Best Practices in loan and pricing mechanism - short term and...
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V. M. Sakhiya - Chief Executive Officer Shri Rajkot District Co-Operative Bank Ltd “Jilla Bank Bhavan”, Rajkot, Gujarat Best Practices In Loan And Pricing Mechanism - Short Term And Long Term Loans
Transcript of Best Practices in loan and pricing mechanism - short term and...
V. M. Sakhiya - Chief Executive Officer
Shri Rajkot District Co-Operative Bank Ltd“Jilla Bank Bhavan”, Rajkot, Gujarat
Best Practices In Loan And Pricing Mechanism
- Short Term And Long Term Loans
Introduction:
Shri Rajkot District Co-Operative
Bank is incorporated on 15th May
1959 with registration no. 24940.
Licensed by the Reserve Bank of
India vide letter dated 14th
September 1994.
Bank is located in Saurashtra region
of Gujarat state. This area is a semi
arid region with extreme
temperature and frequent draught. Photo: Overview of Bank’s Head Office Building
Bank is well organized with very good
network of 185 branches, having 899
affiliated co-operative societies. Out of
which 454 are PACS.
Bank operates under 866 villages of
Rajkot and Morbi districts of Gujarat
state.
Under the bank’s operational area
more than 44 % farmers are associated
with Rajkot DCCB
Fig. Farmers associated with Rajkot DCCB
under Bank’s Operational Area
Introduction:
Rajkot DCCB
Other Banks
2.58 lakhsfarmers
2.06 lakhsfarmers
Investments
Advances
Deposits
Balance Sheet Size
0
1000
2000
3000
4000
5000
6000
31.03.13 31.03.14 31.03.15 31.03.16 31.03.17
11411727 1730
1514 1569
2275 22562835 3130 3076
22172631
31033437
3905
36384271
4908 50595708
Bank’s Financial Position As on 31 st March (Rs. In Cr.):
As on 31st March 2017 Bank’s total investments are Rs. 1569 Cr., advances are Rs. 3076 Cr.and deposits are Rs. 3905 Cr. which increased 38 %, 35 % and 76 % respectively as comparedto 31st March 2013.
Bank’s balance sheet size stood at Rs. 5708 crore as on 31st March 2017 which increasedmore than 57 % as compared to 31st March 2013.
Board consists one Managing Director + 21 Elected Directors. As per bye-laws board
meeting is convened time to time with transparent governance.
Sub-committees (Eleven Committees):
1. Executive Committee – consisting 9 members
2. Deposit Committee – consisting 9 members
3. Recovery Committee – consisting 7 members
4. Audit Committee – consisting 5 members
5. Investment Committee – consisting 3 members
6. Expenditure Committee – consisting 8 members
7. Staff Committee – consisting 6 members
8. PACS Viability Review Committee - consisting 8 members
9. Special Fraud Prevented Committee – consisting 5 members
10. Risk Management Committee – consisting 9 members
11. ALCO Committee – consisting 8 members
Management System:
For quick and effective implementation of the decision taken by the Board and
Sub-committees of the bank, six departments have been constituted for overall
supervision and monitoring under the guidance of General Manager (CEO) and
Additional General Manager. These are as under.
1. Administrative Department
2. Personnel Department
3. Loans Department
4. Finance Department
5. Accounts Department
6. Vigilance Department
Bank’s Department Set-up:
Dy. Manager Zonal – Rajkot
Dy. Manager Zonal –
Padadhari
Dy. Manager Zonal - Morbi
Dy. Manager Zonal -
Wankanaer
Dy. Manager Zonal – Jasdan
Dy. Manager Zonal – Gondal
Dy. Manager Zonal – Jetpur
Dy. Manager Zonal - Dhoraji
General Manager (CEO)
Manager
Loans
Dy. Manager Loans
Dy. Manager Branches
Dy. Manager Inspection
Manager Finance
Dy. Manager Finance
Manager Vigilance
Manager Accounts
Dy. Manager Accounts
Dy. Manager Audit
Manager Administrative
Dy. Manager Computer
Manager Personnel
Dy. Manager Technical
Add. General Manager
Bank’s Staff Set-up:
Bank’s present Chairman Shri Vithalbhai
Radadiya (Member of Parliament) and
Board of Directors have a vision to fulfill
credit needs of farmer for each and every
assets / infrastructure created for
adoption of modern agriculture like
farm godown, farm fencing, drip/sprinkler
irrigation, tractor, thresher, dug well,
power tiller, pipeline, milch animal, cattle
shed, farm pond etc. with nominal
interest rate, with very easy procedure
and within least possible time.
