Project report on CREDIT MANAGEMENT Of RAJKOT NAGARIK SAHAKARI BANK LTD.

- RAJKOT

PREFACE Banks are regarded as the blood of the nations economy without them one cannotimagine economy moving. Therefore banks should be operated very efficiently, co-operative banks although a small part of whole banking system in India, but they are veryimportant not only from economical point of view but also from social point of view as itis more concerned about common peoples welfare and development.Advance is heart and recovery is oxygen for the bank and for the bank to survive it isnecessary to give advances and recover the amount at the appropriate time. Throughcredit management I have tried to cover the various aspects like credit appraisal, NPAmanagement, recovery management, etc. E.g. credit management covers all the areasright form the beginning like inquiry till the loan has been paid up.Though credit management, a very vast topic, I have tried to incorporate to the best of mycapacity from all possible aspects in this project.I do hope that institution will appreciate this project.

OBJECTIVE OF STUDY Banking is the activity of my interest. I have seen from the annual reports of the variousbanks and find that most of their income is from the interest getting on the credit given soI choose and hence I studied on credit management.Game of statistics is always attracts me and banking is one the place where we can learnit very well. So I have selected bank and have preferred credit management as topic formy project

RESEARCH METHODOLOGY There are many methods, which are well known today for research methodology, out of which one I have chosen is sampling method, which is really easier, still producingaccurate results.Sampling in laymens language, is nothing but selecting pockets or samples representingthe whole group and analysis of these samples gives the idea about the respective groups.On the basis of this, prediction is done and full information about group is integrated.Though this is not a first hand method, it gives sufficiently good outcomes if usedcarefully by experts. It saves the time and energy. The only care should be taken, in orderto have great accuracy, is selection of sample should be such that it should represent thewhole group and information we get from them should be cent percent reliable.

Salient features of my chosen sample The biggest co-operative bank having head office in my vicinity enables me to domy work efficiently. This is the striking feature of my sample. The exclusive schedule bank in Rajkot and hence gets priority over the others. Generally the new bank lacks the experience so it is mandatory to select a sample,which has enormous experience. RNSB has a gigantic experience of successful 50years, under the lights of which work becomes easier. The other enchanting point is that RNSB have maximum number of shareholderi.e. above 2 lacs

CONTENT PrefaceAcknowledgementObjective of studyResearch methodologyContentINTRODUCTION Early history of bankingOrigin of word bankStatus wise bifurcation of bank Types of bank RNSB - The Small Mans Big Bank PROJECT Main Fund Inflow (sources of funds)Main fund outflow (funds used)Meaning of credit and credit managementForms of credit/advancesTime wise bifurcation of advancesSecurity wise bifurcation of advancesProcess of credit CREDIT POLICY

General eligibility criteria for credit in RNSBTable of interest rate on various advancesScrutiny of creditTypes of creditExplanation of all types of creditData analysis and observation and suggestion

CREDIT APPRAISAL Appraisal formatObservation and suggestion CREDIT MONITORING, FOLLOW UP AND REVIEW Credit monitoring system in RNSBFollow up actions for credit monitoring in RNSBObservation and suggestion NPA MANAGEMENT Identification of Non Performing AdvancesAsset classificationClassification of Non Performing AdvancesProvision for NPAFindings (reason for NPA)Suggestions (NPA reduction techniques) RECOVERY Process of recoveryFinding/observation LIMITATION OF STUDY BIBLIOGRAPHY

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INTRODUCTION

EARLY HISTORY OF BANKING As early as 2000 B.C., the Babylonians has developed a banking system. There isevidence to show the temples of Babylon were used as banks. After a period of time,there was a spread of irreligion, which soon destroyed the public sense of security indepositing money and valuable in temples. The priests were longer acting as financial 45agents. The Romans did minute regulations, as to conduct private banking and to createconfidence in it. Loan banks were also common in Rome. From these the poor citizensreceived loans without paying interest, against security of land for 3 or 4 years.During the early periods, although private individuals mostly did the banking business,many countries established public banks either for the purpose of facilitating commerceor to serve the government.However, upon the revival of civilization, growing necessity forced the issued in themiddle of the 12 th century and banks were established at Venice and Genoa. The Bank of Venice established in 1157 is supposed to be the most ancient bank. Originally, it was nota bank in the modern sense, during simply an office for the transfer of the public debt.Again the origin of modern banking may be traced to the money dealers in Florence, whoreceived money on deposit, and were lenders of money in the 14 th century and also in1349, the business of banking was carried on by drapers of Barcelona.In India, as early as the Vedic Period, banking, in most crude from existed. The books of Manu contain references regarding deposits, pledges, policy of loans, and rate of interest.True, the banking in those days largely mint money lending and they did not know thecomplicated mechanism of modern banking.This is true not only in the case of India but also of other countries. Although, thebusiness of banking is as old as authentic history, banking institutions have since thanchanged in character and content very much. They have developed from a few simpleoperation involving the satisfaction of a few individual wants to the complicated

mechanism of modern banking, involving the satisfaction of capital slowly seekingemployment and thus providing the very life blood of commerce. THE ORIGIN OF WORD BANK The word Bank itself derived from the word bancus or banque that is a French.There were others of the opinion that the word Bank is originally derived from theGerman word back meaning joint for which was Italianised into banco.

