Canara Bank Project 2 Nam

CONTENT

Certificate

Acknowledgement

Executive summary

Chapter I - Introduction

1.1- Meaning of bank

1.2 - Importance of the study

1.3 - Objective of the study

1.4 - Hypothesis of the study

1.5 - methodology of the project

1.6 - Layout of the project

Chapter II - Lending

Chapter III - Investment

Chapter IV -Risk

Chapter V - summary,Findings, suggestion, conclusion.

4.1 - Major Findings

4.2 - suggestion

4.3 - Limitation

4.4 - conclusion

Dr. Umen Dutta Residence: Associate professor Na-Ali Department of Accounting and Finance Bongal PukhuriC.K.B. Commerce College, K.N. PathJorhat-1 Jorhat

Mobile : 9435052474

TO WHOM IT MAY CONCERN

This is to certify that Miss Anusraya Majumder is a student of B.Com 3rd year

of C.K.B Commerce College, Jorhat, having Specialization in Accounting and Finance.

Currently she is collecting necessary data, information and explanation from government,

semi-government and from other sources for her project work. The title of the project is

“A study about the lending, Investment and Risk policy of the Canara Bank with

special reference to its Jorhat Branch.”

Anybody supplying necessary data and information for her academic pursuit will

be thankfully acknowledged.

Place: (Dr.UmenDutta)Data :

ACKNOWLEDGEMENT

It would be a vague attempt to acknowledge all the persons who helped me

directly or indirectly in connection with my project work. However, I express my sense

of gratitude to a few of them.

I have a pleasant duty to express my gratitude to Dr. Pranjal Bezborah Professor

in Commerce, Dibrugarh University for giving me an idea to write project report. I have

no adequate words to express my gratitude to him.

Without the encouragement, novel supervision & suggestions of Dr. Umen

Dutta, Selection Grade Lecturer, Dept. of Accounting And Finance, the task facing me

would have been difficult. It is my pleasant duty to express deep gratitude to him.

I must express my heartfelt gratitude to Dr. P.C. Bora, Principal of C.K.B

Commerce College, Jorhat, B.C. Saikia, Head Dept. of Accounting And Finance and

other faculty members for their valuable suggestions. I must thankful to Senior Officials

of District Industries and Commerce Centre, Jorhat for their kind cooperation and

encouragement in providing necessary data and information.

Place: Jorhat Namrata Majumder

Date: Roll no: 14430087

CHAPTER-I

1. INTRODUCTION

Commercial Banks are the most important source of institutional credit in the money

market. A bank is a profit seeking business firm, dealing in money and credit. It is a

financial institution dealing in money, that it accepts deposits of money from the public

to keep them in its custody for safety. it also, deals in credit, i.e. it creates credit by

making advances out of the funds received as deposits to needy people. It thus functions

as a mobliser of saving in the economy.

A bank is, therefore, like a reserve into which flow the saving, the idle surplus money of

households, and from which loans are given on interest to businessman and other who

need them for investment on productive uses.

1.2. DEFINITION

Kinley has define a bank as" an establishment which makes to individuals advances of

money on the means of payments as may be required and safely made, and to which

individuals entrust money or means of payment when not required by them for use."

H.L Hart define a bank as" the one in the ordinary course of his business honours cheques

drawn upon by person from and for whom he receives money on current account."

John Paget has attempted to given a functional of a bank by stating

"Nobody can be a banker who does not -(i) take deposit account (ii) take current account

(iii) issue and pay cheque and (iv) collect cheques- crossed and uncrossed for its

customers."

The discussion on definition will be in conclusion and incomplete unless we discuss the

definition given by The Banking Companies(Regulation) Act of India,1949, which is not

only most acceptable but comprehensive as wee. According to the act, banking means

“the accepting, for the purpose of lending or investment, of deposits of money from the

public, repayable on demand or otherwise, and withdrawable by cheque, draft or

otherwise,"

1.3. BANKING INDUSTRY IN INDIA

Banking in India originated in the last decades of the 18th century. The oldest bank in

existence in India is the State Bank of India, a government-owned bank that traces its

origins back to June 1806 and that is the largest commercial bank in the country. Central

banking is the responsibility of the Reserve Bank of India, which in 1935 formally took

over these responsibilities from the then Imperial Bank of India, relegating it to

commercial banking functions. After India's independence in 1947, the Reserve Bank

was nationalized and given broader powers. In 1969 the government nationalized the 14

largest commercial banks; the government nationalized the six next largest in 1980.

Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector banks

(that is with the Government of India holding a stake), 31 private banks (these do not

have government stake; they may be publicly listed and traded on stock exchanges) and

38 foreign banks. They have a combined network of over 53,000 branches and 17,000

ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks

hold over 75 percent of total assets of the banking industry, with the private and foreign

banks holding 18.2% and 6.5% respectively

1.4. NATIONALIZATION

By the 1960s, the Indian banking industry has become an important tool to facilitate the

development of the Indian economy. At the same time, it has emerged as a large

employer, and a debate has ensued about the possibility to nationalise the banking

industry. Indira Gandhi, the-then Prime Minister of India expressed the intention of the

GOI in the annual conference of the All India Congress Meeting in a paper entitled "Stray

thoughts on Bank Nationalisation." The paper was received with positive enthusiasm.

Thereafter, her move was swift and sudden, and the GOI issued an ordinance and

nationalised the 14 largest commercial banks with effect from the midnight of July 19,

1969. Jayaprakash Narayan, a national leader of India, described the step as a

"masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the

Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking)

Bill, and it received the presidential approval on 9 August, 1969.

A second dose of nationalization of six more commercial banks followed in 1980. The

stated reason for the nationalization was to give the government more control of credit

delivery. With the second dose of nationalization, the GOI controlled around 91% of the

banking business of India. Later on, in the year 1993, the government merged New Bank

of India with Punjab National Bank. It was the only merger between nationalized banks

and resulted in the reduction of the number of nationalised banks from 20 to 19. After

this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the

average growth rate of the Indian economy.

1.5. HISTORY OF CANARA BANK

Canara Bank was founded as the 'Canara Bank Hindu Permanent Fund' in 1906 by Late

Sri. Ammembal Subba Rao Pai, a philanthropist, this small seed blossomed into a limited

company as 'Canara Bank Ltd.' in 1910 and became Canara Bank in 1969 after

nationalization.

Founding Principles:

To remove Superstition and ignorance.

To spread education among all to sub-serve the first principle.

To inculcate the habit of thrift and savings.

To transform the financial institution not only as the financial heart of the

community but the social heart as well.

To assist the needy.

To work with sense of service and dedication.

To develop a concern for fellow human being and sensitivity to the

surroundings with a view to make changes/remove hardships and sufferings.

Sound founding principles, enlightened leadership, unique work culture and remarkable

adaptability to changing banking environment have enabled Canara Bank to be a frontline

banking institution of global standards.

1.6. ABOUT CANARA BANK

Today, Canara Bank occupies a premier position in the comity of Indian banks. With an

unbroken record of profits since its inception.

As at September 2009, the Bank has further expanded its domestic presence, with 2802

branches spread across all geographical segments. Keeping customer convenience at the

forefront, the Bank provides a wide array of alternative delivery channels that include

over 2000 ATMs- one of the highest among nationalized banks- covering 715 centres,

1591 branches providing Internet and Mobile Banking (IMB) services and 2084 branches

offering 'Anywhere Banking' services. Under advanced payment and settlement system,

all branches of the Bank have been enabled to offer Real Time Gross Settlement (RTGS)

and National Electronic Funds Transfer (NEFT) facilities.

Not just in commercial banking, the Bank has also carved a distinctive mark, in various

corporate social responsibilities, namely, serving national priorities, promoting rural

development, enhancing rural self-employment through several training institutes and

spearheading financial inclusion objective.

