FINAL PROJECT REPORT ON ANALYSIS OF LOAN PROCEDURE IN PUNJAB NATIONAL BANK

The name u can bank upon BHAGYANAGAR, BEHIND BABA PETROL PUMB, AURANGABAD. SUBMITTED BY SHANKAR PARIKSHIT BHAGAR (M.B.A IV Sem) 2010-12. UNDER THE GUIDANCE OF Prof. ABDUL MUQEET SIR In partial fulfillment of the requirements for the degree of Master of Business Administration (MBA).

Page 1

BEED BY PASS, NEAR RENUKAMATA MANDIR, SATARA PARISAR. AURANGABAD - 431005

CERTIFICATE

This is to certify that, SHANKAR PARIKSHIT BHAGAT, student of MBA-IV Sem has successfully completed Project Study at PUNJAB NATIONAL BANK, BHAGYANAGAR, AURANGABAD and submitted a report as per the requirements of Dr. Babasaheb Ambedkar Marathwada University in partial fulfillment of Master of Business Administration (MBA) course for the academic year 2011-12.

Major Dr. P.K. Bhalerao Director

Prof. ABDUL MUQEET Project Guide

Page 2

ACKNOWLEDGEMENT
I wish to express my gratitude to MR. MESHRAM for giving me an opportunity to do my Project Study in your esteemed organization. I also wish to express my thanks to other senior employees of the company for providing me valuable information which help in completion of report Last but not the least I would like to thank my guide Prof. ABDUL MUQEET for his timely support & guidance in completion of my project report.

Mr. Shankar P. Bhagat M.B.A. IVth Sem

Page 3

EXECUTIVE SUMMARY

Page 4

DECLARATION
I hereby declare that the project report entitled Critical Analysis of LOAN PROCEDURE AT, Bhagyanagar Branch, Aurangabad submitted to Chate Business School, in partial fulfillment of the requirements for the degree of Master of Business Administration (MBA) under the guidance of Prof. Abdul Muqeet is my original work & the conclusions drawn therein are based on the data and material collected by me.

SHANKAR PARIKSHIT BHAGAT M.B.A. IVth Sem. Chate Business School

Page 5

INDEX
Sr. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Topic Title page Institute Certificate Certificate from company Acknowledgments Executive Summery Declaration Introduction of the topic & Reason for selecting the topic Introduction of PNB Company Profile Scope of project study Objective of project study Research Methodology Data Collection & Data Analysis Observation & Findings Limitations Suggestions & Recommendations Conclusion Bibliography References Annexure 4 5 8 13 17 20 21 22 32 41 42 43 44 45 46 Page No. 1 2 3 4

Page 6

INTRODUCTION
Introduction of the topic, Reason for selecting the topic

The banking industry is fast growing industry in todays conditions. It will lot of develop in future date. Therefore the banking will be must . Now a days it is must for the all sectorsManufacturing Industry Automobile Industry I. T. Industry Hospitals Government Etc.

And there are lot of difficulties to the bank in credit management. I want to study about the process of the credit management and the how they manages there credit.

Page 7

MEANING OF BANK

The term bank comes from the French word Banco which means a bench. In the earlier days, European money-lenders or money changers used to display coins of different countries in big heaps on benches or tables, for the purpose of lending or exchanging. A bank is a financial institution which deals with deposits and advances and other related services. It receives money from those who want to save in the form of deposits and it lends money to those who need it. Oxford Dictionary defines a bank as an establishment for custody of money, which it pays out on customers order.

Page 8

Introduction of the PNB

Page 9

Punjab National Bank (PNB) was registered on May 19, 1894 under the Indian Companies Act with its office in Anarkali Bazaar Lahore. The Bank is the second largest government-owned commercial bank in India with about 4,904 branches across 764 cities. It serves over 37 million customers. The bank has been ranked 248 th biggest bank in the world by Bankers Almanac, London. The bank's total assets for financial year 2007 were about US$60 billion. Punjab National Bank (PNB) has the distinction of being the first Indian bank to have been started solely with Indian capital. The bank was nationalized in July 1969 along with 13 other banks. PNB has a banking subsidiary in the UK, as well as branches in Hong Kong and Kabul, and representative offices in Almaty, Dubai, Oslo, and Shanghai. From its modest beginning, the bank has grown in size and stature to become a front-line banking institution in India at present.A professionally managed bank with a successful track record of over 110 years.Strategic business area covers the large IndoGangetic belt and the metropolitan centers.Strong correspondent banking relationships with more than 217 international banks of the world.More than 50 renowned international banks maintain their Rupee Accounts with PNB. Well equipped dealing rooms; 20 different foreign currency accounts are maintained at major centers all over the globe.

