Project report

On

“ANALYSIS OF LOAN PROCEDURE IN STATE BANK

OF HYDRABAD.”

Submitted by
DIGAMBAR N. BEDARKAR
MBA-FINANCE
PRN No: 07408101138

Guided by
Prof. Mrs. Nilakshi Khater
IMTR, AURANGABAD

STUDY CENTRE
Institute of Management Training & Research
Adalat Road, Aurangabad

Tilak Maharashtra University,

Gultekdi, Pune 411037.

1
 CONTENT

SR TOPICS PAGE
NO

1 Rational for the study 3

2 Objectives for the study 4

3 Company Profile 7

4 Review of Literature 10

5 Research Methodology 13

6 Data analysis & Interpretations 16

7 Findings And Suggestions 50

8 Limitation 51

9 Bibliography 52

2
 CHAPTER NO. 1

RATIONALE FOR THE STUDY

Finance is a blood of all industrial groups. Finance can be raised with

the help of various types of financial institutions. There are different

methods of finance of providing finance and various bank to bank. The

main era of study is to examine the process of finance, types of

finance, and different types of rates applicable for loan of finance

provided by State Bank of Hydrabad.

Following are the type of finance provided by State Bank of

Hydrabad.

1) Commercial and industrial cash credit

2) Housing loan

3) Personal loan

4) Educational loan

5) Agricultural loan

6) Mortgagee loan

The study includes analysis of last2years data regarding loan and

finance raised by various organizations with the help of State Bank of

Hydrabad.

3
 CHAPTER NO. 2

 OBJECTIVES OF THE STUDY

The major objectives of the present study are as follows:-

 To Study the loan procedure of State Bank of Hydrabad.

 To assess the requirement of loan at various organization.

 To study the document involve while giving loan to particular

party.

 Procedure to know the credit worthless of parties to whom

loan is to be granted.

4
 SCOPE OF STUDY

Structure of Indian Banking Industry

The formal banking system in India comprises the Reserve Bank
of India, Commercial Banks, Regional Rural Banks and the Co-operative
Banks. In the recent past, private non-banking finance companies also
have been active in the financial system, and are being regulated by
the RBI.

Scheduled Commercial Banks (SCBs)

The scheduled commercial banks (SCBs) comprise of Public
Sector Banks (SBI Group + Nationalized banks), Private Sector Banks
and Foreign Banks.

Public Sector Banks (PSBs)

The banking sector in India has been characterized by the
predominance of PSBs. The PSBs had 46,683 branches (SBI &
Associates: 13,593; Nationalized Banks: 33,090) as on 31st March 2004.
The aggregate assets of all PSBs stood at Rs.14,71,427.67 Crores at
end FY04 accounting for nearly 74.50% of assets of all SCBs in India as
on March 31st, 2004. The PSBs’ large network of branches enables
them to fund themselves with low-cost deposits. PSBs account for
77.90% of deposits, 73.20% of advances, and 74.88% of income, of all
Scheduled Commercial Banks at end FY- 04, thus demonstrating
clearly their dominance of the Indian banking sector.

Private Sector Banks

In July 1993, as part of the banking sector reform process and as
a measure to induce competition in the banking sector, the RBI

5
permitted entry by the private sector into the banking system. This
resulted in the addition of 10 private sector banks. These banks are
collectively known as the `new’ private sector banks. Private sector
banks operated through 5,607 branches as at end FY 2003-04. As on
March 31st, 2004, total assets of private sector banks aggregated
Rs.3,67,276.18 crore and accounted for 18.60% of the total assets of
all SCBs. Although the share of private sector banks in total assets has
increased from 12.61% as at the end FY01 to 18.60% as on March,
2004, new private sector banks have accounted for most of the gain.
The new private sector banks’ share of the assets of all private sector
banks increased from 27.5% at end- FY97 to 67.14 % on 31.3.2004
(12.48% of assets of SCBs). The share of old private sector banks in
total assets of SCBs has decreased marginally from 6.40% at the end
FY 1996-97 to 6.11% at the end of 2003-04.

Foreign Banks

Presently, there are 33 foreign banks operating in India with 220

branches as on March 31st, 2004. At end-FY 2003-04, the total assets

of Foreign Banks aggregated Rs.1,36,315.72 crore and accounted for

6.90% of the total assets of all SCBs. The primary activity of most

Foreign Banks in India has been in the corporate segment. However,

in recent years, some of the larger foreign banks have started making

consumer financing a larger part of their portfolios, based on the

growth opportunities in this area in India. These banks also offer

products such as automobile finance, home loans, credit cards and

household consumer finance.

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 CHAPTER NO. 3

History

State Bank of Hyderabad had been constituted as Hyderabad State

Bank on 8th August 1941 under Hyderabad State Bank Act, 1941. It

served as the central bank of the erstwhile State of Hyderabad,

covering present-day Telangana region of Andhra Pradesh, Hyderabad-

Karnataka of Karnataka and Marathwada of Maharashtra. Their

functions include managing the currency - Osmania Sikka and public

debt, leaving aside the usual functions of commercial banking. Gun

foundry in Hyderabad saw the first branch of the bank on 5th April,

1942.

It was in the year 1953 that the Bank overtook the assets and
liabilities of the Hyderabad Mercantile Bank Ltd. and started
conducting Government and Treasury business as RBI's agent. Then
right in 1956, the Bank was taken over by RBI as its first subsidiary and
the name got rechristened from Hyderabad State Bank to State Bank
of Hyderabad. More transition waited for the bank as the bank became
a subsidiary of the State Bank of India one 1st October 1959 and
presently it is the largest Associate Bank of State Bank of India.

All the branches of the State Bank of Hyderabad are completely

intertwined under Core Banking Solutions - with a wide product and
service range for its customers. Latest technologies like Internet
Banking, ATMs - all customers are entitled to these facilities. With a

7
pan India presence, the Bank operates through more than 1,000
branches.

