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Project report on

CREDIT MANAGEMENT
Of
RAJKOT NAGARIK SAHAKARI BANK LTD. - RAJKOT
PREFACE
Banks are regarded as the blood of the nation’s economy without them one cannot
imagine economy moving. Therefore banks should be operated very efficiently, co-
operative banks although a small part of whole banking system in India, but they are very
important not only from economical point of view but also from social point of view as it
is more concerned about common people’s welfare and development.
Advance is heart and recovery is oxygen for the bank and for the bank to survive it is
necessary to give advances and recover the amount at the appropriate time. Through
credit management I have tried to cover the various aspects like credit appraisal, NPA
management, recovery management, etc. E.g. credit management covers all the areas
right form the beginning like inquiry till the loan has been paid up.
Though credit management, a very vast topic, I have tried to incorporate to the best of my
capacity from all possible aspects in this project.
I do hope that institution will appreciate this project.
OBJECTIVE OF STUDY

Banking is the activity of my interest. I have seen from the annual reports of the various
banks and find that most of their income is from the interest getting on the credit given so
I choose and hence I studied on credit management.

Game of statistics is always attracts me and banking is one the place where we can learn
it very well. So I have selected bank and have preferred “credit management” as topic for
my project.
RESEARCH METHODOLOGY

There are many methods, which are well known today for research methodology, out of
which one I have chosen is “sampling method”, which is really easier, still producing
accurate results.
Sampling in laymen’s language, is nothing but selecting pockets or samples representing
the whole group and analysis of these samples gives the idea about the respective groups.
On the basis of this, prediction is done and full information about group is integrated.
Though this is not a first hand method, it gives sufficiently good outcomes if used
carefully by experts. It saves the time and energy. The only care should be taken, in order
to have great accuracy, is selection of sample should be such that it should represent the
whole group and information we get from them should be cent percent reliable.

Salient features of my chosen sample


 The biggest co-operative bank having head office in my vicinity enables me to do
my work efficiently. This is the striking feature of my sample.
 The exclusive schedule bank in Rajkot and hence gets priority over the others.
 Generally the new bank lacks the experience so it is mandatory to select a sample,
which has enormous experience. RNSB has a gigantic experience of successful 50
years, under the lights of which work becomes easier.
 The other enchanting point is that RNSB have maximum number of shareholder
i.e. above 2 lacs.
CONTENT
Preface
Acknowledgement
Objective of study
Research methodology
Content

INTRODUCTION
Early history of banking
Origin of word ‘bank’
Status wise bifurcation of bank
Types of bank
RNSB - The Small Man’s Big Bank

PROJECT
Main Fund Inflow (sources of funds)
Main fund outflow (funds used)
Meaning of credit and credit management
Forms of credit/advances
Time wise bifurcation of advances
Security wise bifurcation of advances
Process of credit

CREDIT POLICY
General eligibility criteria for credit in RNSB
Table of interest rate on various advances
Scrutiny of credit
Types of credit
Explanation of all types of credit
Data analysis and observation and suggestion
CREDIT APPRAISAL
Appraisal format
Observation and suggestion

CREDIT MONITORING, FOLLOW UP AND REVIEW


Credit monitoring system in RNSB
Follow up actions for credit monitoring in RNSB
Observation and suggestion

NPA MANAGEMENT
Identification of Non Performing Advances
Asset classification
Classification of Non Performing Advances
Provision for NPA
Findings (reason for NPA)
Suggestions (NPA reduction techniques)

RECOVERY
Process of recovery
Finding/observation

LIMITATION OF STUDY

BIBLIOGRAPHY
INTRODUCTION
EARLY HISTORY OF BANKING

As early as 2000 B.C., the Babylonians has developed a banking system. There is
evidence to show the temples of Babylon were used as banks. After a period of time,
there was a spread of irreligion, which soon destroyed the public sense of security in
depositing money and valuable in temples. The priests were longer acting as financial 45
agents. The Romans did minute regulations, as to conduct private banking and to create
confidence in it. Loan banks were also common in Rome. From these the poor citizens
received loans without paying interest, against security of land for 3 or 4 years.

During the early periods, although private individuals mostly did the banking business,
many countries established public banks either for the purpose of facilitating commerce
or to serve the government.

However, upon the revival of civilization, growing necessity forced the issued in the
middle of the 12th century and banks were established at Venice and Genoa. The Bank of
Venice established in 1157 is supposed to be the most ancient bank. Originally, it was not
a bank in the modern sense, during simply an office for the transfer of the public debt.

Again the origin of modern banking may be traced to the money dealers in Florence, who
received money on deposit, and were lenders of money in the 14th century and also in
1349, the business of banking was carried on by drapers of Barcelona.

In India, as early as the Vedic Period, banking, in most crude from existed. The books of
Manu contain references regarding deposits, pledges, policy of loans, and rate of interest.
True, the banking in those days largely mint money lending and they did not know the
complicated mechanism of modern banking.

This is true not only in the case of India but also of other countries. Although, the
business of banking is as old as authentic history, banking institutions have since than
changed in character and content very much. They have developed from a few simple
operation involving the satisfaction of a few individual wants to the complicated
mechanism of modern banking, involving the satisfaction of capital slowly seeking
employment and thus providing the very life blood of commerce.

THE ORIGIN OF WORD ‘BANK’

The word ‘Bank’ itself derived from the word ‘bancus’ or ‘banque’ that is a French.
There were others of the opinion that the word ‘Bank’ is originally derived from the
German word ‘back’ meaning joint for which was Italianised into ‘banco’.
STATUS WISE BIFURCATION OF BANKS
Scheduled Banks.
Non-Scheduled Banks.

Scheduled Banks
In first schedule, Government of India notifies the Primary Banks, which are licensed and
whose demand and time liability are not less than 50 crores in 1987.
Government of India notifies the Primary banks, which are licensed and whose demand
and time liability are not less than 100 crores can only qualify to be included in the
second schedule since 1993.
A bank becomes scheduled when it fulfils the followings:
‘A’ grade rating from RBI
Demand and Time Liability over 100 Crores
Satisfy the RBI guidelines related to CRR and SLR
As per the norms Priority Sector wise lending
Benefits of Being a Scheduled co-operative are described below:
RBI would provide Rediscounting facility at nominal rate
RBI gives remittance facility at par
The demerit of being a scheduled co-operative bank is that the bank will not get 0.5%
subsidy from RBI.
The conferment of scheduled status on the banks has certain advantages like refinance
facility, directly industrial finance from Reserve Bank of India, avail of Reserve Bank of
India Remittance facility scheme, accept deposits from local bodies, quasi-government
organization, religious, and charitable institutions, guarantees and cheques issued by
Banks are accepted by Government Departments. At the same time, it casts greater
responsibility on the banks in the maintenance of books of accounts and submission of
returns.

Non-Scheduled Bank
The banks, which are not applicable as per the criteria of Scheduled Banks, are called as a
Non-scheduled Banks. These are very small banks.
TYPES OF BANKS
Regional Rural Bank
Nationalize Bank
State Bank Group
Co-operative Bank
Private Bank
Foreign Bank

RESERVE BANK OF INDIA


The Hilton-young commission, appointed in 1926 has recommended the necessity of
centrally empowered institution to have effective control over currency and financial
transaction in the country. Accordingly, the Government had then passed Reserve Bank
of India Act, 1934 and established the Reserve Bank of India with effect from 1st April
1935. The principal aim behind this was to organize proper control over the currency
management in the interest of country benefits and to maintain financial stability. With
this, the RBI mainly looks after the following important functions:

To keep effective control over creation of credits and currency supply


To control the Banking transactions of Central and State Governments
To act as Central administered Authority of all other Banks in the Country.
To organize control over Foreign Currency Transaction
To assist for improvement in financial aspects of the country

Nationalize Banks
The Banking Company Act establishes it in July 1969 by nationalization of 14 major
banks of India. The sent percent ownership of the bank is of government of India.

State Bank Group


The State Bank of India was established under the State Bank of India Act, 1955, the
subsidiary banks under the State Bank of India (subsidiary Banks) Act, 1959. The
Reserve Bank of India owns the State Bank of India, to a large extent, and rest of the part
is some private ownership in the share capital of State Bank of India. The State Bank of
India owns the subsidiary Banks.
Old Private Banks
These banks are registered under Company Act, 1956. Basic difference between co-
operative banks and private banks is its aim. Co-operative banks work for its member and
private banks work for earn profit.

New Private Banks


These banks lead the market of Indian banking business in very short period, because of
its variety of services and approach to handle customer, also because of long working
hours and speed of services. This is also registered under the Company Act, 1956.

Foreign Banks
Foreign Bank means multi-countries bank. In case of India Foreign Banks are such
Banks, which open its branch office in India and their head office is outside of India.

Regional Rural Banks (RRB)


Regional Rural Banks are added in Indian Banking since October 1975. The Government
of India in terms of the provision of the Regional Rural Bank Act 1976 has established
these banks. The distinctive feature of Regional Rural Bank is that through it is a separate
body corporate with the Commercial Bank, which has sponsored the proposal to establish
it. The Central Government, while establishing a Regional Rural Bank at the request of a
Commercial Bank, shall specify the local limits within which it shall operate. The
Regional Rural Bank may establish its branches or agencies at any place within the
notified area.
State Bank of Saurashtra sponsors Regional Rural Banks in Saurashtra.

Co-operative Banks
State Co-operative Banks
State Co-operative Bank means the principal Co-operative society in the state. The
primary objective of which is the financing other co-operative societies in the state.

Central / District Co-operative Banks


Central / District co-operative Bank means the principal co-operative society in a district,
the primary objective of which is the financing of other co-operative in that particular
district.