Page 10

HISTORY OF PUNJAB NATIONAL BANK

1895: PNB commenced its operations in Lahore. PNB has the distinction of being the first Indian bank to have been started solely with Indian capital that has survived to the present. (The first entirely Indian bank, the Oudh Commercial Bank, was established in 1881 in Faizabad, but failed in 1958.) PNB's founders included several leaders of the Swadeshi movement such as Dyal Singh Majithia and Lala HarKishen Lal, Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C. Jessawala, Shri Prabhu Dayal, Bakshi Jaishi Ram, and Lala Dholan Dass. Lala Lajpat Rai was actively associated with the management of the Bank in its early years. 1904: 1940: 1947: PNB established branches in Karachi and Peshawar. PNB absorbed Bhagwan Dass Bank, a scheduled bank located in Delhi circle. Partition of India and Pakistan at Independence. PNB lost its premises in Lahore, but continued to operate in Pakistan. PNB acquired the 39 branches of Bharat Bank (est. 1942); Bharat Bank became Bharat Nidhi Ltd. PNB acquired Universal Bank of India. The Government of Burma nationalized PNB's branch in Rangoon (Yangon). After the Indo-Pak war the government of Pakistan seized all the offices in Pakistan of Indian banks, including PNB's headoffice, which may have moved to Karachi. PNB also had one or more branches in East Pakistan (Bangladesh). The Government of India (GOI) nationalized PNB and 13 other major commercial banks, on July 19, 1969. PNB opened a branch in London. The Reserve Bank of India required PNB to transfer its London branch to State Bank of India after the branch was involved in a fraud scandal. PNB acquired Hindustan Commercial Bank (est. 1943) in a rescue. The acquisition added Hindustan's 142 branches to PNB's network. PNB acquired New Bank of India, which the GOI had nationalized in 1980.

1951:

1961: 1963: 1965:

1969:

1976: 1986:

1986:

1993:

Page 11

1998: 2003:

PNB set up a representative office in Almaty, Kazakhstan. PNB took over Nedungadi Bank, the oldest private sector bank in Kerala. At the time of the merger with PNB, Nedungadi Bank's shares had zero value, with the result that its shareholders received no payment for their shares.

PNB also opened a representative office in London. 2004: PNB established a branch in Kabul, Afghanistan. PNB also opened a representative office in Shanghai. PNB established an alliance with Everest Bank in Nepal that permits migrants to transfer funds easily between India and Everest Bank's 12 branches in Nepal. 2005: 2007: PNB opened a representative office in Dubai. PNB established PNBIL - Punjab National Bank (International) - in the UK, with two offices, one in London, and one in South Hall. Since then it has opened a third branch in Leicester, and is planning a fourth in Birmingham. PNB opened a branch in Hong Kong. PNB opened a representative office in Oslo, Norway, and a second branch in Hong Kong, this in Kowloon.

2008: 2009:

Page 12

COMPANY PROFILE

With over 38 million satisfied customers and 4668 offices, PNB has continued to retain its leadership position among the nationalized banks. The bank enjoys strong fundamentals, large franchise value and good brand image. Besides being ranked as one of India's top service brands, PNB has remained fully committed to its guiding principles of sound and prudent banking. Apart from offering banking products, the bank has also entered the credit card & debit card business; bullion business; life and non-life insurance business; Gold coins & asset management business, etc. Since its humble beginning in 1895 with the distinction of being the first Indian bank to have been started with Indian capital, PNB has achieved significant growth in business which at the end of March 2009 amounted to Rs 3,64,463 crore. Today, with assets of more than Rs 2,46,900 crore, PNB is ranked as the 3rd largest bank in the country (after SBI and ICICI Bank) and has the 2nd largest network of branches (4668 including 238 extension counters and 3 overseas offices).During the FY 2008-09, with 39% share of low cost deposits, the bank achieved a net profit of Rs 3,091 crore, maintaining its number ONE position amongst nationalized banks. Bank has a strong capital base with capital adequacy ratio as per Basel II at 14.03% with Tier I and Tier II capital ratio at 8.98% and 5.05% respectively as on March09. As on March09, the Bank has the Gross and Net NPA ratio of only 1.77% and 0.17% respectively. During the FY 2008-09, its ratio of priority sector credit to adjusted net bank credit at 41.53% & agriculture credit to adjusted net bank credit at 19.72% was also higher than the respective national goals of 40% & 18%. PNB has always looked at technology as a key facilitator to provide better customer service and ensured that its IT strategy follows the Business strategy so as to arrive at Best Fit. The bank has made rapid strides in this direction. Along with the achievement of 100% branch computerization, one of the major
Page 13

achievements of the Bank is covering all the branches of the Bank under Core Banking Solution (CBS), thus covering 100% of its business and providing Anytime Anywhere banking facility to all customers including customers of more than 2000 rural branches. The bank has also been offering Internet banking services to the customers of CBS branches like booking of tickets, payment of bills of utilities, purchase of airline tickets etc. Towards developing a cost effective alternative channels of delivery, the bank with more than 2150 ATMs has the largest ATM network amongst Nationalized Banks.

With the help of advanced technology, the Bank has been a frontrunner in the industry so far as the initiatives for Financial Inclusion is concerned. With its policy of inclusive growth in the Indo-Gangetic belt, the Banks mission is Banking for Unbanked. The Bank has launched a drive for biometric smart card based technology enabled Financial Inclusion with the help of Business Correspondents/Business Facilitators (BC/BF) so as to reach out to the last mile customer. The BC/BF will address the outreach issue while technology will provide cost effective and transparent services. The Bank has started several innovative initiatives for marginal groups like rickshaw pullers, vegetable vendors, diary farmers, construction workers, etc. The Bank has already achieved 100% financial inclusion in 21,408 villages. Backed by strong domestic performance, the bank is planning to realize its global aspirations. In order to increase its international presence, the Bank continues its selective foray in international markets with presence in Hongkong, Dubai, Kazakhstan, UK, Shanghai, Singapore, Kabul and Norway. A second branch in Hongkong at Kowloon was opened in the first week of April09. Bank is also in the process of establishing its presence in China, Bhutan, DIFC Dubai, Canada and Singapore. The bank also has a joint venture with Everest Bank Ltd. (EBL), Nepal. Under the long term vision, Bank proposes to start its operation in Fiji Island, Australia and Indonesia. Bank continues with its goal to become a household brand with global expertise. Amongst Top 1000 Banks in the World, The Banker listed PNB at 250 th place. Further, PNB is at the 1166th position among 48 Indian firms making it to a list of the worlds biggest companies compiled by the US magazine Forbes.