Mission & Vision:
The bank has been awarded five times
“Nabard Best Performance Award” by
Prime Minister and Finance Minister
(Government of India).
Bank was two times awarded by
“NAFSCOB” in the year 2009/10 and
2014/15 for best performance in all
aspect.
The bank has achieved 1st position in
recovery performance amongst all DCCB in
Gujarat state since last 24 years and for
that bank has been awarded with
“Dashabdi” Award by The Gujarat State
Co-Operative Bank Ltd. and second award
of Rs. 51 lakhs.
Awards and Achievements:
Best Performance Award by NABARD
Best Performance Award by TheGujarat State Co-Operative Bank Ltd.
Awards and Achievements:
Best Performance Award by NABARD Best Performance Award by NAFSCOB
Bank is fully operational under CBS platform with 13 ATM, 75 micro ATM NEFT,
RTGS, SMS alert facilities, IMPS, Mobile Banking etc.
Bank has maintained a recovery position 99.00 % and above during last 24 years
Bank has been getting “A” class of audit since last 45 years as well as bank is
paying maximum dividend of 15 % as per co-operative act to its member societies.
Out of total 454 affiliated PACS, 449 PACS are computerized, while 427 PACS are
profit making.
Important Milestones Achieved:
Bank is providing unique facility of safe deposit locker for 365 day and 24 hours at
Bank Head Office i.e. well known as “Jilla Bank Bhavan” having 4219 different size of
safe deposit lockers with 24 x 7 gun man security, CCTV camera and Israel Alarm
Security System. Moreover two other branches at district level also provide locker
facilities for 16 hours i.e. morning 8.00 am to midnight 12.00.
Bank is providing gold loan facility after banking hours i.e. 4.00 pm to 10.00 pm at
Gold Loan Extension Counter at Head Office. This kind of special timings have been
kept by keeping customers convenience at center. This single gold loan counter has
loan outstanding of Rs. 21.60 crores as on 23rd Nov 2017. Bank’s all 185 branches
provides gold loan during regular banking hours.
Innovative Banking:
Sr. No. Scheme Details Subsidy /Claim
1 Rural Godown Scheme for farmers
(Credit link capital investment 25 % subsidy)
2554 Godown completed with
3,48,243 MT storage capacity
Rs. 18.90 Crore
2 State Govt. Rural Godown Scheme
(25 % Capital Investment Subsidy)
214 Godown completed with
37,603 MT storage capacity
Rs. 3.31 Crore
3 PACS Godown Scheme
(90 % and 73.09 % Capital Investment Subsidy
Scheme)
228 Godown completed with
50,961 MT storage capacity
Rs. 15.40 Crore
4 Dairy Entrepreneurship Development Scheme 1340 beneficiaries Rs. 6.93 Crore
5 Crop Insurance Scheme
PMFBY – Pradha Mantri Fasal Bima Yojana
(formarly known as NAIS)
2,66,815 farmers are benefited
with crop insurance scheme since
its implementation
Rs. 3123.00 Crore
Table: Bank’s participation with various Government subsidy and crop insurance scheme as on 31st March 2017 (Rs. in Crore)
Government Sponsored Programmes:
Board of Director has delegated their lending power as under.
Sr. No. Purpose For Sanctions For Disbursements
1. ST – SAO (KCC) Manager /Dy. Manager
Ad. Gen. Manager &
One Director
Branch Manager
2. MT – Agriculture Manager /Dy. Manager
Ad. Gen. Manager &
One Director
Branch Manager
3. MT – Non Agriculture Up to 10 lakh
Dy. Manager / Manager
Ad. Gen. Manager & One
Director
Up to 10 lakh
Branch Manager
Above 10 lakh
Board
Above 10 lakh
Dy. Manager (Zonal) &
Branch Manager Jointly
Loan Sanction Policy:
The technical committee decides the credit needs for seasonal agriculture operations of the farmer forthe crops commonly grown in the district. The credit needs of the farmer are decided based on the costof cultivation for the particular crop.
Sr. No. Crop Name Loan Amt./Ha.FY. 2016-17
Repayment Period for Farmers
Remarks
Kharif Crop 1 year from disbursement orup to 31st May,
whichever is earlier
Cost included are• land preparation i.e. land
leveling, ploughing, cultivation etc.
• Farm implement maintenance cost like tractor, power tiller, thresher, irrigation pump / submersible pump, wire fencing etc.
• Agri. input cost like seeds, fertilizer, pesticide, fungicide, electricity / diesel.
• Labour cost• Transportation cost like
fertilizer, manure, agriculture produce, byproduct etc.
