INTRODUCTION

INTRODUCTION:
Summer training forms an integral part of the curriculum of the PGP course. It gives us an opportunity to work in the real corporate world. It gives us the practical knowledge of the working of the organization. During our summer internship in the industry we got the opportunity to learn the various aspects of the organization like the culture followed, the practices follow & all other functional aspects. The main objectives of the summer internship are to experience (apply) the various concepts that we learn in our management course and to learn to face various situations. I got an opportunity to work in Bank of Maharashtra which is one of the nationalized banks in Credit Management. Credit management in banks deals with evaluating and monitoring various loan proposals.

INDUSTRY PROFILE

BANKING IN INDIA
Central Bank Nationalized Banks Reserve Bank of India, NABARD Allahabad Bank, Andhra Bank, Bank of Baroda, Bank of India, Bank of Maharashtra, Canara Bank, Central Bank of India, Corporation Bank, Dena Bank, IDBI Bank, Indian Bank, Indian Overseas Bank, Oriental Bank of Commerce, Punjab & Sind Bank, Punjab National Bank, Syndicate Bank, UCO Bank, Union Bank of India, United Bank of India, Vijaya Bank. State Bank of India, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Indore, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore. Axis Bank, Bank of Rajasthan, Catholic Syrian Bank, Dhanalakshmi Bank, South Indian Bank, City Union Bank, Federal Bank, HDFC Bank, ICICI Bank, IndusInd Bank, ING Vysya Bank, Jammu & Kashmir Bank, Karnataka Bank Limited, Karur Vysya Bank, Kotak Mahindra Bank, Lakshmi Vilas Bank, Nainital Bank, Ratnakar Bank, Saraswat Bank, Tamilnad Mercantile Bank Limited,Yes Bank, Development Credit Bank. ABN AMRO, Abu Dhabi Commercial Bank, Antwerp Diamond Bank, Arab Bangladesh Bank, Bank International Indonesia, Bank of America, Bank of Bahrain and Kuwait, Bank of Ceylon, Bank of Nova Scotia, The Bank of Tokyo-Mitsubishi UFJ, Barclays Bank, Citibank India, Credit Suisse, HSBC, Standard Chartered, Deutsche Bank, Royal Bank of Scotland. Regional Rural banks Financial Services North Malabar Gramin Bank , South Malabar Gramin Bank, Pragathi Gramin Bank , Shreyas Gramin Bank. Real Time Gross Settlement (RTGS), National Electronic Fund Transfer (NEFT), Structured Financial Messaging System (SFMS), CashTree, Cashnet, Automated Teller Machine (ATM)

State bank Group

Private Banks

Foreign Banks

BANKING INDUSTRY IN INDIA:

Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India. The first fully Indian owned bank was the Allahabad Bank, which was established in 1865. By the 1900s, the market expanded with the establishment of banks such as Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai - both of which were founded under private ownership. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers.

NATIONALISATION:
Despite the provisions, control and regulations of Reserve Bank of India, banks in India except the State Bank of India or SBI, continued to be owned and operated by private persons. By the 1960s, the Indian banking industry has become an important tool to facilitate the development of the Indian economy. At the same time, it has emerged as a large employer, and a debate has ensued about the possibility to nationalize the banking industry. Indira Gandhi, the-then Prime Minister of India expressed the intention of the GOI in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalization." The paper was received with positive enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued an ordinance and nationalized the 14 largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9th August, 1969. A second dose of nationalisation of 6 more commercial banks followed in 1980. The stated reason for the nationalisation was to give the government more control of credit delivery. With the second dose of nationalisation, the GOI controlled around 91% of the banking business of India. After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.

LIBERALIZATION:
In the early 1990s the then Narasimha Rao government embarked on a policy of liberalization and gave licenses to a small number of private banks, which came to be known as New Generation tech-savvy banks, which included banks such as UTI Bank(now re-named as Axis Bank) (the first of such new generation banks to be set up), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, kick started the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks. The next stage for the Indian banking has been setup with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%, at present it has gone up to 49% with some restrictions. The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. All this led to the retail boom in India. People not just demanded more from their banks but also received more.

CURRENT SITUATION:
Currently (2007), banking in India is generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some timeespecially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&As, takeovers, and asset sales. In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the Government of India holding a stake), 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs.
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According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.

INCOME OF NATIONALISED BANKS:

BANK NAME INTEREST INCOME (Rs. In Crore) 7365 5375 15092 16347 4292 17119 10455 6067 3447 6830 9641 8856 3247 19326 9580 8121 11889 3150 5238 OTHER INCOME (Rs. In Crore) 1142 765 2758 3052 500 2311 1070 1107 430 1035 1596 1071 408 2920 860 1020 1483 975 699 TOTAL INCOME (Rs. In Crore) 8507 6140 17850 19399 4792 19430 11525 7174 3874 7865 11237 9927 3655 22246 10440 9141 13372 4125 5937

Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab & Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank

INCOME OF PRIVATE SECTOR BANKS:

BANK NAME Axis Bank Bank of Rajasthan Catholic Syrian Bank City Union Bank Development Credit Bank Dhanalakshmi Bank Federal Bank HDFC Bank ICICI Bank IndusInd Bank ING Vysya Bank Jammu & Kashmir Bank Karnataka Bank Karur Vysya Bank Kotak Mahindra Bank Lakshmi Vilas Bank Nainital Bank Ratnakar Bank SBI Commercial & International Bank South Indian Bank Yes Bank INTEREST INCOME 10835 1384 557 804 645 408 3315 16332 31093 2309 2240 2988 1917 1446 3065 658 209 138 54 1687 2003 164 435 OTHER INCOME 2897 124 100 124 120 79 516 3291 7604 456 548 245 353 265 358 107 10 16 TOTAL INCOME 13732 1508 657 928 765 487 3831 19623 38697 2765 2788 3233 2270 1711 3423 765 219 154 54 1851 2438