Page 14

Financial Performance: Punjab National Bank continues to maintain its frontline position in the Indian banking industry. In particular, the bank has retained its NUMBER ONE position among the nationalized banks in terms of number of branches, Deposit, Advances, total Business, operating and net profit in the year 2008-09. The impressive operational and financial performance has been brought about by Banks focus on customer based business with thrust on SME, Agriculture, more inclusive approach to banking; better asset liability management; improved margin management, thrust on recovery and increased efficiency in core operations of the Bank. The performance highlights of the bank in terms of business and profit are shown below:

Parameters Operating Profit* Net Profit* Deposit Advance Total Business (Rs. Crores)

Mar'07 3617 1540 139860 96597 236456

Mar'08 4006 2049 166457 119502 285959

Mar'09 5744 3091 209760 154703 364463

CAGR 26.02 41.67 22.47 26.55 24.15

* Respective figure for the corresponding financial year

Page 15

VISION AND MISSION OF PUNJAB NATIONAL BANK

VISION
To evolve and position the Bank as a world class progressive cost effective and customer friendly institution providing comprehensive financial and related services; integrating frontiers of technology and serving various segments of society especially the weaker section; committed to excellence in serving the public and also excellence in serving the public and also excelling in corporate values.

MISSION
To provide excellent professional services and improve its position as a leader in the field of financial and related services; build and maintain a team of motivated and committed workforce with high work ethos; use latest technology aimed at customer satisfaction and act as an effective catalyst for socio-economic development

Page 16

Scope of project study

The study of credit management is very useful in the various banking industry as well as financial services provider companies. It is also helpful to the all the MBA students as well as workers who are pursuing in the banking industry. It is helpful to the credit management researcher. We will get the benefits of the project in the specification of the financial services.

Page 17

Chart showing the Indian Financial System

The Indian Financial System

Organized sector

Un-Organized Sector

Financial Markets

Financial Services

Financial Institutions

Financial Instruments Money Lenders Land Lords

Others

Non-Interme Diaries

Interme Diaries

Regulatory Pawn Brokers Traders Indigenous Bankers

Organized

Un-organized

Primary

Secondary

Primary

Secondary

Short -Term

Medium-Term

Long-Term

Capital Market

Money Market

Page 18

iii. Financial instruments

Financial instruments constitute of securities, assets and claims. Financial securities are classified as primary and secondary securities. The primary securities are issued by the companies directly to the ultimate savers as ordinary shares and debentures. While the secondary securities are issued by the financial intermediaries to the ultimate savers as bank deposits, insurance policies so and on.

iv. Financial services

The term financial service in a broad sense means Mobilizing and allocating savings. Thus, it can also be offered as a process by which funds are mobilized from a large number of savers and make them available to all those who are in need of it, particularly to the corporate customers.

2. THE UNORGANIZED SECTOR

The unorganized financial system comprises of relatively less controlled money lenders, indigenous bankers, lending pawn brokers, land lords, traders etc. This part of the financial system is not directly controlled by RBI. .

Legislations passed by the RBI Relating to Foreign Investments

The Reserve Bank of India through its circular RBI/2004/39 A.P.Dir series circular no 64/February 4 2004 has introduced a special scheme The Liberalized Remittance scheme of USD 25,000 (per year) for Resident individuals. The implications of this legislation: Resident Indians can now freely invest in any overseas transaction; this opens the entire gamut of the Indian Investment scenario to overseas instruments like forex markets, forex derivatives, index futures, commodity future and options and all other alternative investments. The legislation would eventually lead to complete liberalization in the areas of overseas investments.

Page 19

Objective of project study

There are some important objectives in front of me when I decide to make the project report on Credit management. I will go to the various banks. I will also get the information through the internet as well as project guide. Then I decide to make the project study on the Analysis of LOAN PROCEDURE AT. It is one of the leading bank in all over india. Its a second largest bank in india.