1.6.1. ABOUT CANARA BANK, JORHAT BRANCH

The branch was established on 19th July 1977 situated at the heart of the town Jorhat on

Gar-ali. It is the business centre of town. There are many others nationalized banks are in

the vicinity but Canara Bank has a good customer base in the locality. Presently the

branch is headed by Sri B.K. Mahanta, Senior Manager and S.K. Bage, Manager. Besides

the Sr. Manager and Manager, there are 19 staff that working in the bank from them,

there are 3 Officer, 14 Clerks and 2 Guards.

The 3 officers maintain the working process and the accounts of the branch and the clerks

look after the bank’s transactions including deposits, money withdrawn etc.

The Canara bank Jorhat branch has around 11000 customers and 11089 accounts with

total business of Rs. 80 crores.

1.7. IMPORTANCE OF THE STYDY

The study contains the Lending, Investment and the Risk Policies that

adopted by the Canara Bank. In this study the following activities are found

to be performed by the Canara Bank,

Bank accept deposits from public at adequate rate of interest by the way of saving

deposit, fixed deposit and current deposit and invests the deposited money in

various sources.

The bank provides loans to the customer at an agreed rate of interest. In this sence

bank provide two type of loan. i.e. term loan and demand loan.

Issuing letter of credit, travelers cheque, circular notes etc.

Providing customers with facilities of foreign exchange.

Transferring money from one place to anthers and from one branch to another

branch of the bank.

Standing guarantee on befalf of its customers, for making payments for purchase

of goods, machinery, vehicles etc.

Collecting and supplying business information.

Issuing demand drafts and pay orders etc. The canara Bank of the Jorhat Branch

has been playing a vital role in terms of providing deposits of the customers, different

type of loans to its investments facilities to the investors. But it is seen that no intense the

study has been made so far in this area of the branch keeping this idea in the mind, I have

undertaken to study on the topic “A study about the lending, Investment and Risk

policy of the Canara Bank with special reference to its Jorhat Branch.”

1.8. OBJECTIVES OF THE STUDY

The study has been undertaking with the following objective.

To study the lending operation of the branch.

To study the investment undertaking by the branch.

To study the risk covered by the branch.

1.9. THE HYPOHTESIS OF THE STUDY

The study undertaking with the following

The loan operation of the branch is not sound

That investment facilities of the branch are not satisfactory.

That the risks are not covered.

1.10. METHODOLOGY OF THE STUDY

The methodology of the study is both descriptive and analytical. Both primary and

secondary data have been collected. The study covers latest 5 years from 2006-2007 to

2010-2011, both years inclusive. Most of the data are collected from the official records

of the branch, annual accounts, audit reports, journals and magazines published by the

branch. Apart of this, discussions are also made with the senior officials of the branch. To

make the study realistic and meaningful, a questionnaires was drafted and distributed

among 30 respondents. The data and information so collected, are properly tabulated and

analyzed with the help of simple statistics and inferences have been drawn there from.

1.11. LAYOUT OF THE PROJECT

CHAPTER-I

INTRODUCTION

o DEFINITION

o BANKING INDUSTRY IN INDIA

o NATIONALIZATION

o HISTORY OF CANARA BANK

o ABOUT CANARA BANK

ABOUT CANARA BANK, JORHAT BRANCH

o IMPORTANCE OF THE STYDY

o OBJECTIVES OF THE STUDY

o THE HYPOHTESIS OF THE STUDY

o METHODOLOGY OF THE STUDY

o LAYOUT OF THE PROJECT

CHAPTER-II

LENDING

o 2.1. MEANING OF LENDING

o 2.2. METHODS OF LENDING

o 2.3. TYPES OF LENDING

o 2.4. FEATURES OF MORTGAGE

o 2.5. TYPES OF MORTGAGE

o 2.6. LOAN SANCTION AND DISBURSEMENT

o 2.7. FACTORS AFFECTING LENDING OPERATION

o 2.8. BENEFITS OF LENDING

CHAPTER-III

INVESTMENT

o 3.1. MEANING OF INVESTMENT

o 3.2. DEFINITION OF INVESTMENT

o 3.3. OBJECTIVES OF INVETMENT

o 3.4. FEATURES OF IDEAL INVESTMENT PROGRAMME

o 3.5. IDEAL INVESTMENT POLICY

o 3.6. TYPES OF INVESTMENT

o 3.7. FACTORS AFFECTING INVESTMENT DECISIONS

o 3.8. BENEFITS OF INVESTMENT

CHAPTER-IV

o 4.1. RISK

o 4.2. RISK AND THEIR TYPES

o 4.3. RISK ANALYSIS AND MITIGATION

o 4.4. RISK POLICY

o 4.5. RISK STRATEGY

o 4.6. RBI GUIDELINES ON RISK MANAGEMENT- RISK MODELS

CHAPTER-V

o 5. DATA ANALYSIS

o 5.1. DATA ANALYSIS OF THE CUSTOMERS

o 5.2. DATA ANALYSIS OF THE BANK STAFFS

CHAPTER-VI

o 6. SUMMARY

o 6.1. MAJOR FINDINGS

o 6.2. SUGGESTION

o CONCLUSION

o BIBLIOGRAPHY

o ANNEXURE-I

o ANNEXURE-II

CHAPTER-II

2.1. MEANING OF LENDING

Lending of funds to the constituents, mainly traders, business and industrial enterprise,

constituents the main business of the banking company. The major portion of a bank's

fund is employment of its funds. The major part of bank's income is earned from interest

and discount on the funds so lent. The business of lending, nevertheless is not without

certain inherent risks. Largely depending on the borrowed funds a banker cannot afford to

take undue risks in lending. While lending his fund, a banker, therefore, following a very

cautions policy and conducts his business on the basis of the well-known principles

sound lending in order to minimize the risk.

2.2. METHODS OF LENDING

Depending on the size of credit required, one of the following methods could meet the

lending process:

First Method of Lending:

Banks can work out the working capital gap (Guaranteed Auto Protection), i.e. total

current assets less current liabilities other than bank borrowings and finance a maximum

of 75 per cent of the gap; the balance to comeout of long-term funds.

Second Method of Lending:

Under this method, it was thought that the borrower should provide for a minimum of

25% of total current assets out of long-term funds i.e., owned funds plus term

borrowings.

Third Method of Lending:

Under this method, the borrower's contribution from long term funds will be to the extent

of the entire CORE CURRENT ASSETS, which has been defined by the Study Group as

representing the absolute minimum level of raw materials, process stock, finished goods

and stores which are in the pipeline to ensure continuity of production and a minimum of

25% of the balance current assets should be financed out of the long term funds plus term

borrowings.

2.3. TYPES OF LENDING

Loan

A loan is a kind of advance made with or without security. Now a day, bank have started

providing term loan and long-term loans for a period of more than one year. Here, the

amount is repaid either on maturity or in installments after charging interest on the whole

amount taken as loan. And demand loan is payable on demand. It is a short period loan.

Such loan are mostly taken by security brokers and other whose credit needsfluctuate

from day to day.

Cash Credit

This is the most popular method of WC finance and the most flexible arrangement from

the borrowers’ point of view. Under this facility, the debtor is allowed to withdraw funds

from the Bank up to the sanctioned credit limit. The credit limit gets renewed year after

year .He is not required to borrow the entire sanctioned credit once, rather he can draw

periodically to the extent of his requirements and repay by depositing surplus funds in his

CC account. Interest is payable on the amount actually utilized by the borrower.

Generally the Bank does not recall such advance until and unless the account becomes

NPA.