Primary / Urban Co-operative Banks


The primary objective of principal business of which the transaction is of banking
business and paid up share capital and reserve of which are not less than rupees 100,000
and bye-laws of which do not permit admission of any other co-operative society as a
member.
RNSB - The Small Man’s Big Bank
Rajkot Nagarik Sahakari Bank is a leading Co-Operative Bank in Gujarat State, India.
Bank was established on 5th October 1953 With a small Capital Of Rs. 4890 and
Membership of 59 persons under the leadership of Late Keshavlal Amrutlal Parekh as a
Chairman, and Late Janmashankar Antani as a M.D. Bank has made tremendous & real
progress under the leadership of former Chairman Late Shri Arvindbhai Maniar.
Bank is celebrating its 50th anniversary (Golden Jubilee) year this year. During past years
bank has played vital & leading role for the development of industries, business &
Economy of Rajkot City, Development and nursing of Co-operative movement in the
Saurashtra region of Gujarat State. Bank was the first co-operative institute to start
functioning in the erstwhile state of Saurashtra. “SAHAKAR MAHARSHI” late Shri
Vainkunthbhai Metha inaugurated bank.
Bank has developed in manifolds with the time. Membership (Share Holder) of bank is
mounting towards 2,50,000/-, which is a record by itself & provides an example of how a
mass movement can be turned into the instrument for social upliftment. To day Bank has
more than 600,000+ deposit accounts with a deposit base of 711+ Crores, And 40000+
Establishments/Individuals enjoy the facility of Rs 485+ Crores of Advances.
Since inception the people with foresight & vision, which Includes the names Like Shri
Keshubhai Patel, Shri Vajubhai Vala, Shri Shashikant Mehta, Shri Vasantbhai Khokhani,
Shri Pravinbhai Maniyar, Shri Shivlalbhai Vekaria etc, guided bank.
Being in the service sector, with a vision of current & future trends, Bank started
automation & modernization way back in 1987 and by 1995 all the Branches were
computerized.
Bank is enjoying the SCHEDULE BANK Status since 1989. Recently in year 2001 Bank
was registered UNDER MULTI-STATE CO-OPERATIVE SOCIETY ACT. With this
Bank has opened a Branch In Mumbai, Economic Capital of India and become MULTI-
STATE SCHEDULE CO-OPERATIVE BANK.
Parameters for Multi-State:
NPA level is 15% bellow of total advances.
Not penalized for continuous 3 years for SLR and CRR.
Customers are the key to success of any commercial organization. The bank has taken up
number of projects to improve its customer services as well as facilities during the year.
Some of these are listed below:
 Banks has started its own website www.rsnbindia.com for the benefit of
customers.
 A kiosk has been installed at the Para Bazaar branch for facilitating the customer
needs for account balances and status without the help of banks staff. This also
ensures secrecy of customer account.
 Banks has started issuance of free drafts on its own branches for the benefit of
customers.
 Drafts as well as term deposit receipt are now being issued online (immediately)
at all branches.
 Computerized passbook printers have been installed at all branches.
Bank has also taken up the project of installing technologically upgraded core banking
solution that will network all the branches as well as provide anywhere banking services.
This project has already been launched and the work is progressing at a fast pace.

Bank has recently started five new credit products for customers:

Small business and industrial credit scheme:


This scheme covers the business and industries, which are in existence for minimum 3
years. This scheme is for the working capital requirement of business or industry in the
form of overdraft. “One guarantor and stock statement once a year” - is specialty of this
scheme.

Tatkal (On the spot) credit scheme:


Purpose of this scheme is to fulfill the current requirement (like business, marriage,
medical treatment, education). This is given in the limit of Rs.1 lac against the security of
immovable property. This loan is required to be paid in the monthly installments of 12 to
24. Specialty of the scheme is that within 24 hour you can get the loan
Scheme for the social responsibilities requirement:
This scheme covers the social responsibilities, medical treatment and other occasions. In
this scheme loan is sanctioned against security of immovable property in the limit of Rs.5
lac. Maximum loan repayment period is 36 months.

Building repairing/renovation loan scheme:


Recently bank has increased limit of loan amount from Rs.75000 to Rs.200000 for the
Rajkot, Ahmedabad, Surat city and for other branches to Rs.100000.

Loan against N.S.C. / K.V.P. / L.I.C. Policy scheme:


The loan amount is given in the form of overdraft.
PR OJEC T
MAIN FUND INFLOW (SOURCES OF FUNDS)

Owned deposit
Deposits
Borrowings
Others

Owned deposit
The owned funds consisting of paid capital of the bank, reserve fund, and other reserves.

Deposits
It is sum of current deposits, fixed deposits, saving deposits, special saving deposits, NRI
deposits, inoperative deposits, etc. It is the main Cash Inflow for any institution.

Borrowings
The borrowed funds consisting of borrowings from other banks (as per some writer
deposits of various types is also part of borrowed funds), debentures offered to public,
etc.

Others
Increase in current liabilities, reduction in debtors, fund from operations like net income,
depreciation, and reserves, less payment to creditors, reduction in advances, reduction in
inventories, reduction in cash, sold marketable securities, etc.
MAIN FUND OUTFLOW (FUNDS USED)

CRR (Cash Reserve Ratio) with Reserve Bank of India


SLR (Statutory Liquidity Ratio) in Reserve Bank of India approved securities
Loanable Fund
Others

CRR (Cash Reserve Ratio) with Reserve Bank Of India


The capacity of credits creation of bank is depending upon their cash flow received. To
restrict this credit creation, the reserve bank of India has directed their terms. In case of
scheduled banks and sec.18 of banking regulation act are required to maintain the cash
reserve ratio *@ 4.75% and non-scheduled bank @ 3% of their demand and time liability
amounts separately. The scheduled banks are required to deposit the cash reserve ratio
amount with Reserve Bank of India while the non-scheduled banks are required to
maintain separate account for this. The Reserve Bank of India is also empowered to raise
the cash reserve ratio up to 15% only in respect of scheduled banks. It is maintained
reported to RBI every fortnight.
*30th April RBI declared new credit policy and as per that RBI reduced CRR with 0.25%
Demand and time liability:
Time liability is related with time like, fixed deposits
Demand liability is related with the demand like, Current deposits, inoperative deposit,
and matured fixed deposits

SLR (Statutory Liquidity Ratio)


The cash flow for regular banking transactions mainly depends upon deposit received in
the bank. The reserve bank of India there fore puts some restrictions on utilization of
these amounts. The scheduled and non-scheduled banks are required to deposit 25%
amount of their demand and time liability amount in the security approved by reserve
bank of India. These securities are converted into cash and therefore they are termed as
‘liquid assets’ and 25% amount termed as ‘liquid ratio’. The reserve bank of India is
empowered to raise this liquidity ratio from 25% to 40%. It is maintained average
fortnight and reported to RBI.
Loanable Fund
Credit deposit ratio is not more than 70%.
Loanable funds means amount of money, which is applicable for lending. Three main
factors own fund, deposits, and borrowings decide it. Advances can never be more than
loanable fund.
Loanable fund is a total of:
 75% of own funds
 70% of deposits
 100% of borrowings

Others
Purchase of fixed assets, purchase of marketable securities, addition to advances, addition
to inventories, payment to creditors, payment of dividend, etc..
Meaning of CREDIT
The word ‘credit’ is actually derived from the Latin word ‘Credere’. ‘Credere’ means to
have trust or faith. Thus ‘credit’ is directly related with trust. That is why State Ford
stated that ‘Credit is nothing more than that of trust’. By this we can say that credit is a
tool that is resulted by the complete mutual trust/faith.
‘Credit creation implies a situation when a bank may receive interest simply by
permitting customer to overdraw their accounts or by purchasing securities and paying
for them its own cheque or bank may pay amount to borrower or directly to seller of
goods whom against borrower get amount’.

CREDIT MANAGEMENT
Credit management means the total process of lending start from inquiry from potential
borrower to recover the lending amount from borrower. Whenever my study is concern,
credit management in sense of banking sector is the set of activities like Except
application, loan appraisal, Shakh posting, monitoring, recovery, NPA management, etc.
FORMS OF CREDIT/ADVANCES

Loan (term loan)


Cash credit and overdrafts
Purchase /discounting of bills
Bank guarantee

Loan/term loan
In case of a loan a specified amount is sanctioned by the banker to the customer, who
may either draw the amount in case immediately or may like the amount to be credited to
his current account. But legally it is presumed that he has withdrawn the amount from the
bank and deposited it in his current account. He is required to pay interest on the full
amount from the date of sanction. A loan may be repayable in installments or in lump
sum.

Cash credit
Cash credit is the main method of lending in India and accounts for above 70% of total
bank credit. Under the system, the banker specifies the limit, called the cash credit limit
for each customer, up to which the customer is permitted to borrower against the security
of tangible assets or guarantees. The customer withdraws from his cash credit account as
and when requires the funds and deposits any amount of money, which he finds surplus
with him on any day. The cash credit amount is thus an active and running account to
which deposits and withdrawals may be affected frequently. The customer is required to
provide tangible assets as security to cover the amount borrowed from the banker. The
borrower is charged interest on the actual amount utilized by borrower and for the period
actually utilized only.

Overdrafts
When a current amount holder is permitted by the banker to draw more than what stands
to his credit, such an advance is called an overdraft. The banker may take some collateral
security or may grant such advance on the personal security of the borrower. The
customer is permitted to withdraw the amount as and when he needs it and to repay it by
means of deposit in his account as and when it is feasible for him. Interest is charged on
the exact amount overdrawn by the customer and for the period of its actual utilization

Bills Purchase
The Banker credits customer’s account with the amount of the bill after deduction his
charges. As the demand bills are repayable on demand and there is no maturity, the
banker is entitled to demand their payment immediately on presentation before of
drawee. Their practice adopted in the case of demand bills, is known as purchase of the
bills.