Key Concept:
Credit:
Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately ( thereby generating a debt), but instead arranges either to repay or return those resources ( or other material of equal value) at a later date. The resources provided may be financial (e.g. granting al loan), or they may consist of goods or services (e.g. consumer credit),

Page 20

Research Methodology
Research Design: Data Collection Method: Universe: Sampling Method: Sample Size: Sampling Unit: Descriptive Design Survey Method and subjective data. Punjab National Bank, Bhagyanagar, Aurangabad. Non probability convenience sampling method 100 respondents Salaried Person-Govt. & Non-Govt., Businessmen, Professional, Retired Individuals Data Source: Data Collection Instrument: Primary data and Secondary data Structured Questionnaire

Page 21

Data Collection & Data Analysis

TERMS: BANK A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets. A bank connects customers that have capital deficits to customers with capital surpluses.
ROLE OF BANK IN OUR ECONOMY

The economic functions of banks include:

1. Issue of money, in the form of banknotes and current accounts subject to check or payment at the customer's order. These claims on banks can act as money because they are negotiable or repayable on demand, and hence valued at par. They are effectively transferable by mere delivery, in the case of banknotes, or by drawing a check that the payee may bank or cash. 2. Netting and settlement of payments banks act as both collection and paying agents for customers, participating in interbank clearing and settlement systems to collect, present, be presented with, and pay payment instruments. This enables banks to economize on reserves held for settlement of payments, since inward and outward payments offset each other. It also enables the offsetting of payment flows between geographical areas, reducing the cost of settlement between them. 3. Credit intermediation banks borrow and lend back-to-back on their own account as middle men. 4. Credit quality improvement banks lend money to ordinary commercial and personal borrowers (ordinary credit quality), but are high quality borrowers. The improvement comes from diversification of the bank's assets and capital which provides a buffer to absorb losses without defaulting on its obligations. However, banknotes and deposits are generally unsecured; if the bank gets into difficulty and pledges assets as security, to raise the funding it needs to continue to operate, this puts the note holders and depositors in an economically subordinated position. 5. Maturity transformation banks borrow more on demand debt and short term debt, but provide more long term loans. In other words, they borrow short and lend long. With a stronger credit quality than most other borrowers, banks can do this by aggregating issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g. withdrawals and redemption of banknotes), maintaining reserves of cash, investing in marketable securities that can be readily converted to cash if needed, and raising replacement funding as needed from various sources (e.g. wholesale cash markets and securities markets).

Money creation whenever a bank gives out a loan in a fractional-reserve banking system, a new sum of virtual money is created

TYPE OF BANK
Page 22

1 2 3

Commercial Bank Agriculture Bank Investment Bank

HISTORY OF BANKING
Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India.(Joint Stock Bank: A company that issues stock and requires shareholders to be held liable for the company's debt) It was not the first though. That honor belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla. When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period fey and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Pondicherry, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center. Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India.(Joint Stock Bank: A company that issues stock and requires shareholders to be held liable for the company's debt) It was not the first though. That honor belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla. When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period fey and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862;
Page 23

branches in Madras and Pondicherry, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center. The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India. Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities. Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately (thereby generating a debt), but instead arranges either to repay or return those resources (or other materials of equal value) at a later date. The resources provided may be financial (e.g. granting a loan), or they may consist of goods or services (e.g. consumer credit). Credit encompasses any form of deferred payment.[1] Credit is extended by a creditor, also known as a lender, to a debtor, also known as a borrower. Credit does not necessarily require money. The credit concept can be applied in barter economies as well, based on the direct exchange of goods and services (Ingham 2004 p. 12-19). However, in modern societies credit is usually denominated by a unit of account. Unlike money, credit itself cannot act as a unit of account. Movements of financial capital are normally dependent on either credit or equity transfers. Credit is in turn dependent on the reputation or creditworthiness of the entity which takes responsibility for the funds. Credit is also traded in financial markets. The purest form is the credit default swap market, which is essentially a traded market in credit insurance. A credit default swap represents the price at which two parties exchange this risk the protection "seller" takes the risk of default of the credit in return for a payment, commonly denoted in basis points (one basis point is 1/100 of a percent) of the notional amount to be referenced, while the protection "buyer" pays this premium and in the case of default of the underlying (a loan, bond or other receivable), delivers this receivable to the protection seller and receives from the seller the par amount (that is, is made whole). Credit, in commerce and finance, is a term used to denote transactions involving the transfer of money or other property on promise of repayment, usually at a fixed future date. The transferor thereby becomes a creditor, and the transfer, a debtor; hence credit and debt are simply terms describing the same operation viewed from opposite standpoints.

The word credit is used in commercial trade in the term "trade credit" to refer to the approval for delayed payments for purchased goods. Credit is sometimes not granted to a
Page 24

person who has financial instability or difficulty. Companies frequently offer credit to their customers as part of the terms of a purchase agreement. Organizations that offer credit to their customers frequently employ a credit manager.

Consumer credit
Consumer debt can be defined as money, goods or services provided to an individual in lieu of payment. Common forms of consumer credit include credit cards, store cards, motor (auto) finance, personal loans (installment loans), consumer lines of credit, retail loans (retail installment loans) and mortgages. This is a broad definition of consumer credit and corresponds with the Bank of England's definition of "Lending to individuals". Given the size and nature of the mortgage market, many observers classify mortgage lending as a separate category of personal borrowing, and consequently residential mortgages are excluded from some definitions of consumer credit - such as the one adopted by the Federal Reserve in the US. The cost of credit is the additional amount, over and above the amount borrowed, that the borrower has to pay. It includes interest, arrangement fees and any other charges. Some costs are mandatory, required by the lender as an integral part of the credit agreement. Other costs, such as those for credit insurance, may be optional. The borrower chooses whether or not they are included as part of the agreement.
Interest and other charges are presented in a variety of different ways, but under many legislative regimes lenders are required to quote all mandatory charges in the form of an annual percentage rate (APR). The goal of the APR calculation is to promote truth in lending, to give potential borrowers a clear measure of the true cost of borrowing and to allow a comparison to be made between competing products. The APR is derived from the pattern of advances and repayments made during the agreement. Optional charges are not included in the APR calculation. So if there is a tick box on an application form asking if the consumer would like to take out payment insurance, then insurance costs will not be included in the APR calculation (Finlay 2009).

