A PROJECT REPORT

ON

DISBURSEMENT AND RECOVERY OF TERM LOAN

G.M FIANANCIALS (FRANCHISEE OF HDFC BANK), YAVATMAL.

In partial fulfillment of Masters degree in Business Administration

By
Ms. KIRAN.T. ADE

SMT.HIRABEN NANAVATI INSTITUTE OF MANAGEMENT

& RESEARCH FOR WOMEN
KARVENAGAR, PUNE-411052
2013

CERTIFICATE

This is certify that MS. KIRAN ADE has successfully completed her summer
project titled DISBURSEMENT AND RECOVERY OF TERM LOAN in
partial fulfillment of MBA programme.

(Director)

(Project guide)

ACKNOWLEDGMENT

I take this opportunity to express my gratitude towards G.M FIANANCIALS

(FRANCHISEE OF HDFC BANK), YAVATMAL for allowing me to carry out
the project in the area of DISBURSEMENT AND RECOVERY OF TERM
LOAN. I am particularly obliged to Mr. Pravin Mahale(Manager). This project
would not have been completed successfully without the support & guidance of
him.
And cordial thanks to my project guide Ms. Sangita Sonar of G.M
FIANANCIALS (FRANCHISEE OF HDFC BANK). For the continued support
& direction they give during this project work. I am thankful to them for
providing their valuable time & all necessary information whenever required.
I am indebted to Dr.Bharti Dole (Director) of our institute & my very dear
internal guide Prof. Prashant Mamarde for his constant support & expert
guidance in preparing my report.
I would also like to thanks all staff members of .M FIANANCIALS
(FRANCHISEE OF HDFC BANK) & our institute, my family & my friends
who have helped me directly & indirectly in completion of the report.

Chapter

Chapter Title

No.
1.
2.
3.
4.
5.
6.
7.

Project Profile
Introductory Chapter
Organizational Profile
Analysis of the data
Findings & Observation
Conclusions
Recommendations
INDEX

Page No.

CHAPTER 1
PROJECT PROFILE

Introduction of the project

Object of the project
Research Methodology
Scope of the Project
Limitation of the project

Introduction of the Project

For starting any type of business capital is required. For example establishing
new business like coffee shop capital is required. There are many source of
capital i.e. owned capital or borrow capital. One of the major financing from
borrowed capital is term loan from bank. In term loan, it is important to
understand what the meaning of term loan is.
Term Loan is a loan borrowed for fixed amount over the fixed period of
repayment and floating rate of interest. Term Loan is normally perform by small
and medium scale business to meet the needs of working capital or to by asset or
infrastructure which is require to run the business on day to day basis
It may include purchase of machinery or buying an office or workshop premises
the maturity period or term is between 1-10 years.
For getting term loan any businessman required balance sheet and project report
of that business. Because after calculating the ratios between balance sheet bank
can give loan for any business.
In doing this project in G M Financials play very important role. Mr. Pravin
Mahale (Manager of G.M Financials) gives all the important information about
the Term Loan. They explain all the procedure of term loan and calculation of
interest and installments of repayment of capital.

Objective of the Project

1 To study the loans disbursement & recovery system of HDFC Bank Ltd.
2 To identify problems related to various loans & advance products of HDFC.
3 To explain how the bank sanction loan to clients.
4 To illustrate the loan recovery system of HDFC Bank Ltd.
5 To make some recommendations on the basis of the problems.
6 To help retire high cost debt for business.
7 To share up the net worth of business.
8 To build asset of business.
9 To help grow a business.
10 To strengthen the asset base.
11 To meet the contingency needs of micro and small enterprises.

Research Methodology

Introduction:
The term research pertains to a search for facts In other word, it conveys a
sance of deep and powerful study through scientific and scholarly investigation.
In short research is a process whereby, one gains knowledge about my
phenomenon natural or human. The objective of given research may be either to
gain new insights or for adding to existing knowledge or problem solving.

Meaning:
The research may be term as systematic, controlled, empirical, and critical
investigation of hypothetical proposition. Research is said to be systematic
because, it involves the following definite set of steps in order to arrive at a same
conclusion. Also it is said to be organized, as it is a planned procedure which is
focused and having a well defined scope, it has a structure and method.
Definition:
Research is a careful, patient, systematic, diligent enquiry or examination in
some field of knowledge undertaken to establish facts or principals.
Data Collection
There are two method of date collection. With the help of these methods the
information is collected, which is important to do any type of research. The
methods are as follow-

1. Primary data collection.

2. Secondary data collection.
For doing the project on term loan, information is collected from both the
method.
The secondary data is collected from bank like application form, guarantors
form, proposal note, sanctioned letter, etc and by using internet.
The primary data is collected from bank manager by using questionnaire

Scope of the Project

This report has been prepared through extensive discussion with bank employees
and with the clients. While preparing this report, I had a great opportunity to
have an in depth knowledge of all the loans & advance by the HDFC Bank
limited.

Limitations of the Project

To prepare a report on the achieved practical experience in a short duration is not

an easy task. In preparing this report, some problems & limitations have
encountered, which are as follows:
1. Large scale analysis was not possible due to constraints & restrictions posted
by the banking authority.
2. This report is limited only to the Loans & Advance Department, it does not
cover the general banking part of HDFC Bank Ltd.
3. In many cases, up to date information was not published.
4. In some cases, access to relevant papers & documents were strictly prohibited.
5. In some other cases, access was denied to procedural matters conducted
directly by the top management in the operations of loans & advance
department.