STATUS WISE BIFURCATION OF BANKS Scheduled Banks. Non-Scheduled Banks. Scheduled Banks In first schedule, Government of India notifies the Primary Banks, which are licensed andwhose demand and time liability are not less than 50 crores in 1987.Government of India notifies the Primary banks, which are licensed and whose demandand time liability are not less than 100 crores can only qualify to be included in thesecond schedule since 1993.A bank becomes scheduled when it fulfils the followings:A grade rating from RBIDemand and Time Liability over 100 CroresSatisfy the RBI guidelines related to CRR and SLRAs per the norms Priority Sector wise lendingBenefits of Being a Scheduled cooperative are described below:RBI would provide Rediscounting facility at nominal rateRBI gives remittance facility at parThe demerit of being a scheduled co-operative bank is that the bank will not get 0.5%subsidy from RBI.The conferment of scheduled status on the banks has certain advantages like refinancefacility, directly industrial finance from Reserve Bank of India, avail of Reserve Bank of India Remittance facility scheme, accept deposits from local bodies, quasi-governmentorganization, religious, and charitable institutions, guarantees and cheques issued byBanks are accepted by Government Departments. At the same time, it casts greaterresponsibility on the banks in the maintenance of books of accounts and submission of returns. Non-Scheduled Bank The banks, which are not applicable as per the criteria of Scheduled Banks, are called as aNon-scheduled Banks. These are very small banks. TYPES OF BANKS

Regional Rural Bank Nationalize Bank State Bank GroupCo-operative Bank Private Bank Foreign Bank RESERVE BANK OF INDIA The Hilton-young commission, appointed in 1926 has recommended the necessity of centrally empowered institution to have effective control over currency and financialtransaction in the country. Accordingly, the Government had then passed Reserve Bank of India Act, 1934 and established the Reserve Bank of India with effect from 1 st

April1935. The principal aim behind this was to organize proper control over the currencymanagement in the interest of country benefits and to maintain financial stability. Withthis, the RBI mainly looks after the following important functions:To keep effective control over creation of credits and currency supplyTo control the Banking transactions of Central and State GovernmentsTo act as Central administered Authority of all other Banks in the Country.To organize control over Foreign Currency TransactionTo assist for improvement in financial aspects of the country Nationalize Banks The Banking Company Act establishes it in July 1969 by nationalization of 14 majorbanks of India. The sent percent ownership of the bank is of government of India. State Bank Group The State Bank of India was established under the State Bank of India Act, 1955, thesubsidiary banks under the State Bank of India (subsidiary Banks) Act, 1959. TheReserve Bank of India owns the State Bank of India, to a large extent, and rest of the partis some private ownership in the share capital of State Bank of India. The State Bank of India owns the subsidiary Banks.

Old Private Banks These banks are registered under Company Act, 1956. Basic difference between co-operative banks and private banks is its aim. Co-operative banks work for its member andprivate banks work for earn profit. New Private Banks These banks lead the market of Indian banking business in very short period, because of its variety of services and approach to handle customer, also because of long workinghours and speed of services. This is also registered under the Company Act, 1956. Foreign Banks Foreign Bank means multi-countries bank. In case of India Foreign Banks are suchBanks, which open its branch office in India and their head office is outside of India. Regional Rural Banks (RRB) Regional Rural Banks are added in Indian Banking since October 1975. The Governmentof India in terms of the provision of the Regional Rural Bank Act 1976 has establishedthese banks. The distinctive feature of Regional Rural Bank is that through it is a separatebody corporate with the Commercial Bank, which has sponsored the proposal to establishit. The Central Government, while establishing a Regional Rural Bank at the request of aCommercial Bank, shall specify the local limits within which it shall operate.

TheRegional Rural Bank may establish its branches or agencies at any place within thenotified area.State Bank of Saurashtra sponsors Regional Rural Banks in Saurashtra. Co-operative Banks State Co-operative Banks State Co-operative Bank means the principal Co-operative society in the state. Theprimary objective of which is the financing other co-operative societies in the state. Central / District Co-operative Banks

Central / District co-operative Bank means the principal co-operative society in a district,the primary objective of which is the financing of other co-operative in that particulardistrict. Primary / Urban Co-operative Banks The primary objective of principal business of which the transaction is of bankingbusiness and paid up share capital and reserve of which are not less than rupees 100,000and bye-laws of which do not permit admission of any other co-operative society as amember.