Bills Discount
In case of bills discounting, a bank credits the amount of the bill to the drawer’s account
before the realization of the bill and thus lends its funds to him after deduction his
charges. The bills purchased and bills discounted by a bank are, therefore, shown in its
balance sheet as part of loans and advances. In case of a bill maturing after a period of
time maximum for 180 days in RNSB, the banker retains the bill for that period and
realizes the amount of bill from the drawee on its due date. This practice is called
discounting of the bill.

Bank Guarantee
It is a contract to perform the promise or discharge the liability of a third person in case
of his default. In case of guarantee, Bank is taking responsibility to pay the amount to
seller if buyer will not pay amount in time.
TIME WISE BIFURCATION OF ADVANCES
- Short-term Finance : Up to 26 months
- Medium-term Finance : 26 to 66 months
- Long-term Finance : Above 66 months

SECURITY WISE BIFURCATION OF ADVANCES


Secured Finance / Advances:
Secured Advances are those advances, which provide absolute safety to the Banker by
means of a charge, created on the tangible assets of the borrower in favor of the Banker.
In such cases, the Banker gets certain rights in the tangible assets over which a charge is
created. A Secured Loan or Advance means a loan or advance made on the security of
assets, the market value of which is not at any time less than the amount of such loan or
advance.

Unsecured Finance / Advances:


Unsecured Loan or Advance means a loan or advance, which are not secured, this types
of advances is not preferable for any banking institutions.
PROCESS OF CREDIT

Application inward
Shakh report
Advocate report
Branch report
Loan report
Inspection report
Committee report
Fulfill conditions
Equitable mortgage and equitable extension
Make/sign document
Open account
Insurance posting
Record department - filing

Inward application
A customer seeking an advance is required to submit an appropriate application form.
There are different types of application forms for different types of advances available.
The information furnished in the application covers, inter alias, the following: name and
address of the borrower and his establishment, the details of borrower’s business, the
nature and amount of security offered. The application form has to be supported by
various ancillary statements like the financial statements and financial projections of the
firm. A separate inquiry department is set under the loan department. Here, different
types of application forms are available and collect process charge from borrower;
application is accepted and entered into computer.

Shakh report
This is one of the strangest facility of RNSB compare with other co-operative banks in
Rajkot district because of its computerization. This facility provides bank to total
‘kundali’ of the borrower related to dealing with bank not only as a borrower but also as
partner, as a director also as a guarantor and same detail of the guarantor also and also
about all the types of loans, which are already paid up, which are overdue, which are
running and also about past performance of particular.

Advocate report
Bank through its legal department’s staff in two matters prepares advocate report mostly,
which are given below:
 In case of land and building loan
 Before equitable of immovable property as a security
When the bank prepares advocate report, bank charges some amount from borrower.

Branch turn over report


This report mostly prepare in case of cash credit review/renew, is also known as a branch
turn over report. This report presents:
 Performance of borrower with the branch in previous year
 Debit-credit transaction of borrower,
 Submission of stock statement,
 Payment of interest
 Last outstanding balance

Processing of application/loan report


The application is processed by the clerical staff and checked and passed by senior loan
officer and monitoring by loan manager. The preliminary involves an examination of the
following factors:
 Ability, integrity, and experience of the borrower in the particular business
 General prospects of the borrower’s business
 Purpose of advance
 Requirement of the borrower and its reasonableness
 Adequacy of the margin
 Provision of security
 Period of payment
And prepare the appraisal report for committee approval
Inspection report
Before presenting appraisal report against the committee, bank sends his field
officer/inspection officer to on site inspection. The situation which created by borrower
by providing information of his business to bank is it fact or not? After the inspection
report, this application is ready for putting against the loan committee of the bank.
Inspection varies according to the various loans. For e.g.
In case of cash credit he personally visits the business site and verifies the original books
of accounts with that of submitted books of accounts. He verifies the real stock with the
stock mentioned if any difference is found it is clearly mentioned in the report.
In case of housing loan inspection officer visits the place and check whether the building
is really in existence or not, whether the construction is as per the statical figure provided
to him and plan is as per sanctioned by the municipal corporation.

Committee approval and terms and conditions


Once the application is duly processed, it is put for sanction to the appropriate authority.
Here appropriate authority means various loan committees, standing committee and
board of directors. Loan manager is a sanctioning authority only in case of review of cash
credit facility. Types of committee and its lending powers are given below:
If appropriate authority gives sanction, along with the sanction of advance the
bank specifies the terms and conditions applicable to the advance. These usually cover
the followings:
 The amount of loan or maximum limit of the advances
 The nature of the advances
 The period for which advance is valid
 The rate of interest applicable to the advance
 The primary security to be charged
 The insurance of the security
 The detail of collateral security, if any, to be provided
 The margin to be maintain
 Other restrictions or obligations on the part of the borrower
Name Of Committee
2. Board of directors
3. Standing committee
4. Reconsideration committee
5. Loan committee (Rs.500001 to 1000000)
6. Loan committee (Rs.300001 to 500000)
7. Loan sub-committee/1 (Rs.150001 to 300000)
8. Loan sub-committee/2 (Rs.75001 to 150000)
9. Loan sub-committee/3 (Up to Rs.75000)
10. Loan sub-committee/4 (Up to Rs.5,000)
11. Committee for loan against immovable property/1 (Rs.2,50,001 to 5,00,000)
12. Committee for loan against immovable property/2 (Rs.1,50,001 to 2,50,000)
13. Committee for loan against immovable property/3 (Rs.25,001 to 1,50,000)
14. Committee for loan against immovable property/4 (Up to Rs.25,000)
15. Recovery committee/1 (more than Rs.3,00,000)
16. Recovery committee/2 (Rs.1,50001 to 3,00,000)
17. Recovery committee/3 (Up to Rs.1,50,000)

It is common banking practice to incorporate important terms and conditions on a


stamped security document to be executed by the borrower. Rate of stamp duties are
given follows:
Demand promissory note : Rs. 1
Letter of guarantee : Rs. 60
*Agreement letter Up to 5,00,000 : Rs. 50
(Letter of lien) Above 5,00,000 : Rs. 2/thousand
Letter of pledge : Rs. 50
Letter of continuity : Rs. 50
Agreement letter for Cash credit/Overdraft
Up to 5,00,000 : Rs. 110
Above 5,00,000 : Rs. 2/thousand
Maximum limit of stamp duty is Rs. 2,00,000

*Agreement letter is in case of vehicle loan, security loan, bills purchase, bills
discounting, guarantee, education loan, etc.

Equitable Mortgage And Equitable Extension


When the loan is sanctioned with condition that to put the real document as a mortgage in
security (prime/collateral), it is must that to make the equitable mortgage of the property.
Some time a property which given in mortgage by borrower is already put before the
bank in case of other loan as a security at that time equitable mortgage is already done by
party so there is no need of equitable mortgage again but the equitable extension is only
needed.
Equitable mortgage on non-judicial stamp paper
Amount of sanctioned loan loan of non-judicial stamp paper for equitable mortgage

Up to 15,00,000 1/2% of sanctioned loan


Above 15,00,000 1% of sanctioned loan OR Rs. 1,00,000
(Whichever is less)

Make/sign document
This application is now in the document department, document department take signature
of loanee and guarantors in specimen card and also on the sanction letter to seat beside
and verify all the documents. Types of documents are discussed in each type of loan
separately. This process is last for borrower, after this loan is sanctioned. No formality is
remaining at the borrower side.

Open account
Now loan is sanctioned, all formalities are completed. So bank is giving your amount of
loan either by credited in your account or pay the amount to the party, whose quotation is
provided by borrower to bank. Bank opens your account with himself to get the actual
transaction between bank and borrower.
Insurance posting
It is must for loanee to insure the property or equipment, which is hypothecated with the
bank against loan as a security. This policy is assigned in favor of bank, which is also
required. In case of immovable property or new purchase of machinery, equipment, etc.
insurance of same amount and in case of old machinery, goods stock, etc. twice of the
price insurance is needed. In case of education loan, the life insurance of student is
required. Shakh department is posting it in borrower’s account.

Record department – filing


Now total process is over and whole documents are need filing for bank record. Record
department does this work. Record department file the documents and store it to proper
place.
C RE DI T
P O L IC Y
General Eligibility Criteria For Credit In RNSB
 As per the rules of co-operatives, any one who wants to avail finance has to
become a member of the bank.
 As a shareholder of the bank, he/she have to make compulsory deposit, or the
payment of deposit as per rules and regulations of the bank and thereafter, he/she
can submit the application for loan. In all the practice with the bank, you are
known by bank through your compulsory deposit number.
 The application will have to be submitted in the prescribed form, wherein all
details and particulars will have to be furnished as demanded in the form. He/she
has to submit further particulars as may be asked by the bank.
 The loanee will be advanced loan against the security and he/she has to submit 1
or 2 guarantors, who will be the recognized member and accepted to the bank.
 The interest will be calculated on month-to-month basis.
 Taking in view the total amount of loans taken for different purpose by the firm or
individual, the interest will be calculated at the same rate on all the advances.
 It will be necessary to make payment of share deposit or loan deposit at the rate of
2.5% of the sanction in case of secured loan and 5% of sanctioned loan or in case
of unsecured loan. The maximum share deposit accepted of Rs.25000 and
additional deposit over Rs.25000 will be accepted as loan deposit.
 The rate of interest on share deposit is 15% and that on loan deposit is 10%.
 The company, who wants to take loan from bank, has to get its name registered
for the said loan purpose with the registrar of companies and has to submit the
document of registration charge to the bank.
 In case of mortgage of immovable property steps are given below:
Title clear report
Equitable mortgage on non-judicial stamp paper
Amount of sanctioned loan loan of non-judicial stamp paper for equitable
mortgage
Up to 15,00,000 1/2% of sanctioned loan
Above 15,00,000 1% of sanctioned loan OR Rs.1,00,000
(Whichever is less)
 Some time a property which given in mortgage by borrower is already put before
the bank in case of other loan as a security at that time equitable mortgage is
already done by party so there is no need of equitable mortgage again but the
equitable extension is only needed.
 In case of immovable property or new purchase of machinery, equipment, etc.
insurance of same amount and in case of old machinery, goods stock, etc. twice of
the price insurance is needed. In case of education loan, the life insurance of
student is required.
 Margin money means gap between purchase value and bank finance. Bank always
does payment directly to the seller. So loanee has to deposit the margin money in
the bank.
INTEREST RATE ON VARIOUS ADVANCES