Overdraft

Under this facility, the borrow is allowed to withdraw funds in excess of his current

account balance up to a certain specified limit during a stipulated period against some

security. Though overdrawn amount is repayable on demand, they generally continue for

a long period by annual renewals of the limits. The borrower can withdraw and repay

funds whenever he desires within the overall stipulation. Interest is charged on the daily

balance subject to some minimum charges. The borrower operates the count through

cheques.

Purchasing or Discounting of bills

Under this facility the borrower can obtain credit from the Bank. The Bank purchases or

discounts the borrower’s bills. The amount provided under this facility is covered within the

limit of Bill purchased or Bill Discounting. In case of purchasing of bills the Bank becomes

the owner of the Bank but generally holds the bills as security for the credit. When the Bank

discounts the bills, the borrower is paid the discounted amount and the Bank collects the full

amount on maturity.

Table: 2.1

Table showing different types of lending (Year wise)

Amount in Crore

Total Loan Total Cash

Credit

Total

Overdraft

Discounting and

purchasing of bills

2006-07 16.83 2.20 0.70 1.02

2007-08 19.90 2.78 0.82 1.17

2008-09 20.45 3.15 1.10 2.02

2009-10 23.55 2.40 1.03 3.21

2010-11 26.20 3.50 1.87 3.80

Total 106.93 14.03 5.52 11.22

Source: Field survey 2012

The above table is showing the different types of lending operations performed by the

Canara Bank, Jorhat branch, which are ‘Loan Sanctioning’, ‘Cash Credit’, ‘Overdraft’

and ‘Discounting and purchasing of bills’. The table indicates that the bank has

sanctioned Rs. 106.93 crores in last 5 years where only Rs. 14.03 crores has given as a

cash credit, Rs. 5.52 crores has given overdraft and Rs. 11.22 crores in Discounting and

purchasing of bills. This means that the Bank does not give any importance to the other

types of lending rather than Loan sanctioning; as it is much profitable for the bank.

Mortgage

A Mortgage is a specific type of loan which is used to purchase a building. Mortgages are

long-term loans from 15 to 30 years in length, and they are secured with the value of the

asset being purchased, along with collateral from the buyer.

A loan to finance the purchase of real estate, usually with specified payment periods and

interest rates. The borrower (mortgagor) gives the lender (mortgagee) a lien on the

property as collateral for the loan.

2.4. FEATURES OF MORTGAGE

The main features of mortgage are:

A mortgage retains the right of redemption of the mortgaged property.

The property intended to be mortgaged must be specific.

The interest in the mortgage property is reconveyed to the bank on the

repayment of the amount of the loan along with interest thereon.

The bank gets, subject to the terms of the mortgage deed.

The actual possession of the property need not always be transferred to the

bank.

2.5. TYPES OF MORTGAGE

Simple Mortgage – This type of mortgage are mutual agreement that in case

of non-payment by the mortgagee to the mortgagor within the specified time,

the mortgage can cause the mortgaged property to be sold in accordance with

loan and have the sale proceeds adjusted towards the payment of the mortgage

money.

Conditional Sale – This type of mortgage entails the apparent sale of property

by the mortgagor to the mortgagee on a conditional basis, that on default by

mortgagor, the sale shall become absolute and complete. If the mortgagee

repays his loan, the sale shall become null and void.

Usufructuary Mortgage – This type of mortgage by an express or implied

term gives possession to the lender and gives him rights to accrue the rents on

income coming from that property as repayment for interest and Mortgage

money till the time repayment is complete. There is no time limit for payment

of the mortgage money.

English Mortgage – This mortgagor transfer the mortgaged property to the

mortgagee in entirely. However there is a condition that on complete

repayment of the money he will re-transfer the property back to himself.

Reverse Mortgage – This type of Mortgage involves lending money to senior

citizen against mortgage of their property (house) and there is no need or as

monthly installments.

Anomalous Mortgage – A mortgage that does not fall under the preview of

any of the mortgage type is called Anomalous Mortgage.

2.6. LOAN SANCTION AND DISBURSEMENT

The Canara Bank of Jorhat Branch Provides loans and advances to home loan, home

improvement loan, canara cash, canara mobile (vehicle),canara site loan, canara budget,

canara pension, teacher loan, swarna loan, canara rent, canara jeeven, Doctors choice,

education loan.

Table-2.2Table showing loan sanctioned under different heads.

Canara BankAmount in Crore

2006-07 2007-08 2008-09 2009-10 2010-11 TotalHome Loan 4.60 5.30 5.80 6.50 9.20 31.40Home Improvement Loan 1.90 0.60 0.80 0.20 0.75 4.25Canara Cash 2.20 3.20 2.40 2.60 4.50 14.90Canara Mobile (Vehicle) 2.60 3.90 3.80 4.20 4.30 18.80Canara Budget 1.30 2.00 1.80 0.75 1.20 7.05Canara Site Loan 0.30 0.20 0.50 0.90 0.80 2.70Canara Pension 0.25 0.60 0.85 0.30 0.15 2.15Teachers Loan 0.20 0.25 0.55 0.60 0.65 2.25Swarna Loan 0.00 0.00 0.00 0.50 0.00 0.50Canara Rent 0.60 0.85 0.80 1.20 1.50 4.95Canara Mortgage 1.20 0.60 0.85 1.20 1.30 5.15Canara Guide 0.00 0.00 0.00 0.00 0.00 0.00Canara Jeevan 0.08 0.23 0.20 0.35 0.05 0.91Doctors Choice 0.80 0.95 0.60 1.50 0.50 4.35Education Loan 0.80 1.22 1.50 2.75 1.30 7.57Total 16.83 19.90 20.45 23.55 26.20 106.93


The above table highlighted that in the year 2010-11 loan sanctioned to its borrowers

followed by the year 09-10.It is least in the year 2006-07. Similarly while analyzing the

different fields of loan sanction it is seemed that highest loan sanction under the heading

'Home loan' and it is followed by 'mobile vehicle;. It is least under the head 'canara

guide'.

Table2.3

Table showing total loan sanctioned and total loan disbursed

(Amount in Crore)

Year

Total Loan

Sanctioned

Total Loan

Disburse

Disbursement

Rate (%) Profit %

2006-07 16.83 11.55 68.63 12.58

2007-08 19.90 13.80 69.35 12.95

2008-09 20.45 14.30 69.93 13.15

2009-10 23.55 18.90 80.25 12.80

2010-11 26.20 20.80 79.39 13.80

Total of the 5 Years 106.93 79.35 74.21 65.28


The above table shows that loan sanction and total loan disbursed during the period of

study were Rs.106.93 crores and 79.35 crores respectively in the year wise analysis, the

loan were sanctioned to its loaners. It is followed by the year 09-10.It is least in the year

06-07. Similarly in the year wise the disbursement of loan it is observed that highest loan

disabused percentage is in the year 2009-10, while it is least in the year 2006-07. It may

be due to the fact that the bank authority took resolution to enhance loan sanction and

disburse in the recent years.

2.7. FACTORS AFFECTING LENDING OPERATION

Some of the main factors that affect the lending operation are described below:

Deposit Structure

A ratio of a bank’s time and savings deposits to total deposits (DEPOSIT) was used to

represent the proportion of total deposits that are sensitive to interest rate changes. It can

be argued that there is a positive relationship between DEPOSIT and lending in general

because time and savings deposits enhance the stability of lendable funds. Therefore,

banks need less liquidity and can invest more money in loans. It can also be argued that

there is a negative relationship.

Deposits are more interest rate sensitive and banks may choose to increase investments in

interest rate sensitive assets and to decrease investments in loans, Banks may choose to

invest in more investment securities like Government securities because their interest rate

movement more closely matches the interest rate movements on deposits, thus, reducing

interest rate risk. This may especially be true in the post-deregulation era that is

characterized by volatile interest rates. Banks could use adjustable interest rates on

lendings to make them more sensitive to interest rate movements.

