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BACHLEOR OF COMMERCE
BUSINESS MANAGEMENT STUDY
SEMESTER V
2016-17
SUBMITTED BY
PUJYA A. SOMVANSHI
SEAT NO.102
B.N.N COLLEGE
DECLARATION
PUJYA A.SOMVANSHI, Student of BMS Semester V (2016-17) Hereby, Declare that I have completed
the project on; "TYPES OF LAONS AND ADVANCES IN NAGRIK SAHAKARI BANK"
The Information Submitted is true & original to the best of my knowledge.
SIGNATURE
PUJYA A.SOMVANSHI
SEAT NO 102
INTRODUCTION TO LOANS
One of the primary functions of the commercial bank. Through lending commercial banks me
their objective of making profits. The deposits collected from the public cannot be kept idle. It has to
beutilized in order to derive benefits out of it. The bank collects deposits with the objective of lending and
makes profit out of the interest received and paid. Their main aim is to deal in money and provide for
those who need it. The banker performs the job of lending within the framework of statues governing the
banking business, the government policy and guidelines issued by the authorities of the country (RBI in
India).The basic objective of nationalization of commercial banks was to provide funds to the neglected
sectors like agriculture, tiny industries and other weaker sections of the society. Today nearly 40% of the
total commercial bank advances are the priority sectors. Greater part of the commercial bank funds are
employed in the form of loans and advances. Loans bring good money to the bank in the form of profit by
charging interest. Lending function of a commercial bank benefits the bank in the form of profit and the
one who takes loans enjoy the benefit of money required for their activities. The wheels of industry
cannot run without the bank advances. The bank needs to assess the condition of industry or trade or any
business enterprise while making advances
Definition of Loans
The amount lent by the lender to the borrower for a specific purpose like the construction of the
building, capital requirements, purchase of machinery and so on, for a particular period of time is known
as Loan. In general, loans are granted by the banks and financial institutions. It is an obligation which
needs to be repaid back after the expiry of the stipulated period. The loan carries an interest rate on the
debt advanced. Before advancing loans, the lending institution checks the credit report of the customer, to
know about his credibility, financial position and capacity to pay. Loan is classified in the following
categories:
Unsecured Loan: The loan on which no asset is pledged as security is Unsecured Loan.
Demand Loan: The loan which is repaid on demand of the lender is Demand Loan.
Time Loan: Loan, which is repaid in full at a future specified date is Time Loan.
Installment Loan: Loans which are to be repaid in evenly distributed monthly installments is
Installment Loan.
Home Loan
Car Loan
Education Loan
Commercial Loan
Industrial Loan
Gold Loan
Mortgage Loan
Personal Load
Definition of Advances
Advances are the source of finance, which is provided by the banks to the companies to meet the
short-term financial requirement. It is a credit facility which should be repaid within one year as
per the terms, conditions and norms issued by Reserve Bank of India for lending and also by the
schemes of the concerned bank. They are granted against securities which are as under:
Short term loans: Advance in which the entire amount is provided to the borrower at one time.
Overdraft: A facility provided by the bank in which the customer can overdraw money from his
account up to a specified limit.
Cash Credit: A facility granted by the bank in which the customer can advance money up to a
certain limit against the asset pledged.
Bills Purchased: An advance facility provided by the bank against the security of bills.
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.
The loan is generally provided at a cost, referred to as interest on the debt, 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 covenants.
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 institutions such as banks and
credit card companies. For other institutions, issuing of debt contracts such as bonds is a typical source of
funding
Types
Secured
See also: Loan guarantee
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral.
A mortgage loan is a very common type of loan, used by many individuals to purchase things. In this
arrangement, the money is used to purchase the property. The financial institution, however, is given
security a lien on the title to the house until the mortgage is paid off in full. If the borrower defaults on
the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to
it.