COMPANY PROFILE

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Bank of Maharashtra (One Family One Bank Mahabank)

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BANK OF MAHARASHTRA is a nationalized bank with a standing of more than 75 years. The Bank has branch offices across the length and breadth of the country. In the state of Maharashtra itself it has the largest network of branches by any Public Sector Bank in a state. All the branches of the Bank are under Core banking Solution (CBS). It has a three tier organizational set up consisting of branches, Regional Offices and Central Office. Bank of Maharashtra is the premier bank of Maharashtra, operating in the country of India. Registered on 16th Sept 1935 with an authorized capital of Rs.10.00 lakh and commenced business on 8th Feb 1936. Known as a common man's bank since inception, its initial help to small units has given birth to many of today's industrial houses. After nationalization in 1969, the bank expanded rapidly. It now has 1506 all over India. The Bank has the largest network of branches by any Public sector bank in the state of Maharashtra. The Bank was founded by a group of visionaries led by the Late V.G.kale and the Late D.K.Sathe and registered as Banking Company on 16th September, 1935 at Pune. The vision was to reach out and serve the common man and meet all their banking needs. Today, Bank of Maharashtra has over 12 million customers across the length and breadth of the country served through 1506 branches in 23 states and 2 union territories - a truly pan India bank .

BANKS VISION
To be a vibrant, forward looking, techno-savvy, customer centric bank serving diverse sections of the society, enhancing shareholders and employees value while moving towards global presence.

BANKS MISSION

To ensure quick and efficient response to customer expectations. To innovate products and services to cater to diverse sections of society. To adopt latest technology on a continuous basis. To build proactive, professional and involved workforce. To enhance the shareholders wealth through best practices and corporate governance.
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To enter international arena through branch network.

LOGO

THE DEEPMAL - With its many lights rising to greater heights.

THE PILLAR - Our institution- Symbolizing strength

THE DIYAS - Our Branches- Symbolizing service. THE 3 M'S SYMBOLISING

Mobilization of Money Modernization of Methods and Motivation of Staff.

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ABOUT BANK OF MAHARASHTRA

Date of Establishment Revenue Market Cap Corporate Address 16-09 1935 1247.61 ( USD in Millions ) 23170.3737993 ( Rs. in Millions ) Lokmangal,1501 Shivaji Nagar, Pune-411005, Maharashtra www.bankofmaharashtra.in Chairperson - A S Bhattacharya MD - A S Bhattacharya Directors - A K Pandit, A S Bhattacharya, A Y Shedshale, Allen C A Pereira, C Patwari, C R Patwari, Chittaranjan Patwari, D R Tuljapurkar, D S Patel, Kamala Rajan, M G Sanghvi, Naresh Kumar Drall, R K Deshpande, Ramesh Chandra Agrawal, S D Dhanak, S H Kocheta, S K Gogia, S U Deshpande, Shirish Dattatraya Dhanak, T Parameswara Rao, V P Bhardwaj Bank Public Bank of Maharashtra (BoM) was registered on September 16, 1935 with a capital of Rs10 Lakh. Today it has the largest network of 1,375 branches than any other public sector banks in Maharashtra. It has a network of 345 ATMs. It has a vision to reach a business level of Rs 85,500 crore, to increase ATMs upto 500, to introduce internet banking, mobile banking and phone bank Total Income - Rs. 60939.454 Million ( year ending Mar 2011) Net Profit - Rs. 3303.883 Million ( year ending Mar 2011) A Y Shedshale Wahi & Gupta, VC Gautam & Co, CR Sagdeo & Co, Shah Baheti Chandak & Co, B Chhawchharia & Co

Management Details

Business Operation Background

Financials

Company Secretary Bankers Auditors

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CREDIT MANAGEMENT IN BANK OF MAHARASHTRA:

Banks accept deposits and also lend money to the people who require it for various purposes. Lending of funds to traders, businessmen and industrial enterprises is one of the important activities of banks. The major part of the deposits received by banks is lent out, and a large part of their income is earned from interest on such lending. There is a considerable difference between the rate of interest which the commercial bank grants on deposits, and the rate they charge on loans and advances. It is this difference which constitutes the main source of bank earnings. Operation and expansion of business and commercial activities depend a great deal on the availability of loans/advances from commercial banks. In this lesson, you will learn about the procedure of getting loans and advance, cash credits, overdrafts, etc from the commercial banks.

MEANING OF LOANS AND ADVANCES:

The term loan refers to the amount borrowed by one person from another. The amount is in the nature of loan and refers to the sum paid to the borrower. Thus from the view point of borrower, it is borrowing and from the view point of bank, it is lending. Loan may be regarded as credit granted where the money is disbursed and its recovery is made on a later date. It is a debt for the borrower. While granting loans, credit is given for a definite purpose and for a predetermined period. Interest is charged on the loan at agreed rate and intervals of payment. Advance on the other hand, is a credit facility granted by the bank. Banks grant advances largely for short-term purposes, such as purchase of goods traded in and meeting other short-term trading liabilities. There is a sense of debt in loan, whereas an advance is a facility being availed of by the borrower. However, like loans, advances are also to be repaid. Thus a credit facility- repayable in installments over a period is termed as loan while a credit facility repayable within one year may be known as advances. However, in the present lesson these two terms are used interchangeably.