However, reprising a loan can result in additional transaction costs to the bank and

transferring risk to a borrower may increase the likelihood of a loan default. It is not clear

which effect overshadows the other. Thus, the sign on the estimated coefficient is

indeterminate a priori.

Competition

The competition faced by an individual bank in a certain community or sector should

affect its investment decisions. This is particularly true if there are specialized lenders.

The major competitor of commercial banks in the non real estate farm loan market is

Production Credit Associations (PCAS). A commercial bank is likely to allocate less

money to agriculture relative to its total assets in areas where PCAS and other competing

commercial banks are very active. The number of alternative credit sources in the

community has previously been used as a proxy for competition, However, this does not

consider the size of the competitors.

In this study, the proxy for bank competition was based on the volume of assets of its

competitors in its market. A bank’s market area was delineated by county boundaries.

Although this might not be true in all cases, it has been found a reasonable assumption

under conditions where the study does not focus on local market characteristics and the

flow of funds. A competition index was computed that consisted of PCA assets and total

assets of the commercial banks operating in the same county, where the competition

index (COMPETITION) is a measure of the amount of competition faced by the bank in

its market area, with denoting lack of competition and I denoting maximum competition;

bank assets refer to the total assets of the bank; and total assets refer to all the combined

assets of PCAS and commercial banks operating in the county.

Equity

An important function of bank capital is to reduce risk, Koch discusses three ways in

which this is achieved. First, it provides a cushion for firms to absorb losses and remain

solvent. Second, it provides ready access to financial markets and thus guards against

liquidity problems caused by deposit outflows. Third, it constrains growth and limits risk

taking. A well-capitalized institution is in a better position to take on risk by investing

more in loans and less in safe assets like government securities. Its large equity base

would cushion the institution against large loan losses.

However, the decision makers of less capitalized institutions may choose a similar

investment strategy to increase expected profits, although at a greater risk. It is consistent

with this risk/return preference for them to invest in more risky assets such as loans

because of their higher expected returns. Thus, the estimated coefficient of the equity

variable, which was defined as the ratio of the bank’s total equity to its total assets

(EQUITY), is indeterminate.

Farm Risk

The ratio of the coefficient of variation of farm income to the coefficient of variation of

total income in each county was used as a measure of farm risk. It is expected that

counties with higher farm risk would attract less lending from commercial banks. Thus,

the estimated coefficient should be negative.

2.8. BENEFITS OF LENDING

Lending is the main business of a bank, and the benefits of lending are stated below:

1. Lending gives the bank a source to earn profit from with the deposited money.

2. Bank can give its customers interests that earn from the lending.

CHAPTER-III

INVESTMENT

3.1. MEANING OF INVESTMENT

The concept of investment has many meanings. Investment is the employment of funds

with the aim of getting return on it. It is the commitment of funds which have been saved

from current consumption with the hope that some benefits will receive in future. Thus, it

is a reward for waiting for money. Savings of the people are invested in assets depending

on their risk and return.

3.2. DEFINITION OF INVESTMENT

''Sacrifice of certain present value for some uncertain future value"

- SHARPE/ALEXANDER

"Purchase of a financial asset that produces a yield that is proportional to the risk

assumed over some future investment period"

- F. AMLING

"Investment aims at multiplication of money at higher or lower rates depending upon

whether it is a long term or short term investment, and whether or risk free investment"

3.3. OBJECTIVES OF INVETMENT

People make investment for a variety of purposes. The objectives of investments should

be understood before initiating the process of investment. Selection of investments should

rather be based on research of various factors. The major objectives of investment in

securities are as follows:

1. Income: The major objective of every investment is to earn income in the form of

dividend, yield or interest. Suitable securities are those whose prices are relatively stable

but still pay reasonable dividends or interest, such as blue chip companies. The

investment should earn reasonable and expected return on the investments. Certain

investments like bank deposits, debentures, bonds etc. carry fixed rate of return payable

periodically.

2. Capital Appreciation: The other important objective of investments is appreciation in

the capital invested over a period of time. Capital appreciation can be achieved in the

following three ways:

(a) Conservative Growth: Investors who seek to achieve conservative growth seek to

build an investment portfolio that will make money over the long term by capital

appreciation known as wealth building over time.

(b) Aggressive Growth: Investors who seek to achieve short term and long term capital

gains opt for aggressive growth in stocks. Current income from dividends is, of a low

priority and the investors are risk seekers.

(c) Speculation: An investor with speculation as an objective wants to maximize returns

by buying and selling shares and securities so often solely to make profit from short term

price fluctuations. Speculators do not expect to hold securities for long periods. High rate

of risk is involved with this objective.

3. Forms of Return: The returns expected from securities may be of two types:

(i) Periodic Cash Receipts: Cash dividends are payable as and when the board of

directors of the company decides to distribute the after tax earnings of the company to the

shareholders. In case of debentures, bonds, bank deposits etc. the coupon rate is payable

at the end of each specified period.

(ii) Capital Gain: The second component of return is the change in the price of

investment called the capital gain or loss. This element of return is the difference between

the purchase price and the price at which the asset can be or is sold.

The combination of periodic cash receipts and capital gain made on investments

constitute the total return on particular investment.

4. Safety and Security of Funds: Another important consideration making investments

is that the funds so invested should be safe and secure. The investment should be capable

for redemption as and when due.

5. Risk: The level of risk depends on the object of investment. An investor who expects

greater return should be prepared to take greater risk. By careful planning and periodical

review of the market situation, the investor can minimize his risk on the investments.

6. Liquidity: The liquidity of investments is another consideration to be kept in mind by

the investor. Before making the investment, the investor should consider the degree of

liquidity required. Certain securities are capable of being sold in the readily available

market and some securities may not be so liquid. The investors generally prefer securities

which ensure liquidity and marketability.

7. Tax Considerations: Before making the investments the investor should also take into

consideration the provisions of income tax, capital gains tax, wealth tax and gift tax Acts,

to minimize his tax burden and avail all tax exemptions available to him.

The investor should also keep in mind considerations like the extent of inflation,

diversification of portfolios, degree of risk and risk coverage, growth rate etc.

3.4. FEATURES OF IDEAL INVESTMENT PROGRAMME

The main features of ideal investment are as follows:

1. Safety: Be accomplished reasonably and should not be carried out in extremes because

over diversification is also undesirable.

2. Liquidity: A liquid investment is that which can be converted into cash immediately at

full market value in any quantity whatsoever; to ensure liquidity, the investor should keep

a part of his total investments in the form of readily saleable securities. A reasonable

amount of cash should always be kept in hand for transactions and contingencies.

Investment like real estate, insurance policy. pension fund, fixed lime securities etc. cane

ensure immediate liquidity.

3. Regularity and Stability of income Regularity of income at a stab and consistent rate

is essential in any investment programme. However, d stability of income is not

consistent with the other investment principle Monetary stability limits the scope for

capital growth and diversification.

4. Stability of Purchasing Power: investors should balance their investment

programmes to fight against any purchasing power instability. If money lent cannot earn

as much as rise in prices or inflation, the real rate return is negative.

5. Capital Appreciation: Capital appreciation has become a very imports principle in the

present days volatile markets. The ideal growth stock is the right issue in the right

industry bought at the right time. The investors should try and forecast which securities

will appreciate in future. It is an exceeding difficult job and should be done thoughtfully

in a scientific manner and not the way of speculation or gambling.

6. Tax Benefits: Every investor must plan his investment programs keeping in mind his

tax status. Investors should be concerned about the return on the investments as well as

the burden of taxes upon such returns. Real return are returns after taxes. Tax burden on

some investments are more whereas sod investments are tax-free. The investors should

plan their investments in such way that the tax liability is minimum.