Particulars Interest rate Installment / Number of


Rs.1000 installment

Up to 25000(except vehicle loan) 12% 32 40

Up to 25000 vehicle loan 14% 32 40

25001 to 200000 14% 32 40

200001 to 1000000 15% 23 66

Above 1000000 16% 23 66

Surety loan, home appliances 16% 32 40

Gold loan 14% 50 26

Land and building (unsecured) up to 16% 32 40


25000

Staff surety loan 16% 23 66

Loan against fixed deposit More than Till the


2% of F.D. maturity date
of F.D.

Building repairing up to 75000 14% 17 108

Building purchase, construction

75001 to 200000 14% 17 108

200001 to1000000 15% 17 108


Scrutiny of credit
While scrutinizing an application from the bank takes into consideration-safety, liquidity,
purpose profitability, security, and spread of advances.
Safety
Bank has to see that the prospective borrower is a reliable user of the finance and bank’s
money is safe in his hands.

Liquidity
Bank has to find out that the borrower is quite capable in repaying the finance within
reasonable period.

Purpose
The purpose for the finance should not be illegal. It should be creative, service oriented,
development oriented, and like. Banks should check end use of funds.

Profitability
If the project or the purpose of the finance is not profitable in the hands of the borrower
than he will not be in a position of repaying the amount to bank. It should be profitable
enough to generate the income to satisfy his needs and bank’s dues.

Security
The bank has to take into consideration the character, capacity, and capital of the
prospective borrower. Bigger advances and cash credit are to be secured with collateral
security over and above prime security.

Spread of advances
For having balanced economy the bank should choose to spread the finance amongst
various sectors of the society, so that the risk of incoming bad advances is minimized.
Concentration on one type of advances may turn into bad advances if the scheme
becomes ineffective due to some natural calamities or government rules or change in
taste or demands of the society, by and large.
TYPES OF CREDIT

Surety Loan
Vehicle Loan
Security Loan
Domestic Appliances Loan
Gold Loan
Land And Building Loan/Industrial Building Loan
Educational Loan
F.D. Loan
Cash Credit
Overdraft
Bankable Loan
Bills Purchase
Bills Discounting
Bank Guarantee
Staff Loans
Staff Surety Loan
Staff Housing Loan
Staff Vehicle Loan
Staff Domestic Appliances Loan
Gyan Prakash Yojana
EXPLANATION OF ALL TYPER OF CREDIT

Surety Loan
Purpose Personal use
Limit Rs. 5000 to 10000
Rate of interest 16%
Period 40 months
Repayable Equate Monthly installments Rs.32 per thousand
Security Personal Guarantee of two members of the bank
Documents Loan Appliances form, Letter of guarantee, DP note, letter of Sanction.
Submit Paper In case of service person pay sleep, in case of businessperson last yearly
business report.
Other terms
½ % of the loan amount if the loan is sanctioned to the tune of Rs. 5000 and 1% of the
loan amount is sanctioned to the tune of Rs. 10000 will have to be deposited in the
benefit fund.
Under the above scheme, if the death of the loanee under surety loan occurs, in the said
circumstances, in remaining loan in his account will be credited from this account under
his loan account and an amount of Rs. 1000, as Assistance will be paid to the heirs of the
loanee immediately from this fund
The confirmed government employee can be granted a loan of Rs. 10000 on acceptance
letter taken from his employer to the effect that they will deduct the installment from his
salary every month regularly and remit the same to Bank.
It is not applicable that the surety loan of other co-operative society is in presence.

Domestic Appliances Loan


Purpose For purchasing consumer durable articles viz. freeze, washing machine,
flour mill, T.V. VCD, sewing machine, room heater, room conditioner,
etc.,
Limit Minimum Rs. 5000 Maximum Rs. 20000
Margin 40%
Rate of interest 16%
Period 40 months
Repayable Equate Monthly installments Rs.32 per thousand
Security Hypothecation of goods, personal guarantee of two members of the bank
Documents Loan Appliances form, Letter of guarantee, DP note, Hypothecation of
goods/articles purchased, insurance policy
Submit Paper In case of service person pay sleep, in case of businessperson last yearly
business report, quotation of the item obtained from Authorized Dealer

Security Loan (Against Machinery/Furniture & Fixtures/Equipments)


Purpose For purchasing NEW/OLD machineries/furniture for business purpose
Limit Any limit as per requirement
Margin 25% to 40%
Rate of interest Up to 25000 12%,
25001 to 200000 14%
200001 to 1000000 15%
Above 1000000 16%
Period 40 months up to 200000, 66 months above 200000
Repayable Equate Monthly installments Rs.32 up to 200000, In case of more than
200000 Rs.23 per thousand
Security The Hypothecation of machinery/furniture purchased as a prime
security, as a collateral security
(A) Existing old machineries
(B) Equitable mortgage of land and building
(C) Guarantee of two members of the bank as guarantors
Documents Loan Application form, Letter of guarantee, DP note, Hypothecation of
machineries old/new, insurance policy, letter of sanction
Submit Paper Last three-year business report, Shop Act License, SSI license, Elec.
Connection proof, IT Return (in case of new firm project report)
If applicant is a Partnership Firm
Partnership deed copy, Reg., of firms
If applicant is a limited company
Resolution for getting loan, Memorandum of association, Articles
of association, letter of assurance for registration in Reg. of
Companies
Other terms
The payment of this kind of loan is given to the seller directly by Bank.
In case of mortgage of old security the insurance of the double amount of old security and
about new security, the insurance of the value of purchase price, is required to the taken
out from the insurance company recognized by bank and the said insurance policy is
required to be recognized to be assigned in favor of the bank.
The immovable property of either loanee of guarantor will have to be assigned as
collateral security to the bank.

Security Loan (Against Good Stock)


Purpose Provide loan against good stock
Limit Any limit as per requirement
Margin 40%
Rate of interest Up to 25000 12%,
25001 to 200000 14%,
200001 to 1000000 15%,
Above 1000000 16%
Period 40 months up to 200000, 66 months above 200000
Repayable Equate Monthly installments Rs.32 per thousand up to Rs.200000, in
case of more than 200000 Rs. 23 per thousand
Security The Hypothecation of goods purchased as a prime security, As a
Collateral security
(A) Equitable mortgage of land and building
(B) Guarantee of two members of the bank as guarantors.
Documents Loan Appliances form, Letter of guarantee, DP note, Hypothecation of
goods, insurance policy, letter of sanction, equitable mortgage of land
and building
Submit Paper Last three-year business report, Shop Act License, SSI license, Elec.
Connection proof, IT Return, Rent receipt
If applicant is a Partnership Firm
Partnership deed copy, Reg., of firms,
If applicant is a limited company
Resolution for getting loan, Memorandum of association, Articles
of association, letter of assurance for registration in Reg. of
Companies
Other terms
The payment of this kind of loan is given to the loanee by Bank.
Insurance is twice of the value of goods price, is required to the taken out from the
insurance company recognized by bank and the said insurance policy is required to be
recognized in favor of the bank.
The immovable property of either loanee of guarantor will have to be assigned as
collateral security to the bank.

Land And Building / Industrial Building Loan


Purpose For purchase or construction or repairing of immovable property
Limit Rs. 1000000 or value of the property which ever is less in case of
secured loan for housing purchase or construction
For industrial purpose as per requirement
Rs. 75000 Maximum (in case of secured loan repairing of house
property)
Rs. 75000 Maximum (land less than 50 yards in case of purchase)
Rs. 40000 Maximum (repairing of building and less than 50 yards)
Rs. 25000 Maximum (in case of unsecured loan for repairing of
house property)
Margin 30% (in case of secured loan for repairing of house property)
Rate of interest 16% (unsecured loan) and 75001 to 200000 14% and 200001 to
1000000 15 %( secured loan (purchase /construction))
14% (housing repairing (secured loan))
Period 40 months (unsecured loan)
108 months (secured loan (purchase / construction) / repairing).
Repayable Equate Monthly installments Rs.32 (unsecured loan repairing)
Rs. 17 (secured loan (purchase/construction/repairing) per thousand.
Security Equitable mortgage of property, two guarantor’s guarantee
Documents Original Lekh, certified copy of sequential document of the property,
loan application form, letter of guarantee, equitable mortgage of
property/indemnity Bond, insurance policy, letter of sanction
Submit Paper Last three-year business report, shop Act License, IT Return, (In case of
new project, project report), approved plan and estimate.
If applicant is a partnership Firm
Partnership deed Copy, Reg. of firms
If applicant is a limited company
Resolution for getting loan, Memorandum of association, Articles
of association, letter of assurance for registration in Reg. of
Companies
Other terms
Loanee is required to pay the document inspection and advocate fee along with process
charge as per the rate time-time decided by the bank.
In case of secured loan, when the loan is given for purchase of construction of the
immovable property, the full insurance of the value of construction is required to be taken
out. In case of collateral of unsecured loan, the insurance of double the value of the
sanctioned loan is required to be taken out from the insurance company recognized by the
bank. The insurance policy is required to the assigned to the bank.
In case of unsecured loan, the applicant has to submit the original document showing the
ownership of the immovable property. For this type of loan, no insistence is given for
title clearance. But the applicant has to submit Indemnity Bond on stamp paper of 150
whenever the demand of bank and necessary as per the advice of the legal retainer of the
bank. The insurance for the value of building will have to be taken over and the insurance
policy will have to be assigned to the bank.
Construction Level And Amount Passing Slab Chart