UTILITY OF LOANS AND ADVANCES:

Loans and advances granted by commercial banks are highly beneficial to individuals, firms, companies and industrial concerns. The growth and diversification of business activities are effected to a large extent through bank financing. Loans and advances granted by banks help in meeting short-term and long term financial needs of business enterprises. We can discuss the role played by banks in the business world by way of loans and advances as follows: Loans and advances can be arranged from banks in keeping with the flexibility in business operations. Traders may borrow money for day to day financial needs availing of the facility of cash credit, bank overdraft and discounting of bills. The amount raised as loan may be repaid within a short period to suit the convenience of the borrower. Thus business may be run efficiently with borrowed funds from banks for financing its working capital requirements. Loans and advances are utilized for making payment of current liabilities, wage and salaries of employees, and also the tax liability of business. Loans and advances from banks are found to be economical for traders and businessmen, because banks charge a reasonable rate of interest on such
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loans/advances. For loans from money lenders, the rate of interest charged is very high. The interest charged by commercial banks is regulated by the Reserve Bank of India. Banks generally do not interfere with the use, management and control of the borrowed money. But it takes care to ensure that the money lent is used only for business purposes. Bank loans and advances are found to be convenient as far as its repayment is concerned. This facilitates planning for future and timely repayment of loans. Otherwise business activities would have come to a halt. Loans and advances by banks generally carry element of secrecy with it. Banks are duty-bound to maintain secrecy of their transactions with the customers. This enhances peoples faith in the banking system.

BORROWING RATE AND LENDING RATE:

People make their funds available to the banks by depositing their savings in various types of accounts. In other words, bank funds mainly consist of deposits from the public, though banks may also borrow money from other institutions and the Reserve Bank of India. Banks thus mobilizes funds through its deposits. On public deposits the banks pay interest at and the rate of interest varies according to the type of deposit. The borrowing rate refers to the rate of interest paid by a bank on its deposits. The rates which the banks allow depend upon the nature of deposit account and the period for which the deposit is made with the bank. No interest is generally paid on current account deposits. The rate is relatively lower on savings account deposits. Higher rates ranging from 6% to 12% per annum are paid on Fixed deposit accounts according to the period of deposit. Banks also borrow from other institutions as well as from the Reserve Bank of India. When the Reserve Bank of India lends money to commercial banks, the rate of interest it charges for lending is known as Bank Rate. The rate at which commercial banks make funds available to people is known as Lending-rate. The lending rates also vary depending upon the nature of loans and advances. The rates also vary according to the purpose in view. For example if the loan is sanctioned for the purpose of activities for the development of backward areas, the rate of interest is relatively lower as against loans and advances for commercial/business purposes. Similarly for smaller amounts of loan the rate of interest is higher as compared to larger amounts. Again lending rates for consumer durables, e.g. loans for purchase of twowheelers, cars, refrigerators, etc. are relatively higher than for commercial borrowings. However, the Reserve Bank of India from time to time announces changes in the interestrate structure to regulate the lending of funds by banks. Different rates of interest are prescribed for various categories of advances, such as advances to agriculture, small scale industries, road transport, etc. Graded rates of interest are prescribed for backward areas. Lower rate is normally charged from agencies selling food-grains at fixed price through Govt. approved outlets. Lastly, lower rate of interest is charged for loans granted to persons belonging to weaker sections of the society.
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LENDING OF MONEY: Commercial banks lend money in four different ways: (a) direct loans, (b) cash credit, (c) overdraft, and (d) discounting of bills. These are briefly discussed below: 1. Loans: Loan is the amount borrowed from bank. The nature of borrowing is that the money is disbursed and recovery is made in installments. While lending money by way of loan, credit is given for a definite purpose and for a pre-determined period. Depending upon the purpose and period of loan, each bank has its own procedure for granting loan. However the bank is at liberty to grant the loan requested or refuse it depending upon its own cash position and lending policy. Commercial banks grant loans for different periods- short term loan and medium and long term loans (Term Loan) for different purposes. a. Short-term loan: Short term loans are granted by banks to meet the working capital needs of business. The working capital needs refer to financial needs for such purposes as, purchase of raw materials, payment of wages, electricity bill, taxes etc. Such loans are granted by banks to its borrowers to be repaid within a short period of time not exceeding 15 months. Short term loans are normally granted against the security of tangible assets like goods in stock, shares, debentures, etc. The rate of interest charged on short term loans ranges from 12% to 18% p.a. b. Term Loans: Medium and long term loans are generally known as term loans. These loans are granted for more than 15 months. In case of medium term loan, the period ranges from 15 months to less than 5 years. Medium term loans are generally granted for heavy repairs, expansion of existing units, modernization or renovation etc. Such loans are sanctioned against the security of immovable assets. The normal rate of interest ranges between 12% to 18% depending upon the period, purpose, nature and amount of the loan. Though banks may grant long term loans, they avoid granting loan for more than 5 years. 2. Cash credit: Cash credit is a flexible system of lending under which the borrower has the option to withdraw the funds as and when required and to the extent of his needs. Under this arrangement the banker specifies a limit of loan for the customer (known as cash credit limit) up to which the customer is allowed to draw. The cash credit limit is based on the borrowers need and as agreed with the bank. Against the limit of cash credit, the borrower is permitted to withdraw as and when he needs money subject to the limit sanctioned. It is normally sanctioned for a period of one year and secured by the security of some tangible assets or personal guarantee. If the account is running satisfactorily, the limit of cash credit may be renewed by the bank at the end of year. The interest is calculated and charged to the customers account. Cash credit, is one of the types of bank lending against security by way of pledge or /hypothecation of goods. Pledge means bailment of goods as security for payment of debt. Its primary purpose is to put the goods pledged in the possession of the lender. It ensures recovery of loan in case of failure of the borrower to repay the borrowed amount. In Hypothecation, goods remain in the possession of the borrower, who binds himself under the agreement to give possession of goods to the banker whenever the banker requires him to do so. So hypothecation is a device to create a charge over the asset under circumstances in which transfer of possession is either inconvenient or impracticable.
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3. Overdraft: Overdraft facility is more or less similar to cash credit facility. Overdraft facility is the result of an agreement with the bank by which a current account holder is allowed to draw over and above the credit balance in his/her account. It is a short-period facility. This facility is made available to current account holders who operate their account through cheques. The customer is permitted to withdraw the amount of overdraft allowed as and when he/she needs it and to repay it through deposits in the account as and when it is convenient to him/her. Overdraft facility is generally granted by a bank on the basis of a written request by the customer. Sometimes the bank also insists on either a promissory note from the borrower or personal security of the borrower to ensure safety of amount withdrawn by the customer. The interest rate on overdraft is higher than is charged on loan. The following are some of the benefits of cash credits and overdraft:a. Cash credit and overdraft allow flexibility of borrowing, which depends upon the need of the borrowing. b. There is no necessity of providing security and documentation again and again for borrowing funds. c. This mode of borrowing is simple and elastic and meets the short term financial needs of the business. 4. Discounting of Bills: Apart from sanctioning loans and advances, discounting of bills of exchange by bank is another way of making funds available to the customers. Bills of exchange are negotiable instruments which enable debtors to discharge their obligations to the creditors. Such Bills of exchange arise out of commercial transactions both in inland trade and foreign trade. When the seller of goods has to realize his dues from the buyer at a distant place immediately or after the lapse of the agreed period of time, the bill of exchange facilitates this task with the help of the banking institution. Banks invest a good percentage of their funds in discounting bills of exchange. These bills may be payable on demand or after a stated period. In discounting a bill, the bank pays the amount to the customer in advance, i.e. before the due date. For this purpose, the bank charges discount on the bill at a specified rate. The bill so discounted is retained by the bank till its due date and is presented to the drawee on the date of maturity. In case the bill is dishonored on due date the amount due on bill together with interest and other charges is debited by the bank to the customers account.