RNSB - The Small Mans Big Bank Rajkot Nagarik Sahakari Bank is a leading Co-Operative Bank in Gujarat State, India.Bank was established on 5th October 1953 With a small Capital Of Rs. 4890 andMembership of 59 persons under the leadership of Late Keshavlal Amrutlal Parekh as aChairman, and Late Janmashankar Antani as a M.D. Bank has made tremendous & realprogress under the leadership of former Chairman Late Shri Arvindbhai Maniar.Bank is celebrating its 50th anniversary (Golden Jubilee) year this year. During past yearsbank has played vital & leading role for the development of industries, business &Economy of Rajkot City, Development and nursing of Co-operative movement in theSaurashtra region of Gujarat State. Bank was the first co-operative institute to startfunctioning in the erstwhile state of Saurashtra. SAHAKAR MAHARSHI late ShriVainkunthbhai Metha inaugurated bank.Bank has developed in manifolds with the time. Membership (Share Holder) of bank ismounting towards 2,50,000/-, which is a record by itself & provides an example of how amass movement can be turned into the instrument for social upliftment. To day Bank hasmore than 600,000+ deposit accounts with a deposit base of 711+ Crores, And 40000+Establishments/Individuals enjoy the facility of Rs 485+ Crores of Advances.Since inception the people with foresight & vision, which Includes the names Like ShriKeshubhai Patel, Shri Vajubhai Vala, Shri Shashikant Mehta, Shri Vasantbhai Khokhani,Shri Pravinbhai Maniyar, Shri Shivlalbhai

Vekaria etc, guided bank.Being in the service sector, with a vision of current & future trends, Bank startedautomation & modernization way back in 1987 and by 1995 all the Branches werecomputerized.Bank is enjoying the SCHEDULE BANK Status since 1989. Recently in year 2001 Bank was registered UNDER MULTI-STATE CO-OPERATIVE SOCIETY ACT. With thisBank has opened a Branch In Mumbai, Economic Capital of India and become MULTI-STATE SCHEDULE CO-OPERATIVE BANK. Parameters for Multi-State: NPA level is 15% bellow of total advances.Not penalized for continuous 3 years for SLR and CRR.

Customers are the key to success of any commercial organization. The bank has taken upnumber of projects to improve its customer services as well as facilities during the year.Some of these are listed below:

Banks has started its own websitewww.rsnbindia.comfor the benefit of customers.

A kiosk has been installed at the Para Bazaar branch for facilitating the customerneeds for account balances and status without the help of banks staff. This alsoensures secrecy of customer account.

Banks has started issuance of free drafts on its own branches for the benefit of customers.

Drafts as well as term deposit receipt are now being issued online (immediately)at all branches.

Computerized passbook printers have been installed at all branches.Bank has also taken up the project of installing technologically upgraded core bankingsolution that will network all the branches as well as provide anywhere banking services.This project has already been launched and the work is progressing at a fast pace.Bank has recently started five new credit products for customers: Small business and industrial credit scheme :This scheme covers the business and industries, which are in existence for minimum 3years. This scheme is for the working capital requirement of business or industry in theform of overdraft. One guarantor and stock statement once a year - is specialty of thisscheme. Tatkal (On the spot) credit scheme :Purpose of this scheme is to fulfill the current requirement (like business, marriage,medical treatment, education). This is given in the limit of Rs.1 lac against the security of immovable property. This loan is required to be paid in the monthly installments of 12 to24. Specialty of the scheme is that within 24 hour you can get the loan

Scheme for the social responsibilities requirement :This scheme covers the social responsibilities, medical treatment and other occasions. Inthis scheme loan is sanctioned against security of immovable property in the limit of Rs.5lac. Maximum loan repayment period is 36 months. Building repairing/renovation loan scheme :Recently bank has increased limit of loan amount from Rs.75000 to Rs.200000 for theRajkot, Ahmedabad, Surat city and for other branches to Rs.100000. Loan against N.S.C. / K.V.P. / L.I.C. Policy scheme :The loan amount is given in the form of overdraft.

PROJECT

Customers are the key to success of any commercial organization. The bank has taken upnumber of projects to improve its customer services as well as facilities during the year.Some of these are listed below:

Banks has started its own websitewww.rsnbindia.comfor the benefit of customers.

A kiosk has been installed at the Para Bazaar branch for facilitating the customerneeds for account balances and status without the help of banks staff. This alsoensures secrecy of customer account.