NO. OF PARTICUL UPTO UPTO 1St. UPTO 2 ND


INSTALME AR GROUND FLOOR FLOOR
NT FLOOR
1 Plinth level 20% 20% 20%
2 Lintel level 20% 20% 20%
10% 10%
3 Slab 30% 10% 10%
10% 10%
4 Plaster, tiles, 20% 20% 20%
electric,
Plumbing
5 Completion 10% 10% 10%

Vehicle Loan
Purpose Purchase of new two wheeler/purchase of four wheeler old/new
Limit As per demand
Margin 25% (in case of new vehicle purchase)

OLD KIND OF YEAR OLD % OF VALUATION OF VEHICLE


VEHICLE MODEL PASSED
Truck, Tractor 2 years 60%
Matador 3-4 years 55%
5 years 50%
6-7 years 40%
8-10 years 30%
11-15 years 25%
Petrol Motor 10 years 50%
11-15 years 30%
Diesel motor 5 years 60%
6-15 years 50%
*Valuation by bank recognized valuer

Period 40 months up to 200000, 66 months above 200000


Rate of interest 25001 to 200000 14%
200001 to 1000000 15%
Above 1000000 16%
Repayable Equated monthly installments Rs. 32 up to 200000 Rs. 23 more than
200000 per thousand
Security Hypothecation of the vehicle, two guarantor’s guarantee as a collateral
security immovable property of loanee or guarantor
Documents Copy of registration of vehicle in RTO in particular city, Higher
purchase agreement in favor of bank, loan application form, Vehicle
dealer’s guarantee letter, DP note, letter of sanction, insurance policy,
equitable mortgage or extension of property
Submit Paper In case of service person pay sleep, in case of businessperson last yearly
business report, IT return, Quotation of vehicle
Other terms
It is necessary to take full comprehensive insurance for the vehicle, for which the higher
purchase agreement is done in favor of the bank. The above insurance will have to be
taken from the insurance company recognized by bank and will have assign in favor of
the bank.
Bank shall make direct payment to the dealer/seller.
In case of second hand vehicle, necessary valuation report from a recognized valuer to be
submitted to the bank.

Gold Loan
Purpose Personal use
Limit Rs. 50000 (in Rajkot city) 20000 (out of Rajkot)
Period 26 months
Rate of interest 14%
Repayable Equated monthly installments Rs. 50 per thousand.
Security Gold silver ornaments or items on Re-pledge
Documents Loan application form, DP note
Submit Paper In case of service person pay sleep, in case of businessperson last yearly
business report
Other terms
This kind of loan is given on the re-pledge of ornaments or items of gold-silver. This kind
of loan is not available to the merchants of gold-silver for the purpose of buying selling.
This kind of loan can be given to the member of the bank, but this kind of loan can also
be given to the non-member, taking Rs. 5 as admission fee and giving nominal
membership for the loan only.
The purity of the ornaments or items of Gold, which is given on re-Pledge, should be
minimum 21 Carets.
For the purpose of this kind of loan the bank shall appoint one or more goldsmiths, who
will make valuation of the ornaments or items of gold-silver and the loanee has to accept
his decision arrived at on the basis of the kind/weight etc. of gold-silver ornaments or
items.
Per 11.664 Gram (Per TOLA) Rs. 3000 is Valued & 70 % Valued Amount is Sanctioned
as Loan.

Bankable Loan
Purpose To assist the small scale industry
Limit Rs 200000
Margin 25% to 40%
Period 40 months
Rate of interest Up to 25000 12%
25001 to 200000 14%
Repayable Equated monthly installments of 32 Rs. Per thousand
Security As a collateral security house property of loanee or guarantor or fixed
deposits or national saving certificates as a mortgage 70% of sanctioned
loan, guarantee of two guarantors
Documents Equitable mortgage of property, loan application form, letter of
guarantee, DP note, letter of sanction, insurance policy
Submit Paper Shop Act License, SSI license, Elec. Connection proof, Rent receipt,
project report

Other terms
This loan is sanctioned on the recommendation of district industrial center after security
and taking in view the value of security given against loan and particulars of guarantor.
Amount of subsidy given and sanctioned to the application is credit in his loan account.
The payment except amount, which is sanctioned against working capital, of this loan is
made directly to the party, who has given the quotation.

Type of business condition of subsidy


Trading firm 7500 or 10% of loan amount whichever is less
Service sector 10000 of 10% of loan amount whichever is less
Manufacturing firm 20000 or 10% of loan amount whichever is less

Over Draft
Purpose To fulfill the need of working capital of business
Limit As per requirement
Margin 40%
Period Up to 1 year
Rate of interest Up to 25000 12%
25001 to 200000 14%
20001 to 1000000 15%
Above 1000000 16%
Repayable The customer is permitted to withdraw the amount as and when he needs
it and to repay it by means of deposit in his account as and when it is
feasible for him
Security Hypothecation of goods stock and or equitable mortgage of property
guarantee of two guarantors
Documents Overdraft application form, letter of guarantee, equitable mortgage of
property, DP note, letter of continuity, letter of sanction, insurance
policy
Submit paper Last three-year business report, rent receipt, IT return, shop act license

Cash credit (good stock)


Purpose To meet the need of working capital business unit
Limit As per require
Margin 40%
Period 12 month (to be reviewed every year and renewed every three year)
Rate of interest Up to Rs. 25000/- 12%, 25001 to 2,00,000 14%, 2,00,001 to 10,00,000
15%, above 10,00,000 16%
Repayable The customer is permitted to withdraw the amount as and when he need
it and to repay it by means of deposit in his account as and when it is
feasible for him
Security a) as a prime security hypothecation of goods stock
b) As a collateral security machinery, furniture equipment, fixed deposit,
national saving certificate, equitable mortgage of immovable property
c) Guarantee of two guarantors
Document Cash Credit Application Form, Agreement Letter, Equitable Mortgage
of Property, Letter Of Sanction, Letter Of Continuity, DP note,
hypothecation of goods, Insurance Policy
Submit paper Last three year Business Report, Shop Act License, SSI License,
electricity connection proof, IT return, rent receipt
If applicant is a partnership firm
Partnership deed copy, Reg. of firms
If applicant is a limited company
Resolution for getting loan, memorandum of association, articles of the
association, letter of assurance for registration in reg. of companies
Other terms
Loanee has to submit the stock statement to the bank every month regularly.
Loanee has to submit the balance sheet, profit and loss account every year.
Loanee has to submit the copy of income tax return or income tax assessment order every
year.
In the cash credit account facility, the turn over will to be done thrice of the sanctioned
facility within 6 month and the same will have to be done five times of the sanctioned
facility within one year.
The insurance for twice the value of sanctioned cash credit will have to be taken over and
the insurance policy will have to be assigned to the bank.
In case of cash credit the facility can be availed maintaining the goods stock margin.
Sale of goods and amount of recovery cannot be set off, but the same should be credited
in the bank and the amount of payment should be made by bank cheque all the business
transaction should be made through bank.
As per the norms of the reserve bank of India, a borrower cannot operate two cash credit
account at a time with two different banks.

Education Loan
Purpose This kind of loan is given to the brilliant students, who do not further
their study because of paucity of finance, with a view to building their
career. The bank is giving loan to cooperate and to give assistance to
such students for education purpose
Limit a) Study in India : Rs. 1,50,000
b) Study in abroad : Rs. 2,00,000
Margin Up to 25,000 : nil
25,001 to 1,50,000 : 15%
25,000 to 2,00,000 : 25%
Rate of interest 14%
Repayable Equates monthly installments of Rs. 32 per thousand
Security Equitable mortgage of property, guarantee of two guarantors
Document Loan application form, Equitable Mortgage Of Property, Letter Of
Sanction, Letter Of continuity, continuity security letter, DP note,
Insurance Policy of student, which is assigned in favor of bank, letter of
lien and set off, letter of guarantee, stamp application cum agreement
form
Submit paper In case of service person pay sleep, in case of businessperson last yearly
business report, two photograph of student
Other terms
Interest is required to be paid every month
The loan can be sanctioned keeping in view the loanee’s repaying capacity
Compulsory first class in every important examination
Loanee is that who has a property on his own name. Student has to join as a co-loanee.
The installment of loan will be stated after 6 months of the completion of study

Fixed deposit loan


Purpose To grant loan / overdraft to an individual or a firm against F.D.R.
Limit As per requirement
Margin 50 % or less
Period Till due date of F.D.R.
Rate of interest 2 % more than F.D.R.
Security Duly discharge F.D.R.
Documents DP note, duly discharge F.D.R., form of application
Other terms Lien should be noted in the FDR account and on the back of the F.D.R.
duly discharged

Bills purchase
Purpose To assist the customer for their short-term need of working capital
Limit As required by applicant
Margin Generally 25 %
Rate of interest 18 % per annum
Period Actual realization period
Charges Table is given
Documents DP note, letter of guarantee, letter of continuity, agreement letter

Bills Discounting
Purpose To assist the customer to provide them working capital against his post-
dated received bills
Limit As per required by applicant
Margin Generally 25 %
Rate of interest 18 % per annum
Period Maximum 180 days
Documents Letter of bills discounting undertaking, DP note, letter of guarantee,
letter of continuity, agreement letter
Charges Table is given
Other terms Interest to be covered in advance

Collection Of Cheques (O.B.C.)