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NATURE AND SECURITY OF LOANS:

To ensure the safety of funds lent, the first and most important factor considered by a bank is the capacity of borrowers to repay the amount of loan. The bank therefore, relies primarily on the character, capacity and financial soundness of the borrower. But the bank can hardly afford to take any risk in this regard and hence it also has the security of tangible assets owned by the borrower. In case the borrower fails to repay the loan, the bank can recover the amount by attaching the assets. It can sell the assets offered as security and realize the amount. Thus from the view point of security of loans, we can divide the loans into two categories: (a) secured, and (b) unsecured. Unsecured loans are those loans which are not covered by the security of tangible assets. Such loans are granted to firms/institutions against the personal security of the owner, manager or director. On the other hand, Secured loans are those which are granted against the security of tangible assets, like stock in trade and immovable property. Thus, while granting loan against the security of some assets, a charge is created over the assets of the borrower in favour of the bank. This enables the bank to recover the dues from the customer out of the sale proceeds of the assets in case the borrower fails to repay the loan. There are various types of securities which may be offered against loans granted, but all of those are not acceptable to the banks. The types of securities generally accepted by the bank are the following: Tangible assets such as plant and machinery, motor-van, etc. Documents of title to goods, like Railway Receipt (R/R), Bills of exchange, etc. Financial Securities (Shares and Debentures) Life-Insurance Policy Real estates (Land, building, etc.). Fixed Deposit Receipt (FDR) Gold ornaments, Jewellery etc.

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PROCEDURE OF GRANTING LOAN:

Banks provide financial assistance to its customers in the form of loans, advances, cash credit, and overdraft and through the discounting of bills. The procedure of applying for and sanction of loans and advances differs from bank to bank. However, the steps which are generally to be taken in all cases are as follow: 1. FILLING UP OF AN LAON APPLICATION FORM: Customer fills loan application in the Request Form. Each bank has separate loan application forms for different categories of borrowers. When anyone wants to borrow money from a bank, he will have to fill up a loan application form available with the bank free of cost. The loan application form contains different columns to be filled in by the applicant. It includes all information required about the borrower, purpose of loan, nature of facility (cash-credit, overdraft, etc.) required, period of repayment, nature of security offered, and the financial status of the borrower. Along with loan application form, customer is required to submit project report. A running business limit may be required to furnish additional information in respect of: Assets and liabilities Profit and loss for the last 2 to 3 years. The names and addresses of three persons (Which may include borrowers, suppliers, customers and bankers) for reference purposes. 2. SUBMISSION OF FORMS ALONG WITH RELEVANT DOCUMENTS: The loan application form duly filled should be submitted to the bank along with the relevant documents. In bank of Maharashtra following forms are required to be filled and submitted. They area. Form RF 45 (Request letter for making credit facility available) b. Form RF 46/47 ( Demand Promissory Note) c. F237 (Letter of Authority) d. Form RF 243( Agreement for Term Loan) e. Irrevocable Letter of Authority ( To deduct EMI) from Salary f. Deed of Hypothecation or pledge g. Receipt of loan amount h. Memorandum of Documents. 3. SANCTIONING OF LOAN: The bank scrutinizes the documents submitted and determines the credit worthiness of the applicant. If it is found to be feasible, the loan is sanctioned. 4. EXECUTING THE AGREEMENT: When the loan is sanctioned by the bank and the borrower is informed about it, he will have to execute an agreement with the bank regarding terms and condition for the amount of loan sanctioned. 5. AGREEMENT OF SECURITY FOR LOAN: The borrower will now arrange for security against the loan. These securities may be immovable properties, shares, debentures, fixed deposit receipts, and other documents, like, Kisan Vikas Patra, National Savings Certificate, as per agreement. When the borrower completes all the formalities, he is allowed to get the amount of loan/advance/ over draft as sanctioned by the bank.
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6. DISBURSEMENT OF LOAN: Once the customer fulfills all the terms and conditions of the loan, bank disbursed the loan to him.

