purchase of new flat and construction of house or purchase of old flat / house including extension to existing flat / house. Maximum Amount: 75% of the (Agreement Value + Stamp Duty + Registration Charges) Max:Rs.50.00Lakh Repayment: Upto 180 installments in case of salaried employee Upto 60 to 120 installments in case of others / businessmen

Rate of Interest :( Effective from 01-07-2009) 10 % (Floating) in case of Loans upto Rs.20.00 Lakhs 11 % (Floating) in case of Loans above Rs.20.00 Lakh upto Rs. 50.00 Lakh 9% (Fixed) upto 31.03.20011 in case of Abhyudaya Special Housing Loan Scheme (The Scheme is open upto 31.03.2010 and only for Loans upto Rs.20.00 Lakh)

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Sureties: Two sureties with Net Income / Salary of above Rs.7,000/- per month and age below 45 years

Purchase of Flats in Building more than 15 years old: For purchase of flat in Building which is more than 15 years old, loan will be considered only if it is certified by the Structural Engineer that the residual life of the building is more than 20 years and the building is in good condition. Service Charges: 1.2% of the Loan amount sanctioned 2. Personal loans: Purpose: 1.Purchase of Consumer Durables / Furniture / Fixtures / Computers 2.Repairs / Renovations of Flat / House 3.Purchase of 2 wheelers 4.Purchase of Gold Ornaments 5.Marriage & other religious ceremonies 6.Domestic / Foreign Tours & Travels 7.Repayment of existing debt 8.Takeover of personal loan from other banks
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Consumer Loans Offered By Urban Co-Operative Banks

Maximum Amount: Rs.2.00 Lakhs Eligibility: Salaried Persons: (a) Minimum take home pay after EMI amount of loan Rs.4, 500/- and net salary above Rs.7,000 /-p.m. Repayment: Upto 60 installments

Rate of Interest: 14% [With 50% Collateral securities 13%] Sureties: A)Employees of Limited companies / Large organizations / Govt. Employees: B)Persons employed in reputed companies / organizations : Upto Rs.25, 000/- One Surety with net salary of Rs.7,000/- and above Above Rs.25,000/- upto Rs.2,00,000/- Two Surety with net salary of Rs.6,000/- and above C)If the borrower is a businessman and employees of other organization with good repaying capacity and owning a house : Two sureties with net salary of Rs.6,000/- and above.

Service Charges : 1.2% of amount sanctioned.

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3. Vehicle loan: Purpose: Purchase of Private / Commercial Vehicles (New or Used) Maximum amount, Eligibility For Private Vehicles (New) a) Max Rs.10.00 Lakh b) 30 times net salary c) 3 times of average net profit / net income p.a. for Businessman d) 80% of cost of vehicle For Private Vehicles (Used) a) Max Rs.3.00 Lakh b) 30 times net salary c) 2 times of average Net Profit / Net Income p.a. for Businessman d) 60% of valuation / agreement value whichever is lower Repayment: upto 60 installments Sureties: For Private Four Wheelers / Two Wheelers : One Surety (salaried family member to be considered) with Net Salary / Income of Rs. 10,000/- and above (B) For Commercial Vehicles :Two sureties with Net Salary /

Consumer Loans Offered By Urban Co-Operative Banks

Income of Rs.10,000/- and above Service Charges : 1.2% of the sanctioned amount Share Amount : 2.5 % of the sanctioned amount

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7. Analysis of case study: 1. HOME LOAN Cosmos co-operative bank Interest on Home Loans w.e.f. 1/04/2009 [Floating Slab (Rs. in Lakhs) Rs. 1.00 Lac to Rs. 10.00 Lacs Rs. 10,00,001/- to Rs.20.00 Lacs Rs.20,00,001/- to Rs.30.00 Lacs Rs.30,00,001/- Onwards rates] Rate of Interest 9.50% 10.00 % 10.50 % Saraswat co-operative bank
Rate of Interest:

12.50 %

Loan Amount 1st_year Fixed

Proposed Rate of Interest p.a. Subseque nt Floating (Floor rate 8.50%) years Fixed (Repricing every 3 years) 2.50% below PLR

Upto 20 lakh Upto 30 lakh

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3.50 % below PLR 8.50% __________ 2.25 % below PLR 3.25 % below PLR