Organizational Set-up

The organizational set-up is represented by the Managing Director at

the top
assisted by the Chief General Manager and 6 General Managers
looking
after the functions of Operations, Commercial and International
Banking,
Business Development and Marketing, Treasury, Inspection &
Vigilance; and

8
Information & Technology. The Bank has Eight decentralized units i.e.,
Zonal
Offices at Hyderabad, Secunderabad, Warangal, Visakhapatnam,
Gulbarga, Nizamabad, Tirupathi and Aurangabad – and three
independent
Regional Offices at New Delhi, Chennai and Mumbai headed by Deputy
General Managers. The Bank also has a Commercial Module comprising
of
branches dealing with high-value corporate business.

Business Profile

The total deposits of the Bank as at the end of June 2009 was
Rs.64079.41
crores and the total advances stood at Rs.42796.57 crores. The Bank’s
advances to priority sector stood at Rs.16349.00 crores and
constituted
38.42% of its net bank credit, while advances to agriculture stood at
Rs.7347.07 crores and export credit stood at Rs.1634.00 crores. The
gross NPA
ratio was stood at 1.24% and net NPA ratio was stood at 0.64% as on
30-06-
2009. The Bank has provided the requisite provisions on NPA as per
IRAC
norms. The Bank is maintaining floating provision of Rs.79.85 crores to
meet
Contingencies if any, as per the RBI guidelines. The Bank has recorded
Net
Profit of Rs.110.24 crores (after limited review) as on 30-06-2009

9
10
 CHAPTER NO. 4

REVIEW OF LITERATURE

A review of the current literature on Web site evaluation as well as

reviews of sites with similar missions can help identify successes from
which designers can learn. Several pieces of Federal legislation and
executive orders are relevant to the development and management of
government

Clinger-Cohen Act. The Information Technology Management

Reform Act (ITMRA, also known as Clinger-Cohen) is intended to
address the management of information technology in the
Federal Government.
http://www.itpolicy.gsa.gov/mke/capplan/cohen.htm
Government Performance and Results Act of 1993 (GPRA). GPRA
seeks to improve the effectiveness, efficiency, and accountability
of Federal programs by mandating that Federal agencies set
strategic goals, measure performance, and report on the degree
to which those goals are met. http://www.npr.gov/initiati/mfr/
Executive Order #13011, Federal Information Technology. This
Executive order links the ITMRA, the Paperwork Reduction Act
(PRA), and GPRA. It formalizes the OMB’s oversight of
information technology (IT) management and stresses the
importance of accountability, mission- and performance-based
planning, and implementation of Federal IT.
http://www.whitehouse.gov/search/executive-orders.html

11
 Executive Order #12862, Setting Customer Service Standards.
This Executive Order defines the standard of quality for services
provided to the public as “customer service equal to the best in
business” and requires all executive departments and agencies
that provide significant services directly to the public to develop
and meet service standards.
http://www.whitehouse.gov/search/executive-orders.html
Section 508 of the Federal Rehabilitation Act of 1973, as
amended (1998). This section of the Act requires that when
Federal agencies develop, procure, maintain, or use electronic
and information technology, they must ensure that it is
accessible to people with disabilities, unless doing so would
impose an undue burden. Federal agencies that provide
information to the public or to their employees through Web sites
must ensure that such sites are available to all persons with
Internet or Intranet access, including persons with disabilities.
http://www.access-board.gov/eitaac/section-508-q&a.htm
A Web site evaluation study should also include a review of
current standards and evaluation criteria. At the present time,
there have been several efforts to establish evaluation criteria
and development standards for public health information Web
sites. The most notable is the Health on the Net Foundation Code
of Conduct (Honchoed) for medical and health Web sites.
http://www.hon.ch/HONcode/Conduct.htm

Comprehensive Web site reviews are occasionally published. One

of the most useful is the Hart and Marchionini (1997) study of the BLS

Web site.6 Hert and Marchionini evaluated the BLS Web site, Current

Population Survey (CPS) Web site (co-sponsored by BLS and the

12
Bureau of the Census), and the FedStats Web site (sponsored by the

Interagency Council on Statistical Policy). The objectives of the study

were to “determine who uses these services, what types of tasks they

bring to the sites, what strategies they use for finding statistical

information, and to make recommendations for design improvements.”

The BLS study used a variety of evaluation methodologies to address

different aspects of the Web sites from both internal (developer) and

external user) perspectives. The research was divided into two phases:

investigative and analysis of user activities. During the investigative

phase, Hert and Marchionini sought to clarify the objectives of the site

and understand the organizational perspective of the site’s history and

development processes. They used five data gathering methods:

literature and Web site reviews, expert critiques, site mapping,

document analysis, and interviews. During the user activities phase,

the investigators focused on collecting data specifically related to how

users accessed the site. This included online interviews and focus

groups, content analysis of email requests, impressionistic analysis of

online comments, usability tests, and transaction log analyses.

Undoubtedly, additional studies will continue to be conducted and

published. An online bibliography of selected resources related to Web

site evaluation can be found at

http://istweb.syr.edu/~mcclure/Web.Eval.Bibl.May20.html.

13
 CHAPTER NO. 5

RESEARCH METHODOLOGY

SOURCHES OF DATA COLLECTION USED

Primary data Secondary

Data

1) Personal Interview 1) Internet

2) Observation method 2) Bulletins

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 Primary Data

1) Personal Interview
A person known as the interviewer asking questions
generally in a face to face contact to the other person or
persons. At times the interviewee may also ask certain
questions and the interviewer responds to these, but usually
the interviewer initiates the interview and collects the
information. This sort of interview may be in the form of direct
personal investigation or it may be an indirect oral
investigation. In the case of direct personal investigation the
interviewer has to collect the information personally from the
sources concerned. He has to be on the spot and has to meet
people from whom data have to be collected. This method is
particularly suitable for intensive investigations. But in certain
case it may not be possible or worthwhile to contact directly
the persons concerned or on account of the extensive scope
of enquiry, the direct personal investigation technique may
not be used. In such cases an indirect oral examination can be
conducted under which the interviewer has to cross examine
other persons who are supposed to have knowledge about the
problem under investigation and the information, thus,
obtained is recorded. Most of the commissions and
committees appointed by government to carry on
investigations make use of this method.
The method of collecting information through personal
interviews is usually carried out in as structured way. As such
we call the interviews as structured interviews. Such
interviews involve the use of a set of predetermined

15
questions and of highly standardized techniques of recording.
Thus, the interviewer in a strutted interview follows a rigid
procedure laid down, asking question in a form and order
prescribed.