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TYPES OF LOANS THAT I HAD STUDIED IN BANK OF MAHARASHTRA:

Home loan Top up loan for home borrowers Home loan Vehicle loan Loan for durables / Consumer loan scheme Loan against Gold Ornaments Loan scheme for corporates Loan schemes for Individuals / Loan against Deposit Loan scheme for professionals and self employed Mahabank Personal Loan Scheme Bank Guarantee Letter of Credit

RATE OF INTEREST OF BANK OF MAHARASHTRA:

BASE RATE 10.70% (with effect from 1 August, 2011) BPLR 15% (with effect from 1 August, 2011)

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HOME LOAN:
PURPOSE: 1. Build your own house. 2. Purchase new house/ flat (old/ new). 3. Repairs/ renovation of existing house.

ELIGIBILITY: 1. 2. 3. 4. 5. Salaried person Professional Businessman with sufficient disposable income. Farmers having minimum 5 acres of irrigated land holding. Non-resident Indians are also eligible.

AGE: 1. Minimum 21 years maximum 50 years for salaried person. 2. Minimum 21 years maximum 55 years for other than salaried person.

QUANTUM OF LOAN: 1. For salaried class: 50 times of Gross Monthly Salary or 60 times of Net Monthly Salary whichever is higher subject to applicable margin. 2. For Businessman: Equal to average annual income (Net Profit + Depreciation) of last 3 years * 4 times (IT returns) 3. For Farmers: 4 times of average annual net income. Cross check Gross income, land holding, cropping pattern. Sugar factory / other agencies bills, etc. Ensure for repayment capacity and repayment experience. If jointly owned, considers joint holders income.

MAXIMUM LOAN QUANTUM: 1. No maximum limit for Metro/ Urban area 2. Rs.15 lakhs in Semi Urban/ Rural area. 3. Rs.5 lakhs for repairs/ renovation.

DEDUCTIONS: Total deductions including proposed EMI should not exceed 65% of Gross monthly salary / annual income.

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SECURITY: 1. Up to Rs.25000/- one guarantor with sufficient income / networth. 2. Above Rs.25000/- Equitable / Registered Mortgage of property or Equal amount of paper security (NSCs, FDRs of our bank etc. excluding shares) guarantee of the spouse, guarantee of relatives whose income is considered for quantum.

INSURANCE: For full value against fire / earthquake etc. with banks clause.

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TOP UP LOAN FOR HOME LOAN BORROWERS:

ELIGIBILITY: Existing home loan borrower not beyond age of 60 years will eligible, but only after minimum 24 monthly installments are paid.

ANNUAL INCOME: Annual Gross income should be more than Rs.3 lakhs.

REPAYMENT RECORD: Very regular repayment, should have not defaulted in payment of any installments at any stage.

PURPOSE OF LOAN: 1. 2. 3. 4. 5. 6. For repair / renovation / extension of house Furnishing of house Childrens education Childrens marriage Medical treatment Buying a vehicle or hi-tech gadgets

NATURE OF FACILITY: Term Loan

QUANTUM: Lower of any of the following: 1. 12 months average gross salary / income. 2. Rs.5 lakhs 3. Amount already repaid towards the housing loan amount.

REPAYMENT: The maximum repayment period is of 5 years.

RATE OF INTEREST: 1. For repair / renovation / extension of house: Base Rate + 1%. 2. For other purpose: Base Rate + 2.25

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TOTAL DEDUCTION: Net take home pay / monthly income should be not less than 35% of gross monthly income / earnings after considering all deductions including the EMI of the proposed Top-up Loan.

PROCESSING CHARGES: 0.50% of the Top-up Loan amount.

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EDUCATIONAL LOAN:
PURPOSE: For studies in India and abroad.

ELIGIBILITY: 1. The applicant should be an Indian National. 2. He should have secured admission to professional / technical courses through merit / entrance test based selection process. 3. Students should have secured admission to foreign University / Institution.

QUANTUM OF LOAN: 1. For studies in India: Up to Rs.10 lakh 2. For studies in Abroad: Up to Rs.20 lakh

MARGIN: Up to Rs.4 lakh: nil Above Rs.4 lakhs: * For studies in India - 5% * For studies in abroad 15% This may include own contribution as well as scholarship.

RATE OF INTEREST: 1. Up to and inclusive Rs.4 lakhs: Base Rate + 1.75% 2. Above Rs.4 lakhs: Base Rate + 2.75%.

SECURITY: 1. Up to Rs.4 lakhs: no security 2. Above Rs.4 lakhs and up to Rs.7.5 lakhs: Collateral in the form of satisfactory third party guarantee. 3. Above Rs.7.5 lakhs: Value of collateral security equal to the loan amount. Additional Two guarantors acceptable to bank.

REPAYMENT: 1. EMI 60 months (Loan plus interest occurred together)

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2. Course period plus 1 year OR 6 months after getting job whichever is early.

EXPENSES: Tuition fees, hostel expenses, purchase of books, equipment, considered instruments etc. travel expenses for studies abroad and other essential expenses.