CHAPTER 2
THEORETICAL BACKGROUND

Introduction of Loan
Introduction to Term Loan
Types Of Term Loan
Advantages And Disadvantages Of Term Loan

Introduction of Loan
Meaning of loan
In finance, a loan is a debt evidenced by a note which specifies, among
other things, the principal amount, interest rate, and date of repayment. A loan
entails the reallocation of the subject asset(s) for a period of time, between the
lender and the borrower.
In a loan, the borrower initially receives or borrows an amount of money,
called the principal, from the lender, and is obligated to pay back or repay an
equal amount of money to the lender at a later time. Typically, the money is paid
back in regular installments, or partial repayments; in an annuity, each
installment is the same amount.
The loan is generally provided at a cost, referred to as interest on the debit
which provides an incentive for the lender to engage in the loan. In a legal loan,
each of these obligations and restrictions is enforced by contract, which can also
place the borrower under additional restrictions known as loan convenient.
Although this article focuses on monetary loans, in practice any material object
might be lent.
Acting as a provider of loans is one of the principal tasks for financial
institution. For other institutions, issuing of debt contracts such as bonds is a
typical source of funding.

Definition of loan

Arrangements in which a lender gives money or property to a borrower, and the

borrower agrees to return the property repay the money, usually along with
interest, at some future points in time. Usually there is a predetermined time for
repaying a loan, and generally the lender has to bear the risk that the borrower
may not repay a loan (though modern capital markets have developed many
ways of managing this risk)
Loan Characteristics
1. Time To Maturity
The length of the loan contract the time to maturity therefore, loans vary
according to maturity. Short term is from one day to one year Intermediate debt
ranges from one to seven years. Long term debt is more than seven years.
Revolving credit and perpetual debt have to fixed date for retirement Banks
provide revolving credit though extensions of alien of credit. Brokerage firm
supply margin credit for qualified Customers on certain securities. While the
borrower constantly over the line of credit by paying it down and re-borrowing
the funds when needed. A perpetual loan, on the other hand, requires only regular
interest payment. The borrower who usually issued such debt through a
registered offering, determines the timing of the debt retirement.
2. Repayment Schedule
Payments may be required at the end of the contract or at set intervals, usually on
a monthly or semiannual basis. The payments generally consist of two parts, a
portion of the outstanding Principle and the interest cost. With the passage of
time, the Principle amount of the loan amortize, repaid little by until completely
retired. As the principle balance diminishes, the Interest on the remaining balance

also Interest only loans do not pay down the principle. The borrower Pays interest
on the principle loan amount and is expected to retire the principle at the end of
the contract through refinancing.
3. Interest
Interest is the cost of borrowing money. The interest rate charged by lending
institutions must be sufficient to cover operating costs, administrative costs, and
an acceptable rate of return. Interest rate may be fixed for the term of the loan, or
adjusted to reflect changing market condition. A credit contract may adjust rates
daily, annually, or at intervals of 3, 5, and 10 years, floating rates are tide to some
market index and are adjusted regularly
4. Security
Assets pledged as security against loan loss are collateral. The Asset purchased
by the loan often serves as the only collateral. For example, real estate or land
collateralizes mortgages. In other Cases the borrower puts other assets, including
cash, aside as Collateral. Credit backed by collateral is thus known as secured
Debt, while unsecured debt relies on the earning power of the Borrower.
Government survey figures suggest that around 40 Percent of all commercial and
industrial and industrial loans are collateralized.

Introduction to Term Loan

Term loan is loan borrowed for fixed amount over the fixed Period of repayment
and floating rate of interest. The borrowers offered a predefined schedule of
repayment by the leading institution comprising of principle amount and interest
thereon Term loan is secured by a collateral security term loan facilitates the
borrower to raise a stipulated amount one time and plan the business expenditure

or investment or purchase on his or her own. Term loan is normally preferred by

small and medium scale business to meet the needs of working capital or to buy
assets or infrastructure which is required to run the business on day to day basis. It
may include purchase of machinery or buying an office or workshop premises the
maturity period or term is between 1-10 year. Term loan is required for the purpose
of starting a new business Activity, renovation, modernization, expansion of
existing units, Purchase of plant and machinery, purchase of land for setting up of a
factory, construction of factory building or purchase of other immovable assets.
These loans are generally secured against the mortgage of land, plant and
machinery, building and the like.

Advantages and Disadvantages of Term Loan

Bank routinely offer various types of loan that cover the cost of whatever
a person or business needs. One type of loan a company or individual may
consider is a term loan. A term loan is a loan in which the borrower pays
interests for a set period. These loans have both advantages and disadvantages
that the lender needs to wait before signing any paper work and committing to
the loan agreement.
A. FLEXIBILITY
Term loans are more flexible when compare to other types of loan .with a term
loan, the borrower doesnt have to make a payment toward both the interest and
the principle balance. He can do so if it is financially feasible, but it isnt
required thus, a term loan better accommodates changes to a persons budget due
to unexpected life or business changes.
B. INTEREST