1 Groundnut Rs. 40,000/-
2 Cotton irrigated Rs. 55,000/-
3 Cotton unirrigated Rs. 25,000/-
4 Castor irrigated Rs. 37,000/-
5 Castor unirrigated Rs. 26,000/-
6 Seasemum Rs. 25,000/-
Rabi Crop
1 Wheat irrigated Rs. 34,000/-
2 Wheat unirrigated Rs. 19,000/-
3 Cumin Rs. 29,000/-
4 Onion Rs. 46,000/-
5 Garlic Rs. 46,000/-
Summer Crop
1 Summer Groundnut Rs. 40,000
Unit Cost For Farm Sector Loan - KCC:
Long term credit needs of the farmers are decided based on the consultation with various stake holders,agriculture departments, state Govt. departments, progressive farmers and information available fromNABARD and State Co-Operative Bank.Sr.
No.Particulars Unit Cost in Rs. Remarks Consultations / Information
1 Dug well4x4x20 mt.
Min. 65 ft depth: Rs. 200000Above 65 ft.: Rs. 3000/ft.Maximum limit: Rs. 300000
-Ground water table of the region and labourcost is considered
-Reviewed periodically
Geological dept., Agriculture dept.,Nabard, Progressive farmer
2 Drip / Sprinkler Irrigation
90 % of Quotation -Unit cost as per Guj.govt. subsidy scheme
GGRC: Gujarat Green RevolutionCompany, Agri. Dept.
3 Cattle purchase Gir Cow: Rs. 37000HF Cow: Rs. 47000Buffalo: Rs. 60000
-Unit cost decided based on breed wise milk producing capacity
Animal Husbandry dept., Agri. dept.,Progressive farmers
4 Cattle Shed Rs. 16000/- per cattle(1 cattle needs 65 sq.ft. areaand construction cost for 1 sqft. is Rs. 250/-
-Decided based on construction cost.
-Reviewed periodically
Animal Husbandry dept., Agri dept.progressive farmer
5 Submersible Pump set (ISI)for dug well
3.0 – 3.5 HP: Rs. 25000/-5.0 HP: 28000/-7.5 HP: 35000/-
-Decided based on capacity
-Reviewed periodically
Agri Engineering Dept.,Vendors, Nabard,
6 Tractor, thresher, power tiller, agri. implements
85 % of quotation -As per prevailing cost of assets
Agri Engineering dept., Govt. dept.,Vendors, Progressive farmer
7 Purchase of Agri. land
Rs. 5. 00 lakh per acreMaximum Rs. 15.00 lakh
-Considering av. market price of agri land of the district,
Agri. department, Revenue dept.Progressive farmers
8 Construction of Water Tank at farm
Rs. 200/- per sq.ft.Max Rs. 300000/-
-Considering cost of construction material and labour.
Contractors,Govt. Dept,Progressive Farmers
Unit Cost For Farm Sector – Long Term / Medium Term Loans:
Long term credit needs of borrower for non farm sector asset is decided in consultation withgovt./revenue department, builders and MSME, SoR of Civil department State Government.Some of the examples are given below for unit cost decided for non farm sector loan.
Sr. No.
Particulars Unit Cost in Rs. Consultations / Discussions
Remark
1 Housing loan Dist level: Rs. 30 lakhTaluka level: Rs. 20 lakhRural level: Rs. 10 lakh
Builders / contractors,Civil departments,
- Decided based on prevailing market price at district, taluka and village level.
- Periodically reviewed.2 Personal Loan/
Mortgage loanDist level: Rs. 10 lakhTaluka level: Rs. 7 lakhRural level: Rs. 5 lakh
3 Higher Education Max. Rs. 15 lakh Educational University
4 Nabard Non Farm Sector – SSI
Max. Rs. 25 lakh Local industries of theregion, MSME
Credit requirement of local industries of the region
5 Govt. Sponsored Prog. (Bajpai Bankable)
Max. Rs. 8.00 lakh Govt. sponsored prog.