In some instances, a loan taken out to purchase a new or used car may be secured by the car, in much the
same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter
often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. A
direct auto loan is where a bank gives the loan directly to a consumer. An indirect auto loan is where a car
dealership acts as an intermediary between the bank or financial institution and the consumer.
Unsecured
Unsecured loans are monetary loans that are not secured against the borrower's assets. These may be
available from financial institutions under many different guises or marketing packages:
personal loans
bank overdrafts
peer-to-peer lending
The interest rates applicable to these different forms may vary depending on the lender and the borrower.
These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these
may come under the Consumer Credit Act 1974.
Interest rates on unsecured loans are nearly always higher than for secured loans, because an unsecured
lender's options for recourse against the borrower in the event of default are severely limited. An
unsecured lender must sue the borrower, obtain a money judgment for breach of contract, and then pursue
execution of the judgment against the borrower's unencumbered assets (that is, the ones not already
pledged to secured lenders). In insolvency proceedings, secured lenders traditionally have priority over
unsecured lenders when a court divides up the borrower's assets. Thus, a higher interest rate reflects the
additional risk that in the event of insolvency, the debt may be uncollectible.
Demand
Demand loans are short term loans[1] that are typically in that they do not have fixed dates for repayment
and carry a floating interest rate which varies according to the prime lending rate. They can be "called"
for repayment by the lending institution at any time. Demand loans may be unsecured or secured.
Subsidized
A subsidized loan is a loan on which the interest is reduced by an explicit or hidden subsidy. In the
context of college loans in the United States, it refers to a loan on which no interest is accrued while a
student remains enrolled in education.
Concessional
A concessional loan, sometimes called a "soft loan", is granted on terms substantially more generous than
market loans either through below-market interest rates, by grace periods or a combination of both.[3]
Such loans may be made by foreign governments to developing countries or may be offered to employees
of lending institutions as an employee benefit.
Personal Loans
These loans are offered by most banks, and the proceeds may be used for virtually any expense (from
buying a new stereo system to paying off a common bill). Typically, personal loans are unsecured, and
range anywhere from a few hundred to a few thousand dollars. As a general rule, lenders will typically
require some form of income verification, and/or proof of other assets worth at least as much as the
individual is borrowing. The application for this type of loan is typically only one or two pages in length.
Approvals (or denials) are generally granted within a few days. The downside is that the interest rates
these loans can be quite high. According to the Federal Reserve, they range from about 10-12%. The other
negative is that these loans sometimes must be repaid within two years, making it impractical for
individuals looking to finance large projects.In short, personal loans (in spite of their high interest rates)
are probably the best way to go for individuals looking to borrow relatively small amounts of money, and
who are able to repay the loan within a couple of years.
Credit Cards
When consumers use credit cards, they are essentially taking out a loan with the understanding that it will
be repaid at some later date. Credit cards are a particularly attractive source of funds for individuals (and
companies) because they are accepted by many - if not most - merchants as a form of payment. In
addition, to obtain a card (and, by extension, $5,000 or $10,000 worth of credit), all that's required is a
one-page application. The credit review process is also rather quick. Written applications are typically
approved (or denied) within a week or two. Online / telephone applications are often reviewed within
minutes. Also in terms of their use, credit cards are extremely flexible. The money can be used for
virtually anything these days from paying college tuition to buying a drink at the local watering hole. (To
find out more about this process, see The Importance of Your Credit Rating and How Credit Cards Affect
Your Credit Rating.)There are definitely pitfalls, however. The interest rates that most credit-card
companies charge range as high as 20% per year. In addition, a consumer is more likely to rack up debt
using a credit card (as opposed to other loans) because they are widely accepted as currency and because
it's psychologically easier to hand someone a credit card than to fork over the same amount of cash. (To
read more on this type of loan, see Take Control Of Your Credit Cards, Credit, Debit And Charge: Sizing
Up The Cards In Your Wallet and Understanding Credit Card Interest.)