7. Legality: Legal aspect of investments must also be kept in mind. Legal securities pose

many problems for the investors. Investors should be aware of the various legal

provisions relating to the purchase of investments. The safest way is to invest in the

securities issued by the UTI, the LIC or Post office National Saving Certificates. These

securities are legal beyond doubt at help the investor in avoiding many problems.

3.5. IDEAL INVESTMENT POLICY

The ideal investment policy

• Liquidity – Liquidity refers to the availability of cash when required. It is

important for all business. And as Banking business is depends on the confidence

of deposition, so if the banks’ investments are in liquid form, they can easily meet

the demand of the depositors for cash.

• Profitability – banks deal money with a view to earn profit. Therefore, the bank

should invest their surplus funds in such a way that it earn profit without any

sacrificing consideration of liquidity and safety. Thus the bank should invest in

productive assets. Higher the productivity of its investment, higher shall be the

profit of the bank.

• Safety – Bank should not overlook the safety principle while deciding the

investment of its surplus fund. In fact, the main banking principle is safety first. In

case a bank neglects the safety principle, it may endanger its very existence.

Hence, the loan granted by the bank should be fully secured by adequate

securities

• Principle of Salability of Securities – The bank should invest its fund in such

type of securities which can be easily sold in the market at the time of emergency.

For e.g. – if the bank invest its fund in unsafeable type of securities it may have to

suffer heavy losses in emergencies.

• Convertability and Shiftability – Bank should maintain a portion of their

investment in such assets whichcan be easily and quickly converted into cash in

time of need. Some assets should be shiftable or transfarable to other banks on the

central bank of the country for acquiring cash in case of an emergency or crisis.

• Principle of diversity – While making investment, the bank should see to it that a

major portion of its investable fund is not invested in a particular type of security

nor should it be advanced to particular type as possible invest its surplus fund in

different type of security. This means that bank should diversify their fund in

various fund in various type of investment.

3.6. TYPES OF INVESTMENT

Non-Corporate investments

There are a number of other avenues for investment such as deposits with commercial

cooperative banks, post office savings banks, National Savings Certificates, Provident

fund pension fund contribution, insurance, deposits with companies, purchase of real

estate, gold silver etc. There are other links of investment, more frequently resorted to by

companies, finale institutions etc. such as securities of the Government and Semi-

Government bodies, viz., Treasury, Government bonds, public sector unit bonds,

Government securities, etc.

Corporate Intendments

The major avenues of investment among corporate securities are equity shares and

preference shares, which are of ownership category and debentures and fixed deposits

from the public, which of debt category. Of these, preference shares debentures and

deposits are having a fixed interest we equity shares are of variable dividend. The risk is

in the case of fixed despite of companies as they are unsecured, while equity shares are

of high risk and high return category.

Deposits with Banks

Among the non-corporate investments, the most popular are deposit with banks such as

current accounts, savings accounts and fixed deposits. On current account deposits, no

interest is paid as these are meant for regular transactions by businessmen and companies.

Savings deposits are those on which bank pays a small interest on the deposits. There is

also the category of fixed deposits, which has varying characteristics. Thus, fixed

deposits may be recurring deposits wherein savings are deposited at regular intervals or

fused deposits of varying maturities or with varying notice periods such as 7 days, 15

days, etc.

Instruments of Post Offices

The investment avenues provided by tile post of flees are generally non-marketable, as

they ate the savings media. The only exception is Indira Vikas Patra, which are bearer

bonds transferable by delivery. The major instruments of P.O. enjoy tax concessions such

as exemption of investment contribution from tax or interest income from tax or both up

to certain limits.

Public Provident Fund

The PPF deposits can be made in monthly installments with a minimum of Rs. 100 and a

maximum of Rs 60000 per annum. These deposits carry cumulative interest of 8%

credited to the account. The account has a maturity period of 15 year. It is not

transferable, but has nomination

NSS

Deposits made in NSS were completely tax exempt, however, is taxable at the time of

withdrawal. Interest is credited to the account at the end of each month at the rate of 10%

per annum.

Indira Vikas Patra

These are bearer bonds in denominations of Rs. 200, Rs. 500, Rs. 1000 and Rs. 5,000

sold at half the face value. These have a maturity period of 6-7 years carrying a

compound interest of 12.25%. These are freely transferable by delivery as these ate

bearer bonds. These are now discontinued

Kisan Vikas Patra

These are certificates in denomination of Rs. 1,000, Rs. 5000, 10,000 and Rs, 50,000,

which will double in 8 years 7 months giving a compound rate of interest. These can be

encashed after a specific years for specified amounts of money but with some

limitations. This has nomination facility but is not transferable

Public Sector Bonds

There are two categories of these bonds, namely, tax-free and taxable. The tax-free bonds

are 7 or 8% bonds issued for Rs. 1,000; interest compounded half-yearly and payable

half-yearly. They have a maturity period of 7 to 10 years with the facility for buy-back

sometimes provided to small investors up to certain limits. The taxable bonds yield 13%

or above, compounded half yearly and payable half-yearly. They have normally a face

value of Rs. 1,000 and hare buy-back facilities similar to taxable bonds.

Investment table of Canara Bank, Jorhat branch for of last 5 years.

Amount in Crore

Consumer

Loan

Commercial

Loan

Forex

Investmen

t

OthersOverall

Profit (%)

2006-07 6.20 16.60 3.60 4.20 14.90

2007-08 5.10 13.80 3.20 3.80 14.80

2008-09 5.60 8.70 2.80 3.10 13.35

2009-10 4.80 9.00 2.60 1.90 13.10

2010-11 3.30 8.25 2.10 2.60 12.69

25.00 56.35 14.30 15.60

Source: Field Survey 2012

Canara Bank of Jorhat branch invests its money in deferent sources as shown in the

above table. From the table, it is clear that the bank invests most of its money in

consumer and commercial loans where some part of its money is also invested in Forex

and other investment, as there is much risk than providing loans. This means that Canara

Bank is investing in the market in a secure way to provide maximum security to their

customers money.

In the last five years, Canara Bank invested Rs. 25 Crores in Consumer loans and Rs.

56.35 crores in commercial loans where only Rs. 14.30 crores and Rs. 15.60 crores have

been invested in Forex and other investment respectively.

3.7. FACTORS AFFECTING INVESTMENT DECISIONS

Investment decisions are influenced by a number of factors. Some of these factors are

discussed as follows:

1. Amount of Investment- The amount of funds available for investment will influence

the form of investment. In case of an individual investor the amount may be small. There

are a number of avenues for making such investments like bank deposits, mutual funds,

etc. If the ingestible funds are more than transferable financial securities like shares,

debentures etc. may be purchased. Investment in real estate can be thought of if the

amount is large.

In case of business enterprises the surplus funds are comparatively large so the avenues

may be different. Sometimes memorandum of an institution may specify the areas where

investment can be done.

2. Purpose of Investment- The purpose of investment must be very clear before making

it. The purpose makes one think in the same way. The object of an individual investor

may be Jo save lax, fixed return, appreciation in value of securities etc. If the purpose is

to save tax then master equity linked schemes, public provident fund, general provident

fund etc. may be the avenues of investment. Similarly other factors will be taken into

account while making an investment.

The purpose of an enterprise investor will be different than that of an individual investor.

A business enterprise may like lo employ idle funds for short period to earn some

income. If the management wants lo earn higher returns then speculative securities will

be preferred. So the purpose of investment greatly influences such decisions.

3. Type of investment- Another important factor which influences investment decision is

the selection Or securities. A decision about where to invest is very important. A number

of securities are available in the market and which one suits the investor’s objective

should be taken up. Varied securities may be taken up to sail different needs.