2) Observation Method
In a way we all oberserve things around us, but this sort
of observation is not scientific observation. Observation
becomes a scientific tool and the method of data
collection for the researcher, when it serves a
formulated research purpose, is systematically planned
and recorded and is subjected to checks and controls on
validity and reliability. Under the observation method,
the information is sought by way of investigator’s own
direct observation without asking from the respondent.

 Secondary data
Secondary data means data that are already available,
they refer to the data which have already been collected and
analyzed by someone else. When the researcher utilizes
secondary data, then he has to look into various sources from
where he can obtain them. In this case he is certainly not
confronted with the problems that are usually associated with
the collection of original data

1) Internet
In that data collection method some data collected
by using various types of websites

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 2) Bulletins
Various types of bulletins provided by state bank of
Hydrabad.
CHAPTER NO. 6

DATA ANALYSIS AND INTERPRETATION

PERSONAL LOAN

1. Provides loans to purchase a Plot for construction of a

House, to purchase/construct house/flat, as well as for
renovation/ repair/alteration/addition to house/flat,
furnishing of house.
2. Maximum loan amount is Rs.300 lacs and repayment
ranges upto 20 years, with reasonable margin and nominal
processing charges. No commitment /administrative
charges.
3. The loan is available at very competitive rates of interest,
currently available in the industry.
4. Option for different EMI amounts for different periods
during tenure of loan to suit customer’s repayment
capacity.
5. Prepayment of Loan permitted
6. Interest is 11.25% p.a. (1.75% below BPLR) calculated on
daily balance basis which is of great advantage to
customer as it results in lower interest amount.
7. Loan to NRIs as well as Persons of Indian Origin.

17
 8. Simplified application form/procedures for convenience of
customers, and speedy approvals.
9. Free Personal Accident Insurance cover
10. Life Insurance Cover to borrowers for Loan
Protection(optional)
11. Please visit our nearest Branch and avail loan to own your

dream home.

STAR EDUCATIONAL LOAN

• Computer certificate courses of reputed institutes accredited to

Department of Electronics or institutes affiliated to university.
• Courses like ICWA, CA, CFA, etc.
• Courses conducted by IIM, IIT, IISc, XLRI, NIFT, NID and other
Institutes set up by Central/State Govt.
• Courses offered in India by reputed foreign universities with prior
approval of Head Office.
• Evening courses of approved institutes.
• Other courses leading to diploma/degree, etc. conducted by
colleges/universities approved by UGC/Govt./AICTE/AIBMS/ ICMR,
etc.
• Courses offered by National Institutes and other reputed private
institutions with prior approval of Head Office.

Note: 1. Professional courses not approved by AICTE and conducted by

Institutes not recognized by State Universities is outside the purview of
the eligibility under the scheme.

2. Special scheme for students admitted to IITs, at

concessional rate of interest.

b) Studies abroad:

18
 • Graduation: For job oriented professional/technical courses
offered by reputed universities.
• Post Graduation: MCA, MBA, MS, etc.
• Courses conducted by CIMA - London, CPA in USA, etc.

2. STUDENT'S ELIGIBILITY:

• Should be an Indian National;

• Secured admission to professional/technical courses in India or
Abroad through Entrance Test/Merit based selection process.
• Good academic career.
• The student should not have outstanding education loan from
any other Institution.
• Father/Mother should be co-borrower.
• Branch nearest to the permanent residence of student will
consider the loan.

3. EXPENSES CONSIDERED FOR LOAN:

• Fee payable to college/school/hostel.

• Examination/Library/Laboratory fee.
• Purchase of books/equipments/instruments/uniforms.
• Caution deposit/building fund/refundable deposit supported by
Institution bills/receipts.
• Travel expenses/passage money for studies abroad.
• Purchase of computers - essential for completion of the course.
• Insurance cover for the student.
• Any other expense required to complete the course - like study
tours, project work, thesis, etc.

19
 4. QUANTUM OF FINANCE:
Need based finance subject to repaying capacity of the
parents/students with margin and the following ceilings:

• Studies in India - Maximum Rs.10.00 lakh

• Studies abroad - Maximum Rs.20.00 lakh.

5. MARGIN:

Upto Rs.4 lakh: Nil

Above Rs.4 lakh - Studies in India: 5%
Studies abroad: 15%

7. RATE OF INTEREST:

Upto Rs.4.00 Lakhs 11.50% p.a. (1.50% below BPLR)

Above Rs.4.00 Lakhs 12.00% p.a. (1.00% below BPLR)

As per bank norms changes time to time

6. SECURITY:
Upto Rs. 4 lakh : No security
Above Rs.4 lakh & upto Rs.7.5 lakh : Collateral security in the form of a
suitable third party guarantee.
Above Rs.7.5 lakh : Collateral security of suitable value or at the
discretion of the Bank suitable third party guarantee alongwith the
assignment of future income of the student for payment of
instalments.

8. INSURANCE:

All the student borrowers are offered a specially designed Term

Insurance cover and the premium can be included as an item of
finance.

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9. REPAYMENT:

Repayment holiday/Moratorium: Course period + 1 year or 6 months

after
getting job, whichever is earlier.

• The loan is to be repaid in 5-7 years after commencement of

repayment.

10. PROCESSING CHARGES:

No processing/upfront charges.
Documents charges at actual.

11. AGREEMENT CHARGES:

Applicable as per Fair practice code.

For further information, you may contact nearest branch of the Bank.
Loan at the sole discretion of State Bank of Hyderabad.

21
 MORTGAGE LOAN

This scheme provides loan/overdraft facility against mortgage of

property at low rate of interest. The scheme is for people engaged in

trade, commerce & business and also professionals & self employed,

Prop. Firm, partnership firm, companies, NRIs and individuals with high

net worth including salaried people, agriculturists and staff members.

The product provides an opportunity to customers to borrow against a

fixed asset (mortgage of property) at a short notice without much

paper work/attendant hassles.