Home-Equity Loans
Homeowners may borrow against the equity they've built up in their house using a home-equity loan. In
other words, the homeowner is taking a loan out against the value of his or her home. A good method of
determining the amount of home equity available for a loan would be to take the difference between the
home's market value and the amount still owing on the mortgage. The loan proceeds may be used for any
number of reasons, but are typically used to build home additions, or for debt consolidation. The interest
rates on home-equity loans are very reasonable as well. In addition, the terms of these loans typically
range from 15 to 20 years, making them particularly attractive for those looking to borrow large amounts
of money. But, perhaps the most attractive feature of the home-equity loan is that the interest is usually
tax deductible. The downside to these loans is that consumers can easily get in over their heads by
mortgaging their homes to the hilt. Furthermore, home-equity loans are particularly dangerous in
situations where only one family member is the breadwinner, and the family's ability to repay the loan
might be hindered by that person's death or disability. Even a 1% increase in interest rates could mean the
difference between losing and keeping your home if you rely too heavily on this style of loan. Note: In
situations like these, life/disability insurance is frequently used to help protect against the possibility of
default. (To keep reading on this subject, see Home-Equity Loans: The Costs and The Home-Equity Loan:
What It Is And How It Works.)
Cash Advances
Cash advances are typically offered by credit-card companies as short-term loans. Other entities, such as
tax-preparation organizations, may offer advances against an expected IRS tax refund or against future
income earned by the consumer.While cash advances may be easy to obtain, there are many downsides to
this type of loan. For They are not typically tax deductible. Loan amounts are typically in the hundreds of
dollars, making them impractical for many purchases, particularly large ones.The effective interest rate
charges and related fees can be very high. In short, cash advances are a fast alternative for obtaining
money (funds are typically available on the spot), but because of the numerous pitfalls, they should be
considered only as a last resort. (Learn more about cash advances in Payday Loans Don't Pay.)
lending institution with regard to the level of interest charged. However, there are some loans on the
market that offer a variable rate.Small business loans are the way to go for anyone looking to fund a new
or existing business. However, be forewarned: getting a business plan approved by the lending institution
may be difficult. In addition, many banks are unwilling to finance "cash businesses" because their books
(ie. tax records) often do not accurately reflect the health of the underlying business.
Personal Loans
These loans are offered by most banks, and the proceeds may be used for virtually any expense (from
buying a new stereo system to paying off a common bill). Typically, personal loans are unsecured, and
range anywhere from a few hundred to a few thousand dollars. As a general rule, lenders will typically
require some form of income verification, and/or proof of other assets worth at least as much as the
individual is borrowing. The application for this type of loan is typically only one or two pages in length.
Approvals (or denials) are generally granted within a few days.The downside is that the interest rates on
these loans can be quite high. According to the Federal Reserve, they range from about 10-12%. The other
negative is that these loans sometimes must be repaid within two years, making it impractical for
individuals looking to finance large projects.In short, personal loans (in spite of their high interest rates)
are probably the best way to go for individuals looking to borrow relatively small amounts of money, and
who are able to repay the loan within a couple of years.