4. Timing of Purchase- The time of purchasing securities is most important. A proper

timing of purchase and sale of securities can bring profit to the investor. The securities

should be purchased when their prices are low and should be sold when prices have

arisen.

3.8. BENEFITS OF INVESTMENT

The main benefits of Investment for a bank are as follows:

1. Banks can exchange its current funds for future benefits.

2. Banks get benefit over a series of time by investing the money for a long time investments.

3. In secure investments, banks also can secure their money and earn profits.

4. Overall, bank can utilize its money through the investment.

CHAPTER-IV

4.1. RISK

Meaning of Risk: The risk is the possibility of losses associated with diminution in the

loan quality of borrowers or counter parties. In a bank's portfolio, losses stem from

outright default due to inability or unwillingness of a customer or counter party to meet

commitments in relation to lending, trading, settlement and other financial transactions.

Alternatively, losses result from reduction in portfolio value arising from actual or

perceived deterioration in loan quality. The risk emanates from a bank's dealings with an

individual, corporate, bank, financial institution or a sovereign.

There is always scope for the borrower to default from his commitments for one or the

other reason resulting in crystallization of risk to the bank. These losses could take the

form outright default or alternatively, losses from changes in portfolio value arising from

actual or perceived deterioration in loan quality that is short of default. Risk is inherent to

the business of lending funds to the operations linked closely to market risk variables.

Causes of Risks: A number of factors which can cause risk in the investment arena are

given below:

1. Wrong method of investment

2. Wrong quantity of investment

3. Wrong Timing of investment

4. Interest rate risk

5. Nature of investment instruments

6. Nature of industry in which the company is operating

7. Creditworthiness of the issuer

8. Maturity period or length of investment

9. Terms of lending

10. National and International factors etc.

4.2. RISK AND THEIR TYPES

Risk associated with bank lending:

Banks mainly faces three kind of risk, which has impact on profitability of the

bank. These risks are

• Credit risk

• Market risk

• Operational risk

Credit risks, basically is the major risk which is faced by the bank on account of their

business activity, which including the lending to corporate world, individual bank,

another bank or financial institution.

Credit risk is of two types:

• Borrower risk

• Portfolio risk

Borrower risk may be the possibility of that a borrower will fail to meet his

financial obligations in accordance with agreed term.

Portfolio risk arises due to credit concentration/ investment concentration i.e. most of

the credit is given to only one type of group and the possibility of default.

Market risk is the variability in the profitability of the firm due to change in market

variables. This is manly of three types.

• Interest rate risk

• Exchange rate risk

Interest rate risk: the risk in the erosion of earning due to variation in the interest rate

within the time period is referred as interest rate risk.

Exchange rate risk: this risk is of two type

• Transaction risk

• Translation risk

Transaction risk: is the risk basically arises due to the fluctuation in the price of a

currency, upward or down ward; result in a loss on a particular transaction.

Translation risk: in a situation of a translation the balance sheet of a bank affected

adversely due to exchange rate movement and change in the level investment or

borrowing in foreign currency even without having translation at a particular time.

Liquidity risk: liquidity risk arises out of the possibility that would not be able to meet its

financial obligation as they become due for the payment. The risk basically arise due to

mismatch between the cash inflow or out flow of the funds or funding the long term asset

term asset by short term liability. Surplus liquidity also is the loss to the banks, as the

money is not used to raise the income to the bank.

4.3. RISK ANALYSIS AND MITIGATION

Risk type Analysis and mitigation

Promoter/Sponsor

risk

The experience and qualification of the promoters.

The capacity and track record of the promoter companies.

The market reputation of the promoters.

Clearance/

approval risk

The company has obtained clearance and approvals from various

authorities for the project like environment clearance,

commencement of business certificate, incorporation certificate etc

Financial risk-

Equity

The adequacy of resources of the promoters to fund the necessary

promoter’s contribution.

The sources of equity requirement of the proposal.

Financial risk-

debt

The risk of raising funds through various sources of debt.

The acceptance of the loan proposal of the company by the Bank

based on its satisfactory credit track record and strong financial

position.

Cost risk The risk of cost overrun and insurance cover of the project

Demand risk Market growth enhancing demand for the concern’s products

Sales opportunity for the business concern

Foreign exchange

risk

Fluctuation of Indian rupee against foreign currency

Payment by the company towards imported components

Hedging facility taken by the borrower

Interest rate risk The interest rates are in line with current market scenario or not

The sensitivity for increase in interest rate and the ability of the

company to service its debts

Force Majeure

risk

Unexpected risk of flood , earthquake etc

Insurance cover obtained by the firm

Risk of change in

law

Modification, repeal or enactment of any laws

Change in any consents, approval or license

Change in interpretation or application of Indian Law

4.4. RISK POLICY

• Bank has risk policy document approved by the Board. The document include risk

identification, risk measurement, risk grading/ aggregation techniques, reporting

and risk control mitigation techniques, documentation, legal issues and

management of problem loans.

• Risk policies defined target markets, risk acceptance criteria, loan approval

authority, loan origination, maintenance procedures and guidelines for portfolio

management.

• The risk policies approved by the Board communicated to branches/controlling

offices. All dealing officials should clearly understand the barne's approach for

loan sanction and are held accountable for complying with established policies

and procedures.

• Senior management of a Canara bank shall be responsible for implementing the

risk policy approved by the Board.

4.5. RISK STRATEGY

Each branch of Canara bank should develop, with the approval of its Board, its own risk

strategy or plan that establishes the objectives guiding the Canara bank's credit-granting

activities and adopt necessary policies/ procedures for conducting such activities. This

strategy should spell out clearly the organization’s loan appetite and the acceptable level

of risk -reward trade-off for its activities.

The strategy would, therefore, include a statement of the Canara bank's willingness to

grant loans based on the type of economic activity, geographical location, currency,

market, maturity and anticipated profitability. This would necessarily translate into the

identification of target markets and business sectors, preferred levels of diversification

and concentration, the cost of capital in granting loan and the cost of bad debts.

4.6. RBI GUIDELINES ON RISK MANAGEMENT- RISK MODELS

The increasing importance of risk modeling should be seen as the consequence of the

following three factors:

• Banks are becoming increasingly quantitative in their treatment of risk.

• New markets are emerging in loan derivatives and the marketability of existing

loans is increasing through securitization/ loan sales market."

• Regulators are concerned to improve the current system of bank capital

requirements especially as it relates to risk.

The potential benefits from risk management are:

• supporting strategic and business planning;

• supporting effective use of resources;

• promoting continuous improvement;

• fewer shocks and unwelcome surprises;

• quick grasp of new opportunities;

• enhancing communication between Schools and Departments;

• reassuring stakeholders;

• helping focus internal audit programme; etc.

CHAPTER-V

5. DATA ANALYSIS

5.1. DATA ANALYSIS OF THE CUSTOMERS

1. Which environmental forces influenced you the most to choose your bank?

Environmental forces No. of respondents %

Reputation 6 20%

Nearness 4 13.33%

Commercial 8 26.67%

Service 5 16.66%

Friends/Family 4 13.33%

Others 3 10%

Inferences:

26% customer choose Canara bank for the ‘Commercial’ reason following by 20% for its

Reputation, and 13.33% customers are involve with Canara Bank for both Service and

Nearness while 10% for other reasons.

2. Are you satisfied with the service and loan procedure of Canara Bank ?

Response No. of respondents %

Yes 19 63.33%

No 7 23.34%

Can’t Say 4 13.33%

Inferences:

The above data shows, 63.33% customers are satisfied with Canara Bank services where

23.34% customers are unsatisfied because of lack of responses of Canara Bank staffs.

And other 13.33% stay neutral in this question.