6 Consumer loan 75 % of quotation Vendors, suppliers Based on market price
7 Rural Godown 75 % of quotation Contractors, builders,SoR of State Govt.
Price of construction material and labour cost
8 Cash Credit Rs. 15.00 lakh MSME, Credit requirement of local industries of the region
9 Gold Loan Rs. 2300 for 1 gr. 23 kt. goldRs. 2200 for 1 gr. 22 kt. goldRs. 2100 for 1 gr. 21 kt. goldRs. 2000 for 1 gr. 20 kt. goldwith 25 % marginMax. Rs. 2.00 lakh
Gold Valuers Periodically reviewed
Unit Cost For Non Farm Sector – Long Term Loans:
As on 31st March 2017, bank’s average cost of borrowing was 6.92 %, av. cost of depositwas 6.00 % and management cost was 1.80 %. Hence total operating cost was 7.96 %.While actual av. earning on loan and advances was 10.12 % which makes financial marginof 2.16.%
ParticularAmount
Rs. in Crore
Interest
Rs. in CroreRatio (%)
Av. Borrowing 800.81 55.40 6.92
Av. Deposit 3923.18 235.57 6.00
Av. Cost of borrowing
and deposit4723.99 290.97 6.16
Management cost 1.80
Operating cost 7.96
Av. earning loan and
advances3229.88 326.88 10.12
Financial Margin 2.16
Financial Ratio as on 31st March 2017:
Sr.
No.Particulars
Loan Out
Standing
(Rs. in Cr.)
Effective interest
rate for farmers /
borrowers (%)
1 KCC 1459.340.00 %(upto Rs.3.00 lakh)
2 MT – Agri. 707.36 12.50 %
3 MT – Non Agri. 494.44 13.00 %
4 Cash Credit 134.58 14.50 %
5 Gold Loan 208.20 14.50 %
6 Staff loan 59.83 7.50 %
7 Other loans 12.60 ---
Total 3076.34
Through PACS 79 %
Directly members
21 %
Share of Loan and Advances Sanctioned through PACS and Directly members
Loan Portfolio as on 31st March 2017:
KCC 47 %MT - Agri.
23 %
MT - Non Agri. 16 %
Gold Loan 7 %
Cash Credit 4 %
Staff Loan 2 % Other
Loan 1 %
Segment wise Loan Advances share %
Even after bank is providing short term -SAO loan at “0” % which contributes 47 %of total loan portfolio, bank continues toincrease their profit year after year. As on31st March 2017 net profit is Rs. 40.00crore.
Bank’s profitability is increased due tofollowing reasons.1. Bank’s own fund and Share capital2. Low cost deposit (55 %)3. Recovery4. High margin loan portfolio
YearProfit
Rs. in Crore
2013 16.00
2014 17.50
2015 25.00
2016 30.00
2017 40.00
Bank’s Profitability:
As on 31st March 2017 banks own fund was Rs. 397 Crore. Its is significantlyincreased over the period. During last five year i.e. from 2013 to 2017 it is increasedfrom Rs. 282 crore to Rs. 397 crore.
As on 31st March 2017 share capital is 66.02 Crore.
0
100
200
300
400
2013 2014 2015 2016 2017
282 290325
364397
Rs. In Cr.
1. Bank’s Own Fund and Share Capital:
Bank’s Own Fund (Rs. in Crore)
Bank is mobilizing saving, current, fixed deposits and recurring deposits.
At the end of March 2017 bank’s total deposit stood at Rs. 3925.57 Crore out of
which CASA deposit were Rs. 2175.55 Crore with more than 55 % of total share.
0
1000
2000
3000
4000
2013 2014 2015 2016 2017
Total Deposit Low Cost DepositRs. in Cr.
55 %
51 %
56 %
54 %
53 %
2. Low Cost Deposit:
Bank’s Low Cost Deposit
With accurate planning and developing customer relationship bank has achieved a
recovery position above 99.00 percent since last 24 years. Bank’s last five year
recovery position are as given in figure.
55 %
51 %
56 %
54 %
53 %
0
500
1000
1500
2000
2500
2013 2014 2015 2016 2017
Demand Recovery
Rs. in Crore
99.42 %
99.66 %99.70 %
99.60 %
99.50 %
3. Recovery:
Bank’s Recovery Position
47%
3%23%
16%11% Interest Rate 0.00 %
Interest Rate 7.50 %
Interest Rate 12.50 %
Interest Rate 13.00 %
Interest Rate 14.50 %
Bank has a wide portfolio under farm sector and non farm sector advances.Almost 50 % advances are under low interest rate, where as 50 % advances areunder high interest rate.
Despite of having higher interest rates on non farm sector advances, banksucessed to maintain its non farm sector advances portfolio.
continue . . .
4. High Margin Loan Portfolio :
Interest Rate
Share in Total Loan Portfolio
0.00 % 47 %
7.50 % 3 %
12.50 % 23 %
13.00 % 16 %
14.50 % 11 %
Despite having higher interest rates on non farm sector advances, bank sucessedto maintain its non farm sector advances portfolio due to following facts.