Products BOI Star Mortgage Loan Scheme

Purpose A. To meet the credit needs of trade, commercial
activity, other general business, Profession as also for
their bonafide requirements.
B. To meet marriage or medical or educational
expenses of family members including near relatives.
C. To undertake repairs/renovation/extension to the
residence/commercial property.
D. Purchase of consumer durables.
E. To purchase/construct house/flat, purchase of plot.
F. To purchase 2/4 wheeler vehicles.
G. For going on pilgrimage/tours/excursions, etc.
H. Repayment of existing loans from other Banks/FIs.
Eligibility People engaged in trade, commerce and business,
Professionals, Self-employed, Prop. Firms, partnership

22
 firms, HUFs (excluding NFBC, Trade, partnership
firms where HUF is a partner), companies, NRIs,
individuals with high net worth, salaried people,
agriculturists, staff members.
Demand/Term Loan/Overdraft (reducible as per
repayment schedule).
Type of
Overdraft facility (not reducible as per repayment
advance
schedule) can also be permitted to eligible customers
(other than salaried people).
Calculation of The sanctioned limit is to be related to the value of
quantum of security & repayment capacity of borrower, subject to
advance :
I. Salaried employees :

48 times of monthly net emoluments (take home

salary).
OR

4 times of net annual income with other rental

income from property etc. based on Income-tax
returns (Average of Last 2/3 years).

ii. Self-employed/professionals/ individuals engaged in

trade/ commerce/ business- 4 times of their net
annual income based on income-tax returns (Average
of Last 2/3 years).
iii. Proprietorship/Partnership Firm/Company - Four
times of Cash-accruals (i.e. PAT+ Depreciation) as per
their Audited Balance Sheet/ P & L Account (Average
of Last 2/3 years).
Note:
1. For individuals :

23
 While fixing the limit , it is to be ensured that the net
take home pay (net of EMI [national EMI in case of
non reducible OD] of proposed advance ) is not less
than 30% of gross income of the applicant. For Prop.
Firm/Partnership firm/Company: DSCR: Min. 1.5
2. Limit prescribed would be subject to a Maximum of
70% in case of salaried employees (50% in other
cases) of value of property or eligibility level,
whichever is lower.
Rate of 1) Public - 10.75%
interest: 2) SBH Pensioners - 9.75%

Repayment:- In accounts where regular Overdraft facility is not

proposed.
Within a period of eight years by way of EMIs. The
repayment shall commence from the month
subsequent to the month in which final disbursement
is made or 6 months from the first disbursement,
Whichever is earlier. In case of agriculturists: The
repayment will be related to the generation of farm
income from crops and other subsidiary activities.
Security Equitable/Legal Mortgage charge over property in the
name of applicant or his/her spouse or parents or
third party. The person in whose name the property
to be mortgaged stands should either is a
borrower/co-borrower or a guarantor.
Note:
a. The property offered should be a residential or
commercial building or a plot of land
(residential/commercial).
b. The property should be self occupied or leased out

24
 to acceptable individuals, government agencies,
PSUs, Corporate, etc.
c. Agricultural land is NOT accepted as security for
this facility .
Processing As per bank norms.
Fees:
Equitable As per government guideline.
Mortgage Fee:

25
 STAR AUTOFINANCE

The Scheme provides loan for purchasing 2/4 wheeler vehicles (like

car, scooter, motorcycle etc.). Maximum amount of loan is Rs. 25 lacs,

depending upon cost of vehicle & income of proponent, at attractive

rate of interest and easy repayment plan.

Product BOI Star Autofin Scheme

Eligibility Salaried employees, Professionals, Self-employed,
individuals with high networth, People engaged in
trade/commerce/ business, Pensioners, Farmers,
Prop. Firm, Partnership firm, Companies (Pvt.
/Public Ltd.), Staff Members, Retired employees
(other than dismissed/compulsorily retired) of our
Bank.
Purpose Purchase of two/four wheeler vehicles (like car,
scooter, motorcycle etc.)
Type of Advance Demand/Term Loan (reducible as per repayment
schedule)
Quantum of Loan Max.Rs.25 lacs
Minimum size of loan:-At Metro and Urban Centres
: Rs.10,000/-
At Rural and Semi Urban centres: No minimum
size of loan.

26
Eligible Amount i. Salaried employees: - 24 times of monthly Gross
emoluments.
ii. Other than Salaried employees, Farmers &
Pensioners :-
- Two times of gross average annual income as
per last three Income-tax returns.
- In case of Proprietorship/Partnership firm &
Company: Two times of average annual Cash
accruals (i.e. PAT+ Depreciation) as per their last
three Balance - Sheet/ P & L account.
iii. Pensioners: 24 times of monthly pension (Max.
loan: Rs. 2 lacks)
iv. Farmers: Depending upon Farmer's income, his
repayment capacity/ability to service the debt as
is being done in case of agricultural loans.
Rate of Interest 1) First year - 08.50%
(on daily reducing 2) 2nd & 3rd year - 10.50%
balance): 3) 4th & 5th year - 11.25%

4) 5th & 7th year - 11.50%

Repayment Car: Max.72 EMIs
(New Vehicles) Scooter/motorcycle/Two Wheelers: Max.60 EMIs
w.e.f. one month after first disbursement from
loan account.
Purchase of -Age of vehicle: Upto 3 years old from the date of
Second hand first registration- -Repayment Period: Not to
vehicle:- exceed five years.
- Minimum Margin: 30% of depreciated value or
value assessed by valuer or sale consideration,
whichever is lower.
- Obtention of Comprehensive Insurance Policy.
Security i. Hypothecation of vehicle to be purchased out of

27
 Bank finance.
ii. Charge to be registered with RTO.
Processing/ As per bank norms.
Handling/agreeme
nt charges:

Boi - Medi – Mobile

Purpose:
For purchase of new/secondhand (upto 3 years old)
motorcar/jeep/van/light motor vehicle/three/two wheeler in
case of individual.
Or
Ambulance/mobile clinics in the case of private medical
and veterinary clinics, hospitals or maternity homes owned
or personally run by medical practitioner/s.