According to story of finance .com term loans is usually have a fixed interest
rate , but these is not always the case and depend on the type and location of the
bank as show by oceanicbankingeria.com. If a term loan does have affixed
interest rate, then a term loan is extremely beneficial to the borrower it lets the
borrower predict the payment they need to make. these is good for budgeting ,
term loan that have unfixed interest rates still can be advantageous , but they are
riskier because the borrower has no real control over how much interest they will
pay in the future . These can translate into more money paid toward the loan in
the long run.
C. PENALTY AGREEMENTS
Eugene F. Brigham and Louis C. Gapenski, authors of Test Bank .financial
management, Theory and practice clame that the agreements for term loans often
contain penalty clauses. These clauses give the issuing bank the right to issue
additional charges if the borrower is late or deficient in payments since afford a
regular loan, these is not desirable.
D. PREDICTABILITY
A term loan specifies when an interest on a loan will be completely paid. For
example, a five year term loan will have the interest paid predictably in five year.
This different from a regular in which accumulated interest may draw out the
payoff date. This can be extremely beneficial for budgeting and receipt of future
loans, since an individual has some proof that her debt will be repaid within a
given period.
E. ASSUMPTION OF ASSETS

Term loan work by having the principle balance come due in full once the
interest is completely paid. Therefore, people generally use a term loan to get the
capital they need to generate additional funds that will pay off the loan.
However, that a borrower venture will succeed and that they can generate the
principle amount is not guaranteed. If a person cannot generate the principle with
the funds, then they have to figure out how to repay a large amount of money
very quickly Business loans are a great way of companies to expand operations
and increase production without using their own capital. Loans provide
companies with immediate resources to expand their business potentially earn
more profits.
F. CREDIT
As business use bank loans, they increase their stability and rise the credit source
used by bank that value of companys risk. Becoming a low risk investment
increase the chances of a company securing bank financing for future needs.
G. LEVERAGE
A danger of using too much bank financing is over leveraging company assets,
companies with high debt ratio are at risk for loan default because their assets are
unable to cover the bank loans if profit being fall.
H. CASH FLOW
Companies that use financing as a primary growth tool may commit too much
cash flow to debt repayment. This negative cash flow can lead to bankruptcy if
the company is unable to cover for normal operating expenses and the debt
repayment.

Types of term loan

Home Loan
Triple benefits on your Home Loan!
Attractive interest rate*
Enjoy smaller EMIs with 30 years loan
Pre- approved loan
Why HDFC Home Loans ?
Pioneer in the Home Loan industry
4.4 Million satisfied home owners
Faster processing of loan with door step service
Get the HDFC Advantage
Widest range of Home Loan Products

 Flexible loan repayment options

Free & safe document storage

Personal Loan
HDFC Bank Personal Loans can help meet all your financial needs effectively.
With simplified documentation and speedy approvals, availing Personal Loan
finance couldn't get easier. You can check personal loan eligibility online and
across all our branches.
Features
Convenience of contacting us through SMS, Web chat, Click2Talk, Phone
Banking and across all Branches
Personal Loan eligibility in 1 minute available online & across all
branches
Loan in your account in 2 days*
Special loan offers* for women employees
Best in class offerings on loan amount, interest rates and charges, for
HDFC Bank account holders
Benefits
Simplified documentation and Loan disbursal in 2 days*
Competitive pricing

 Transparency
Loan available for various needs

Business Loan
With simplified documentation and speedy approvals, getting the loan couldn't
get easier.
Features
Convenience of contacting us through SMS, Web chat, Click2Talk, Phone
Banking and across all Branches
Business Loan eligibility in 1 minute available online & across all
branches
Self employed customers get exclusive higher loan amount
Best in class offerings on loan amount, interest rates and charges, for
HDFC bank A/c customers
Benefits
No collateral is a necessary element that a recipient has to keep with him
to get a loan. Securities can also be used as collateral./ Guarantor. A
guarantor is a person who guarantees payment by another. A guarantor
becomes a co-endorser and assumes liability in event of default. / security
required

 Speedy approvals
Funds available for business expansion, working capital, child's education
or home renovation

Education Loans Products

Education Loan for Indian Education

Get loans up to Rs. 10 lacs for education in India
Get our service at your doorstep!
Central Government Interest Subsidy Scheme
In order to support students from economically weaker sections of the
society, Department of Education, Ministry of Human Resource
Development, Government of India has launched an interest subsidy
scheme. The MoHRD has appointed Canara Bank as the Nodal Bank for
the Scheme
Education Loan for Foreign Education
Get loans upto Rs. 20 lakh for your foreign education and no collateral
required if the loan amount is less than Rs. 7.5 lakh
Get access to special remittance rates, NRE accounts, insurance and
service at your doorstep!

 Car Loans

New Car Loans

Up to 100% funding
7 year loan tenure
Faster approvals and doorstep services

Pre-owned Car Loans

Widest range of authorized dealers
Up to 100% finance and up to 60 months tenure

Loan against Car

Pre-approved cash loan for existing Car Loan customers
No income documents required

 Gold Loan
Enjoy Safe, Secure and Convenient loan processing experience. Your trust is
precious to us as your gold is to you.
Features
Safe: Unique triple layered security for your gold
Quick: spot sanction and disbursal
Easy: One page documentation
Benefits
Special interest rate for women customers
Lowest monthly outflow
No EMI*
Documents required
Identity Proof (Passport Copy/ Voters ID card/ Driving License)

 An address proof document (Ration card/ Telephone Bill/ Electricity Bill/

Rental Agreement/ Passport copy/Trade license /Shop & Est License /
Sales Tax certificate)

The term loan can be availed to:

