INTRODUCTION OF LOANS AND ADVANCES

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from the bank that is withdrawn in one lump sum.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

BANKS PROFILE
Vaishya Sahakari Bank is a small Co-Operative Bank in our Mumbai. It is established in 1945. It
has Completed 68 years as on 12th November 2013. It has total 6 branches in Mumbai. It has
acquired Tier II status by crossing Rs.100 Cr. Deposit mark. Now the Bank can open branches
anywhere in Maharashtra.

TODAYS VAISHYA SAHAKARI BANK LTD.

Today, Vaishya Sahakari Bank is spreading its arms around the Mumbai and has a network of
branches spanning all time zones. Now the Bank is continuous A Grade by Statutory Auditors
appointed by Co operative Department Government of Maharashtra Since F.y. 2008-09. The
Bank has started paying dividend from F.y. 2008-09 after a lapse of seven years. Even they have
facilities like anywhere banking through CBS Package. All their branches have high level
security arrangements. They have cross deposit milestone of Rs.100 Cr. On 31st March 2012.
They have many competitors co-operative Banks like Abhuday Bank, Saraswat Bank, Dombivali
Nagari Sahakari Bank etc.

VISION
To install ATM at all our branches.
To seek membership of NFS for making available ATM facility to our customer throughout
India.
To expand beyond Mumbai & Thane Districts in Maharashtra.
To triple the business-mix in next three years from present Rs. 178.00 Cr. to
Rs. 534 Cr. by 2015-16

PRODUCTS OFFERED BY VAISHYA SAHAKARI BANK:

Deposits
Saving Account
Current Account
Term Deposit
Loans

Vehicle Loan
Education Loan
Housing Loan
Mortgage Loan
Personal Loan
Secured Loan
Gold Loan

Facilities
RTGS
ECS
ATM Card

METHODOLOGY
The following methodology will be followed for the study:
3

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

OBJECTIVE OF THE STUDY

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

SCOPE OF THE STUDY

The study would focus on the following areas of Vaishya Sahakari Bank Limited
4

Credit evaluation system of Vaishya Sahakri Bank Limited.

Procedure for different loan facilities.

Credit portfolio management of Vaishya Sahakari Bank Limited.

Organization structures and responsibilities of management.

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

LIMITATION OF THE REPORT

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

DATA ANALYSIS AND INTERPRETATION

FINANCIAL PERFORMANCE OF VSBL

DEPOSIT OF VSBL

ANALYSIS OF GROWTH IN LOAN AND ADVANCES

PROBLEMS OF VAISHYA SAHAKARI BANK LTD.

FINANCIAL PERFORMANCE OF VSBL

Vaishya Sahakari Bank's policy was to expand the loan portfolio moderately in consideration of
economic and socio-political scenario of the country. The Bank's loans and advances increased
by 1% in 2013 to 7121.63 Lakhs as against 7096.40 Lakhs in 2012.

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

The Bank has already given continued efforts to maintain high quality of assets. Besides giving
emphasis on the satisfactory business performance of the clients and collateral support, we have
geared up loan monitoring and follow up activities to arrest the loans from becoming nonperforming. The non-performing loans of the Bank increased to 1.30% as on March 31, 2013
from 0.97% of the year 2012.

Financial Statement of Vaishya Sahakari Bank Ltd.

From 31 March;2009 to 31 March;2013
Particulars

31/3/2013

31/3/2012

31/3/2011

31/3/2010
7

Income
Interest Earned
Commission

118001477
161145

114041199
243193

96898073
317422

82267245
442517

9120228
127282850

8535838
122820230

6784372
103999867

6730962
89440724

81382895
41776898
246550
123406343
3876507
500000
-

73519542
39841351
1148551
114509444
8310786
2200000
251402

62363511
35318406
1418172
99100089
4899778
-

52029472
30626493
1410107
84066072
5374652
2157633
-

Earlier Year
(+) Excess Provision of Income

242604

Tax of Earlier Year

(-) Provision for Deferred Tax
Net Profit After Tax
Profit of previous year brought