Credit Cards
When consumers use credit cards, they are essentially taking out a loan with the understanding that it will
be repaid at some later date. Credit cards are a particularly attractive source of funds for individuals (and
companies) because they are accepted by many - if not most - merchants as a form of payment. In
addition, to obtain a card (and, by extension, $5,000 or $10,000 worth of credit), all that's required is a
one-page application. The credit review process is also rather quick. Written applications are typically
approved (or denied) within a week or two. Online / telephone applications are often reviewed within
minutes. Also in terms of their use, credit cards are extremely flexible. The money can be used for
virtually anything these days from paying college tuition to buying a drink at the local watering hole. (To
find out more about this process, see The Importance of Your Credit Rating and How Credit Cards Affect
Your Credit Rating.) There are definitely pitfalls, however. The interest rates that most credit-card
companies charge range as high as 20% per year. In addition, a consumer is more likely to rack up debt
using a credit card (as opposed to other loans) because they are widely accepted as currency and because
it's psychologically easier to hand someone a credit card than to fork over the same amount of cash. (To
read more on this type of loan, see Take Control Of Your Credit Cards, Credit, Debit And Charge: Sizing
Home-Equity Loans
Homeowners may borrow against the equity they've built up in their house using a home-equity loan. In
other words, the homeowner is taking a loan out against the value of his or her home. A good method of
determining the amount of home equity available for a loan would be to take the difference between the
home's market value and the amount still owing on the mortgage. The loan proceeds may be used for any
number of reasons, but are typically used to build home additions, or for debt consolidation. The interest
rates on home-equity loans are very reasonable as well. In addition, the terms of these loans typically
range from 15 to 20 years, making them particularly attractive for those looking to borrow large amounts
of money. But, perhaps the most attractive feature of the home-equity loan is that the interest is usually
tax deductible. The downside to these loans is that consumers can easily get in over their heads by
mortgaging their homes to the hilt. Furthermore, home-equity loans are particularly dangerous in
situations where only one family member is the breadwinner, and the family's ability to repay the loan
might be hindered by that person's death or disability. Even a 1% increase in interest rates could mean the
difference between losing and keeping your home if you rely too heavily on this style of loan.
Note: In situations like these, life/disability insurance is frequently used to help protect against the
possibility of default. (To keep reading on this subject, see Home-Equity Loans: The Costs and The
Home-Equity Loan: What It Is And How It Works.)
5. Cash Advances
Cash advances are typically offered by credit-card companies as short-term loans. Other entities, such as
tax-preparation organizations, may offer advances against an expected IRS tax refund or against future
income earned by the consumer.
While cash advances may be easy to obtain, there are many downsides to this type of loan. For example:
you with an experienced business person who can mentor you during (and after) the start-up phase.
d. Locker Rent.
III) SIGIFICANT ACCOUNTING POLICIES :i) Accounting Convention :The financial statements are drawn up in accordance with historical cost convention and on the going.
They are in confirmity with genrally accepted principles and practices prevalling in India, Statutory
provisons and guidlines issued by RBI, Accounting Standard issued by the Instution of Chartered
Accountans of India (ICAI) except where otherwise stated.
ii) Revenue Recognition :Items of Income and Expenditure are generally accounted on accrual basis except
a.
Interest on Non -performing are generally assets is recozies to the extent realized, in
pursuance with the guidlines issued is recozies to the extent realized, in pursuance with the gu
guidlines issued by the Reserve Bank Of India.
d. Locker rent.
Held to Maturity (HTM)
The valution of investments in the above category has been done as follows:-
investments in HTM category are carried at cost of acquisition. The premium if any, paid on acquisition
is amortized over balance period of maturity. The bank has the practice of debiting amortized premium to
profit & loss account . government securities (GOI) are valuued as per the price quoted in the Fixed
Income Money Market & Derivatives Association of India (FIMMDA) as on 31.03.2016.
Amortization
Premium on acquisition of Government Securities under HTM category has been amortized over the
balance period of maturity. broken period interest (the amount of interest from the previous interest
payment date till the date of purchase / sale of instruments ) on debt instruments is treated as a revenue
item.
Foreign Exchange Transaction
The bank does not have any foreign exchange business.
Fixed Assets
Fixed Assets are stated at their weitten down value.
Depreciation on Fixed Assets is charged on written down value (WDV) basis as per the rates determined
by the management.
Depreciation on Fixed assets purchased during the year is charged for entire year if the asset is purchased
and retained for 180 days or more, otherwise it is cherged at 50% of the normal rate.
No Depreciation is charged in case in of assets disposed during the Year. Profit / Loss on sale of asset are
recognized in the year if sale / disposal.