Eligibility:
Qualified medical practitioner/radiologist, dentist,
etc. having either degree or diploma recognized by
government; registered with respective medical council
and who conduct professional practice on their own with or
without full / part time employment. Income from part time
/ full time. Income from part time/full time employment to
be taken into account for mixing credit limit/repayment.

Quantum of finance:
Maximum loan: Rs.10.00 lakh

28
 Rs.15.00 lakh for setting up clinic in
rural/semi urban areas with a sub ceiling of
Rs.3 lakh for working capital requirement.

Margin:
New vehicle : minimum 15%
Second hand vehicle : minimum 30%

Repayment:

By EMI – Max. up to 7 years.

Rate of Interest :

Up to 3 years - 14.00%

3rd & 5th year - 14.25%

Security:

Hypothecation of vehicle / personal guarantee.

AGRICULTURE LOAN

AGRICULTURE FINANCE: GENERAL

29
 • An agriculturist has to have necessary capital to purchase these
input and services.
• Credit is also needed by the agencies for supply of the inputs and
services to the agriculturist and for development for storage and
marketing facilities for the agriculture produce.

ACTIVITIES INCLUDED IN AGRICULTURE

A list has been circulated by the reserve State Bank of Hyderabad to

indicate the activities included in direct and indirect finance to

agriculture. A few changes have been made from time to time in the

activities in the agriculture finance.

 DIRECT FINANCE TO FARMER FOR AGRICULTURE PURPOSE

1. Short term loans for raising crops, i.e., for crop loans. In addition,
advances up to rs.10 lack to farmers against
pledge/hypothecation of agricultural produce for a period not
exceeding 12 months, where the farmers were given crop loans
for raising the produce, provided the borrowers draw credit from
one bank.

2. Medium and long-term loans (provided directly to farmers for

financing production and development needs).

Loans provided to farmers for,

30
 I. Purchase of agriculture implementation and machinery
–

A. Purchase of agriculture implements – iron ploughs harrows,

hose, landlevellers, bund formers, hand tools, sprayers,
dusters, hay-press, sugarcane crushers, thresher
machines, etc.
B. Purchase of farm machinery – tractors, trailers, power
trailers, tractor accessories, viz., disc ploughs, etc.
C. Purchase of trucks, mini-trucks, jeeps, pick-up vans,
bullock carts and other transport equipment, etc. to assist
the transport of agricultural inputs and farm products.
D. Transport of agricultural inputs and farm products.
E. Purchase of plough animals.

II. Development of irrigation potential through –

A. Construction of shallow and deep tube wells, tank, etc.,

and purchase of drilling units.
B. Constructing, deepening and clearing of surface wells,
boring of wells, electrification of wells, purchase of oil
engines and installation of electric motor and pumps.
C. Purchase and installation of turbine pumps, construction of
field channels (open as well as underground).etc.
D. Construction of lift irrigation project.
E. Installation of sprinkler irrigation system.
F. Purchase of generator sets for energisation of pump sets
used for agricultural purposes.

III. Reclamation and land development schemes –

31
 Building of farm lands, leveling of land, terracing, conversion
of dry paddy lands into wet irrigable paddy lands, wasteland
development, development of farm drainage, reclamation soil
lands and prevention of salinisation, reclamation of ravine
lands, purchase of bulldozers, etc

IV. Construction of farm building

and structure, etc. –

Bullock sheds, implement sheds, tractors and truck sheds,

farm stores, etc.

V. Construction and running of

storage facilities. –
Construction and running of warehouses, godowns, silos and
loans granted to farmer for establishing cold storages used
for storing own produce.

VI. Payment of irrigation charges,

etc. –
Charges for higher water from wells and tube wells, canal
water charges, maintenance and upkeep of oil engines and
electric motors, payment of labor charges, electricity charges,
marketing charges, service charges to customs service units,
payment of development cess, etc.

32
 VII. Other types of direct finance to
farmers –
b) Short-term loans -
• To traditional/non- traditional plantations and
horticulture.
• For allied activities such as dairy, fishery, piggery,
poultry, bee-keeping etc.
c) Medium and long term loans –
• Development loans to all plantations, horticulture,
forestry and wasteland.
• Development of poultry, piggery, etc., in all its aspects
including grain ages, etc. however, breeding of race
horses cannot be classified here.
• Bio – gas plants.
• Financing of small and marginal farmers for purchase of
land for agriculture purposes.
• Investment by banks in securitized assets which
represent direct advances to agriculture.

2. INDIRECT FINANCE TO FARMER FOR AGRICULTURE PURPOSE

 Credit for financing the distribution of fertilizers, pesticides,

seeds etc.
 Loans upto Rs. 40 lakhs granted for financing distribution of
inputs for the allied activities such as cattle feed, poultry feed,
etc.

33
 Loans to electricity boards for reimbursing the expenditure
already incurred by them for providing low tension connection
from step-down point to individual farmers for energizing their
wells.
 Loans to SEBs for systems improvement scheme under special
project agriculture (SI-SPA).

 Loans to farmers through PACS, FSS and LAMPS.

 Deposits held by the banks in Rural Infrastructure Development

Fund (RIDF) maintained with NABARD.

 Subscriptions to bonds issued by NABARD with the objective of

financing exclusively/allied activities.

 other types of indirect finance such as -

I. Finance for hire-purchase schemes for distribution of
agricultural machinery and implements.
II. Loans for constructions and running of storage facilities
(warehouse, market yard, godowns and silos), including cold
storage units designed to store agriculture
produce/products, irrespective of their location. If the
storage unit is registered as SSI unit, the loans granted to
such units may be classified under advances to SSI, provided
the investment in plant and machinery is within the
stipulated ceiling.

III. Advances to customs service units managed by individuals,

institutions or organizations who maintain a fleet of tractors,

34
 bulldozers, well-boring equipment, threshers, combines, etc.,
and undertake work from farmers on contract basis.
IV. Loans to individuals, institutions or organizations who
undertake spraying operations.
V. Loans to co-operative marketing societies, co-operative
banks for re-lending to co-operative marketing societies
(provided a certificate from the state co-operative bank in
favour of such loans is produces) for disposing of the
produce of members.
VI. Loans to co-operative banks of producers (e.g. Aarey Milk
Colony Co-operative Bank, consisting of licensed cattle
owners).
VII. Financing the farmers indirectly through the co-operative
system (otherwise than by subscription to bonds and
debenture issues), provided a certificate from the state Co-
operative Bank in favour of such loans is produces.
VIII. Advances to state-sponsored corporations for onward
lending to weaker sections.