19506
3599605
2645

108668
5750716
2457

664657
4235121
1861

56547
3273566
2295

forward
Profit

3602250

5753173

4236982

3275861

on

Insurance

Business
Other Income
Total
Expenditure
Interest expended
Operating Expenses
Provisions and Contingencies
Total
Profit Before Tax
(-) Provision for Income Tax
(-) Provision for Income Tax of

Available

for

Appropriation
Balance sheet of Vaishya Sahakari Bank Ltd.
From 31 March 2010 to 2013
Particulars
Liabilities
Share Capital
Reserves

and

surplus
Deposits
Other Liabilities &

31/3/2013

31/3/2012

31/3/2011

31/3/2010

35615095
67617450

33202425
68053063

30041360
64596310

24216535
65243717

1069660335

105258777

969178139

818979916

126533501

1
150164236

143425284

120809577

Provisions
8

Total

1299426381

130400749

1207241093

1029249745

5
Assets
Cash on hand
Balance with Banks
Investments
Advances
Fixed Assets
Other Assets
Total

21493070
34638982
390888330
712163437
48996446
91246116
1299426381

18851149
50591421
365028847
709640373
51073559
108822146
130400749

18185870
28924271
349693686
656914124
51762947
101760195
1207241093

22216599
28151251
329770919
530285976
39315282
79509718
1029249745

Contingent

1722675

5
1033237

1130250

909850

Liabilities
Bills for Collection

282288

62046

164285

- Contra

DEPOSITS OF VSBL
The bank mobilized total deposits are 1 0 6 9 6 . 6 0 Lakhs as of March 2013which is
raised by 73 % as compared to 6166.73 in 31 March 2009, which is good for the bank.
Competitive interest rate, attractive deposit products, deposit mobilization efforts of the bank
employees and confidence reposed by the customers in the bank contributed to the notable
growth in deposits. The deposits of the bank as on March 31, 2013 was as follows:

12000
10000
8000
6000
4000
2000
0
2009

2010

2011

2012

2013

LOANS OF VAISHYA SAHAKARI BANK LTD.

The bank mobilized total Loans are 7121.63 Lakhs as of March 2013 which is raised by 65% as
compared to 4328.94 in 31 March 2009, which is good for tha bank. Competitive interest rate,
attractive deposit products, deposit mobilization efforts of the bank employees and confidence
reposed by the customers in the bank contributed to the notable growth in Loan Accounts. The
deposits of the bank as on March 31, 2013 was as follows:
10

Loans
8000
7000
6000
5000

Loans

4000
3000
2000
1000
0
2009

2010

2011

2012

2013

ANALYSIS OF GROWTH OF LOANS AND ADVANCES

Here we can observe that the Deposits have been increased by 75% from 2009 to 2013 and the
loans are increased by 65 % from 2009 to 2013, which is lesser than the deposits. It shows that
the performance of the Vaishya Sahakri Bank Ltd. Is good but it will be better if they will attract
more customers towards the loan facility which is offered by the bank.

11

The NPA percentage is increased in 2013 as compare to the previous year i.e. 2012, which is not
good for the bank. It will affect to the financial performance of the Bank. Even in NPAs Graph
we can notice that in 2012 they have recovered most of the loan amount as compare to 2011.
But in 2013 there is increase in the NPA percentage, so here they have to more focus in the
recovery procedure of their loan amount from the customer.

LOANS AND ADVANCES AT VAISHYA SAHAKARI BANK LTD.

o TYPES OF LOAN IN VAISHYA SAHAKARI BANK LTD.
o RATE OF INTERAST ON LOAN
o DOCUMANTATION OF LOAN
12

o PROCESS OF DISBURSMENT

Types of Loan In Vaishya Sahakari Bank Ltd.