Purchase of fixed asset
The term loan can be used to purchase fixed assets like Premises, plant and
machinery etc. the usage or performance of assets increase the business
performance and hence the profit and makes repayment of the loan easier.
Even the term loan is settled the assets procured continue the productivity as
asset life span is certainly longer than term loans span. If premises purchased
then the value of premises is always appreciated and in that case the
business leverages higher value of premises which further can be used to raise
funds for business expansion or diversification.
Switching of higher interest loans
Money a times business owners opt to raise business loans At higher rate of
interest .such loans are processes and Sanctioned faster but result in heavy
burden interest. This interest payment becomes a fixed monthly expense and
stars leaking the profits to arise the growing rate of interest and penalties the
higher interest loan can be switched to lower rate of interest loans or terms
loan. This way a borrower reduce the growing burden of interest on business

loan and can save a considerable amount of money. It also benefits in

maintaining the credit rating as the borrower closes one loan liability and opens
another in form of the term loan with lower rate of interest and easier repayment
condition.
Mortgage term loan
A term loan can be availed by mortgaging a kind Security like home, office
premises etc. this type of loan is borrowed of longer period of time that is 10,
15, 20 years , the repayment of principle amount and interest may be fixed in
nature or it may very over the course of repayment. The borrower may avail the
revised rate of interest later and May be benefited by saving in interest.

Procedure of taking loan

Banks provide financial assistance to its customers in the form of loans,
advances, cash credit and overdraft and through a 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:I. Filling up of loan application form
Each bank has separate loan application forms for different categories of
borrowers. When u went borrow money from a bank, you will have to fill up a
loan application form available with the bank free of cost. The loan application
forms contain 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) require, period of repayment, nature of security offered, and

the financial status of the borrower, a running business limit may be required to
furnish additional information in respect of
-Assets and liabilities
-profit and loss of the last 2 to 3 years (which may include borrower, suppliers,
customers and bankers) for reference purpose.
II. Submission of form along with relevant documents
The loan application form duly filled in should be submitted to the Bank
along with the relevant documents.
III. Sanctioning of loan
The bank scrutinizes the document submitted and determines the credit
worthiness of the applicant. If it is found to be feasible, the loan is sanctioned, if
the loan is for Rs 5000 or less, normally the branch manager himself can take the
decision and sanction the loan. In case the amount of loan is more than 5000, the
application is considered at regional, zonal or head office level, depending on the
amount of loan.
IV. Existing 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 if loan raised.
V. Arrangement of security for loan
The borrower will now arrange for security against the loan. These Securities
may be immovable properties, shares, debentures, fixed Deposits repairs, and

other documents, like kisan vikas patra , National saving certificate, as per
arrangement when the Borrower completes all the facilities, he is allowed to get
the amount of loan/advance/overdraft as sanctioned by the bank. In case of
discounting of bill, the bank creditors the amount of bill the customers
account before the realization of the bill and thus, makes available the found. In
case, the bill is dishonored on due date, the amount due on the bill together with
interest and other charges are payable by the party whose bill is discounted.

VII. Loan payment

The most typical loan payment type is the fully amortizing Payment in which is
monthly rate has the same value overtime. The fixed monthly payment P for a
loan of L for n months and a Monthly interest rate C is:

P = L. c (1+c) n
(1+c) n - 1

CHAPTER 3
ORGANISATIONAL PROFILE

Introduction
Bank profile
Technology Used In Hdfc Bank
Bank structure

Introduction
The Housing Development Finance Corporation Limited (HDFC) was
amongst the first to receive an in principle' approval from the Reserve Bank
of India (RBI) to set up a bank in the private sector, as part of the RBI's
liberalization of the Indian Banking Industry in 1994. The bank was
incorporated in August 1994 in the name of 'HDFC Bank Limited', with its
registered office in Mumbai, India. HDFC Bank commenced operations as a
Scheduled Commercial Bank in January 1995.
HDFC is Indias premier housing finance company and enjoys an
impeccable track record in India as well as in international markets. Since its
inception in 1977, the Corporation has maintained a Consistent and healthy
growth in its operations to remain the market leader in mortgages. Its
outstanding loan portfolio covers well over a million dwelling units. HDFC has
developed significant expertise in retail mortgage loans to different market
segments and also has a large corporate client base for its housing related credit
facilities.

With its experience in the financial markets, a strong market

reputation, large shareholder base and unique consumer franchise, HDFC was
ideally positioned to promote a bank in the Indian environment.
HDFC Bank began operations in 1995 with a simple mission to be a
World Class Indian Bank. It realized that only a single minded focus on
product quality and service excellence would help us get there. Today, the Bank
is proud to say that it is well on its way towards that goal.

Bank Profile
HDFC bank ltd provides various financial products and services. It
operates in three segments: Retail Banking, Wholesale Banking, and Treasury.
The Retail banking segment provides various deposit products, including savings
Accounts, current accounts, fixed deposits, and de-mat accounts. It also offers
Auto, personal, commercial vehicle, home, gold, and educational loans; loans
Against securities and property and health care finance Working capital finance,
construction equipment finance, and warehouse Receipt loans, as well as credit
cards, debit cards, depository, investment Advisory, bill payments, and
transactional services. In addition, this segment Sells third party financial
products, such as mutual funds and insurance, as Well as distributes life and
general insurance products through its tie-ups with insurance companies and
mutual fund houses. The wholesale banking Segment provides loans, non-fund
facilities, and transaction services to large Corporate, emerging corporate, small
and medium enterprise, supply chain, Public sector undertaking, central and state
government departments, and Institutional customers.
It offers deposit and transaction banking products, Supply chain financing,
working capital and term finance, agricultural loans, and funded non-funded
treasury, and foreign exchange products. This segments services include trade
services, cash management, and money Market, custodial, tax collection, and
electronic banking. In addition, it provides correspondent bank services to cooperative banks, private banks, foreign banks, and regional rural banks. The
Treasury Services segment operates primarily in areas, such as foreign exchange,
money market, interest rate trading, and Equities. As of March 31, 2009 HDFC
bank had a network of 1,142 branches And 3,295 automated teller machines in

528 cities in India. The company was founded in 1994 and is based in Mumbai,
India.

