PROJECT REPORT ON BANK LOANS

Bank Loans : Leading of fund to the constituents, mainly traders, business and
industrial enterprises, constitutes the main business of the banking industry. The
major portion of a Bank fund is employed by way of loans, which is the most
profitable employment of its fund. The major part of bank is earned from interest. The
business of leading, nevertheless is not without certain inherit risks largely
depending on the borrowed funds, a banker therefore, follow a very caution policy,
and conduct his business on the basis on the basis of safety, liquidity, profitability
etc.

MEANING OF LOANS

Under the lonas, credit is given for a definite purpose and for a predetermined
period. Normally these loans are repayable in installments. Funds are required for
single non-repetitive transactions and are withdrawn only once. If the borrower need
funds again or wants renewal of an existing loan, a fresh request is made to the
bank.
This borrower is required to negotiate every time; he is taking a new loan or
renewing an existing loan. Banker is at liberty to grant or refuse such a request
depending upon his owner cash resources and credit policy of the control bank.
TYPES OF LOANS

Bank grants loan for different periods short, medium and long and for different
purposes.

Short Term Loans

Short-term loan is granted to meet the working capical needs of the borrowers.
These loans are granted against securities of tangible assets mainly the movable
assets like goods and commodities, shares, debentures etc. Since April 1995, RBI
has made it mandatory for the banks to grant a portion of bank credit to big
customers in the form of loans, which may be for various maturities. The RBI has
also permitted the banks to roll over such loans i.e. to extend the loan for another
period at the expiry of the tenure of the first loan.

Term Loan

Medium and long-term loans are usually called Term loans. These loans are
granted for more than one year and also meant for the purpose of capital asset for
establishment of new expansion or diversification of an existing unit. Banks usually
grant such loans together with specialized financial institutions like industrial Finance
Corporation of India, credit and investment corporation etc.
In April 1995, RBI banned bridge loan granted by banks and financial institutions to
all companies. But in oct. 1995, RBI permitted banks to sanction bridge loans
/Interim finance by banks subject to some conditions in no. 1997, RBI permitted to
banks to grants bridge loans to companies (other than non-banking finance
companies) against public issue of equity of India or in abroad.
Composite Loans

When a loan is granted both for buying capital assets and for working capital
purpose it is called composite loans. Such loans are ususllly granted to small
borrowers such as artisans, farmers, small industries etc.

Retail loans

These are loans that are given to individuals for their purpose, Retail loans can be
subdivided into 4 categories.

Housing Loans

This is the loans scheme that is offered to individual for constructions of house,
purchase of house, plot purchase, repair, renovation, purchase of flat from private
builder, for furnishing etc. This is one of the retail product thus involve colossal
volumes in terms of customers and dunds.

Education Loans

Education loan is given to the students for further studies in India and abroad both.
This loan can be for air fare travel expenses admission/tuition fees, boarding and
lodging expenses books & stationary expenses etc.

Auto Loans

Auto loan is given to individual to buy old/new car and two wheeler. It is very popular
loan among borrowers as today everyone want vehicle in their home and bank
provide them at easy installments.
Personal Loans

Though normally banks provide loans for productive purpose only, but as a
exception loans are granted on a limited scale to meet the medical needs or the
educational expenses or expenses relating to marriage or other social purpose of the
needs persons. Such 1Soans are called Personal loans.

ADVANTAGE OF LOANS

Financial discipline of the borrower

As the time of repayment of loans or its installments is fixed. In advance, these
systems ensure a greater degree of self discipline of borrower as compared to cash
credit system.
Periodic review of loans A/C
Whenever a loan is granted or its renewal is sanctioned, the banker gets an
opportunity of automatically reviewing the loan account. Unsatisfactory loan account
may be discontinued at the discretion of the banker.
Profitability
System is comparatively simple, interest occurs to the bank on the entire amount lent
to a customer.

DRAWBACK OF LOANS
Every time loan is required. It is to be negotiable with the banker. To avoid it, borrower
may borrow in excess of their exact requirement to provide for any contingency.

Bank have no control over the use of fund borrowed by the customers, however banks
insist on hypothecation of the asset/vehicle purchase with loan amount.

Though the loans are for fixed period but in practice they roll over i.e. they are renewed
frequently.

Loan documentation is more comprehensive as compared to cash credit system.