Banks has started issuance of free drafts on its own branches for the benefit of customers.

Drafts as well as term deposit receipt are now being issued online (immediately)at all branches.

Computerized passbook printers have been installed at all branches.Bank has also taken up the project of installing technologically upgraded core bankingsolution that will network all the branches as well as provide anywhere banking services.This project has already been launched and the work is progressing at a fast pace.Bank has recently started five new credit products for customers: Small business and industrial credit scheme

:This scheme covers the business and industries, which are in existence for minimum 3years. This scheme is for the working capital requirement of business or industry in theform of overdraft. One guarantor and stock statement once a year - is specialty of thisscheme. Tatkal (On the spot) credit scheme :Purpose of this scheme is to fulfill the current requirement (like business, marriage,medical treatment, education). This is given in the limit of Rs.1 lac against the security of immovable property. This loan is required to be paid in the monthly installments of 12 to24. Specialty of the scheme is that within 24 hour you can get the loan

Scheme for the social responsibilities requirement :This scheme covers the social responsibilities, medical treatment and other occasions. Inthis scheme loan is sanctioned against security of immovable property in the limit of Rs.5lac. Maximum loan repayment period is 36 months. Building repairing/renovation loan scheme :Recently bank has increased limit of loan amount from Rs.75000 to Rs.200000 for theRajkot, Ahmedabad, Surat city and for other branches to Rs.100000. Loan against N.S.C. / K.V.P. / L.I.C. Policy scheme :The loan amount is given in the form of overdraft.

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MAIN FUND INFLOW (SOURCES OF FUNDS) Owned depositDepositsBorrowingsOthers

Owned deposit The owned funds consisting of paid capital of the bank, reserve fund, and other reserves. Deposits It is sum of current deposits, fixed deposits, saving deposits, special saving deposits, NRIdeposits, inoperative deposits, etc. It is the main Cash Inflow for any institution. Borrowings The borrowed funds consisting of borrowings from other banks (as per some writerdeposits of various types is also part of borrowed funds), debentures offered to public,etc. Others Increase in current liabilities, reduction in debtors, fund from operations like net income,depreciation, and reserves, less payment to creditors, reduction in advances, reduction ininventories, reduction in cash, sold marketable securities, etc.

MAIN FUND OUTFLOW (FUNDS USED) CRR (Cash Reserve Ratio) with Reserve Bank of IndiaSLR (Statutory Liquidity Ratio) in Reserve Bank of India approved securitiesLoanable FundOthers CRR (Cash Reserve Ratio) with Reserve Bank Of India The capacity of credits creation of bank is depending upon their cash flow received. Torestrict this credit creation, the reserve bank of India has directed their terms. In case of scheduled banks and sec.18 of banking regulation act are required to maintain the cashreserve ratio *@ 4.75% and non-scheduled bank @ 3% of their demand and time liabilityamounts separately. The scheduled banks are required to deposit the cash reserve ratioamount with Reserve Bank of India while the non-scheduled banks are required tomaintain separate account for this. The Reserve Bank of India is also empowered to raisethe cash reserve ratio up to 15% only in respect of scheduled banks. It is maintainedreported to RBI every fortnight.*30 th April RBI declared new credit policy and as per that RBI reduced CRR with 0.25%Demand and time liability: Time liability

is related with time like, fixed deposits Demand liability is related with the demand like, Current deposits, inoperative deposit,and matured fixed deposits SLR (Statutory Liquidity Ratio) The cash flow for regular banking transactions mainly depends upon deposit received inthe bank. The reserve bank of India there fore puts some restrictions on utilization of these amounts. The scheduled and non-scheduled banks are required to deposit 25%amount of their demand and time liability amount in the security approved by reservebank of India. These securities are converted into cash and therefore they are termed asliquid assets and 25% amount termed as liquid ratio. The reserve bank of India isempowered to raise this liquidity ratio from 25% to 40%. It is maintained averagefortnight and reported to RBI.

Loanable Fund Credit deposit ratio is not more than 70%.Loanable funds means amount of money, which is applicable for lending. Three mainfactors own fund, deposits, and borrowings decide it. Advances can never be more thanloanable fund.Loanable fund is a total of: 75% of own funds 70% of deposits 100% of borrowings

Others Purchase of fixed assets, purchase of marketable securities, addition to advances, additionto inventories, payment to creditors, payment of dividend, etc..