Amount Of Cheques Location Listed All Other Location


Above
Up to Rs. 5000/- Rs. 10.00 Collecting Banks
Commission + Rs.10
Postage Charge
From Rs. 5001 to 10000 Rs. 15.00 Collecting Banks
Commission + Rs.10
Postage Charge
From Rs. 10001 to 1 Lac Rs. 1.50 / 1000 Collecting Banks
Commission + Rs.10
Postage Charge
For Rs. Above 1 Lac Rs. 1.50 / 1000 Collecting Banks
Commission + Rs.10 Postage
Charge

Collection Of Bills (I.B.C)

Amount Of Bill Location Listed All Other Location


Above
Up to Rs.1000 Rs, 10.00 Collecting Banks
Commission + Rs.10
Postage Charge
From Rs. 1001 to 5000 Rs. 15.00 Collecting Banks
Commission + Rs.10
Postage Charge
From Rs. 5001 to 10000 Rs. 25.00 Collecting Banks
Commission + Rs.10
Postage Charge
From Rs. 10001 to 1 Lac Rs. 3.00 / 1000 Collecting Banks
Commission + Rs.15
Postage Charge
For Rs. Above 1 Lac Rs, 3.00 / 1000 Collecting Banks
Commission + Rs.15
Postage Charge

Bank guarantee:
1) Performance guarantee
This type of guarantee does not involve financial obligation
It involves performance with regard to construction of building, installation of
plant and machineries within a given time frame and with agreed
specifications
Performance relating to supply of materials as per agreed terms and conditions
Guarantees may be given to secure advanced payment, in place of security
deposit / earnest money deposit / tender money deposit etc.
Performance of any other work contract
Performance of plant / machinery up to agreed level capacities

2) Financial guarantee
These guarantees are given for meeting with financial obligations
Purpose To assist the business
Limit As required by applicant
Margin Cash margin (minimum 25 %) by way of F.D.R.
Equitable mortgage (rest of the part)
Period Generally 12 months
Commission 1% per annum in case of 100% cash margin
2% per annum in other cases
Charges 0.1% (upfront)
Security F.D.R. duly discharged, equitable mortgage of property
Documents Application form, counter guarantee
Different types of staff loans

Staff surety loan


Purpose Personal use
Limit Rs. 15,000 maximum
Period 66 months
Rate of interest 16 %
Repayable Equated monthly installments of Rs. 23 / thousand
Security Personal guarantee of two staff members of the bank
Documents application form, letter of sanction, DP note, letter of guarantee

Gyan Prakash Yojana


Purpose this kind of loan is given to the staff members for the higher study of
their two children
Limit a) Study in India : Rs. 3,50,000
b) Study in abroad : Rs. 4,50,000
Margin 25 %
Rate of interest Bank rate + 1 %
Repayable Equates monthly installments of Rs. 32 / thousand
Security Equitable mortgage of property
Documents DP note, sanction letter, equitable mortgage charge extension letter, life
insurance policy of student, which assigned in favor of bank, term loan
agreement, rectification letter
Other terms Interest is required to be paid every month
The installment of loan will be stated after 6 months of the completion
of study

Staff vehicle loan


Purpose to purchase a new / old two wheeler for personal use
Limit Rs. 40,000
Rate of interest 0 %
Repayable equated monthly installments Rs. 15 / thousand
Security hypothecation of vehicle to be purchased
Documents DP note, letter of guarantee, hypothecation of vehicle, insurance policy

Staff domestic appliances loan


Purpose For purchasing consumer durables articles viz. freeze, washing machine,
flourmill, T.V., VCD, room conditioner, etc.
Limit Rs. 50,000
Rate of interest for initial 20,000 bank rate for rest amount bench mark rate (current rate)
Repayable equated monthly installments of Rs. 20 / thousand for first 20,000 then
afterward Rs. 23 / thousand
Security hypothecation of vehicle to be purchased
Documents DP note, letter of guarantee, hypothecation of vehicle, insurance policy

Staff housing loan


Purpose To construct / purchase residential building
Limit for officers and other upper cadre : Rs. 5,00,000
For clerk : Rs. 4,00,000
For peon and others : Rs. 3,00,000
Period 20 years
Rate of interest 6.5 %
Repayable equated monthly installments of Rs. 7 / thousand
Security equitable mortgage of property, two staff members’ guarantee
Documents DP note, letter of guarantee, letter of sanction, insurance policy,
equitable mortgage of property
Data analysis and observation and suggestions

Presence of loan policy


In the RSNB, before two year there was not proper policy for loan, but separate circular
for each loan. But at present RSNB have its own loan policy and criteria to sensor the
loan. Coincidently, RBI also declared in near, each and every bank should have its own
loan policy. This is the point, which is striking us the foresightedness of the bank
management and also loan manager of that time Mr. Bhatt who prepare present loan
policy with the help of the some efficient staff members of the loan department.

Revision made on annual basis


RSNB prepare its own loan policy just before two year. So in one sense, we can say
RSNB revised its loan policy in last two year but it is not revised every year regularly. So
I can suggest that to RSNB, for walk with the new era of credit market, bank should try to
improve own self in the field of credit management by revising the loan policy time to
time by learn from past year’s experience.

Loan policy cover


Delegation of lending power
Method for assessment of working capital
Rating of borrowers
Loan pricing

Delegation of lending power


In the past time, RSNB had given delegation of lending power to its selected branch
offices but at present RBI hurdle against this. By effect of it, RSNB cancel all the
delegation power of its branch offices and burden of the head office gives in written in
language of suggestion that what should be the decision? And head office only complete
fulfils the legal formality to sanction the loan. However it takes more time for sanctioning
loan but by the practical approach bank can solve this difficulty.
Method of assessment of working capital
In the RSNB, there are three methods for working capital, which is useful to bank for
calculating the need of cash credit or short-term loan of firm. This method gives
advantage to bank to find out if the demand borrower is fair. Methods of working capital
calculation are given below:
Capital of borrower, and borrowing from relatives are multiplied by three
Difference between current assets and current liabilities multiply by four
20 % of estimated sales
Borrower contribution 5% of the turnover in working capital is accepted
Above three whichever is less is original working capital demand of the borrower as per
the calculation of RSNB.

Rating of borrowers
RSNB has its own method of credit rating that is beneficial for both the bank and the
borrower. Because through this bank should maintain their customer who deal with bank
regularly and the borrower is appreciated for their performance. Another side borrower
gets benefit through interest rate reduction. This method is given below:

Credit rating of loans


AAA:
Cash credit account
In the account, interest is paid regularly; it is paid at the end of every quarter within 10
days.
Stock statement is received regularly.
Overdraft is paid regularly with its interest.
Every document is getting regularly for review and renew of account.

Term loans
In the account, interest and installments are paid regularly.
Notice is not given on account for any reason.
Amount of loan Interest concession
sanctioned
25,001 to 2,00,000 1%
2,00,001 to 10,00,000 1%
Above 10,00,000 2%

AA:
Cash credit account
In the account which interest is paid regularly; it is paid at the end of the every quarter
maximum 30 days.
Stock statement is received regularly
Overdraft is paid regularly with its interest.

Term loans
Maximum two installments are due but at the end of the year i.e. on 31st march, there is
no due installment.

Amount of loan Interest concession


sanction
25,001 to 2,00,000 0.5 %
2,00,001 to 10,00,000 0.5 %
Above 10,00,000 1%

Loan pricing
RSNB always give more interest on deposit than other bank in Rajkot district to attract
the market, effects the loan pricing. So loan rate of RSNB is higher. Though RSNB get
customer because of its services, its speedy process, practical approach, and its reliability
in market. But here one possibility is also that the payer of higher interest is sometime
reason for future loss or burden on bank. So try to get deposit at lower rate to reduce the
loan pricing. It is also fact that in this critical situation of co-operative banks, it is very
hard to get deposits from the market but if bank management tries to create trust in
public, here one more benefit is that the depositor and the borrower is the shareholder of
the bank or say owner of the bank. So it is less hard than other types of bank to create
trust.

Reporting format
Reporting format for excess utilization of lending process by branch manager is now not
needed, because as per the new guidelines of the RBI, branch of co-operative bank has no
power to sanction loan.

Identification of sensitive sectors and discounting further lending


RSNB is not that much big bank in compare of commercial bank, though it is needed for
the bank to watch on the general sensitive sectors means lending in that sector which is
risky / dangerous for any financial institutions. For example lending against shares. To
find out the special sensitive sector, we should continuously watch on our borrowers.
Sometimes in case of co-operative banks, reason of their NPA is lending to particular
group or industry. RSNB also keep watch and discouraging further lending. For example
builders developers’ cash credit.