Customer Relationship: Bank is working from last 58 years and has developedstrong customer relationship.
Proper Loan Assessment: Bank’s policy of exact financing through proper loanassessment. Bank’s policy of exact financing leads to a recovery of above 99.00percent during last 24 year.
Gold Loan Facility After Banking Hours: To meet the contingent financial needsof customer bank provides the gold loan facility after banking hour i.e. 4.00 pmto 10.00 pm at Head Office.
Locker Facility: Bank provides 365 days and 24 hours locker operating facility atthe premises of Head Office, Rajkot. Moreover two other branches at districtlevel also provides locker facilities for 16 hours i.e. morning 8.00 am tomidnight 12.00 am. That makes the strong customer relationship.
Easy loan procedure: Easy loan procedure with all papers and procedure inlocal language i.e. Gujarati.
Fast Loan Sanction: Fast loan sanction to satisfy the credit needs of customer.
Detailed Loan Manual: Loan manual having different necessary aspects of loansanction provided to all PACS resulting in clarity about requirement of the banktimely.
2 lakh KCC holders, bank’s employees
and Board of Directors are covered
under accidental insurance cover of
Rs. 10.00 lakh by bank.
Providing medical support to KCC
holders up to Rs. 5000/- for major five
diseases i.e. cancer, paralysis, heart
attack etc.
Bank provides accommodation facility
of Kisan Guest House at Head Office
for the farmers to stay at night with
token charge of Rs. 10 only.
Social Responsibility:
Co-Operation among farmers, PACS Committee members and Bank’s Board of Directors. Devotee, disciplined, trained and workaholic staff of Bank and PACS Delegation of loan sanction power to the Managers, Dy. Managers and Br. Managers. Timely Sanction of the loan. Actively participating in government subsidy schemes. Bank provides 79 % loan through PACS and 21 % directly to members, which makes all PACS
viable. Bank’s policy of exact financing through proper loan assessment. Strong recovery position above 99.00 percent. Maximum low cost deposit mobilization as on 31st March 2017 low cost deposit is above 55.00
percent. Constant monitoring of SLR / CRR, daily review of cash and deposits. As on 31st March 2017
CRAR is 10.45 % Frequent managers’ meeting to review on loan, deposit, fund position, risk factors and
challenges. As per the outcome of this meeting quick decision and implementation is done. Immediate implementation of the decision taken by the Board of Directors and by sub
committees after deep discussions. Quick implementation of NABARD and RBI guideline. Strong customer relationship through innovative and convenient banking, providing contingent
financial need after banking hours. Policy of one secretary per PACS after approval by bank, all PACS have own godowns and it’s
own office.
Secret of Success :
Customer Relationship:
Agriculture Expert Advice : Bank has developed
healthy relationship with farmers by providing
expert agriculture advice at field level on plant
nutrition, plant protection and marketing of
agriculture produce by Agriculture officers of the
banks. Healthy banker-borrower relationship is
developed which will help for loan and recovery.
Farmers Meeting: Bank is regularly organizing Crop Information Meeting (“Pak Shibir”)at village level in association with State Co-Op. Bank, IFFCO, KRIBHCO.
Customer Relationship:
PACS Encouragement: Bank has introduced a scheme to give a motor bike to encourage thePACS for best performance in recovery, loan, administrative cost, social responsibility etc.PACS are divided in group as per their loan outstanding, from each group 3 PACS areselected. Every year 12 PACS are encouraged with a motor bike for recovery purpose.
Customer Relationship:
Bank’s Annual General Meeting with Many Co-Operaters:
PACS Chairmans are encouraged at AGM – Annual General Meeting of Bank
Bank’s Annual General Meeting:
FLC – Financial Literacy Center:
PDC – PACS Development Cell:
On behalf of all the farmers and co-operative families, we are verythankful to NABARD for their continuous support and encouragementfor upliftment of agriculture and rural sector.
We are really thankful to Head Office Nabard, RO Nabard Ahmedabadand DDM Nabard Rajkot for continuous guidance and encouragement.
Thank you for all your wonderful contributions by Nabard for financialsupport to DCCBs for Rupay Card, ATM, Micro ATM, Digital Going, FLCand Technical Support etc.
We are also thankful for Government of India and Government ofGujarat for their very valuable development programmes ofagriculture and rural area.
Vote of Thanks:
V. M. Sakhiya - Chief Executive Officer
Shri Rajkot District Co-Operative Bank Ltd“Jilla Bank Bhavan”, Rajkot, Gujarat
Web : www.rdcbank.org, E-mail : [email protected]
Contact No. +91 98794 55525