RATE OF INTEREST: 1. Loans up to Rs.4.00 lac (Base rate + 2%) 2. Loans above Rs.4.00 lac (Base rate + 2.75%)

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VEHICLE FINANCE LOAN:

Type of Vehicle Minimum annual Gross Income Loan Amount Margin 2 Wheeler Rs.2 lakhs 4 Wheeler Salaried Rs.3.50 lakhs Other Rs.2 lakhs Maximum Rs.0.50 lakhs Maximum Rs.15 lakhs 15% 15% 50% for second hand 4 wheeler up to 3 wheeler. a. Hypothecation of Vehicle purchase b. One guarantor acceptable to bank. Maximum 60 months Rs.500/60% of gross pay Maximum 84 months Rs.2000/60% of gross pay

Security Repayment Period Processing Fee Deduction limit

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LOANS FOR DURABLES / CONSUMER LOAN SCHEME:

PURPOSE: Purchase of Consumer Durables / Computer.

ELIGIBILITY: Salaried person, permanent on service / professionals / with minimum income of Rs.3 lakhs p.a.

AGE: 21years 60years at Loan Maturity

LOAN AMOUNT: Maximum Rs.1.5 lakhs Salaried - 6 times Gross Pay Professionals -50% of Gross Avg. Income of last 3 years IT return or last year income whichever is less

MINIMUM ANNUAL INCOME: Salaried persons, permanent in service / professionals minimum income Rs. 3.00 lakh p.a. (Teachers having salary a/c Rs.2.00 lac)

MARGIN: 25%

SECURITY: 1. Hypothecation of asset purchase. 2. One guarantor acceptable to bank.

REPAYMENT PERIOD: Maximum 5 years.

PROCESSING FEE: 1% of the loan amount or Minimum Rs.500/- whichever is higher.

DEDUCTION LIMIT: 60% of Gross Pay

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LOAN AGAINST GOLD ORNAMENTS:

COVERAGE: The scheme is implemented through 176 selected branches of the bank across India as per the list enclosed.

PURPOSE OF LOAN: 1. To cater the requirements of business, agriculture, etc. 2. To meet other personal expenses.

ELIGIBILITY: All individuals desirous of availing Jewel Loan against their own Gold Ornaments subject to compliance of KYC norms.

AGE LIMIT: 18 to 70 years at the time of availing loan.

QUANTUM OF LOAN: Minimum loan amount would be Rs.25000/- and Maximum loan amount would be Rs.5 lakhs calculated as per the scale of finance.

ELIGIBLE LOAN AMOUNT: 1. Rs.1500/- per gram of 22 carat or 75% of the market value of the net weight of the Gold Ornaments, whichever is less and subjected to minimum and maximum ceiling mentioned above. 2. The gold ornaments to be pledged shall be tested and certified by an appraiser empanelled by the Bank. The gold appraisal charges shall be borne by the borrower.

REPAYMENT OF LOAN: The maximum repayment period is 36 months.

RATE OF INTEREST: For agriculture loans 1. For loans eligible under interest subvention scheme: 7% at present. 2. For other agriculture loans: As per applicable rate of interest
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For loans other than agriculture 1. For Senior citizens : Base Rate + 2.25% 2. For others : Base Rate + 3%

PROCESSING CHARGES: 0.50%of the sanctioned loan amount.

COVERAGE: Through selected branches all over India.

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LOAN SCHEME FOR CORPORATES:

The Bank finances the corporate sector for its business activity and for setting up units, modernization, diversification and upgradation. Such finance is extended in the form of: 1. Funded facilities Term Loans: Repayment in installments over a fixed period. (i) Purpose: For acquisition of fixed assets / machinery or for financing projects. (ii) Amount of Loan: Generally 75% of the cost of maintaining a margin of 25%. (iii) Rate of Interest: (iv) Security: Charge on Asset Cash Credit: Running account facility. (i) Purpose: To meet working capital loan. (ii) Amount of facility: Based upon the Banks assessment of the working capital requirement. (iii) Rate of Interest: (iv) Security: Charge on current assets, collaterals if required. Bill Discounting: In the nature of post sales limit. (i) Amount of facility: Generally up to a specific percentage of the value of the bill. (ii) Discounting under: L/C or firm order. (iii) Rate of Interest: (iv) Security: Charge on the Bill, Collateral if required.

2. Non Funded facilities: Letter of Credit facility to facilitate of material / goods. Letter of Guarantor facility for the issuance of Guarantee in the nature of bid bonds, performance bonds, etc. For finance of International trade, the Bank provides Working Capital facility to

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LOAN SCHEMES FOR INDIVIDUALS / LOAN AGAINST DEPOSIT:

LOAN AGAINST DEPOSIT: If you have any term deposit with us you can in emergencies always avail of this facility which we offer.

PERSONS ELIGIBLE: Anyone who has a deposit with bank.

MARGIN: As low as 10% As high as 25%

RATE OF INTEREST: BPLR of the bank: 14.75% (with effect from 2nd August, 2011) Base Rate: 10.50% (with effect from 2nd August, 2011)

REPAYMENT: In easy installments or date of maturity of the receipt.

GAURANTEE: No guarantors required.

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LOAN SCHEME FOR PROFESSIONALS AND SELF EMPLOYED:

PURPOSE: To purchase equipment/ repairs/renovation to existing equipment, purchase of tools, working capital requirements, and acquiring/repairing business premises.

ELIGIBILITY: Doctors, Dentists, Chartered Accountants, Cost accountants, Lawyers, Solicitors, Engineers, Architects, Surveyors, Construction contractors or Management Consultants or to a person trained/qualified/skilled in the chosen vocation/field in which employed, "the bank extends finance under its own facilities and even under the Govt. sponsored schemes.

AMOUNT: Depending upon the assessed requirement considering financial viability, repayment capacity etc.

MARGIN: Generally 25%, which can vary according to requirement and assessment.

SECURITY: Assets created by the Loan to be charged to the bank and other collateral security.