Cash management services generally offered

Page 25

The following is a list of services generally offered by banks and utilised by larger businesses and corporations:

Account Reconcilement Services: Balancing a checkbook can be a difficult process for a very large business, since it issues so many checks it can take a lot of human monitoring to understand which checks have not cleared and therefore what the company's true balance is. To address this, banks have developed a system which allows companies to upload a list of all the checks that they issue on a daily basis, so that at the end of the month the bank statement will show not only which checks have cleared, but also which have not. More recently, banks have used this system to prevent checks from being fraudulently cashed if they are not on the list, a process known as positive pay. Advanced Web Services: Most banks have an Internet-based system which is more advanced than the one available to consumers. This enables managers to create and authorize special internal logon credentials, allowing employees to send wires and access other cash management features normally not found on the consumer web site. Armored Car Services (Cash Collection Services): Large retailers who collect a great deal of cash may have the bank pick this cash up via an armored car company, instead of asking its employees to deposit the cash. Automated Clearing House: services are usually offered by the cash management division of a bank. The Automated Clearing House is an electronic system used to transfer funds between banks. Companies use this to pay others, especially employees (this is how direct deposit works). Certain companies also use it to collect funds from customers (this is generally how automatic payment plans work). This system is criticized by some consumer advocacy groups, because under this system banks assume that the company initiating the debit is correct until proven otherwise. Balance Reporting Services: Corporate clients who actively manage their cash balances usually subscribe to secure web-based reporting of their account and transaction information at their lead bank. These sophisticated compilations of banking activity may include balances in foreign currencies, as well as those at other banks. They include information on cash positions as well as 'float' (e.g., checks in the process of collection). Finally, they offer transaction-specific details on all forms of payment activity, including deposits, checks, wire transfers in and out, ACH (automated clearinghouse debits and credits), investments, etc. Cash Concentration Services: Large or national chain retailers often are in areas where their primary bank does not have branches. Therefore, they open bank accounts at various local banks in the area. To prevent funds in these accounts from being idle and not earning sufficient interest, many of these companies have an agreement set with their primary bank, whereby their primary bank uses the

Page 26

Automated Clearing House to electronically "pull" the money from these banks into a single interest-bearing bank account.

Lockbox - Retail: services: Often companies (such as utilities) which receive a large number of payments via checks in the mail have the bank set up a post office box for them, open their mail, and deposit any checks found. This is referred to as a "lockbox" service. Lockbox - Wholesale: services: are for companies with small numbers of payments, sometimes with detailed requirements for processing. This might be a company like a dentist's office or small manufacturing company. Positive Pay: Positive pay is a service whereby the company electronically shares its check register of all written checks with the bank. The bank therefore will only pay checks listed in that register, with exactly the same specifications as listed in the register (amount, payee, serial number, etc.). This system dramatically reduces check fraud. Reverse Positive Pay: Reverse positive pay is similar to positive pay, but the process is reversed, with the company, not the bank, maintaining the list of checks issued. When checks are presented for payment and clear through the Federal Reserve System, the Federal Reserve prepares a file of the checks' account numbers, serial numbers, and dollar amounts and sends the file to the bank. In reverse positive pay, the bank sends that file to the company, where the company compares the information to its internal records. The company lets the bank know which checks match its internal information, and the bank pays those items. The bank then researches the checks that do not match, corrects any misreads or encoding errors, and determines if any items are fraudulent. The bank pays only "true" exceptions, that is, those that can be reconciled with the company's files. Sweep accounts: are typically offered by the cash management division of a bank. Under this system, excess funds from a company's bank accounts are automatically moved into a money market mutual fund overnight, and then moved back the next morning. This allows them to earn interest overnight. This is the primary use of money market mutual funds. Zero Balance Accounting: can be thought of as somewhat of a hack. Companies with large numbers of stores or locations can very often be confused if all those stores are depositing into a single bank account. Traditionally, it would be impossible to know which deposits were from which stores without seeking to view images of those deposits. To help correct this problem, banks developed a system where each store is given their own bank account, but all the money deposited into the individual store accounts are automatically moved or swept into the company's main bank account. This allows the company to look at individual statements for each store. U.S. banks are almost all converting their systems so that companies can tell which

Page 27

store made a particular deposit, even if these deposits are all deposited into a single account. Therefore, zero balance accounting is being used less frequently.

Wire Transfer: A wire transfer is an electronic transfer of funds. Wire transfers can be done by a simple bank account transfer, or by a transfer of cash at a cash office. Bank wire transfers are often the most expedient method for transferring funds between bank accounts. A bank wire transfer is a message to the receiving bank requesting them to effect payment in accordance with the instructions given. The message also includes settlement instructions. The actual wire transfer itself is virtually instantaneous, requiring no longer for transmission than a telephone call.