3. Have you taken any loan(s) from Canara Bank ?


Yes 13 43.33%

No 17 56.66%

Inferences:

43.33% customers have taken loan from the Canara Bank where 56.66% yet haven’t take

any loan from the bank. The reason behind it are vary customer to customer e.g. Lack of

knowledge, Not needed, or Critical policy etc.

4. The procedure of loan is:

Procedure of loan No. of respondents %

Easy 6 20%

Critical 24 80%

Inferences:

Most of the customers (80%) of Canara Bank, said that the Loan procedure of the bank is

critical where 20% said the procedure is easy.

5. Do you pay the installment of loan regularly?


Yes 24 80%

No 6 20%

Inferences:

The data shows that the 80% customers pay their installments regularly where 20% are

unable to pay the installment in time.

6. Does the bank make any extra charge for the late payment of the installment?


Yes 26 86.67%

No 4 13.33%

Inferences:

The above data reveals that the Canara Bank put some extra charges for the late payment

of installments by the customers for which 86.67% customers respond ‘Yes’ and 13.33%

said ‘No’ in this question.

7. Do you wish to take any other loan from the Canara Bank?


Yes 25 83.33%

No 5 16.67%

Inferences:

83.33% customers said that they will take loans from the Canara bank in future which

shows that even there are some critical procedure in sanctioning and disbursing the loan

but they got enough help from the bank in the whole procedure. But 16.67% customers

are not willing to take any other loan from the bank.

8. Do you wish to change your bank in term of taking loan(s)?


Yes 9 30%

No 21 70%

Inferences:

70% customers don’t want to change their bank where 30% customers want better service

for which they want to change their account in another bank.

9. If yes, what is the reason?

Reason No. of respondents %

Critical process 10 33.33%

Long procedure 12 40%

Lack of response 8 26.67

Inferences:

From the above table I found that 33.33% customers are want to change Canara Bank for

the critical process of the loan sanctioning, 40% people want to change the bank for the

Long procedure of loan sanctioning and disbursing process where Lack of Response of

the Bank staffs is the reason of 26.67% customers.

5.2. DATA ANALYSIS OF THE BANK STAFFS

1. Rate the performance of Canara Bank in Jorhat Branch:

Performance No. of respondents %

Poor 1 4.35%

Average 6 26.09%

Good 14 60.86%

Excellent 2 8.70%

Inferences:

Most of the staff rated the performance of the Canara Bank good (60.86%), following by

26.09% said Average, 8.70% rated Excellent where 4.35% also rated the performance

Poor.

2. Rate the Growth of Canara Bank in Jorhat Branch:

Growth rates No. of respondents %

Poor 0 0%

Average 5 2.17%

Good 17 73.91%

Excellent 1 4.35%

Inferences:

Above data shows that most of the staff said that the growth of the bank is Good

(73.91%) in the town, 1 staff said Excellent (4.35%), and 5 staff rated Average (2.17%)

where no one said the growth of the Canara Bank is Poor.

3. Where the Canara Bank invest its money most?

Source Respondents %Consumer Loan 11 47.83%Commercial Loan 12 52.17%Forex Investment 0 0%Other Investment 0 0%

Inferences:

According to the above data, the most of the money of Canara Bank is invested in the

Commercial Loan following by the Consumer Loan but in Forex and Other investment,

the bank do not pay much attention as there is lower percentage of return than the

consumer and commercial loan.

4. In which investment of Canara Bank has maximum Risk:

Source Respondents %Consumer Loan 5 21.74%

Commercial Loan 7 30.43%Forex Investment 8 34.78%Other Investment 3 13.05%

Inferences:

The data about risk shows that there is maximum risk in the Forex investment (34.78%)

following by Commercial Loan (30.43%), Consumer Loan (21.74%) and only 3 staff said

that the Risk is in other investment (13.05%).

5. Does the Canara Bank take any measure for repayment of loan in time?

Response No. of respondents %Yes 23 100%No 0 0%

Inferences:

From the above table I found that Canara Bank takes some measures for the repayment of

the loan if somebody not will to pay it in time. As all the staff said Yes in this question.

CHAPTER-VI

6. SUMMARY

In the forgoing chapters, the organization and management of Canara Bank, Jorhat

Branch, lending, Investment and risk policies of Canara Bank, Jorhat Branch etc were

studied.

This chapter deals with summary, conclusion and suggestion on the basis of findings of

the study and also recommended some suggestion for the betterment of Canara Bank,

Jorhat Branch can be removed. The suggestion frame work is outcome of the data and

information analyzed for the study.

The study is primarily based on the information collected from the Canara Bank, Jorhat

Branch. The main source of the information were annual report, audit report, journals,

magazines of the branch.

This has been supported by the information gathered from the discussion from the senior

officials of Canara Bank, Jorhat branch. Apart from these the viewer of the others

employees were also taken into consideration. Moreover data and information were also

collected from the library of C.K.B Commerce College, Jorhat, District library of Jorhat.

Data and information collected were properly tabulated and analyzed with the help of

simple statistics and ultimately inferences were drawn there from.

Chapter I: is introductory in nature. It consists of meaning of banking, history and

growth of Canara Bank, Jorhat Branch, objectives of the study, importance of the study,

research methodology, hypothesis, layout of the study.

Chapter II: is prepared to discuss the Lending process of Canara bank. It consists of

Meaning of Lending, Types of Lending, Method of lending, Meaning of mortgage,

Feature of mortgage, Type of mortgage, Factors affecting lending operation, and the

related tables.

Following findings are shown for the study of lending in above chapter:

Lending is the main business of the banking institute. And Banks lend money in

various forms for every business activity.

There are so many risks in lending money; therefore, banks have their own

method of lending to secure the return.

The major lending types are, Liquidity, Cash Credit, Overdraft and Purchasing or

Discounting of bills

The following suggestion are made after study the chapter:

As lending became the main business for banks, they must reduce the formalities

and make it simple to encourage the customers.

The system has to be quite convenient to operate as banks to maintain only one

account for all transactions of the customers.

Chapter III: is consists of entire investment process of Canara Bank, Jorhat branch.

Meaning of investment, Feature of ideal investment, Ideal investment policy, Types of

investment, Factors affecting investment decision and the related tables have been

included.

The main findings of the above chapter of investment are:

Investment is the process of multiplication of money. Therefore, bank invests the

money deposited by the consumers in various sources to gain profit and give

some interest to the depositors.

The study shows that bank invests most of its money in consumer and commercial

loan as there is less risk than other investments.

Amount, purpose and type of investment are some main factors that affect the

investment process of bank.

The following suggestions are made for the chapter:

The main objective of investment is to earn money but bank should always keep

in mind that the entire money it used to invest is its depositors’ and bank should

give them the security that they never have to lose their money.

Bank should not invest a huge portion of its depositors’ money in very risky

sources where they might have to lose money.

Chapter IV: is consists of the risks of lending and investment of Canara Bank, Jorhat

branch. The chapter also included with the Meaning of risk, Causes of Risk, Types of risk

faced by the bank and Steps to manage risk.

The following findings are made for the chapter:

To earn money bank has to invest and in every investment there is some risk.

Bank has their own policy to reduce the risk of losing money in investing.

The suggestions are made from the study:

As to run the business banks must have to take risks but they should always keep

trying to improve their risk policy and risk strategy.

Bank must have to follow the RBI guidelines to reduce the risk to lose money.

CHAPTER-V: is consists of Summary which also included, Major Findings, Suggestion,

Limitation and Conclusion

The major findings found from the chapter:

Most of the customer influenced to choose the Canara Bank for the commercial

reason and as Canara Bank is a commercial bank it is good for the bank.

Most of the customers of the bank have not taken any loan from the yet. As there

are many reason shown by the customers in the survey from which the main

reason was lack of proper knowledge about the loan process.

Suggestions that are made from the study are:

Canara Bank must have to improve its service towards the customers.