SECURITY AND MARGIN NORMS:

SI
No. Loan amount Security Margin
1 For loans upto Rs.50,000 Hypothecation of
(demand / term loan) assets created out of Nil
bank finance
2 In case of agriclinics and Hypothecation of
Agri business for limit upto assets created out of Nil
Rs.5 lakhs bank finance

35
 3 For loans over Rs.50,000 Hypothecation of
assets created out of 15-20 %
bank finance

Margins in case of crop loans need not be in cash. The cost of labor of
the farmer and his family and the cost of other inputs not financed by
the can constitute margin.

RATE OF INTEREST:

Agriculture Term Loans

SlNo Size of Credit Revised rates Revisesd rates
. w.e.f.01.07.201 w.e.f.01.07.2010 for term
0 for term loans loans as repayable in 3 years
as repayable in and above
1-3 years
1 Upto Rs.50000/- 10.25% 10.75% ( BR+3.00%)
( BR+2.50%)
2 Rs.50000/- - 11.00% 11.50% ( BR+3.75%)
Rs.2.00 lacs ( BR+3.25%)
3 Rs.2.00 - Rs.5.00 11.75 % 12.25 %( BR+4.50%)
lacs ( BR+4.00%)
4 Rs.5.00 - Rs.25.00 12.75 % 13.25 %( BR+5.50%)
lacs ( BR+5.00%)
5 Over Rs.25.00 lacs :
A SBH(AGR-1)TL-1 12.25 % 12.75 %( BR+5.00%)
( BR+4.50%)
B SBH(AGR-2)TL-2 13.00 % 13.50 %( BR+5.75%)
( BR+5.25%)
C SBH(AGR-3)TL-3 13.50 % 14.00 %( BR+6.25%)
( BR+5.75%)
D SBH(AGR-4)TL- 13.75 % 14.25 %( BR+6.50%)
4,5,6,7,8 ( BR+6.00%)

REPAYMENT:
I. Demand loan:-Repayment within 3 years (36 months).
II. Term loans: -

36
a. Medium term loans: - repayment above 3 and within 7
years.
b. Long term loans: - repayment above 7 and within 15 years.
APPLICATION FORM OF AGRICULTURE
(TYPES)

37
1 Short Term Loan (Corp Loan) AG101 AG10
1

2 Investment Credit Requirements AG102 AG10

2
3 Development Of Minor Irrigation AG103 AG10
3

4 Interview-cum-proposal Form for Tractor, AG104 AG10

Power-Tillers, Farm Machineries. 4

5 Interview-cum-proposal Form for Purchase of AG105 AG10

Boats, Nets, Floats etc. 5

6 Interview-cum-proposal Form for Horticultural AG106 AG10

cum Plantation Crops 6

7 Interview-cum-proposal Form for Purchase of AG107 AG10

Milch Cattle/ Bullocks and other Live stocks 7

8 Interview-cum-proposal Form for Financing AG108 AG10

Installations of Gobar Gas Plants 8

9 Interview-cum-proposal Form for Land AG109 AG10

Development for Term Loan Above 25,000/- 9

10 Interview-cum-proposal Form for financing AG110 AG11

Poultry activities other than Commercial 0
Poultry Advances
11 Application Form for Development of Dairy AG111 AG11
Farming 1

12 Application Form for Development of Poultry AG112 AG11

Farming 2

13 Application Form for Financial Assistance to AG113 AG11

wholesale/Retail/Fertilizers/Pesticides/Improve 3
d seed Distributors 38
14 Application Form for Financial Assistance to AG114 AG11
Farm Graduates/Technocrats/Entrepreneurs 4
3] COMMERCIAL AND INSTITUTIONAL CREDIT

The public sector banks have been catering to the credit needs

of medium and large industries, trade and commerce and individuals.

Commercial and institutional credit division of bank cover finances to

corporate bodies, partnership/proprietorship concerns other than SSI

sector for manufacturing/trading activities, for exports and personal

advances for consumer durables, against term deposits/government

securities, etc. it is one of the largest segments of bank lending with

numerous schemes to cater to the needs of different segments.

1. Advances under hypothecation of stock.

Under hypothecation charge neither the possession nor the

ownership is passed to the creditor. It being only a floating

charge on movable property without possession, it should be

granted to parties with the highest integrity and of un doubtful

39
means. It should be limited to borrowers who by reason of their

daily turnover of stocks are unable to give possession of goods.

In the case of individual borrowers and partnership firm,

there is no legal provision for registration of the hypothecation

charge. But in the case of limited company borrowers, the

hypothecation charge must be registered with the registrar of

companies within 30 days of the creation of the charge as per

section 125 of Indian Companies Act, 1956. Hence it is preferable

to extend the hypothecation facility mainly to limited company

borrowers.

As in the case of pledge, in the hypothecation accounts

also, the safety of the advance depends on the value of the

goods and their marketability.

As neither possession nor ownership is with the banker, the

only means with which we can ascertain the value and monitor

the account is through the periodical stock-statements submitted

by the borrower and regular periodical inspections. The stock

statements are submitted with a declaration regarding their clear

title to the goods, and the correctness of the quality, quantity

and valuation. Hence obtaining periodical stock statements and

carrying out periodical inspection is an important requirement in

40
 such accounts. Periodical inspection is one of the ways of

supervising the advance as the scope to deal with the security to

the detriment of interest of the banker is more under

hypothecation. The books of the borrower should be checked to

reconcile the figures given in the stock statement, to verify the

turnover of the goods and valuation thereof. The goods should

be fully insured. The description and location of the goods be as

given in the deed of hypothecation. As an additional check, the

value of the stock shown in the annual balance sheet and that

shown in the stock statement as at that date should be verified.

2. Advances against pledge of goods.

 The godown should be pucca built, leak proof, the flooring

and lower portion of walls guarded against moisture. Entry

should be through one door only with independent access,

and in a secure locality.