Meaning of CREDIT The word credit is actually derived from the Latin word Credere. Credere means tohave trust or faith. Thus credit is directly related with trust. That is why State Fordstated that Credit is nothing more than that of trust. By this we can say that credit is atool that is resulted by the complete mutual trust/faith.Credit creation implies a situation when a bank may receive interest simply bypermitting customer to overdraw their accounts or by purchasing securities and payingfor them its own cheque or bank may pay amount to borrower or directly to seller of goods whom against borrower get amount. CREDIT MANAGEMENT Credit management means the total process of lending start from inquiry from potentialborrower to recover the lending amount from borrower. Whenever my study is concern,credit management in sense of banking sector is the set of activities like Exceptapplication, loan appraisal, Shakh posting, monitoring, recovery, NPA management, etc.

FORMS OF CREDIT/ADVANCES Loan (term loan)Cash credit and overdraftsPurchase /discounting of billsBank guarantee Loan/term loan In case of a loan a specified amount is sanctioned by the banker to the customer, whomay either draw the amount in case immediately or may like the amount to be credited tohis current account. But legally it is presumed that he has withdrawn the amount from thebank and deposited it in his current account. He is required to pay interest on the fullamount from the date of sanction. A loan may be repayable in installments or in lumpsum. Cash credit Cash credit is the main method of lending in India and accounts for above 70% of totalbank credit. Under the system, the banker specifies the limit, called the cash credit limitfor each customer, up to which the customer is permitted to borrower against the securityof tangible assets or guarantees. The customer withdraws from his cash credit account asand when requires the funds and deposits any amount of money, which he finds surpluswith him on any day. The cash credit amount is thus an active and running account towhich deposits and withdrawals may be affected frequently. The customer is required toprovide tangible assets as security to cover the amount borrowed from the banker.

Theborrower is charged interest on the actual amount utilized by borrower and for the periodactually utilized only. Overdrafts When a current amount holder is permitted by the banker to draw more than what standsto his credit, such an advance is called an overdraft. The banker may take some collateralsecurity or may grant such advance on the personal security of the borrower. Thecustomer is permitted to withdraw the amount as and when he needs it and to repay it by

means of deposit in his account as and when it is feasible for him. Interest is charged onthe exact amount overdrawn by the customer and for the period of its actual utilization Bills Purchase The Banker credits customers account with the amount of the bill after deduction hischarges. As the demand bills are repayable on demand and there is no maturity, thebanker is entitled to demand their payment immediately on presentation before of drawee. Their practice adopted in the case of demand bills, is known as purchase of thebills. Bills Discount In case of bills discounting, a bank credits the amount of the bill to the drawers accountbefore the realization of the bill and thus lends its funds to him after deduction hischarges. The bills purchased and bills discounted by a bank are, therefore, shown in itsbalance sheet as part of loans and advances. In case of a bill maturing after a period of time maximum for 180 days in RNSB, the banker retains the bill for that period andrealizes the amount of bill from the drawee on its due date. This practice is calleddiscounting of the bill. Bank Guarantee

It is a contract to perform the promise or discharge the liability of a third person in caseof his default. In case of guarantee, Bank is taking responsibility to pay the amount toseller if buyer will not pay amount in time.

TIME WISE BIFURCATION OF ADVANCES

- Short-term Finance : Up to 26 months- Medium-term Finance : 26 to 66 months- Longterm Finance : Above 66 months SECURITY WISE BIFURCATION OF ADVANCES

Secured Finance / Advances:Secured Advances are those advances, which provide absolute safety to the Banker bymeans of a charge, created on the tangible assets of the borrower in favor of the Banker.In such cases, the Banker gets certain rights in the tangible assets over which a charge iscreated. A Secured Loan or Advance means a loan or advance made on the security of assets, the market value of which is not at any time less than the amount of such loan oradvance.Unsecured Finance / Advances:Unsecured Loan or Advance means a loan or advance, which are not secured, this typesof advances is not preferable for any banking institutions.

PROCESS OF CREDIT Application inwardShakh reportAdvocate reportBranch reportLoan reportInspection reportCommittee reportFulfill conditionsEquitable mortgage and equitable extensionMake/sign documentOpen accountInsurance postingRecord department - filing Inward application A customer seeking an advance is required to submit an appropriate application form.There are different types of application forms for different types of advances available.The information furnished in the application covers, inter alias, the following: name andaddress of the borrower and his establishment, the details of borrowers business, thenature and amount of security offered. The application form has to be supported byvarious ancillary statements like the financial statements and financial projections of thefirm. A separate inquiry department is set under the loan department. Here, differenttypes of application forms are available and collect process charge from borrower;application is accepted and entered into computer. Shakh report This is one of the strangest facility of RNSB compare with other co-operative banks inRajkot district because of its computerization. This facility provides bank to total kundali of the borrower related to dealing with bank not only as a borrower but also aspartner, as a director also as a guarantor and same detail of the guarantor also and also

about all the types of loans, which are already paid up, which are overdue, which arerunning and also about past performance of particular. Advocate report Bank through its legal departments staff in two matters prepares advocate report mostly,which are given below:

In case of land and building loan

Before equitable of immovable property as a securityWhen the bank prepares advocate report, bank charges some amount from borrower. Branch turn over report This report mostly prepare in case of cash credit review/renew, is also known as a branchturn over report. This report presents:

Performance of borrower with the branch in previous year

Debit-credit transaction of borrower,

Submission of stock statement,

Payment of interest

Last outstanding balance Processing of application/loan report The application is processed by the clerical staff and checked and passed by senior loanofficer and monitoring by loan manager. The preliminary involves an examination of thefollowing factors:

Ability, integrity, and experience of the borrower in the particular business

General prospects of the borrowers business

Purpose of advance

Requirement of the borrower and its reasonableness

Adequacy of the margin

Provision of security

Period of paymentAnd prepare the appraisal report for committee approval

Inspection report Before presenting appraisal report against the committee, bank sends his fieldofficer/inspection officer to on site inspection. The situation which created by borrowerby providing information of his business to bank is it fact or not? After the inspectionreport, this application is ready for putting against the loan committee of the bank.Inspection varies according to the various loans. For e.g.In case of cash credit he personally visits the business site and verifies the original booksof accounts with that of submitted books of accounts. He verifies the real stock with thestock mentioned if any difference is found it is clearly mentioned in the report.In case of housing loan inspection officer visits the place and check whether the buildingis really in existence or not, whether the construction is as per the statical figure providedto him and plan is as per sanctioned by the municipal corporation. Committee approval and terms and conditions Once the application is duly processed, it is put for sanction to the appropriate authority.Here appropriate authority means various loan committees, standing committee andboard of directors. Loan manager is a sanctioning authority only in case of review of cashcredit facility. Types of committee and its lending powers are given below:If appropriate authority gives sanction, along with the sanction of advance thebank specifies the terms and conditions applicable to the advance. These usually coverthe followings:

The amount of loan or maximum limit of the advances

The nature of the advances

The period for which advance is valid

The rate of interest applicable to the advance The primary security to be charged The insurance of the security The detail of collateral security, if any, to be provided The margin to be maintain

Other restrictions or obligations on the part of the borrower

Name Of Committee 2.

Board of directors3.

Standing committee4.

Reconsideration committee5.

Loan committee (Rs.500001 to 1000000)6.

Loan committee (Rs.300001 to 500000)7.

Loan sub-committee/1 (Rs.150001 to 300000)8.

Loan sub-committee/2 (Rs.75001 to 150000)9.

Loan sub-committee/3 (Up to Rs.75000)10.

Loan sub-committee/4 (Up to Rs.5,000)11.

Committee for loan against immovable property/1 (Rs.2,50,001 to 5,00,000)12.

Committee for loan against immovable property/2 (Rs.1,50,001 to 2,50,000)13.

Committee for loan against immovable property/3 (Rs.25,001 to 1,50,000)14.

Committee for loan against immovable property/4 (Up to Rs.25,000)15.

Recovery committee/1 (more than Rs.3,00,000)16.

Recovery committee/2 (Rs.1,50001 to 3,00,000)17.

Recovery committee/3 (Up to Rs.1,50,000)

It is common banking practice to incorporate important terms and conditions on astamped security document to be executed by the borrower. Rate of stamp duties aregiven follows:Demand promissory note : Rs. 1Letter of guarantee : Rs. 60*Agreement letter Up to 5,00,000 : R s. 50(Letter of lien) Above 5,00,000 : Rs. 2/thousandLetter of pledge : Rs. 50Letter of continuity : Rs. 50A greement letter for Cash credit/OverdraftUp to 5,00,000 : Rs. 110Above 5,00,000 : Rs. 2/thousand

Maximum limit of stamp duty is Rs. 2,00,000*Agreement letter is in case of vehicle loan, security loan, bills purchase, billsdiscounting, guarantee, education loan, etc. Equitable Mortgage And Equitable Extension When the loan is sanctioned with condition that to put the real document as a mortgage insecurity (prime/collateral), it is must that to make the equitable mortgage of the property.Some time a property which given in mortgage by borrower is already put before thebank in case of other loan as a security at that time equitable mortgage is already done byparty so there is no need of equitable mortgage again but the equitable extension is onlyneeded.Equitable mortgage on non-judicial stamp paper

Amount of sanctioned loan loan of non-judicial stamp paper for equitable mortgage Up to 15,00,000 1/2% of sanctioned loanAbove 15,00,000 1% of sanctioned loan OR Rs. 1,00,000(Whichever is less) Make/sign document This application is now in the document department, document department take signatureof loanee and guarantors in specimen card and also on the sanction letter to seat besideand verify all the documents. Types of documents are discussed in each type of loanseparately. This process is last for borrower, after this loan is sanctioned. No formality isremaining at the borrower side. Open account Now loan is sanctioned, all formalities are completed. So bank is giving your amount of loan either by credited in your account or pay the amount to the party, whose quotation isprovided by borrower to bank. Bank opens your account with himself to get the actualtransaction between bank and borrower.