Consumer Loans Offered By Urban Co-Operative Banks

Above 30 lakh

2.00% below PLR 3.00 % below PLR

loan at cheaper the Thus one can avail of getting a home benefits rate in cosmos bank with a minimum amount of RS 1lac.What makes one to attract towards the cosmos bank for a home loan is its cheaper floating rate of interest. Hence its EMIs are also reasonable. Saraswat Banks offers home loan at higher rate of interest while Abhyudaya bank requires two sureties

Education loan :Cosmos bank

1)It offers loan with a person with following eligibility The applicant should be regular member or nominal member of bank. Applicant/parents should have banking relation with our bank. 2)studying in India-10lacs(maximum amount) 3)Rate of interest Male-10.5% Female-10%

Education loan :Abhyudaya bank It offers loans to any person who are eligible for the education according to its terms and condition but it does not restrict that the applicant should be a member or should have a banking relation with bank.

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Rate of interest: It charges 14% rate of interest on all its applicant irrespective of male applicant or female applicant Amount: It offers maximum loan upto Rs 2lacs for studying in India.

8. Measures adapted by co-operative banks to recover consumer loan: An Outline Of Procedure To Be Followed By Urban Cooperative Banks For Recovery Of Loans And Advances Necessity of recovery of loan amounts : We are familiar about the working of Urban Co-op. Banks. The Urban Co-op. Banks mobilize deposits from the members of the public. The banks have introduced various deposits schemes which induce the common man to save more money. The Urban Co-op. Banks accept deposits for the purpose of lending. One of the most important functions of the banks is to create credit. Except in a few cases like interest on savings bank deposits and interest on export credit and interest on small loans upto Rs2 lakh which are administered ( under the control of the RBI), most of the interest rates on deposits as well as loans & advances can now be freely set by the banks themselves.

Consumer Loans Offered By Urban Co-Operative Banks

It is the primary duty and function of the Urban Co-op. Banks to safeguard the interest of depositors. Whenever deposits are accepted, the bank agrees and undertakes to repay the amount of deposits with interest to the depositor on maturity. The ownership of the deposit amount vests with the customer and the custody of the deposit amount are with the Banker. So whenever Advances and Loans are sanctioned to shareholders / members of the Bank, the Banker has to take utmost care to see that the Borrower repays the amount of loan with interest so as to enable the Banker to repay the amount of deposit with interest to the customer. On careful reading the Loan agreements, we observe the following points are stipulated in each Agreement/Bond. a.Date of sanction of loan b.Amount of loan sanctioned. c.Rate of Interest that would be charged. d.Last date of repayment of loan. e.Period for which loan is granted. f.The mode of repayment of loan, i.e. on monthly basis / quarterly basis etc. g.Rate of penal interest in case there are defaults committed the borrower in respect of repayment of loan amount. by on

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Normal measures to be adopted by bank officials for recovery of dues: Whenever, a borrower commits breach of agreement in respect of repayment of schedule of the amount of loans with interest etc., we safely say that there are 'OVERDUES ' in the Loan Account.

Once the Loan A/c is an overdue A/c i.e. the borrower has committed default in repayment of loan amount as per the dates specified in the Agreement, then the Banker has necessarily to adopt measures which will result into recovery of overdue amounts. We now proceed to suggest certain measures to be adopted by Urban Co-op. Banks for effecting recovery of overdue amounts. Whenever the borrower commits default in repayment of loan amount, immediately the bank should serve ' Preliminary Notices' on the principal borrower and the sureties advising them to repay the amount of overdues with interest etc. Such Preliminary Notices should invariably mention information which is of factual nature relating to (i) amount of loan sanctioned (ii) date of sanction of loan (iii) Names of the sureties (iv)amount of the loan sanctioned (v) amount of over dues with interest etc. on a particular date. In addition to the above it must also be communicated the bank shall proceed to take further action against the principal borrower and sureties in case of failure to repay the amount of loan/over dues. saves nine'.
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It has been often said 'A' stitch in time be vigilant, right from the

Thus, the banker must

Consumer Loans Offered By Urban Co-Operative Banks

disbursement of loan amount till the recovery of the entire loan amount. There should be effective supervision over the amount of loan sanctioned. Recovery through salary / wages: After issue of such preliminary notices, there may be a positive response from the principal borrower and he may repay the amount of defaulted loan installment, or the principal borrower and the surety may approach the authorities of the bank and may explain their genuine difficulties regarding repayment of loan amount or there may offer to repay the dues partially. There may be cases where there is no response from the borrower / sureties. With this background, the bank should proceed further to devise such steps which will result in recovery of dues. Under various State