Vehicle Loan
Education Loan
13

 Housing Loan
Mortgage Loan
Personal Loan
Secured Loan
Gold Loan

Vehicle Loan :
Vehicle Loan means the sum amount of money taken from the bank for the purchase of new or
2nd hand vehicle for personal use or for commercial use.
In a loan, the borrower initially receives or borrows an amount of money, called the principal,
from the lender, and is obligated to pay back or repay an equal amount of money to the lender at
a later time. Typically, the money is paid back in regular installments, or partial repayments; in
an annuity, each installment is the same amount.
Purchase of new Vehicle:
Eligiblity:
Any Individual, group of individual, proprietor, partnership firm, private or public limited
company from the area of operation of the Bank is eligible to apply for the loan.
14

Rate of interest:
The ROI for the loan taken for purchasing the new vehicle is 12.5%. and the minimum margin
is 15%.
Purpose
The loan should be granted for purchase of new vehicle either for personal use or for commercial
use.
Limit of loan:
Maximum 10 lakhs.
Repayment Period :
Purpose of Loan
Personal Use
Commercial Use

Minimum Period
36 Months
36 Months

Maximum Period
60 Months
48 Months

Security:
Prime- Hypothecation of vehicle
Collateral The borrower should have his/her Life Insurance Policy to cover the amount of loan.
Guarantor- One guarantor

Personal Loan
Funds readily available whenever desire or need, be it a sudden vacation that you plan with your
family or urgent funds required for medical treatment? Vaishya Sahakari Banks - Personal Loan
is the answer for those questions.
Advantage of personal loan

Low interest rates. Further, we charge interest on a daily reducing balance!!

15

Low processing charges; only 1%-2% of loan amount

No hidden costs or administrative charges.

Not much security required which means minimal documentationsomething that you had
always wanted.

Long repayment period of up to 48 months.

Purpose
The loan will be granted for any legitimate purpose whatsoever (e.g. expenses for domestic or
foreign travel, medical treatment of self or a family member, meeting any financial liability, such
as marriage of son/daughter, defraying educational expenses of wards, meeting margins for
purchase of assets etc.)

Eligibility
you are eligible if you are a Resident Indian of National having capability to repay a loan.
Loan Amount
Your personal loan limit would be determined by your income and repayment capacity.
Maximum: 1,00,000/- only.
Documents Required
Important documents to be furnished while opening a Personal Loan Account:
For existing bank customers
Passport size photograph
From salaried individuals
Latest salary slip and Form 16
From Self-employed individuals and Professionals
IT returns for the last two financial years,
16

Proof of Professional Qualification

Copy of highest professional degree held
Original Life Insurance Policy
Proof of official address. This can include shop and establishment certificate/Lease
deed/Telephone Bill.

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

Interest Rates
Repayment
The loan is repayable in

EMI. You are allowed to pay more than the EMI if you wish to,

without attracting any prepayment penalty.

Security
Borrowers Original Life Insurance Policy that covers the loan amount.

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

HOUSING LOAN
17

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

No cap on maximum loan amount for purchase/ construction of house/ flat

Option to club income of your spouse or children to compute eligible loan amount.

Provision to finance cost of furnishing and consumer durables as part of project cost.

Interest applied on daily diminishing balance basis

In-principle approval issued to give you flexibility while negotiating purchase of a

property
Purpose

Purchase/ Construction of new House/ Flat

Purchase of an existing House/ Flat

Purchase of a plot of land for construction of House

Extension/ repair/ renovation/ alteration of an existing House/ Flat

Purchase of Furnishings and Consumer Durables as a part of the project cost

Takeover of an existing loan from other Banks/ Housing Finance Companies

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

Loan Amount

18

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

Applicant(s) aged over 45 years of age 48 times NMI or 4 times NAI, subject to
aggregate repayment obligations not exceeding 50%of NMI/ NAI
To enhance loan eligibility you have option to add:

Income of your spouse

Income of your son/ daughter living with you, provided they have a steady income and his/ her
salary account is maintained with Vaishya Sahakari Bank Ltd.

Expected rent accruals (less taxes, cess, etc.) if the house/ flat being purchased is proposed to be
rented out

Regular income from all sources

Margin
Purchase/ Construction of a new House/ Flat/ Plot of land: 15%
Purchase of an existing House/ Flat: 15%
Repairs/ Renovation of an existing House/ Flat: 20%
Processing Fee
0.50% of Loan amount with a cap of Rs.10, 000/-(including Service Tax)
Prepayment Penalty
2% of the loan prepaid if the loan is preclosed before expiry of half the original tenure.
Security
Equitable mortgage of the property other tangible security of adequate value like NSCs, LIC
policies etc., if the property cannot be mortgaged
Maximum Repayment Period
19