REPAYMENT BY EMI: From short term to period generally ranging up to 5 years.

PROCESSING FEE: 1% of the loan for amount above Rs.25,000/-.

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MAHABANK PERSONAL LAON SCHEME:

PURPOSE: To meet personal Expenses

ELIGIBILITY: Permanent salaried / Professionals (must be IT assesses)

AGE: 21yrs 60yrs at Loan Maturity

MINIMUM Employment: For Service Persons Total 5 years Current 2 years Professionals -3 years

MINIMUM ANNUAL INCOME: Salaried persons, permanent in service / professionals minimum income Rs.3.00 lakh p.a. (Teachers having salary a/c Rs.2.00 lac)

MAXIMUM AMOUNT: Rs.1.50 lac Salaried - 6 times Gross Pay Professionals - 50% of Gross Avg. Income of last 3 y IT return or last year income whichever is less.

DEDUCTION LIMIT: 60% of Gross pay

GUARANTOR: One Guarantor acceptable to Bank

REPAYMENT: EMI 36 months (Max) or residual service whichever is less.

PROCESSING FEE: 1% of Loan Amt. Min. Rs.500.00

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BANK GUARANTEE:
Bank issues guarantees on behalf of its clients for various purposes. The guarantees issued comprise of both performance guarantees and financial guarantees.

RBI guidelines relating to the conduct of guarantee business: 1. Normally, guarantees issued shall be for shorter maturities. No bank guarantee shall normally have a maturity of more than 10 years. 2. While issuing guarantees on behalf of customer, the following safeguards should also be observed. a. At the time of issuing financial guarantee, bank should satisfy that the customer would be in a position to reimburse the bank in case the bank is required to make payment under guarantee. b. In case of performance guarantee, bank should exercise due caution and have sufficient experience with the customer to satisfy itself that the customer has the necessary experience, capacity and means to perform the obligations under the contract and is not likely to commit any default. c. Bank should normally refrain from issuing guarantees on behalf of customer who do not enjoy credit facility with the bank. 3. Restriction on inter-institutional guarantee: Bank shall not issue guarantee covering inter-company deposits / loan. 4. Exception where guarantees can be issued. a. Issuance of bank guarantees favoring financial institutions, other banks and other lending agencies. b. Sick / weak industrial unit (nursing finance). c. Guarantees issued for infrastructure project. d. Guarantees issued in favour of Development Agencies / Board. 5. Issuance of guarantee on behalf of banks directors. 6. Guarantees on behalf of share, stocks and commodity brokers. 7. Bank guarantee scheme of government of India. 8. Guarantees governed by regulations issued under Foreign Exchange Management regulation. 9. Other guarantees regulated by Foreign Exchange rules.
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GUIDELINES FOR ISSUANCE OF BANK GUARANTEES: 1. General a. The creditworthiness of the borrower, the security, period of the guarantee as well as the capacity of the borrower must be studied in depth. The contract between banks constituents and the beneficiary shall be studied and preferably a copy be kept on record. b. It shall be ensured that issuance should conform to the prudential exposure norms prescribed from time to time for an individual borrower / group of borrowers. c. Adequate tangible security over and above the margin shall be insisted upon, whenever necessary.

2. Methodology a. Each bank guarantee issued by a branch shall be numbered as under. BOM - AAAA / BG NO. / 11-12 AAAA Four digit branch code BG NO. - Serial No. (BG- Bank Guarantee) 11 12 Financial Year. b. Bank guarantees issued for Rs.10000/- and above shall be signed by two officials jointly, one of them shall be Branch Manager / Chief Manager. c. Guarantee below Rs.10000/- shall be signed only by the branch manager / officiating manager. d. Bank guarantee shall be issued in triplicate. The original should be issued to the beneficiary and a copy each for branch and regional office. e. Issuance shall be properly recorded in Bank Guarantee Register. The individual BG No. shall also be recorded.

COMMISSION FOR ISSUANCE OF BANK GUARANTEE: Bank shall charge commission for issuance of guarantees at such rates as may be decided by it from time to time. The guarantee commission for the entire period has to be recovered at the time of issue of the guarantee. Any deviation in this regards will have to be necessarily approved / confirmed from controlling officer.

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GUARANTEE COMMISSION

CHARGES W.E.F. 01.08.2009 (Excluding Service Tax) Rs.150/- + (0.50% per quarter or part thereof for a minimum of 2 quarters)

REVISED CHARGES W.E.F. 01.04.2011 (Excluding Service Tax) Rs.250/- + (0.50% per quarter or part thereof for a minimum of 2 quarters) Rs.250/- + (0.75% per quarter or part thereof for a minimum of 2 quarters)

PERFORMANCE GUARANTEE

FINANCIAL GUARANTEE Rs.150/- + (0.75% per quarter or part thereof for a minimum of 2 quarters)

EXTENTION OF BANK GUARANTEE: While extending the validity of the bank guarantee it shall be ensured that there is no adverse variation in the security applicable to the bank and credit worthiness of the BG applicant / borrower. a. In case any increase in the risk to Bank, is felt in extension of validity of the BG, additional tangible security to strengthen the banks comfort level shall be obtained before extending validity of BG. b. The extension of bank guarantee shall be conveyed on a stamp paper and such extension shall indicate a reference to the earlier guarantee bond issued and also to prior extension if any. The extension shall the following paragraph. . 1) this renewal / extension of guarantee is an integral part of our earlier guarantee issued in this respect under Guarantee No. dated.. The period of the earlier guarantee bond expiring on. is further extended up to. (date) and for Rs. . . 2) all the terms and conditions mentioned in our earlier guarantee bond No. dated .. shall apply mutates mutandis. c. The commission as applicable for extension period shall be recovered or collected. d. A guarantee bond, whose validity has expired, cannot be renewed after expiry by giving an extension renewal letter as referred as above. The expired guarantee can be extended by issue of fresh guarantee bond only. e. In case of beneficiary or the BG applicant wants continuity in expired guarantee, fresh guarantee can be issued giving effect from a retrospective date. The commission shall also be charged accordingly.
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RENEWAL OF GUARANTEES

CHARGES W.E.F. 01.08.2009 (Excluding Service Tax) As applicable for issuance of guarantees; if renewal is effected before expiry date of original guarantee and if commission was earlier charged for claim period, no commission for claim period.