 If the godown is rented, up-to date rent receipt is to be

obtained.

 Letter of access is required, if access o the godown is

through the premises of the borrowers/third party.

 The signboard with the name of the bank is to be displayed

on the godown.

 godown is to be locked with a lock made by well-known

manufactures which should be inter-changed periodically.

41
• Insurance of the pledged goods

I. Insurance of goods for full value is to be taken to avoid

application of average clause.

II. Insurance policies should be in the name of the bank “A/c

the borrower” incorporating the bank mortgage clause. If the
policy is taken in the name of the borrowers alone, it should
be assigned to the bank.
III. All policies are to be held by the bank. the policies should
generally cover strike riot, malicious damages,
theft/burglary, fire
IV. There should be a separate policy for each godown.

The safety of advance mainly depends on the value of the goods,

and marketability of the goods.
To know the value of goods pledged and movement of goods, the
record of pledged goods should be maintained and updated with
each lodgment/delivery affected.

At the time of lodgment, the original invoices covering the goods

should be verified to ascertain the value and the nature of goods
being stored. Letters of lodgment/delivery orders must bear the
signatures of the borrowers or the person authorized to operate
the account. Signature of the borrower or the authorized person
to be obtained on the back of the delivery order along with
receipt for the goods.

42
 Inspection of pledged goods should be carried out frequently as
may be warranted and age of the goods and the market value of
the goods should be constantly watched as to the expiry date.

3. Advances under hypothecation of book-debts.

Advances against hypothecation of book-debts in one of the

ways of financing post-sales. Those receivables for which bills are
not/cannot be drawn (which can be discounted), are advanced
against, after the borrower raises invoices. hence the safety of
such advance is dependent on the ability of the borrower’s
customer to pay for the goods received i.e. in short on the
quality of book debts.

As our advances are against the receivables which are realizable

and not for bad-debts, a stipulation is prescribed for advancing
normally against book-debts not more than 3 months old. in
cases where movement of goods or services is the basis for
raising the debts, one would be rather more certain about the
realization of debts, hence book-debts of sister/associate concern
are normally not advanced against, as there would be more
temptation and scope to raise debts without corresponding
movement of goods/services i.e. for accommodation purposes
only.

Further as a normal precaution, book debts should be well

spread to safe guard against the failure of debtors.

The document i.e. hypothecation of book-debts contains a

general power of attorney and hence it should be stamped,

43
 additionally as a power of attorney over and above the normal
stamp duty for an agreement.

Consolidation of documents for hypothecation of stocks & book-

debts, plant & machinery has been introduced by the bank.

Obtained periodical statement of book-debts, inspecting the

books/records periodically and ascertaining that the realizations
of the debts are routed through the advance account would go a
long way for proper supervision of such advance.

4. Advances against different kinds of securities.

A. Against term deposits/recurring deposits.
 Obtain deposit receipts discharged appropriately by the
depositor/s. in the case of recurring deposits, pass book
and withdrawal slip duly signed in blank should be
obtained.
 Suitable letter of set off and appropriate duly signed by
the depositor is to be obtained. This will be stamped for
any overdraft account & unstamped for all loan
accounts.
 Obtain the authority letter to credit periodical interest
earned on the deposits to loan account.
 Mark bank’s lien on the deposit receipt and in the
relevant ledger/register.
 In case of deposit receipts standing in the name of
partnership firm, get the receipt and all the letter of
setoff and appropriation duly discharged by all the
partners.

44
 Deposit receipt in the name of one partner of the firm is
not to be treated as third party receipt.
 In case of advances granted to private/ public limited
companies, obtain appropriate board resolution
specifically to borrow and to execute security
documents.
 Advances against deposits standing in the name of
minors, may be granted if the borrowing is for the
benefit of the minor. A suitable declaration in this
respect may be obtained.
 No advance is sanctioned against term deposit receipts,
issued by another bank. Any deviation requires
clearance at appropriate level.
 Advance may be sanctioned against term deposit
receipts held by other branches of same bank, but
ensure that the branch holding the deposits has not
granted advances against the deposit receipt tendered
and they have not issued any duplicate receipt. Advise
that branch to mark bank’s lien in their records and
confirm to the advancing branch.
 On due date of the receipt, appropriate proceeds of the
deposit receipt to liquidate the loan account. In the case
of the overdraft limit renew the receipt and obtain blank
discharge on the fresh receipt.
 In the case of reinvestment plan/ recurring deposit
ensure to recover periodical interest charged to loan
account from borrowers.
 Ensure that outstanding in the loan account does not
exceed the sanctioned limit during the currency of the
advance.

45
B. Against government securities.
 Ensure that the government promissory notes are prima

facie in order and the upper and lower halves of the

same are properly matched.

 If “inscribed stock certificates” are lent against, the

same should be transferred in the bank’s name and sent

to public debt officer for insurance of fresh certificates

 In the case of 7 year national rural development bonds,

no advance should be granted to the party at least for a

period of 3 years from the date of purchase.

 Obtain “mandate letter” to collect periodical interest on

the securities.

 Discretion regarding the margin to be stipulated is given

to the banks (presently 25 %).

C. Against life insurance policies.

 Policies offered should be in force for at least a period of
3 years.
 No advance is to be granted against policy taken under
married women’s property act, 1874 or children’s
deferred assurance policy, taken out for payment of
estate duty.
 Ensure that premiums are paid-up-date and the age of
the assured has been admitted by LIC.
 Surrender value/loan is obtained from LIC of India by
reference to their booklet for this purpose.
46
  Policies should be assigned in favor of the bank and
assignment registered with LIC.
 Authority letter is obtained to debit borrowers account
with the periodical insurance premium on the policy.
 Discretion regarding the margin to be stipulated is given
to the banks (presently 25% of surrender value).

D. Against pledge of national certificate/kisan vikas patra post

office time deposits.
 Ensures that the certificates are discharged by the
holder of the certificate/deposit and the certificates are
at least 6 months old.
 Application in prescribed form issued by post &
telegraph department for transfer of national saving
certificate/time deposits be obtained from the borrower
and registered with the concerned post office.
 Irrevocable letter of authority authorizing the post office
to pay directly to the bank the periodical interest on
national savings certificate/time deposits for the credit
of the loan account.
 Margin is to be stipulated at the discretion of the bank
(presently 25 %).