For applicants upto 45 years of age: 20 years

For applicants over 45 years of age: 15 years
Moratorium
Upto 18 months from the date of disbursement of first installment or 2 months after final
disbursement in respect of loans for construction of new house/ flat (moratorium period will be
included in the maximum repayment period)
Disbursement

In lump sum direct in favour of the builder/ seller in respect of outright purchase

In stages depending upon the actual progress of work in respect of construction of

house/ flat etc.
Documents

Completed application form

Passport size photograph

Proof of Identity PAN Card/ Voters ID/ Passport/ Driving License

Proof of Residence Recent Telephone Bill/ Electricity Bill/ Property tax receipt/
Passport/ Voters ID

Proof of business address in respect of businessmen/ industrialists.

Salary slip of last 3 months in case of employee or Form No.16 in case of businessman

Sale Deed, Agreement of Sale, Letter of Allotment, Non encumbrance certificate, Land/
Building Tax paid receipt etc. (as applicable and subject to satisfaction report from our
empanelled lawyer)

Copy of approved plan and approval from the Local Body

Statement of Bank Account/ Pass Book for last 6 months.

EDUCATION LOAN

20

A term loan granted to Indian Nationals for pursuing higher education in India or abroad where
admission has been secured.
Eligible Courses
All courses having employment prospects are eligible.

Graduation courses/ Post graduation courses/ Professional courses

Other courses approved by UGC/Government/AICTE etc.

Expenses considered for loan

Fees payable to college/school/hostel

Examination/Library/Laboratory fees

Purchase of Books/Equipment/Instruments/Uniforms

Caution Deposit/Building Fund/Refundable Deposit

Travel Expenses/Passage money for studies abroad

Purchase of computers considered necessary for completion of course

Cost of a Two-wheeler upto Rs. 50,000/-

Any other expenses required to complete the course like study tours, project work etc.

Amount of Loan
For studies in India, maximum Rs. 5 lacs, Studies abroad, maximum Rs. 10 lacs

21

Interest Rate
For loans upto Rs.5 lacs - 11.00% p.a. Floating
For loans above Rs.5 lacs - 12.00% p.a. Floating
Processing Fees

No processing fee/ upfront charges

Deposit of Rs. 5000/- for education loan for studies abroad which will be adjusted in the
margin money
Repayment Tenure
Repayment will commence one year after completion of course or 6 months after securing a job,
whichever is earlier.

Place of Study

Loan Amount

Repayment Period
in Years

Up to Rs. 5 lacs

5-7

Above Rs. 5 lacs

5-10

Up to Rs. 10 lacs

5-7

Above Rs. 10 lacs

5-10

In India

Abroad
Margin

For loans up to Rs.4.0 lacs : No Margin

For loans above Rs.4.0 lacs:

Studies in India: 5%

Studies Abroad: 15%

Documentation Required
22

Completed Education Loan Application Form.

Mark sheets of last qualifying examination and 2 passport size photographs

Proof of admission scholarship, studentship etc

Schedule of expenses for the specified course

Borrower's Bank account statement for the last six months

Brief statement of assets and liabilities, of the Co-borrower Proof of Income (i.e. Salary
slips/ Form 16 )

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

Complete transparency in operations

Access this loan from our wide network of branches

Interest rates are levied on a monthly/daily reducing balance method

Lowest processing charges.

Long repayment period of 60 months, up to 120 months for salaried individuals with
check-off facility

No Hidden costs or administrative charges.

No prepayment penalties. You can have surplus funds at any time thereby conveniently
reducing your loan liability and interest burden.
Avail of an All-Purpose loan against mortgage of any of your property. We offer you these loans
23

at all our Personal Banking Branches and those branches having Personal Banking Divisions
amongst others.
Eligibility
You are eligible if you are:
A. An individual who is;
a An Employee or
b. A Professional, self-employed or an income tax assesse or
c. Engaged in agricultural and allied activities.
B. Your Net Monthly Income (salaried) is in excess of Rs.12,000/- or Net Annual Income
(others) is in excess of Rs.1,50,000/-.
The income of the spouse may be added if he/she is a co-borrower or a guarantor.
C. Maximum age limit: 60 years.
Salient Features
Loan Amount
Minimum: Rs.25, 000/Maximum: Rs.25 Lakhs. The amount is decided by the following calculation:

24 times the net monthly income of salaried persons (Net of all deductions including
TDS) OR

2 times the net annual income of others (income as per latest IT return less taxes payable)

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

24

Interest
Term Loan 0.25% above SBAR. i.e.11% p.a. Floating
Current Account Overdraft 0.50% above SBAR. i.e.11.25% p.a. Floating

Repayment
Maximum of 60 equated monthly instalments, upto 120 months for salaried individuals with
check-off facility. You could opt to divert any surplus funds towards prepayment of the loan
without attracting any penalty.

PROCESS OF DISBURSMENT
Pre-disbursement Compliance:
When the credit proposal are approved the credit officer must have to be ensured that the
disbursement of the credit facilities must comply with the directions written in the credit
policy and circular made by time to time along with checking all the following terms and
conditions.
The officer of Loan Administration must collect the acceptance of the customers of the
terms and conditions on the duplicate copy of the sanctioned advice.
They will thoroughly examine and ensure that the subject credit facility does not contradict
to any law, rules and regulation of the country, Bangladesh Bank and deed of the Mortgage
and power of the Attorney to be drafted and executed under the Supervision of the Banks
Legal Advisor.
Lawyers certificate to the effect that all the legal formalities (Equitable/ Registered
Mortgaged) has been properly created on the land and building in favor of the bank and
bank has acquired the effective title of the property.
Registered power of attorney has been collected from the borrower (contractor) assigning
25

the work order favoring the bank and the power of attorney has been registered with the
work order given agency and they have agreed that they will issue all the cheques favoring
bank.
The legal documents of the vehicle have been obtained.
Collection of the satisfaction certificate in respect of all the documents both legal and
banking from the lawyer.
Even after checking documents the bank gives the rating to the borrowers through which
the benk decides that how much the loan amount to be sanction to the borrower and what
will be the rate of interest must be charged to the borrower.
After being satisfied all the above terms and conditions the credit in-charge will disburse
the loan amount to the client.

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

26

LEARNING FROM PROJECT

At the time of SIP, I get to know about the banking system of Vaishya Sahakari Bank Ltd. Even I
get the more practical knowledge about the loans and advances, like how the price of gold
calculated for the gold loan and how much the bank sanction the loan amount as per the rules and
regulations recommended by RBI to the co-operative Banks.
Even I get more knowldge about the computer base banking system, how it works and how it
connects all the Branches of Vaishya Sahakari Bank Ltd.
On first day of my SIP ,they created my own new account on their bankinf system through which
I learn the below functions:

Passbook printing
Outward clearing cheque entry
Voucher entry
27

Cheque book entry

To Open an accounts like FD/SB/CA/RD/loan account etc.

Apart from the computer system I get to learn about:

What kind of documents are required for the which specific purpose.
How to maintain the customer relationship.
How the bank keeps an observing each and every account.
Even I observed the consumer behaviour.

RECOMMENDATIONS

The following important activities need to be performed by the bank to become more efficient
and effective in near future

SEBL should establish new/updated financial products to attract potential depositors.

Customers credit scheme should ameliorate by various modern banking systems.

Current portfolio should be exaggerated. Not to give weight only in working capital
financing.
28

They should create other type of deposit to attract more customers.

The loan officer must determine that borrower for responsible attitude toward using
borrowed funds, is truthful in answering the banks question and will make every effort
to repay what is owed.

The loan officer must be reviewed all types of loan on a periodic basis.

CONCLUSION

In his modern world like all other sectors banking sector is also changing. Vaishya Sahakari
bank

Ltd.

is

operating

its business

facing

various

barriers

like

deregulation,

telecommunication and globalization successfully. Vaishya Sahakari bank limited has been
trying to operate its business successfully since 1945. The bank has already developed good
image and goodwill among its clients by offering excellent services to its customers. Through
VSBL is facing both external and internal problems, it can achieve dynamic leadership by
taking implementing marketing strategies. Within a few years of its operation, the bank has
captured a position in the banking sector and it is looking forward.

29