Cities
Branches
ATMs

March 2006
228
535
1323

March 2007
316
684
1605

March 2008
327
761
1977

March 2009
528
1142
3295

As of March 31, 2008, the Banks distribution network was at 761

Branches and 1977 ATMs in 327 cities as against 684 branches and 1,605 ATMs
in 316 cities as of March 31, 2007. Against the regulatory approvals for new
branches in hand, the Bank expects to further expand the branch network by
around 150 branches by June 30, 2008. During the year, the Bank stepped up
retail customer acquisition with deposit accounts increasing from 6.2 million to
8.7 million and total cards issued (debit and credit cards) increasing from 7
million to 9.2 million. Whilst credit growth in the banking system slowed down
to about 22% for the year ended 2008-09, the Banks net advances grew by
35.1% with retail advances growing

by

38.6% and

wholesale advances

growing by 30%, implying a higher market share in both segments.

The transactional banking business also registered healthy growth with
cash management volumes increased by around 80% and trade services volumes
by around 40% over the previous year. Portfolio quality as of March 31, 2008
remained healthy with gross nonperforming assets at 1.3% and net nonperforming assets at 0.4% of total customer assets

TECHNOLOGY USED IN HDFC BANK

In the era of globalization each and every sector faced the stiff
competition from their rivals and world also converted into the flat from the
globe. After the policy of liberalization and RBI initiatives to take the step for
the private sector banks, more and more changes are taking the part into it. That
are create competition between the private sector banks and public sector bank.
Private sector banks are today used the latest technology for the different
transaction of day to day banking life. As we know that Information Technology
plays the vital role in the each and every industry and gives the optimum return
from the limited resources.
Banks are service industry and today it gives the innovative Technology
application to Banking industries. HDFC BANK is the leader in the industries
and today IT and HDFC BANK together combined they reached the sky. New
technology changed the mind of the customers and changed the queue concept
from the history banking transaction. Today there are different channels are
available for the banking transactions. There are drastically changes seen in the
use of Internet banking, in a year 2001 (2%) and in the year 2008 (25%). This
type of technology gives the freedom to retail customers.
Centralized Processing Units
Electronic Straight Through Processing
Data Warehousing , CRM
Innovative Technology Application

Derived Economies of Scale

Reduced Transaction Cost
Improve cost efficiency, Cross sell
Provide new or superior products

HDFC BANK is the very consistent player in the new private sector banks. New
private sector banks to withstand the competition from public sector banks came
up with innovative products and superior service.

Bank Structure

G.M FINANCIALS (A FRANCHISE OF HDFC BANK)

The G.M. Financials is a franchise of the HDFC bank. It was established in the
2003. Mr. Pravin Mahale is the managing director of the G.M.FINANCIALS.
The G.M. Financials provide different types of loans to customers like
Home loan
Car loan
Personal loan
Education loan
Agriculture loan
Doctors loan it provided only those people who have income more than
4,00,000 etc.
HDFC BANK LTD - YAVATMAL is located at MAHARASHTRA state,
YAVATMAL district, YAVATMAL city and the bank branch's address is [HDFC
BANK LTD.POKARNA TOWERS,MAHADEV MANDIR
ROAD,OPP.POSTAL GROUND]. Contact phone number / numbers - SUJIT
KURUP ANANT SHINDE SANDEEP PUTHRAN 022-30751912 2041 2042.
The IFSC Code is HDFC0001017. Branch code is the last six characters of the
IFSC Code - 001017. Individual bank branch's details are listed below.
Bank :
Hdfc Bank Ltd
State :
Maharashtra
District :
Yavatmal

Branch :
Yavatmal
IFSC Code :
HDFC0001017 (5th character is zero)
MICR Code :
445240002
Branch Code :
001017 (Last 6 Characters of the IFSC Code)
City :
Yavatmal
Address :
Hdfc Bank Ltd.pokarna Towers,mahadev Mandir Road,opp.postal Ground
Contact :
SUJIT KURUP ANANT SHINDE SANDEEP PUTHRAN 022-30751912 2041
2042

Chapter 4
Data analysis

ANALYSI OF LOAN DISBURSEMENT, OUTSTANDING, CLASSIFIED

AND RECOVERY SCENARIO:

It is the duty of the recovery department of the Bank to recover the landed fund
within the stipulated time and if the borrower fails to repay the money within the
said period Bank will declare him as a defaulter and recover the fund by selling
the securities given by the borrower or by freezing his account or make a suit
against him.
The total outstanding Loans and advances of HDFC bank from 2005 to 2009 are
given below:
Tk In Million
Particulars 2007

2008

2009

2010

2011

Amounts

138493

121200

144678

166359

124467

Source: HDFC banks Annual Report

Comment: In the above figure we see that the total Loan & advances of HDFC
bank from 2007 to 2011 is increasing trend that indicates better performance in
providing Loan & advances. In the total Loan & advances of HDFC 25% to 30%
Loan is Industrial sector Loan. Industrial sector of HDFC bank consists of Jute
industries, Tannery Industries, Textile Industries, Agro Industries and Industrial
credit etc.