E. Advances against shares/units of mutual funds/units of unit

trust of India, etc.

 Eligibility:
All individuals (resident Indian) either singly of jointly
including karta of joint of Hindu Family (provided HUF is
not an investment company or stock broker.)

47
  Purpose:
To meet contingencies and needs of personal nature
/subscription in primary/secondary market but not for
speculation.

 Type of facility:
(1) Overdraft,
(2) Demand loan repayable in 30 months (max).

 Rate of interest:
The interest rates are subject to change from time to time.
COMMERCIAL & INSTITUTIONAL (C&I) SEGMENT ADVANCES INTEREST
RATES

C&I Segment (T&C and LMS) Interest Rate with effect from 01-07-2010
(REVISED)
Base Rate (BR) 7.75%
(A) Interest Rates on Loans & Advances upto 25 Lacs
(Percentage per annum)

3 years and
Size of Credit Limit Demand or <3 yrs above
BR +5.25% =
Upto Rs.5 lacs BR + 5.25% =13.25% 13.25%

Above Rs.5 lacs & below BR + 6.50% =

Rs.25 lacs BR + 6.25% =14.00% 14.25%

48
(B) Interest Rates on Loans & Advances w.e.f. 01.07.2010 for
the limits above Rs 25 Lacs as per CRA

Term Short
Loans Term Bills
Working Upto 3 Corporat Discountin
Capital(CC) WCDL years e Loans g #
SBH 1 / BR +5.75% = BR + 5.75% 6.00% 4.75 OVER
SBH (T) 1 13.50% 5.50% over BR over BR BR i.e.,
/ =13.25% 12.50
SBHTL i.e., 13.50 i.e., 13.75
1/
SBHTL
(T) 1
SBH 2 / BR + 6.25% BR + 6.25% ove 6.50% ove 5.25 OVER
SBH (T) 2 =14.00% 6.00% r BR r BR BR i.e.,
/ =13.75% 13.00
SBHTL i.e., 14.00 i.e., 14.25
2/
SBHTL
(T) 2
SBH 3 / BR + 7.00% BR + 7.00% 7.00% 6.00 OVER
SBH (T) 3 =14.75% 6.75% over BR over BR BR i.e.,
/ =14.50% i.e., 14.75 13.75
SBHTL i.e., 14.75
3/
SBHTL
(T) 3
SBH 4 / BR + 7.75% BR + 7.75% 7.75% 6.75 OVER
SBH (T) 4 =15.50% 7.50% over BR over BR BR i.e.,
/ =15.25% 14.50
SBHTL i.e., 15.50 i.e., 15.50
4/
SBHTL
(T) 4
SBH 5 / BR + 8.00% BR + 8.00% 8.00% 7.25 OVER
SBH (T) 5 =15.75% 8.00% over BR over BR BR i.e.,
/ =15.75% 15.00
SBHTL i.e., 15.75 i.e., 15.75
5/
SBHTL
(T) 5

49
 SBH BR + 8.25% BR + 8.25% 8.25% 7.25 OVER
6,7,8 / =16.00% 8.25% over BR over BR BR i.e.,
SBH (T) =16.00% i.e., 16.00 i.e., 16.00 15.00
6,7,8
/SBHTL
6,7,8 /
SBHTL
(T) 6,7,8

 Processing charges:
As may be prescribed by the bank from time to time.

 Handling charges:
As may be prescribed by the bank from time to time.

 Precautions:
 Offered security should be fully paid and in
marketable lots only.
 Should not be held in minor’s name.
 No third party shares should be accepted.
 Genuineness of the security should be verified viz.,
common seal, certificate nos., distinctive nos.,
torn/mutilated scrip’s should not be accepted.
 Transfer endorsement should be authenticated and
debated by the company.

50
  Ascertain from the company if duplicate scrip’s are
offered as security.
 To note bank’s lien on units of unit trust of India, if
units are offered as security. Prescribed forms of unit
trust of India are to be used.

CHAPTER NO. 7

FINDINGS

 Received complete knowledge of all types of loan facilities

available with State Bank of Hydrabad.

 The necessity of documents required for various loan

facility/scheme procedure.

51
 As compeered to risk factor involved interest rate are other

banks.

52
  CHAPTER NO. 8

LIMITATIONS

• Personal Inquiry

• Time Consistency

• Scope of study is limited to State Bank of Hydrabad only.

53
 CHAPTER NO. 9

BIBLIOGRAPHY

• http://www.sbhonline.com

• http://www.wikipedia.com

http://www.google.com
•

• Bulletins provided by SBH

54
 Tilak Maharashtra University, Pune
(Deemed Under Section3 of UGC Act 1956 Vide
Notification No.F.9-19/85-U3 dated 24th April 1987 By the
Government India.)
Vidyapeeth Bhavan, Gultekdi, Pune – 411 037.

CERTIFICATE
This is to certify that the project titled
Analysis of Loan Procedure in State Bank Of
Hydrabad is a bonafide work carried out by Mr.
Digambar Nilkanthrao Bedarkar a student of
Master of Business Administration semester
3rd, Specialization finance PRN.07408101138
under Tilak Maharashtra Vidyapeeth, in the
year 2010.

Head of the Department Examiner

Examiner
Internal External

55
Date :

Place : University Seal

56
 Tilak Maharashtra University, Pune
(Deemed Under Section3 of UGC Act 1956 Vide
Notification No.F.9-19/85-U3 dated 24th April 1987 By the
Government India.)
Vidyapeeth Bhavan, Gultekdi, Pune – 411 037.

CERTIFICATE
This is to certify that the project titled
Market Share of Bajaj Alliance in Insurance
Industries is a bonafide work carried out by Mr.
Sandip Ruprao Waghmare a student of Master
of Business Administration semester 3rd,
Specialization finance PRN.07408101137
under Tilak Maharashtra Vidyapeeth, in the
year 2010.

Head of the Department Examiner

Examiner
Internal External

57
Date :

Place : University Seal

58