Controlled Disbursement: This is another product offered by banks under Cash Management Services. The bank provides a daily report, typically early in the day, that provides the amount of disbursements that will be charged to the customer's account. This early knowledge of daily funds requirement allows the customer to invest any surplus in intraday investment opportunities, typically money market investments. This is different from delayed disbursements, where payments are issued through a remote branch of a bank and customer is able to delay the payment due to increased float time.

FINANCIAL SERVICES
Financial services are the economic services provided by the finance industry, which encompasses a broad range of organizations that manage money, including credit unions, banks, credit card companies, insurance companies, consumer finance companies, stock brokerages, investment funds and some government sponsored enterprises. As of 2004, the financial services industry represented 20% of the market capitalization of the S&P 500 in the United States

HISTORY OF FINANCIAL SERVICES

The term "financial services" became more prevalent in the United States partly as a result of the Gramm-Leach-Bliley Act of the late 1990s, which enabled different types of companies operating in the U.S. financial services industry at that time to merge. [2]
Companies usually have two distinct approaches to this new type of business. One approach would be a bank which simply buys an insurance company or an investment bank, keeps the original brands of the acquired firm, and adds the acquisition to its holding company simply to diversify its earnings. Outside the U.S. (e.g., in Japan), non-financial services companies are permitted within the holding company. In this scenario, each company still looks independent, and has its own customers, etc. In the other style, a bank would simply create its own brokerage division or insurance division and attempt to sell those products to its own existing customers, with incentives for combining all things with one company

Types of credit

Mercantile or commercial credit Investment credit

Page 28

Bank credit Consumer or personal credit Real estate credit Public or government credit

Trade credit
The word credit is used in commercial trade in the term "trade credit" to refer to the approval for delayed payments for purchased goods. Credit is sometimes not granted to a person who has financial instability or difficulty. Companies frequently offer credit to their customers as part of the terms of a purchase agreement. Organizations that offer credit to their customers frequently employ a credit manager.

Consumer credit
Consumer debt can be defined as money, goods or services provided to an individual in lieu of payment. Common forms of consumer credit include credit cards, store cards, motor (auto) finance, personal loans (installment loans), consumer lines of credit, retail loans (retail installment loans) and mortgages. This is a broad definition of consumer credit and corresponds with the Bank of England's definition of "Lending to individuals". Given the size and nature of the mortgage market, many observers classify mortgage lending as a separate category of personal borrowing, and consequently residential mortgages are excluded from some definitions of consumer credit - such as the one adopted by the Federal Reserve in the US.
The cost of credit is the additional amount, over and above the amount borrowed, that the borrower has to pay. It includes interest, arrangement fees and any other charges. Some costs are mandatory, required by the lender as an integral part of the credit agreement. Other costs, such as those for credit insurance, may be optional. The borrower chooses whether or not they are included as part of the agreement

CREDIT RISK
Credit risk is an investor's risk of loss arising from a borrower who does not make payments as promised.[1] Such an event is called a default. Investor losses include lost principal and

Page 29

interest, decreased cash flow, and increased collection costs, which arise in a number of circumstances:[2]

A consumer does not make a payment due on a mortgage loan, credit card, line of credit, or other loan A business does not make a payment due on a mortgage, credit card, line of credit, or other loan A business or consumer does not pay a trade invoice when due A business does not pay an employee's earned wages when due A business or government bond issuer does not make a payment on a coupon or principal payment when due An insolvent insurance company does not pay a policy obligation An insolvent bank won't return funds to a depositor

A government grants bankruptcy protection to an insolvent consumer or business

FINANCIAL INSTRUMENT
Financial instruments can be categorized by form depending on whether they are cash instruments or derivative instruments:

Cash instruments are financial instruments whose value is determined directly by markets. They can be divided into securities, which are readily transferable, and other cash instruments such as loans and deposits, where both borrower and lender have to agree on a transfer. Derivative instruments are financial instruments which derive their value from the value and characteristics of one or more underlying entities such as an asset, index, or interest rate. They can be divided into exchange-traded derivatives and over-the-counter (OTC) derivatives.

Alternatively, financial instruments can be categorized by "asset class" depending on whether they are equity based (reflecting ownership of the issuing entity) or debt based (reflecting a loan the investor has made to the issuing entity). If it is debt, it can be further categorised into short term (less than one year) or long term. Foreign Exchange instruments and transactions are neither debt nor equity based and belong in their own category.

Page 30

Balance Sheet of a Commercial Bank

Liabilities a. Share Capital b. Reserve Funds c. Deposits i. Fixed Deposits ii. Saving Deposits iii.Current Deposits iv. Other Deposits d. Borrowings e. Other liabilities Assets a. i. Cash in Hand ii. Cash with the Central Bank (RBI) iii. Cash with the other banks b. Money at short c. Bills and securities discounted d. Investment of bank e. Loans and Advances given f. Other Assets

Page 31

BALANCE SHEET OF PUNJAB NATIONAL BANK ASSETS

Mar '11 Mar '10 Mar '09 Mar '08 Mar '07

12 mths

12 mths

12 mths

12 mths

12 mths

Capital and Liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities 316.81 316.81 0.00 0.00 19,720.99 1,470.76 21,508.56 312,898.73 31,589.69 344,488.42 12,328.27 378,325.25 315.30 315.30 0.00 0.00 15,915.63 1,491.99 17,722.92 249,329.80 19,262.37 268,592.17 10,317.69 296,632.78 315.30 315.30 0.00 0.00 12,824.59 1,513.74 14,653.63 209,760.50 4,374.36 214,134.86 18,130.13 246,918.62 315.30 315.30 0.00 0.00 10,467.35 1,535.70 12,318.35 166,457.23 5,446.56 171,903.79 14,798.23 199,020.37 315.30 315.30 0.00 0.00 9,826.31 293.85 10,435.46 139,859.67 1,948.86 141,808.53 10,178.51 162,422.50