Monitoring of unduly large exposure to an individual or a group


To stop the unduly large exposure to an individual or a group, in RSNB loan staff
monitor and draw attention of higher authority.
CREDIT
A P P R A I SA L
Appraisal format
PRIMARY INFORMATION
Name of the unit
Date of establishment of business
Type of business
Date of starting of dealing with bank
Address and telephone no.: Office Godown Factory
Structure of unit
Proprietorship firm/ partnership firm / private limited / public limited
Name of the proprietor /partners / directors with CDN (compulsory deposit number)

INFORMATION RELATED TO GUARANTORS


Names of guarantors
Compulsory deposit number
Business
Annual income
Land building property
Information about prevalent loans

INFORMATION ABOUT PREVALENT FACILITY PROVIDED BY RSNB


Types of facility
Amount granted
Due date
Present balance

ABOUT PRESENT CASH CREDIT FACILITY


Credit turn over of last year
Amount of cash credit
Amount of cash credit with overdraft
Previous year stock
Present stock and date
Measurement Ideal Performance of party (remarks)
Credit balance compare with sale 1: 1
To payoff of overdrafts / excess Regular
Submission of stock statement Regular
monthly Regular
Interest payoff Regular
Equated monthly installments on ------
loan 10 to 15
Account over due (yes / no) %
Similarly in stock Difference

INFORMATION OF COLLATERAL SECURITY

IMMOVABLE PROPERTY
Name of owner and designation of him
Address of property
Land in square yard
Construction in square feet
Estimated price of property
(Amount of land is calculated as per the address + Amount of construction is
calculated square feet * 300)
Other liability on it, mention it

MACHINERY/FURNITURE/EQUIPMENT etc.
Amount of property

SECURITY COVERAGE
Estimated value of collateral security
Minus other liability on same property
Plus other collateral security
Total collateral security
Amount of demand / prevalent facility
*Security coverage: (total collateral security/total facility) * 100
*Accepted measure 50 %
THREE YEARS FIGURES FOR COMPARISON

Year Purchase Sales Net Net worth Stock Debtors Creditors


ending Profit

FINANCIAL MEASUREMENT

Financial measurement More / less (compare with last year)


Sales
Closing stock
Gross profit
Net profit
Borrowings from relatives
Net worth
(Capital + reserve – proprietor / partners
directors’ debt)
Financial measurement More / less (compare with ideal)
Current ratio: (current assets/ current
liabilities)
Ideal 1.25 / 1 (minimum)

Debt equity ratio: (Total debt / *total


equity)
*Borrowings from relatives are
included
Ideal 3/1 (maximum)
FORMAT OF BALANCE SHEET

Capital and liability Property and Assets


Current liability Current assets
Bank loan CC/OD Stock
Outstanding expenses Debtors
Creditors of Stores
Goods Cash on hands
Others Bank balance
Prepaid expenses
Advances
Others
Total (A) Total (A)
Medium/long term liability Fixed assets
Bank loan Land and building
Finance corp. loan Machineries
Other debts Furniture
Rnsb term loan Vehicle
Borrowing from relatives Other investments
Others
Total (B) Total (B)
Capital/reserve Proprietor/partner/directors’ debt
Capital Others
Reserve Goodwill
Profit Patent
Other Loss of previous years
Total(C) Total(C)
General total (A+B+C) General total (A+B+C)
ASSESSMENT FOR CASH CREDIT
Capital + borrowings from relatives * 3 __________
(As per the last year balance sheet)
Working capital (current assets – current liabilities) * 4 __________
(As per the last year balance sheet)
Estimated sales * 20 % __________
(Current year)
Minimum of above three __________
Demand / prevalent facility __________
Maximum permissible finance __________
(Minimum from above two)
MACHINERY LOAN APPRAISAL FORMAT
Electricity connection

INFORMATION ABOUT THE MACHINERY TO BE PURCHASED


Supplier’s name
Machinery’s name
Quantity
Price
As per margin permissible loan
MARGIN OF PERMISSIBLE FINANCE (WORKING UNIT)
Margin on amount of demanded loan
Working capital as per last balance sheet
Estimated reinvestment of the current year profit
Current year’s estimated working capital (2+3)
Margin of working capital (25 % current asset of last year)
Margin for permissible finance (4-5)
If (6) is less than (1), how can they bring difference of amount from long term sources is
required clarification

ESTIMATED PROFIT AND DSCR (Debt Security Coverage Ratio)

i. New unit

PARTICULARS YEARS
1 2 3 4 5 6
1. Production capacity
2. Utilization capacity (%)
3. Production
4. Sales
5. Net profit
6. Depreciation
7. Interest on loan
8. Cash flow (5+6+7)
9. Amount of EMI of demanded loan
per annum
10. DSCR (8/9)
11. Average DSCR

ii. Working capital

1) Profit of current year


2) Depreciation of current year
3) Cash profit of current year (1+2)
4) Amount of EMI of demanded loan per annum
5) DSCR (3/4)
Minimum Acceptable Measure for DSCR 1.5 to 2

Sometimes in case of new unit, project report present unrealistic picture of future. So
bank should keep it in consideration at the time of calculation of DSCR. Accepted
measure for it is 60 %.
APPRAISAL OF IMMOVABLE PROPERTY
Name of owner and designation of him
Address of property
Land in square yard
Proposed construction in square feet
Plan of construction passed by Municipal Corporation
Estimated cost of property
(Amount of land is calculated as per the address
+ Amount of construction is calculated square feet * 400)

INSPECTION REPORT
 Goods stock
 Type of business
 Reporting after checking of accounting books, vouchers, etc.
 Insurance of stock and mortgaged property is as norms, isn’t it?
 Is it proper for sanction?

DEPARTMENT NOTE
CREDIT DESERVEDNESS OF LOANEE
 Name of facility
 Requested amount for credit
 Permissible finance as per appraisal

OTHER CRITERIA
 Borrowings from relatives are retained in business. Without permission from bank
relative cannot withdraw that amount.
 Immovable property is needed to take as a collateral security.
 Late/retire partner’s capital is not withdrawn without permission from bank.
 Current ratio
 Debt equity ratio
 Security coverage
 DSCR
OBSERVATION AND FINDINGS AND SUGGESTIONS

Format for collection of minimum information about potential borrower


It is must for any bank who wants to win market to collect the information about his
potential customer. RSNB a bank which eager to increase own market share also collect
the information about future borrower.

Use of software for credit appraisal


Bank has own computer department to develop the software for bank but this now in
initial stage. Majority time consume work is done by the computer though appraisal of
credit is done by manually.

Revision in appraisal format during last two year


RSNB prepared its policy before two year and decide proper criteria for sanction the
loan.

Different appraisal format for different loan segment


There is one common format for all loans are not possible because each loan require
particular information and calculation. Here in RSNB I find different appraisal format for
different segments. That we see in above appraisal format.

System of fixation of maximum time for loan sanction and sanction within limit
On paper, there is no maximum limit for sanction the loan but generally as per the
opinion of officer within ten days loan is sanctioned. Sometimes because of carelessness
of the borrower or take time for providing needed documents is reason for delay of
sanction the loan.

In house expertise for appraisal of hi tech projects


Special works always need experts but in RNSB we find lack of the expert for appraisal
of hi tech project and it is dangerous pr say risky for any institution. I think RNSB have
to recruit expert for appraisal of hi tech projects who has special knowledge about
business sector and mastery of project report study and now because of VRS, expert
having experience is easily available at low cost.

Practice of rating of borrower and loan pricing


RNSB give rating to the borrower on the base of their last year dealing with bank. For
that RNSB have software, which give rating to the borrower. At the time of appraisal,
rating is not given.

Compliance of terms and conditions- Promoter’s contribution, collateral securities,etc.


Before preparing the loan report, it is keeping in view that all types of requirement are
fulfilled. Condition letter is given to customer if customer fulfills all the conditions loan
is sanctioned by bank.

Computation of customer profitability per borrower


Generally I practice, not a single cooperative bank in Rajkot is calculating the customer
profitability per borrower. If it is calculated, bank can know which customers are more
beneficial for them so bank can give attention to maintain them and can increase profit.

Ad – hoc sanction rarely done


At present, the various committee of bank considers ad-hoc/additional credit for meeting
temporary requirement only after the borrower has fully utilized/exhausted the existing
limit. In the ad-hoc sanction, nothing is taken as security so this is risky but the previous
dealing of customer with the bank can give the picture of customer.

Sanction of loan
In the co-operative bank, sanctioning powers are only in the hands of board of directors
so sometime loans are sanctioned on the bases of relation, not on the base of the
deservedness of customer. I also consider that the cooperative banks are basically meant
for the benefit of its members but within the limits of Reserve Bank of India’s guidelines.
Slight modification in these rules for well being of members is still allowed.
CREDIT
M ON I T OR I N G,
FO L L O W U P A N D
REVIEW
CREDIT MONITORING, FOLLOW UP AND REVIEW
When we lend, it is essential for us that to keep watch on it till we recover it. This is
called credit monitoring in terms of banking.

CREDIT MONITORING SYSTEM IN RSNB


In the RNSB, there is system for credit monitoring specially account, which is above
10,00,000 rupees is described below:
Find out the list of potential NPA accounts above 10,00,000 rupees
Statements of potential NPA accounts are submitted to head office from branches
Head office monitoring this every three months and prepare report on it.
Report is submitted to board of directors.

Follow up action for credit monitoring in RNSB


Consolidation of data, which comes from the branches and every month, update the data
and generate this and use it for follow up
Head office directly sends the notice to account holders of such accounts
To stop the slippage of the potential NPA accounts, bank organize the committee under
authorization of Mr. Bhatt(A.G.M.) and Mr. Vadaliya(A.D.M.) with the help every
branch recovery officers, they try to recover. General manager arranges the meeting for
that and gives guidelines to the committee member.
OBSERVATION FINDINGS AND SUGGESTIONS
System of loan portfolio review and monitoring
There is system of weekly review and monitoring of loan portfolio in the RNSB, every
week a statement is prepare to be acquainted with the present credit deposit ratio, if this
ratio is less than 70% for example 65%, it represent that bank can finance up to 5 % at
present.

Preparation of MIS report for loan portfolio review at board level


Every week, present situation of loan portfolio is putting against board of directors.