Insurance posting It is must for loanee to insure the property or equipment, which is hypothecated with thebank against loan as a security. This policy is assigned in favor of bank, which is alsorequired. In case of immovable property or new purchase of machinery, equipment, etc.insurance of same amount and in case of old machinery, goods stock, etc. twice of theprice insurance is needed. In case of education loan, the life insurance of student isrequired. Shakh department is posting it in borrowers account. Record department filing Now total process is over and whole documents are need filing for bank record. Recorddepartment does this work. Record department file the documents and store it to properplace.

CREDIT POLICY

General Eligibility Criteria For Credit In RNSB

As per the rules of co-operatives, any one who wants to avail finance has tobecome a member of the bank.

As a shareholder of the bank, he/she have to make compulsory deposit, or thepayment of deposit as per rules and regulations of the bank and thereafter, he/shecan submit the application for loan. In all the practice with the bank, you areknown by bank through your compulsory deposit number.

The application will have to be submitted in the prescribed form, wherein alldetails and particulars will have to be furnished as demanded in the form. He/shehas to submit further particulars as may be asked by the bank.

The loanee will be advanced loan against the security and he/she has to submit 1or 2 guarantors, who will be the recognized member and accepted to the bank.

The interest will be calculated on month-to-month basis.

Taking in view the total amount of loans taken for different purpose by the firm orindividual, the interest will be calculated at the same rate on all the advances.

It will be necessary to make payment of share deposit or loan deposit at the rate of 2.5% of the sanction in case of secured loan and 5% of sanctioned loan or in caseof unsecured loan. The maximum share deposit accepted of Rs.25000 andadditional deposit over Rs.25000 will be accepted as loan deposit.

The rate of interest on share deposit is 15% and that on loan deposit is 10%.

The company, who wants to take loan from bank, has to get its name registeredfor the said loan purpose with the registrar of companies and has to submit thedocument of registration charge to the bank.

In case of mortgage of immovable property steps are given below:Title clear reportEquitable mortgage on non-judicial stamp paper Amount of sanctioned loan loan of non-judicial stamp paper for equitablemortgage Up to 15,00,000 1/2% of sanctioned loanAbove 15,00,000 1% of sanctioned loan OR Rs.1,00,000(Whichever is less)

Some time a property which given in mortgage by borrower is already put beforethe bank in case of other loan as a security at that time equitable mortgage isalready done by party so there is no need of equitable mortgage again but theequitable extension is only needed.

In case of immovable property or new purchase of machinery, equipment, etc.insurance of same amount and in case of old machinery, goods stock, etc. twice of the price insurance is needed. In case of education loan, the life insurance of student is required.

Margin money means gap between purchase value and bank finance. Bank alwaysdoes payment directly to the seller. So loanee has to deposit the margin money inthe bank.

INTEREST RATE ON VARIOUS ADVANCES Particulars Interest rate Installment / Rs.1000 Number of installment Up to 25000(except vehicle loan)Up to 25000 vehicle loan25001 to 200000200001 to 1000000Above 1000000Surety loan, home appliancesGold loanLand and building (unsecured) up to25000Staff surety loanLoan against fixed depositBuilding repairing up to 75000Building purchase, construction75001 to 200000200001 to100000012%14%14%15%16%16%14%16%16%More than2% of F.D.14%14%15%323232232332503223171717404040666640264066Till thematurity dateof F.D.108108108

Scrutiny of credit While scrutinizing an application from the bank takes into consideration-safety, liquidity,purpose profitability, security, and spread of advances.

Safety Bank has to see that the prospective borrower is a reliable user of the finance and banksmoney is safe in his hands. Liquidity Bank has to find out that the borrower is quite capable in repaying the finance withinreasonable period. Purpose The purpose for the finance should not be illegal. It should be creative, service oriented,development oriented, and like. Banks should check end use of funds. Profitability If the project or the purpose of the finance is not profitable in the hands of the borrowerthan he will not be in a position of repaying the amount to bank. It should be profitableenough to generate the income to satisfy his needs and banks dues. Security The bank has to take into consideration the character, capacity, and capital of theprospective borrower. Bigger advances and cash credit are to be secured with collateralsecurity over and above prime security. Spread of advances For having balanced economy the bank should choose to spread the finance amongstvarious sectors of the society, so that the risk of incoming bad advances is minimized.Concentration on one type of advances may turn into bad advances if the schemebecomes ineffective due to some natural calamities or government rules or change intaste or demands of the society, by and large.