Sector wise Loans and Advance:

SI

Name of Sector

Taka in Million

2011

+/(-)

+(-)

TK.

2010

Jute Sector

9368

8909

459

5.51

Textile Ind. & trade

11076

11325

(249)

2.20

Steel & Engineering

2218

1515

703

46.40

Food & Allied

4692

3903

789

20.22

Export Credit

19083

1555

3533

22.72

Import Credit

32704

32510

194

.60

Industrial Credit

22372

17160

5212

30.37

Rural, ME&SP. Financing

12855

11496

1359

11.82

Housing

2362

2490

(128)

5.14

Others

49629

39820

9809

24.17

Grand total

166359

144678

21681

Source: Annual Report of the Bank

Comment: In the above figure and graph we see that the percentage of Loans in
the Textile Ind. has decreased from 2%.Because of the high Interest rate. On the
other hand HDFC bank ltd loans process need long time. On the other hand, the
flow of Loans and advances increased in case of import credit, Industrial Credit
and Rural, ME&SP Financing sectors.
Geographical area-wise Loans and advances:
The overview of geographical area-wise Loans of HDFC bank is given bellow:

Region

2008

2009

2010

2011

Dhaka

89143

94889

101537

115096

Chittagong

15005

16629

17750

21772

Khulna

8533

8577

10516

12720

Rajshahi

8789

9830

11531

12984

Sylhet

838

888

944

1092

Barishal

1136

1158

1290

1433

990

1110

1262

Overseas Branches(UAE 750

Branches)
Comments

From the table and graph, we see that the flow of Loans and advances of HDFC
bank is showing an increasing trend from 2008 to 2011. It indicates a better
performance in extending credit facilities. Bank disburses Loans more in Dhaka
region than other regions. And loans Recovered in avg.35%.

Performance of Industry Sector: 2009

Items

Taka in million

No. of Project ( Sanction)

123

Sanction

18123

Disbursed

13239

Outstanding

9633

Loan Disbursement, Recovery & Classification of Industrial sector of HDFC

bank Ltd. From 2008 to 2011 according to various sectors wise is given below:
Textile Industry

(Figure in crore)

Year

Loan Disbursement Classified

Recovery

2011

443.21

217.17

118.51

2010

439.60

211.16

112.68

2009

369.95

141.78

130.15

2008

372.72

133.52

101.16

Table of Rural, Micro and Special Program Financing:

Sl. Name of products

No.

no

loanee

ofDisbursement Recovery

Crop loan program

346528

5765.20

2582.23

Agriculture & irrigation equipment

229

13.90

10.01

Fisheries & Shrimp Culture Credit

321

130.30

90

Cyber Caf loan

13

1.70

.95

Credit for Forestry

751

16.90

12.03

Credit Program of employees

78368

1907.20

1653.2

Financing Women Entrepreneur

267

43.92

35.63

Financing Goat & sheep Farming

11370

77.70

67.4

Gharoa Project

3812

74.80

61.24

10

Doctors Loan

66

12.96

11

Small Business161

14.63

11.79

Development
loan
12

Credit for disabled people

113

1.59

.80

13

Consumers credit

1069

45.80

41.8

14

Agro-based Industry

1567

540.90

517.23

15

Others

140699

4225.20

3789

Comment: In 2011 there is no bad loan loss. Rural, Micro and Special Program
recover at most all loans.
Scenario of Doubtful & bad Loan of HDFC bank Ltd:
Debt which is considered doubtful & bad of HDFC bank from 2009 to 2011 is
given below:

(Figure in crore)

Year

2011

2010

2009

Total Amount

893500000

702500000

Comment:
In the above figure we see that the Debt that is considered doubtful & bad of
HDFC bank on total Loan disbursement from 2008 to 2011.There is no doubtful
& bad loan in 2011,. So, it is clear to us due to use of LRA format in industrial
credit default risk is less and recovery rate is well but in the other sectors
recovery is good enough.

EVALUATION OF INVESTMENT PROPOSALS

Financial Statement
Financial spreadsheet provides a quick method of assessing business trends and
efficiency.
Assess the borrowers ability to repay
Realistically show business tends
Allow comparisons to be made within industry
Borrowers that provide Financial Statement are more likely to be good
borrowers.
Lending Risk Analysis (LRA) Lending risk analysis (LRA) constitutes an
important set of activities that has been prescribed for minimizing and averting
risk in funds in business of local Banks. It was identified by the experts and
Banks that high risk involved in providing loan to a particular borrower is the
main reason for failing to recover the Banks money and the issue of risk
analysis remains as one of the main factors in determining the status of
investment in terms of recovery. The LRA forms describe how to assess the risk
that the Bank does not fully recover an Investment. It is a systematic and
structured way of assessing lending risk.
Credit Information Bureau (CIB) Due to the irregular and insufficient flow of
credit information into the Banking system the proportion of classified loan in
relation to the total credit is very high. This proportion of classified loan
generated bad influence in the Banking sector. In order to eliminate the bad