Page 32

LIABILITIES

Mar '11

Mar '10

Mar '09

Mar '08

Mar '07

12 mths

12 mths

12 mths

12 mths

12 mths

Assets Cash & Balances with RBI Balance with Banks, Money at Call Advances Investments Gross Block Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets 23,776.90 5,914.32 242,106.67 95,162.35 4,981.60 1,876.01 3,105.59 0.00 8,259.42 378,325.25 18,327.58 5,145.99 186,601.21 77,724.47 4,215.21 1,701.74 2,513.47 0.00 6,320.07 296,632.79 17,058.25 4,354.89 154,702.99 63,385.18 3,930.36 1,533.25 2,397.11 0.00 5,020.20 246,918.62 15,258.15 3,572.57 119,501.57 53,991.71 3,699.64 1,384.12 2,315.52 0.00 4,380.84 199,020.36 12,372.03 3,273.49 96,596.52 45,189.84 2,247.74 1,237.92 1,009.82 0.00 3,980.80 162,422.50

Contingent Liabilities Bills for collection Book Value (Rs)

101,465.73 37,449.53 632.48

68,124.47 33,215.78 514.77

79,270.65 31,941.43 416.74

80,606.88 23,448.99 341.98

52,884.89 21,815.59 321.65

Page 33

Observation & Findings

PRODUCTS OFFERED BY PUNJAB NATIONAL BANK

Presently, it is the second largest bank of the country rendering a wide variety of banking services:

CENTRALISED BANKING SOLUTION (CBS)

CBS, an inter-branch networking and data-sharing platform helps to operate account from any city in India having CBS networked branches. Changing status from Customer of the Branch to Customer of the Bank, presently, there are over 2,616 CBS networked brandies in 820 cites.

NRIS & TOURISTS

Currency exchange services are being provided by our Exchange Bureaus spread throughout the country.

ONLINE TAX PAYMENT

PNB provides the facility of online payment of service tax, excise duty, DGFT, custom duty & all charges under MCA.

Page 34

CASH MANAGEMENT SERVICE (CMS)

PNBs CMS facilitates management of receivables and payments in technology driven environment, ensuring availability of funds at reduced cost, helping reconciliation at multi location accounts besides providing customized MIS.

MUTUAL FUNDS & INSURANCE

The bank has tied-up with Principal Financial Group for providing Mutual Funds and Insurance services & also tied up for distribution & marketing of UTI Mutual Funds.

NRI SERVICES

NRE, FCNR, RFC, NRO Deposit a/c investment Management & Housing Loan facilities for NRIs.

FOREIGN EXCHANGE

PNB has 150 branches authorized for handling foreign exchange business and these branches have been provided with SWIFT connectivity to ensure faster realization of funds.

Page 35

E-MONEY INDIA

Send money to the loved ones in India through PNBs e-Money India service. Draft delivery across 4,038 locations and Bank Credit to over 2,500 branches in India.

ONLINE RAILWAY RESERVATION/AIR TICKET BOOKING

Say goodbye to long queues. PNB offers online booking & information through IRCTC payment gateway. Just click and travel comfortably.

DEPOSITORY SERVICE

PNB Depository service provides the facility of having shares & securities in Demat form & executes transactions of sales & purchase hassle free electronically.

LOCKERS

Now, customer can relax with assurance of having your locker at the PNB branch nearest to their home.

Page 36

CUSTOMER CARE FACILITY

All the banking queries and problems are just a call away! PNB presents 24 hr. customer care facility.

PNB GOLD COIN

PNB gives opportunity to dazzle the well wishers, patrons, partners and acquaintances with the mystical charisma of PNBs 999.9 fineness pure 24-carat gold coins and to convey the true value of treasured relationship. Enjoy guarantee of purity & weight of hallmarked gold coins.

ELECTRONIC CLEARING SERViCE (ECS) & ELECTRONIC FUNDS TRANSFER (EFT)

Avail ECS for quick movement of funds in a paperless mode & EFT to ensure an expeditious transfer of funds by using electronic media.

WEALTH MANAGEMENT SERVICE

PNB provides customized financial advisory services for individuals that includes Mutual Funds, insurance, Retirement Planning, Tax planning, & Debt Management to customers for wealth maximization.

Page 37

1.1. SERVICES PROVIDED BY PUNJAB NATIONAL BANK

Punjab National Bank offers financial solutions and services in an array of sectors. All these services that are offered keep pace with the changing market trends in order to fulfill the needs and preferences of the customers. Some of the well known sectors on which the main functions of the bank are based are:

Personal Banking Corporate Banking Agriculture finance services Industrial finance services Trade financial services International banking services

PNB also has commercial relationship with more than 200 prestigious international banks across the globe. It has the provisions of Rupee Drawing Arrangements with around 15 exchange companies in the UAE and 1 in Singapore. In case of the personal banking segment, the bank offers customized solutions to take care of almost all financial needs of the customers.