Compliance of prudential guidelines


Exposure Ceiling : a) Individual 20% of the total capital fund
: b) Group 50% of the total capital fund
Priority sector lending: Priority 60% of the total advances
: Weaker 15% of the total advances
This is followed by the RNSB
Items of priority sectors
Advances to individuals for activities allied to agriculture
Loans and advances to cottage/small scale industries and equipment /system for
development of new and renewable sources of energy.
Advances to road and water transport operators for purchase of one vehicle
Private retail traders dealing in essential commodities (fair practice shop)
Other private retail traders with credit limit not exceeding Rs. 5,00,000
Small business enterprise
Professionals and self employed persons
Educational loans
Housing loans not exceeding Rs. 10,00,000
Consumption loan
Items of weaker section
Scheduled caste/scheduled tribe
Women
Others
Timely renew and review by credit limit
Every year RNSB review cash credit accounts and every three years renew that accounts.
At the time of review bank only keep in view the turnover of business, account
inspection, field inspection, renew insurance, renew shop act license, proof of rent,
income tax return or assessment of income tax, turnover with bank. But process of renew
of accounts is totally inspection of party. Bank considers last three year’s business
progress of the party and deal with bank also.
N PA
MANAGEMENT
How account becomes Non Performing Assets?

Term loans
If interest or installment of principal remains past due for a period of any two quarters it
becomes NPA.
Past due means is an amount due under any of the facility but not paid within 30 days
after it becomes due.

Cash credit and overdrafts


If the account remains out of order for a period of any two quarters, it becomes NPA.
Out of order means
If the out-standing balance remains continuously in excess of the sanctioned
limit/drawing power
There is no credit continuously for six months or
Credit is not enough to cover the interest debited during the same period

Bills purchase and discounting


If the bills remains over due and unpaid for the period of two quarters during the year it
becomes NPA.

Other credit facility


If any amount to be received remains past due for a period of two quarters during the
year, it becomes NPA.
Asset classification

The primary (urban) co-operative banks should classify their assets into the following
broad groups, viz.
Performing assets
Standard assets
Non-performing assets
Sub-standard assets
Doubtful assets
Loss assets
Non-performing assets
NPAs are loans given by a bank or financial institute where the borrower defaults or
delays payments of interest or repayment of principal. Asset here also includes a leased
asset. A NPA was defined a credit facility in respect of which interest and/or installment
of principal has remained ‘past due’ for a specified period of time. The specified period
in a phased manner is as under
Year ending If interest has remained unpaid, account become NPA
1993 4 quarters
1994 3 quarters
1995 onward 2 quarters
From 2004 1 quarters

Performing assets
Which accounts are not in performing are performing assets. Which accounts are regular
or cover due installments are less than six is called performing assets.
Classification Of Non-Performing Assets
After identification of borrowed accounts as NPA the next stage is asset classification
Standard assets
Standard Assets is one, which does not disclose any problems and which does not carry
more than normal risk attached to the business. Such as asset should not be an NPA.

Sub-standard assets
In case of sub-standard assets, the current net worth of the borrower/guarantors or the
current market value of the security charged is not enough to ensure recovery of the dues
to the banks in full. In other words, such assets will have well defined credit weakness
that jeopardize the liquidation of the debt and are characterized by the distinct possibility
that the banks will sustain some loss, if deficiencies are not corrected.
An asset where the terms of the loan agreement regarding interest and principal have
been re-negotiated or rescheduled after commencement of production, should be
classified a sub standard and should remain in such category for at least 18 months of
satisfactory performance under the re-negotiated or rescheduled terms. If interest and
installment of loans have been paid regularly as per the terms of re-scheduled. In other
words, the classification of an asset should not be upgraded merely as a result of
rescheduling, unless there is satisfactory compliance of this condition.

Doubtful assets
An asset is required to be classified as doubtful, if it has remained in the sub-standard
category for 12 months. As in the case of sub-standard assets, rescheduling does not
entitle the bank to upgrade the quality of an advance automatically.
A loan classified as doubtful thus all the weakness inherent as that classified as sub-
standard, with the added characteristic that the weaknesses make collection or liquidation
in full, on the basis of currently known facts, conditions and values, highly questionable
and importable.

Loss assets
A loss asset is one where loss has been identified by the bank or internal or external
auditors or by the co-operation department or by the Reserve Bank Of India inspection
but the amount has not been written off, wholly or partly, in other words, such an asset is
considered un-collectible and of such little value that its continuance as a bankable asset
is not warranted although there may be some salvage or recovery value.

PROVISION FOR NPA

Assets classification % Of provision to be made


Standard assets 0.25 %

Sub standard assets


(On the balance out standing MINUS amount guarantee
by ECGC and amount covered by term deposit, NSV,
IVP, KVP, SV and LIC policy) 10 %

Doubtful assets
1. On liability covered by ECGC Nil
2. On secured liability minus amount covered by
term deposit, NSC, IVP, KVP, SV and LIC
policy 20 %
A. Doubtful up to 1 year 30 %
B. Doubtful for above 1 year but not 3 year 50 %
C. Doubtful above 3 years 100 %
3. On unsecured liability

Loss 100 %
(On the balance out standing minus amount guaranteed
by ECGC)

Provision against NPA is adequate in RNSB, which express the sound condition of the
bank. The bad and doubtful debt reserve was strengthened and the net NPA levels have
been brought down to zero.
Findings for NPA
 Improper selection of borrowers activities
 Weak appraisal system for credit proposal industries problem/prospects not
locked into
 Managerial competence of borrower given less consideration
 Irregularities in deficiencies in documentation-
Undated
Not renewed
 Assessment of borrower and guarantors net worth on market opinion
 Lack of review of borrowed accounts
 Inadequate staff to contact borrowers frequently
 Lack of proper follow up by banks
 Failure to take punitive (strict and effective) actions against defaulters
 Bank’s failure to appreciate the acts of prompt repayers
 Under financing/non financing in time of projects
 Mentality and attitude to default willfully
 Non action/co-operation of government agencies in recovery
 Effect of agricultural debt relief scheme
 Inadequate monitoring of court cases and delays in execution
 Socio-physical pressure by some people/activities
 Target fulfilling under govt. poverty alleviation programme
 Lack of income generation due to natural calamities and other uncertainties
(Suggestions) NPA reduction techniques:

Small NPA loans (loans up to Rs.1 lacs)


Repaying capacity can be easily gauged
Mobilizing liquid cash for meeting the debt is not difficult
Written remedies and repeat personal calls help mostly
Legal action is time consuming
Influence of other local persons’ contacts helpful

NPA-larger than small but medium (above Rs.1 lac and up to 5 lac)
Branch team can talk to the borrower and work out the repayment programme
Debts can be settled through Lok Adalat
Influence of trade professional circles, associates useful

Medium size NPA (once Rs.5 lacs and up to Rs. 25 lacs)


SWOT analysis and analysis of security will be helpful
Branches should take advice of H.O. from time to time
Whether to have legal action or to go for compromise
Take legal advice

Large NPA (over Rs. 25 lacs)


Calls for intervention not only by head office staff but also specialists and senior
management
Legal, technical advice called for
Support of state govt. and SFC in selling assets
Threat of winding up action would be useful
R E C OV E R Y
Recovery
Recovery management consist of the functions and activities the bank carries out acquire
back what the bank has advanced with principal amount as well as interest on the same.
So it is recovery of what the bank has advanced to loanee for carrying out their purpose/
objective of taking a loan.

PROCESS OF RECOVERY
If three installments are outstanding,
Notice through branch office
Personal visit and meeting
If no response
Notice through advocate
Though no effect
Claim through court if party ready, of court settlement otherwise
After completion of formalities
Bank will get the order of security from court to recover their due.
Observation/finding

Mission zero NPA


One historical event that occurred during the last quarter of the year was that all the staff
members of the banks took upon themselves of their own volition the task of recovery
and a zero NPA project was launched under the guidance of senior officers of head office
and the directors of the bank.
During this year RBI had tightened the NPA norms for default from 180 days to 90 days.
Despite this tightened norms, the efforts put in by the staff members on their own helped
the bank effect substantial recoveries of NPAs during the year and also prevent slippage
towards NPAs.

One Time Settlement scheme


One time settlement scheme is the plan of reserve bank of India to clear the balance sheet
and put realistic position of bank against common public. Before this scheme the amount
of performing assets was very high in balance sheet of the bank and in real the bank does
not earn it. To reduce the NPA through recovery of their maximum possible amount
(principal) and other (interest, penalty interest, charges) write off from the bad debt
reserve.

The accounts, which are not getting benefit of one time settlement
 Cases of willful default, frauds and malfeasance
 Loan with tie up arrangement for recovery (e.g. loans avail by salary earners)
 Loans avail of or guaranteed by directors or by close relatives of directors or by
firms/companies/institutions in which the directors are the interested or by ex-
directors of respective urban co-operative banks
 Loans guaranteed by government (including cases where government guarantee
has been invoked but not honored by the government)
 Loans due from government departments/undertakings
 Loans under government directed programmes
LIMITATION OF STUDY
Though I have selected the biggest co-operative bank for my study and no doubt here I
have learnt a lot, but compared to nationalize bank, its network is small. The procedure of
credit appraisal, various interest rates on different schemes, recovery programmes are
specific to Rajkot Nagarik Sahakari Bank Ltd.
Also credit management is wide topic; I have tried to cover the most related with it.
BIBLIOGRAPHY

Shekhar K.C. Banking Theory and Practices. New Delhi: Vikas publishing house pvt.
Ltd., 1985.
Bedi H.L.; Hardikar V.K. Practical Banking Advances. New Delhi: Institute of banking
studies, 1975.
Rao S.S. Handbook for Editors and Writers.ahmedabad: Ahmedabad Management
Association, 1999.