culture and to equip the Banks with proper credit information for loan
application processing, proposal for creation of Credit Information Bureau (CIB)
was put forward by different comities and groups such as National Commission
for Money, Banking and Credit, 1986, the World Bank Report, 1987 and
Financial Sectors Task Force Reports, 1990. In the backdrop of the above
proposal Bangladesh Bank approved the CIB in 1992.The main objectives
of the CIB are to collect all shorts of information in respect of the borrowers
(having outstanding balance of Tk. 10 lac and above) from the scheduled Banks,
and other non Banking financial institutions and creation of computer database
in order to feed back the same information to the Banks for quick processing of
new loan applications, rescheduling etc. and preparation of various reports for
MIS purposes to be used in Bangladesh Bank and Ministry concerned.
RECOVERY PROCEDURE OF INVESTMENT
Recovery procedure of HDFC bank is the ultimate combination of time, effort of
money. It follows four procedural steps to recover the lending amount, which is
joint effort of Bank, society and legal institutions, which are shown below:
PRINCIPLES OF SOUND LENDING
A. Safety
HDFC bank exercises the lending function only when it is safe and the risk
factor is adequately mitigated and covered. Safety depends upon:
The security offered by the borrower.
The repaying capacity and willingness of the borrower is to repay the
advance.

B. Liquidity
The liability of a Bank is repayable of demand or at a short notice. So the Bank
has to maintain its liquidity at a sufficient level. Investment on building, plant,
machinery, land etc. cannot be recovered quickly, so it is less liquid.
C. Profitability
Profit is needed to pay interest to depositors, depreciation, and maintenance,
declare dividend to share holders, provide or reserve against bad and doubtful
debts etc. so like all other Banks HDFC bank also disburse advances to earn
profit.
D. Security
To ensure safety of advances, Banks takes different types of securities like
MTDR, Sanchaypatra, land, work order etc. Banker should ensure that the
securities are adequate, marketable and free from encumbrances.
DIVERSIFICATION IF RISKS
It is very risky for a bank to invest all its assets into a particular sector or a single
borrower or to one particular region. If somehow the business of that sector or
area or borrower collapses, the bank may fall in a critical situation. So it is better
to invest in different sectors/borrowers and spread over the country. Thats why
HDFC bank invests its fund in various sectors.
LOAN CLASSIFICATION

Loan classification attempts to categorize the debt information in a systematic

manner. Loan classification is defined in terms of degree of risk associated with
loans. Classification of loans mean and include only such assets of the balance
sheet of a bank which do not yield interest income and which have remained past
due for some quarters. Loans are generally categorized in two types
Loan
Classified Loan
Unclassified Loan

Classified loan: If any continuous credit is not adjusted/ renewed within expiry
date, the loan will be treated as classified/ irregular loan from the next day of the
expiry date. Loans are classified which are judge to have a reduced chance of
repayment. Classified loan can be three types:
Classified loan
Substandard
Doubtful
Bad/ loss
Substandard: If the loan unadjusted for six months or more but less than nine
months, the loan will be treated as substandard.
Doubtful: For nine months and above but less than twelve months the loan will
be treated as doubtful.

Bad: If the period is twelve months or more, the loan will be classified as bad.
The above time frame is applicable in respect of demand loan also.
Unclassified loan: Unclassified loan are those which are repay regularly.
Objectives of loan classification:
Find out net worth/ adjust capital of a bank
Help for assessing financial soundness of a bank.
Calculate the required provision and the amount of interest suspense
Put the bank on sound footing in order to develop sound banking practice
in Bangladesh.
Loan Provisioning:
A certain amount of money is kept for the purpose of provisioning. This
percentage is set following Bank rules.
Loan Type

uC

SS

Bl
DF

Continues Loan
Demand Loan
Term Loan Up to 5 years
Term Loan more then 5 years
Micro Credit

1%
1%
1%
1%
5%

Source: Documents from Head Office

Importance of loan classification:

20%
20%
20%
20%
5%

50%
50%
50%
50%
5%

100%
100%
100%
100%
100%

 Strengthen credit discipline

Improve loan recovery position
Make planning for future course of loan

Basis for loan classification: All loans and advances are classified on the basis
of two criteria:
Qualitative judgment criteria
Objective criteria
DISCOURAGED SECTORS OF INVESTMENT
Investment in following sectors is discouraged by HDFC bank.
Military equipment/Weapons Finance
Highly Leveraged transactions.
Finance of Speculative Investment.
Logging, Mineral Extraction/Mining, or other activity that is Ethically of
Environmentally Sensitive.
Lending to companies listed on CIB black list or known defaulters,
Counter parties in countries subject to UN sanctions..
Taking an Equity Stake in borrowers.

 Lending to Holding Companies.

LOAN MONITORING
Investment monitoring implies that the checking of the pattern of use of the
disbursed fund to ensure whether it is used for the right purpose or not. It
includes a reporting system and communication arrangement between the
borrower and the lending institution and within department, appraisal,
disbursement, recoveries, follow-up etc.
The borrowers behavior of turnover.
The information regarding the profitability, liquidity, cash flow situation
and trend in sales in maintaining various rations
Regular checking the balance of SB/CD/STD accounts of the borrower.
Periodical visit with the customers to maintain relationship and
supervision of supplied articles
Legal action to be taken after failings all possible efforts to recover the
banks due.
Issuance of legal notice to the defaulter customers and guarantors prior to
classification of the loans.
Following steps will be taken against a defaulter:
Reminder the party to repay the loan after validity dates
Send final notice

 Send legal notice

Eventually sue a case against the party.