Page 38

Some of the well known services that are offered in the bank are:

Savings Fund Account Fixed Deposit scheme Current account Loan services

Punjab National Bank is also a well known name in housing loan benefits. The bank offers both short term and long term loans. The rates are also affordable and can be paid within a particular time.

The housing loans are given for a number of purposes such as:

Construction of a building Purchase of a new house or a flat Purchase of flat or house on a First Power of Attorney basis For the purpose of repair or renovation of a house or a building

The PNB Housing Finance sanctions around 80% of the cost of the project. However, the maximum amount is around Rs 50 lakh. The maximum loan amount for the purpose of renovation and repair is Rs 5 lakh. In most cases, the loan is available for a period between 5 and 20 years before one becomes 65 years of age. The interest of the loan is based on the reducing balance and the principal amount of the loan is also based on the repaying capability of the borrower.

Page 39

1.2. LOAN

FACILITIES

PROVIDED

BY

PUNJAB

NATIONAL BANK

CAR LOAN/TWO WHEELER LOAN

Drive dream car/bike home. PNB gives loan for the purchase of new/old car, van or jeep, new bike at very attractive interest rates with a convenient repayment period.

LOAN AGAINST JEWELLERY

Loan against Gold & Jewellery for individuals/business enterprises, both for business & personal needs.

TRADERS LOAN

Maximize business turnover with PNB traders loan with minimum paper work and attractive rate of interest, for whole sellers, dealers, distributors, individuals, firms, registered cooperative societies & companies. Loans also available for purchase of shop /showroom.

Page 40

HOUSING LOAN

Bring own dream home to life. Avail flexi housing loan and have the advantage of substantial savings on the interest component. Insurance cover for home loan borrowers available.

PERSONAL LOANS

A scheme to meet all types of personal needs, for permanent/confirmed employees/Defence Personnel and Professionally Qualified Doctors.

CORPORATE LOANS

Corporate can expand & diversify with user friendly Corporate Loans Products Working Capital, Term Loan, Bank Guarantee, Letter of Credit & others.

EDUCATIONAL LOAN

Avail Sarvottam Shiksha & Vidyalakshyapurti schemes for studies In India & abroad and ensure a great career for child.

Page 41

PNB GRAMIN CHIKITSAK

Scheme for financing qualified medical practitioners for setting up clinics in rural areas at concessional rate of interest.

LOAN TO PENSIONERS

PNB values the traditions of India by giving special benefits to the senior citizens.

LOANS TO WOMEN

PNBs Mahila Sashaktikaran Abhiyaan & Mahila Samridhi Yojana give special benefits to women customers that help in building their confidence & self-esteem.

Page 42

Limitations
The structure of the Punjab National Bank in Aurangabad is limited with comparison of other bank. It is difficult to explain the credit management policy. The policy is change as per the Indian taxation system.

Page 43

Suggestions & Recommendations

I would like to suggest that expand their structure in Maharashtra. The branches could open as per requirement of the area. The credit management policy of the PNB is useful to the Indian economy. They have to develop their new infrastructure as per the requirement.

Page 44

Conclusion
After the whole study of LOAN PROCEDURE AT I

Page 45

ANNEXURE
A) QUESTIONNIRE

1) Do you have any account? YES NO

2) In which bank do you have account? SBI ICICI

PNB

AXIS

ANY OTHER PLEASE SPECIFY

3) Have you taken any loan?

YES

NO

4) From which bank have you taken loan?

SBI

ICICI

HDFC

AXIS

ANY OTHER PLEASE SPECIFY

Page 46

5) Why have you taken loan from above specified bank?

GOOD SERVICE

EASY REPAYMENT

LOW INTEREST RATE

ANY OTHER PLEASE SPECIFY

6) For what purpose have you taken personal loan?

HOME RENOVATION

MEDICAL

DAUGHTERS MARRIAGE

TRAVELLING

ANY OTHER, PLEASE SPECIFY

7) How much loan have you taken?

50000-1LAKH

1-3 LAKH

3-5 LAKH

5 AND ABOVE

Page 47

8) Duration of taking loan?

1 years 4 years

2 years 5 years

3years

9) What is the EMI paid by you?

1000-5000

5000-10000

10000-15000

15000 and above

10) Are you satisfied with facility provided by the bank?

YES

NO

11) Are you aware of personal loan of PNB?

YES

NO

Page 48

12) From which source do you came to know?

FRIENDS

ADVERTISMENT

RELATIVE

MARKETING EXECUTIVE

13) Why have you taken loan from PNB BANK?

LOW INTEREST RATE

BETTER SERVICE

AFFORDABLE EMI

ANY OTHER, PLEASE SPECIFY

NAME:

ADDRESS:

OCCUPATION:

CONTACT NO:
Page 49

BIBLIOGRAPHY
BOOKS

Abhayankar Dipak, International Banking and Finance, Third edition, Vipul Prakashan, Mumbai.

Bhandgar P. K., Environment and Management of Financial Services, Third edition, Vipul Prakashan, Mumbai.

WEBSITES

www.Punjabnationalbank.com www.finance.indiamart.com www.pnbindia.com www.scribd.com

Page 50

Page 51