Staff Retirements Benefits (AS-15)
i. Provient Funt contribution are made to Government Provident Fund on actual basis.
ii. Staff Group Gratuity
bank is bolding reatuity fund and provision bas been made to gratuity fund on yearly basis . However
there is no system of obtaining actuarial valuation of gratuity liabilty every year from the certified valuer
making provision thereof.
Group Leave Encashment
Income Tax
a.
Provision For current tax is made on the basis of the amount expected to be paid to tax
authorities as per Income Tax Act,1961.
b. The bank has not recognized deferred Tax liability / assets in the books of accounts
NOTES TO ACCOUNTS
FIXED ASSETS
No securities are held under 'Held For Trading' (HFT) and Available for sale (AFS) categories. It may be
noted that bank is holding Investment in Non SLR securities in the form of Bonds of Gujarat Road and
Infrastructure Company Limited, a unlisted company,The Non SLR securities should be classified under
Available For Sale category and valuation should made accordingly.
5. ADVANCE
bank has made adequate provision in respect of Substandard, Doubtful and Loss Assets classified by the
bank, as stipulated in the Provisioning norms laid down by the RBI in this regard.
a. We have obeserved that sbifting of Non Perfoming Assets as per the IRAC norms laid down
down by RBI is not made by the bank. Some of the NPA accounts which are to be classified as
standard though they are substandard, resulting into short provision to the extent of Rs.6.39 Lacs
in BDDR.
b. Bank is not considering Gold Loan accounts for classification of Non Perfoming Assets. Hence,
Bank has not followed IRAC Norms in this regard. We have observed thet there are 98 Gold Loan
Accounts having aggregate balance outstanding amount of Rs. 76.81 Lacs, which are eligible to
be classified as NPA but not classified by the Bank, thus resulting in short provision of Rs. 7.68
Lacs.
c. Bank has advanced some loans against the security of Stock of goods, Two wheeler and Four
wheeler Vehicles and classified these loans as Hypothecation Loans We have observed that most
of these loans are classified by the bank as NPA(Doubtful Assets) long Back. Further in the
present scenario, yhe value of the securities bypothecated to the bank cannot be ascertained in the
absence of adequate details. However, bank has Classified these loans as secured advances and
provision has been made accoringly. In the absence of proper details it is difficult to quantify the
effect on Profit and Loss Account.
a. ID proof
b. Address Proof
c. Franing agreement bond with T&C
d. 2 passart size photo
e. (NMF) Nominal Membar fees in Compulson only if customer in not holding share in particular
bank
f. The customer can avail loan facuty only if they are account holder in the parlicular bank.
In this policy / loan Minimum paper work like franling, band agreement on stamp paper is neessary after
this limited. pwecdure person get money immediataiy.
The fanding institution provide loan amount of upto 70 to 75% of the markt value of the gard at the
sanctioned loan on purity basis of gold loan.
If the person suyfer from bend financial condition or any emergeney for money it can apply for
gold loan for immendidte hapt payment like medical treatment coust procedure any personal thing or
problems.
In gold loan there is requirement of any documention or ralidation for income or salary of the
person.if you are unemplyed or you do not earning any meney you can still avail a gold loan. becase you
are pledging a valuasle Asset gold with bank or lender.
Another advantage of taking a gold loan is that they are avail alse at low interest 12.16% annually
in comprison to personal loan interest which is 15.26% per annum.
The duration of loan is opprox 1 years or bank charged a fixed rate of Interest on sanchioned
account.
1. You can get 100% satety and seanntiy of you gold / assets
2. Enjoy and time liquiclity
3. To avail gold loan time consumption very leass i.e 15-30 min.
Dis- advantage
If honec / customre is failed to repay the loan amount on due date or expiry date of loan . bank will
conduct the aution for gold for to recover their loan amount.
HOUSING LOAN
ELIGIBILITY
Get Personal Loans from TJSB Bank.