TYPES OF CREDIT Surety LoanVehicle LoanSecurity LoanDomestic Appliances LoanGold LoanLand And Building Loan/Industrial Building LoanEducational LoanF.D. LoanCash CreditOverdraftBankable LoanBills PurchaseBills DiscountingBank GuaranteeStaff LoansStaff Surety LoanStaff Housing LoanStaff Vehicle LoanStaff Domestic Appliances LoanGyan Prakash Yojana

EXPLANATION OF ALL TYPER OF CREDIT Surety Loan Purpose Personal useLimit Rs. 5000 to 10000Rate of interest 16%Period 40 monthsRepayable Equate M onthly installments Rs.32 per thousandSecurity Personal Guarantee of two members of the bank Docum ents Loan Appliances form, Letter of guarantee, DP note, letter of Sanction.Submit Paper In case of servi ce person pay sleep, in case of businessperson last yearlybusiness report.Other terms % of the loan amount if the loan is sanctioned to the tune of Rs. 5000 and 1% of theloan amount is sanctioned to the tune of Rs. 10000 will have to be deposited in thebenefit fund.Under the above scheme, if the death of the loanee under surety loan occurs, in the saidcircumstances, in remaining loan in his account will be credited from this account underhis loan account and an amount of Rs. 1000, as Assistance will be paid to the heirs of theloanee immediately from this fundThe confirmed government employee can be granted a loan of Rs. 10000 on acceptanceletter taken from his employer to the effect that they will deduct the installment from hissalary every month regularly and remit the same to Bank.It is not applicable that the surety loan of other co-operative society is in presence. Domestic Appliances Loan Purpose For purchasing consumer durable articles viz. freeze, washing machine,flour mill, T.V. VCD, sewing machine, room heater, room conditioner,etc.,Limit Minimum Rs. 5000 Maximum Rs. 20000Margin 40%Rate of interest 16%

Period 40 monthsRepayable Equate Monthly installments Rs.32 per thousandSecurity Hypothecation of goods, personal guarantee of two members of the bank Documents Loan Appliances form, Letter of guar antee, DP note, Hypothecation of goods/articles purchased, insurance policySubmit Paper In case of service person pay sleep, in case of businessperson last yearlybusiness report, quotation of the item obtained from Authorized Dealer Security Loan (Against Machinery/Furniture & Fixtures/Equipments )Purpose For purchasing NEW/OLD machineries/furniture for business purposeLimit Any limit as per req uirementMargin 25% to 40%Rate of interest Up to 25000 12%,25001 to 200000 14%200001 to 1000000 15%Above 1000000 16%Period 40 months up to 200000, 66 months above 200000Repayable Equate Monthly installments R

s.32 up to 200000, In case of more than200000 Rs.23 per thousandSecurity The Hypothecation of machinery/furniture purchased as a primesecurity, as a collateral security(A) Existing old machineries(B) Equitable mortgage of land and building(C) Guarantee of two members of the bank as guarantorsDocuments Loan Application form, Letter of guarantee, DP note, Hypothecation of machineri es old/new, insurance policy, letter of sanctionSubmit Paper Last three-year business report, Shop Act License, SSI license, Elec.Connection proof, IT Return (in case of new firm project report)If applicant is a Partnership FirmPartnership deed copy, Reg., of firmsIf applicant is a limited company

Resolution for getting loan, Memorandum of association, Articlesof association, letter of assurance for registration in Reg. of CompaniesOther termsThe payment of this kind of loan is given to the seller directly by Bank.In case of mortgage of old security the insurance of the double amount of old security andabout new security, the insurance of the value of purchase price, is required to the takenout from the insurance company recognized by bank and the said insurance policy isrequired to be recognized to be assigned in favor of the bank.The immovable property of either loanee of guarantor will have to be assigned ascollateral security to the bank. Security Loan (Against Good Stock) Purpose Provide loan against good stock Limit Any limit as per requirementMargin 40%Rate of interest Up to 25000 12%,25001 to 200000 14%,200001 to 1000000 15%,Above 1000000 16%Period 40 months up to 200000, 66 months above 200000Repayable Equate Monthly installments R s.32 per thousand up to Rs.200000, incase of more than 200000 Rs. 23 per thousandSecurity The Hypothecation of goods purchased as a prime security, As aCollateral security(A) Equitable mortgage of land and building(B) Guarantee of two members of the bank as guarantors.Documents Loan Appliances form, Letter of guarantee, DP note, Hypothecation of goods, insurance policy, letter of sanction, equitable mortgage of landand buildingSubmit Paper Last three-year business report, Shop Act License, SSI license, Elec.Connection proof, IT Return, Rent receipt