Cooperative Acts (e.g. Section 49 of M.C.S. Act 1960) it has been provided that if a member of a society./Bank authorizes his Employer to make deduction from his salary/wages, in order to satisfy the claims of the society/Bank, then on receipt of requisition letter from the concerned Bank, the Employer shall proceed to make deduction from the salary/wages from the concerned employee/member to meet the claims of the Bank. The Employer must remit the amount so deducted immediately to the Bank concerned. Non-compliance of these provisions under the State Cooperative Act shall be constructed as 'offence' and further Civil and Criminal action can be instituted against such Erring Employer.
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In addition to the above, there are provisions under the Indian Payment of Wages Act 1936 (vide Section 7(2) and Section 7(2)(j) which stipulates that the Employer shall Society / Banks. SARFAESI Act, 2002 There are 3 objectives of the Act viz., to regulate: Securitization and Reconstruction of financial assets and Enforcement of security interest. make deduction from the salary/wages of an Employee to satisfy the claims of the Cooperative

From the point of view of the UCBs, the Enforcement of security interest is of particular importance and use for recovery of their bad loans. The specialty of the Act is that the security interest can be enforced without intervention of the courts subject to procedures being followed as per provisions of the Act and the related Rules. Procedure to be followed: Under Section 13(2) of the Act, a 60 days notice has to be served by the bank on the borrower with a request to discharge the loan liability The notice must contain details of : amount payable by the borrower; Security interest intended to be enforced. On receipt of notice, if the borrower makes a representation or
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raises an objection, the secured creditor must consider such representation or objection. If the secured creditor comes to the conclusion that the said representation or objection is not acceptable or tenable, he must communicate the reasons for non-acceptance of representation or objection within one week of receipt of the above. If borrower fails to discharge the liability, secured creditor has the following options Take possession of secured asset Take over the management of the business of the borrower including The right to transfer by way of lease, sale, assignment, etc. The said rights must be exercised only where substantial part of business of borrower is held as security for the debt. Appoint a manager to manage the security asset taken over. Issue notice to persons who acquired the secured asset from the borrower or from whom money is due. The CMM( chief metropolitan magistrate)or DM (district magistrate)is empowered even to use force necessary for taking steps towards securing compliance

Non-application under the Act- Section 31 -The exemptions under this Act i.e. properties which can not be attached have been detailed in the schedule to the Act. Some of the important ones relevant for the UCBs are:
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Any

security interest securing repayment assistance not exceeding Rs.1 lakh.

of

any financial

Security interest not registered under this Act. Any security interest created in agricultural land. A lien on any goods, money or security given under the Indian Contract Act, 1872 A pledge of movables u/s 172 of the Indian Contract Act Any conditional sale or hire-purchase or lease or any other contract in which no security interest has been created. Rights of unpaid seller u/s 47 of Sale of Goods Act. Properties not liable to attachment under s.60 of cpc 1908 excluding properties specifically charged for raising the loan. The amount due is less than 20 per cent of the principal and interest.

The Indian Limitation Act, 1963 is applicable to this Act. The SARFAESI Rules specify as to who should be the AO of a bank, the place of serving of the Demand Notice , the mode of its delivery, measures to be taken if the amount mentioned in the notice is not paid- the manner of takeover of possession of property, steps to be taken thereafter, custody of property, manner in which the property could be sold, the manner of valuation of assets, serving of notice before sale & the contents of the sale notice.

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9. Conclusion: In todays competitive world there are different types of banks which can offer you various consumer loans but when it comes to get consumer loans of much cheaper rate among all the banks than Cooperative banks opens the doors with a red carpet for you.

Certain immediate requirements like home appliances, computer or laptop, holiday trip, marriage, education, car etc are such that a young Indian would hardly want to avoid it for the financial reason. There are multiple urban co-operative banks that give loans and advance for meeting your requirements, through its consumer loans. Thus in order to get the best consumer loan to meet ones requirement one has to look various co-operative banks and features along with its terms and conditions of its offered consumer loans. Comparative analysis of various consumer loans offered by various co-operative banks is the need of the hour. Thus my comparative analysis of urban co-operative banks consumer loans has guided me to understand the concept of consumer loans offered by them and it increased my knowledge to a great extent.

I hope the study of this kind will add another feather in my cap which helps me in developing my further career.

Consumer Loans Offered By Urban Co-Operative Banks

10. Bibliography : Loans and advances of bankBy Anupama Sawant

Webiliography: www.saraswabank.com www.cosmosbank.com www.abhyudayabank.co.in www.iba.co.in

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