According to the survey, with the help of questionnaire following

information is collected about the customers who have taken loan in this
bank.
1. age

Age
12
27

30-40
40-50
50 & above

21

Interpretation:
Out of 60 customers 12 customers are above 50 age group,27 number of
customers are falling between 30 to 40 age group and21 number of customers
are falling between 40 to 50 age group.

2. Occupation

occupation
12

business

15

proffession
service

any other

24

Interpretation:
Out of 60 customers 15 are doing business, 9 are professionals, 24 are doing
services &12 are others.
3. Which type of loan do you have in the bank?

Type of loan
house loan

15
24

personal loan
business loan

15

education loan
6

Interpretation:
Out of 60 customers,24 have house loan, 6 have personal loan, 15 have business
loan & 15 have education loan in the bank.

4) How much amount of loan you had taken from the bank

amount
12

upto 1,00,000
24

1,00,000 to 5,00,000
5,00,000 to 25,00,000

24

Interpretation:
Out of 60 custumers,24 had taken loan upto 1,00,000, 24 had taken loan between
1,00,000 5,00,000

& 12 customers had taken loan between 5,00,000

25,00,000.
5. Do you think that the bank caters all your banking needs?

9
yes
51

no

Interpretation :
Out of 60 customers, 52 customers feel that this bank caters all their banking
needs & 9 customers think that its not.

6. Do you think that bank offers competitive interest rate?

yes
no

51

Interpretation:
Out of 60 customers, 51 customers think these bank offers competitive interest
rate & 9 customers thin these bank offers competitive interest rate.
7. What do you fell about overall service quality of the bank?

service quality
3
15

excellent

12

very good
9

21

good
average
poor

Interpretation:
Out of 60 customers, 12 think that its excellent, 9 think that its very good,

21 think that its good, 15 think that its average & 3 think that its poor.
8. Do you always get prompt service whenever you visit the branch?

6
18
18

always
often
sometime

18

rarely
never

Interpretation:
Out of 60 customers, 18 customers think that they always get prompt service,
18 think always, 18 think sometime, 6 think rarely & no one say never they get
prompt service.

CHAPTER -5
FINDINGS & OBSERVATION

PROBLEMS IDENTIFIED
While doing the internship in the HDFC bank Ltd. Corporate Branch, some
findings were found those are completely personal views for this report.
HDFC bank Limited finance up to Tk. 129.60 million in single project per year.
Where some other banks provide more than HDFC bank Ltd. For this low
investment in projects they loose some of their clients.
In corporate branch, sometimes small loans are not provided to small investors,
for that reason this bank loose those small investors.
HDFC bank Ltd. Charges high interest rate on loans which hinders customers to
take loan.
The number of officers in lone & advance department is insufficient to provide
service to huge number of customers of Corporate Branch HDFC bank Ltd.
In most of the loan disbursement is centrally controlled from the Head Office,
Which sometime creates problem for the branch in choosing the right client.
The credit proposal evaluation process is lengthy .Therefore, sometimes
valuable clients are lost.
Small range of products offered by HDFC bank Ltd, Corporate Branch is
another problem in diversifying its loan risk.
Before sanctioning loan, sometimes CIB report is not obtain from Bangladesh
Bank timely.

The website of HDFC bank Ltd.dose not contains all required information about
loan and advance.

CHAPTER -6
RECOMMENDATIONS

HDFC bank Ltd. should increase their finance on different projects to achieve
more clients.
HDFC bank Ltd. should provide more small loans in corporate branch, so that
they can attract small investors.
HDFC bank Ltd. Should decrease interest rate on loans to attract customers
attention to take loan.
The loan & advance department needs to recruit more expert people to provide
good customer services in Corporate Branch.
The Principle Branch should decentralize it rights of choosing clients.
The credit proposal evaluation process should be shortened so that valuable
customer is not lost.
HDFC bank Ltd. Should increases their loan products to compete in the market.
HDFC bank Ltd. Can give attention to the foreign exchange and remittance
services to maximize profit.
The website of the Bank should be more informative that customers get the all
information about the different activities and facilities of the Bank.

CHAPTER 7
CONCLUSION

CONCLUSION
HDFC bank Limited is serving the market with almost full range of services. As
the number of branches implies, still Bank has limited operation in our country,
but it should also be noted that within the next few years from its establishment,
no bank could make as good standing as hdfc bank has now. While go through
the different reports its found that. Authorized and paid up capital, reserve fund,
Savings, Loans and advances. Loan Management, investment foreign trade,
treasury activities, capital market activities, no. of Branches! Dividend Good
corporate governance, compliance of the regulations provided by Security and
Exchange commission etc. are moving towards a highly positive trend at the
satisfactory level. The Bank is run by a group of professionals who are well
organized and committed to the bank. Now it is gradually moving towards
automation and which will not allow any sort of discrepancies. Bank now
aggressively looking and establishing Foreign partners at abroad, to make easier
and shorter the time for the remit of NRB. All the above implies that they are
successful in gaining the trust of the people and business entities of our country.

BIBLIOGRAPHY
I.M Pandey, 2007, FINANCIAL MANAGEMANT, 9th Edition, Vikas
publishing House private Limited, New Delhi.

Prasanna Chandra 2002, FINANCIAL MANAGEMENT, 5thEdition, TATAMcGraw HILL, New Delhi.

S.P. Jain, K.L Narang, 2003, ADVANCED ACCOUNTANCY, VOLUME II,

13thEdition, Kalyani publishers, Ludhiana.

Website: - Google G.M. FINANCIALS, YAVATMAL(A FRANCHISE OF

HDFC BANK)