RETAIL LOANS

Loan become necessary for every money minded person .From this way they can
invest their money in other profitable purposes . The best coming way to get loan for
building home for buying automobiles or education of your for personnel purposes is
provided by Bank Of Punjab ltd. at preferential rate of interest . If you are eligible for
loan then u will have money in hand in very few days. The bank will provide you the
facility of re payment in easy installments the loan are made available at your
doorstep.

Security required for the loan :

The person who is applying for loan need to provide security of the financed property
and/or such additional/collateral security may be mutually agreed.

Risks and Control:

Like other industries, banking activities are closely monitored by its watchdogs who
guarantee the solvency of each bank and its administration. The controller
concentrates on the agreement with specific conditions, constraints and rules, aiming
to preserve the reliability and veracity of the banking system.

Being one of the most highly controlled industries, banking investors require a
decree of assertion in the dependability of the system so that they can concentrate
on their endeavors and observations on the performance of the bank in diverse
trends.

As agents, banks manage two different kinds of risks - Interest rate risk and Credit
risk. While the former indicates to the risk anticipated between the interest forfeited
on deposits and interest received on loans, the second indicates to probability that a
borrower will fail to pay interest on the loan and the bank might incur a loss. Hence,
every investor must understand these two basic factors while evaluating the bank
loan project report.
Bank's Balance Sheet:
While evaluating the project report, the investor must scrutinize the bank's balance
sheet. It not only offers an analytical structure to identify bank's fiscal ranking but
also reveal its average revenue for a specific time frame.

Interest Rate:
Consider the rate of interest while accessing the bank's performance, for its may
influence the other risk factors encountered by the bank. In an escalating interest
market, the loan clients many not be able to fulfill the banks requirements due to the
hike in the payment structure or a decline in incomes. This will lead to greater level
of trouble loans. Hence, a brief review of the bank's current interest rate on loans
helps a borrower in its banking endeavors.

Object Oriented Approach

UML Diagrams:

USE CASE

1. A use case is a methodology used in system

analysis to identify, clarify, and organize system
requirements.
2. Use case diagrams are employed
in UML(Unified Modeling Language), a standard
notation for the modeling of real-world objects
and systems.
3. A use case diagram looks something like
a flowchart.
Uses:
1. A use case consists mainly of narrative text, it is
easily understandable by all stakeholders,
including customers, users and executives, not
just developers and testers.
 2. use case describes one way the system is used,
but one of the big benefits of use case modeling
is that it also describes all of the things that
might go wrong.
3. a use case model has been developed, it can be
used to drive many other aspects of software
development, including project planning (cost,
complexity and timing estimates), object
models, test case definitions, and user
documentation.

Use Case diagram for bank loan system :

ACTIVITY DIAGRAM

1. An activity diagram visually presents a series of

actions or flow of control in a system similar to
a flowchart or a data flow diagram.
2. Activity diagrams are often used in business
process modeling. They can also describe the
steps in a use case diagram.
3. Activities modeled can be sequential and
concurrent
Uses :
1. Modeling work flow by using activities.
2. Modeling business requirements.
3. High level understanding of the system's
functionalities.
4. Investigating business requirements at a later
stage.
Activity diagram for Apply for loan :
Activity diagram for Verification of loan process :
Activity diagram for Sanction loan :
SEQUENCE DAIGRAM

1. Sequence diagrams describe interactions

among classes in terms of an exchange of
messages over time. They're also called event
diagrams.
2. A sequence diagram is a good way to visualize
and validate various runtime scenarios.
3. A sequence diagram shows object interactions
arranged in time sequence.
Uses :
1. Sequence diagram help you to envision what
will happen during the execution of use case
2. They are great to help developers and business
analysts get to a common understanding.
Sequence diagram for Apply for loan :
Sequence diagram for Verification of loan process :

Sequence diagram for Sanction loan :

DEPLOYMENT DIAGRAM

1. Deployment diagram is a
structure diagram which shows architecture of
the system as deployment(distribution) of
software artifacts to deployment targets.
2. Artifacts represent concrete elements in the
physical world that are the result of a
development process.
3. The term Deployment itself describes the
purpose of the diagram.
Uses :
1. Deployment diagrams are mainly used by
system engineers.
2. These diagrams are used to describe the
physical components (hardware), their
distribution, and association.
3. Deployment diagrams can be visualized as the
hardware components/nodes on which the
software components reside.
Deployment diagram for Sanction loan :