REVISED CHARGES W.E.F. 01.04.2011 (Excluding Service Tax) As applicable for issuance of guarantees; if renewal is effected before expiry date of original guarantee and if commission was earlier charged for claim period, no commission for claim period.

CONCELLATION OF BANK GUARANTEE BEFORE EXPIRY OF VALIDITY PERIOD: Bank may, sometimes, before the expiry of the validity period of the Bank Guarantee, receives request from the BG applicant to cancel the bank guarantee. Such request may be considered if the related original guarantee bond is returned duly discharged by the beneficiary or a written confirmation in a separate letter from a beneficiary stating that the guarantee is released and there is no liability to bank under the same guarantee and the matter relating to the BG is treated as closed. The genuineness of the signature on such letter shall be verified before cancelling the BG. Commission should be refund for the residual period from the date of cancellation to the date of original validity date. TERMINATION OF BANK GUARANTEE: Bank Guarantee, which has expired, need to be cancelled in the books of the bank. When the specified period of the bank guarantee is expired, it is expected that the beneficiary returns the original BG bond duly discharge or a letter from beneficiary stating that the beneficiary has discharged the from the obligation under the BG.

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LETTER OF CREDIT:

Letter of credit is widely used to make payment secure in domestic and international trade. This document is issued by the banks at the buyers request. Buyer also provides the necessary instructions in preparing the document.

There are four parties in Letter of Credit: 1) Applicant (Opener): Applicant which is also referred to as account party is normally a buyer or Importer, who has to make payment to beneficiary. LC is initiated and issued at his request and on the basis of his instructions. 2) Issuing Bank (Opening Bank): The issuing bank is the one which create a LC and takes the responsibility to make the payments on receipt of the documents from the beneficiary or through their banker, provided the documents are in accordance with the terms and conditions of the LC. 3) Beneficiary: Beneficiary is normally stands for a seller or Exporter, who has to receive payment from the applicant. A credit is issued in his favour to enable him or his agent to obtain payment on surrender of stipulated document and comply with the term and conditions of the LC. 4) Advising Bank: An Advising Bank provides advice to the beneficiary and takes the responsibility for sending the documents to the issuing bank and is normally located in the country of the beneficiary.

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Flows in Letter of Credit: 1) Buyer and seller agree to conduct business and seller wants a letter of credit to guarantee payment. 2) Application Letter from applicant (requesting bank to open L/C account) 3) Response Letter to the applicant. 4) Issuing bank issues LC to the advising bank. 5) Advising bank will authenticate the credit and forward the original credit to the seller (beneficiary). 6) Seller (beneficiary) ships the goods, then verifies and develops the documentary requirements to support the letter of credit. Documentary requirements may vary greatly depending on the perceived risk involved in dealing with a particular company. 7) Seller presents the required documents to the advising or confirming bank to be processed for payment. 8) Advising or confirming bank examines the documents for compliance with the terms and conditions of the letter of credit. 9) The Advising bank checks the documents against the LC. If the documents are compliant, the bank pays the seller and forwards the documents to the Issuing bank. 10) The Issuing bank now checks the documents itself. If they are in order, it reimburses the seller's bank immediately. 11) The Issuing bank debits the buyer and releases the documents (including transport document), so the buyer can claim the goods from the carrier.

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OBJECTIVES AND SCOPE

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OBJECTIVES:
. To outline the procedure of granting loan. To point out the nature of security provided for loan. To provide other banking services for development of international trade and business. To enlist the utility of granting loans and advances by Bank of Maharashtra. To enumerate the ways of lending money

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OBSERVATION AND FINDINGS

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OBSERVATION AND FINDINGS:

Large numbers of documents are required for getting loan. Usually it takes much more time for disbursement of loan. Bank takes utmost care for granting loan to their customer. For granting term loan factory visit is essential. The visiting officer verify and countercheck the information provided by the customer in his application and prepares a detailed report. For granting term loan, 3 ratios should be considered. (a) Debt service coverage ratio (DSCR) - minimum 3 to 5:1 (b) Current Ratio - 1.5 to 2 :1 (c) Debt equity ratio 3:1 For granting loan to customer 3 Cs should be considered. (a) Capacity, (b) Character, (c) Co-lateral. Bank disbursed 40% loan to priority sector and 60% to non-priority sector. Priority sector includes loan for education, agriculture, irrigation, solar, etc. Reserve bank of India has no control in the decision of interest rate. Interest rate and repayment schedule is decided by the bank.

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SUGGESTIONS AND CONLUSION

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SUGGESTIONS:
The process of granting loan should be such that it takes less time. Legal formalities (documentation) should be minimized. Online application for loan should be made available for customer.

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CONCLUSION:
The productivity and efficiency of the banks is depends upon the performance of the credit management of the bank. Therefore, bank follows certain guidelines. Bank takes utmost care while granting loan because lending of money is most profitable as well as risky function of the bank. Lending of money by the bank not only generate money to the bank but also helps in development of the country.

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BIBLIOGRAPHY:
WWW.GOOGLE.COM www.bankofmaharashtra.com

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