Canara Bank has to make some informative steps for the customers to give the

proper knowledge of the loan procedure.

According to the staff, there is maximum risk in the forex investment for which

the bank should pay some attention and make some secure investment.

6.1. MAJOR FINDINGS

The major findings from the study are found that,

Most of the customer influenced to choose the Canara Bank for the commercial

reason and as Canara Bank is a commercial bank it is good for the bank. The

reputation in this question comes 2nd, which shows that Canara Bank is servicing

well the customer in the town. Nearness and Family/friends comes in 3rd for

choosing Canara Bank by customers as the bank is situated in the main business

place of the town while 10% customer influenced by other reasons.

63.33% customers said that they are satisfied with the services of the bank while

23.33% customers said that they are not satisfied with the bank and another

13.33% customer didn’t answered the question which is not a good result for the

Bank.

Most of the customers of the bank have not taken any loan from the yet. As there

are many reason shown by the customers in the survey from which the main

reason was lack of proper knowledge about the loan process.

Every bank has their own procedure for loan sanctioning as the Canara Bank also.

Most of the customers of the bank found the process critical where 20%

customers said that it’s the loan procedure is easy as there will always be some

proper paper works which is necessary for the bank.

From the study, I found that most of the customers are paying the installments

regularly. But about 20% customers are failed in it for which they have to pay

some extra charge to the bank.

Even there are some critical paper works and long procedure of the loan

sanctioning process I found that maximum customers that have taken loan, want

to take another loan in future from the bank.

Canara Bank has some goodwill for which 70% customers don’t want to change

their bank but the point is that 30% customers want to change the bank for better

service as they believe Canara Bank has much Critical process, Long procedure

and also lack of response by the bank/staffs.

From the data from the staff of the bank, I found that only 1 staff said that the

performance of the bank in the town poor but all others gave positive responses as

14 staff said ‘Good’, 6 staffs said ‘Average’ while 2 staffs said ‘Excellent’.

The overall growth of the bank is good as responded by the staff. There is no one

rated the growth of the bank ‘Poor’, which is good for the bank but as the data is

collected from the bank staff it is also noteable that no staff will rate their

organization poor.

According to the staff most of the money is invested in the Commercial loan and

Consumer loan where only a small portion of the money is invested in the Forex

and Other Investment as there is least return chance from these sources.

The study shows that there is maximum risk in the Forex Investment where

Commercial Loan comes in 2nd following by consumer loan and other

investments.

As in the customer survey, I found that Canara Bank take some measures for the

repayment of the loans, the staff of the bank also agreed in the question. As all the

banks have some own procedure for repayment of the loan.

6.2. SUGGESTION

Most of the customer may have chosen the bank for the commercial reason but

the percentage is only 26.67%. And as the Canara bank is a commercial bank it

has to take some necessary steps to raise the percentage.

63.33% customers are satisfied with the service and loan procedure of the bank

but 23.33% customers are not satisfied and 13.33% customers have not responded

in this question which means Canara Bank must have to improve its service

towards the customers.

I found that most of the customers have not taken any loan from the bank for the

lack of proper knowledge and as the loan is a main source of investment of the

bank, Canara Bank has to make some informative steps for the customers to give

the proper knowledge of the loan procedure.

Most of the customers that taken loans from the bank want to take further loans

but still some customers not wish to take any other loans, where bank must have

to find out the reason behind it and also have to try to solve the problems.

30% customers want to change their bank in term of loans as they believe the

procedure is critical and also lengthy. So, the bank should look after the matter

seriously to stop the outgoing of the customers.

From the data of the staffs I found that Canara Bank invest their money in

different sources like Consumer Loan, Commercial Loan, Forex Investment and

some other investments. But according to the staff there is maximum risk in the

forex investment where the bank should pay some attention and make some

secure investment.

CONCLUSION

The scenario is becoming highly competitive in every sphere of banking activity- more so

in respect of lending. Processing time and interest rates are major influencing factor for a

bank to satisfy the customers and stay in the market.

Even the Canara Bank is growing well in the Jorhat town and as well as in the Country,

still they have to improve their services towards the customer. They have to adopt some

new kind skills to manage the bank to float in this competition market.

Canara Bank is maintaining well its transactions; it is investing its money in a good and

secure way which is very much important for the customers to stay with the bank.

The future of the bank is depend on technology, marketing, logistics. Therefore Canara

bank has to prepare themselves for it.

Canara bank has to bring some new kind of management skills to manage its portfolio,

which are:

To manage its portfolio Canara Bank has to understand that:

Growth comes from repeat business

Repeat business from relationships

Relationship from customers

Customers relationship based on trust

Trust emanates from customers faiths/beliefs and,

Lastly maintaining harmony with the environment.

BIBLIOGRAPHY

Banking and Financial System

By: S.N Maheshwari, R.R. Paul

Kalyani Publisher.

Mordern Banking of India

By: Dr. V. A. Avadhani,

Himalaya Publishing House

Banking Law and Practice

By: B.S Khubchandal

Anmol Pub. Pvt. Ltd.

Indian Financial System

By: Shashi K. Gupta, Nisha Aggarwal, NeetiGupta

Investment and Security Market in India

By: Dr. V. A. Avadhani

Investment and Protfolio Management

By: M. Ranganatham, R. Madhumathi

Pearson Education

ANNEXURE-I

QUESTIONNAIRE FOR THE CUSTOMERS OF THE CANARA BANK

Name : _____________________________________________

Address : _____________________________________________

Email : _____________________________________________

Contact No. : _____________________________________________

Age : _____________________________________________

Gender : _____________________________________________

Qualification : _____________________________________________

Occupation : _____________________________________________

Income : _____________________________________________

Marital Status : _____________________________________________

1. To which bank you are the customer : ________________________________

2. For how long you are with the bank : _________________________________

3. Which product or service you are taking from Canara Bank?

_______________________________________________________________

4. Which environmental forces influenced you the most to choose your bank?

Reputation [ ] Nearness [ ] Commercial [ ]

Service [ ] Friends/Family [ ] Others [ ]

5. Are you satisfied with the service of Canara Bank?

Yes [ ] No [ ] Can’t Say [ ]

6. Have you taken any loan(s) from Canara Bank? Yes [ ] No [ ]

If Yes, what kind of loan(s)? _______________________________________

How much ? ____________________________________________________

7. The procedure of loan is: Easy [ ] Critical [ ]

8. Do you pay the installment of loan regularly? Yes [ ] No [ ]

If no,

What is the reason for late? _______________________________________

9. Does the bank make any extra charge for the late payment of the installment?

Yes [ ] No [ ]

10. Do you wish to take any other loan from the Canara Bank?

11. Do you wish to change your bank in term of taking loan(s)?

If yes, what is the reason?

Critical process [ ] Long procedure [ ] Lack of response [ ]

12. Do you have any suggestion for the bank?

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

Signature

_____________________

ANNEXURE-II

QUESTIONNAIRE FOR THE BANK STAFFS OF THE CANARA BANK

Name : ____________________________________________________

Designation : ____________________________________________________

For how long you are servicing in Canara Bank? __________________________

1. Rate the performance of Canara Bank in Jorhat Branch:

Poor [ ] Average [ ] Good [ ] Excellent [ ]

2. Rate Growth of Canara Bank in Jorhat Branch:

Poor [ ] Average [ ] Good [ ] Excellent [ ]

3. Rate the different investments of the Canara bank Jorhat Branch from Minimum [1] to Maximum [4]:

[1] [2] [3] [4]

Consumer Loan [ ] [ ] [ ] [ ]

Commercial Loan [ ] [ ] [ ] [ ]

Forex Investment [ ] [ ] [ ] [ ]

Other Investment [ ] [ ] [ ] [ ]

4. Rate the Risk in different investments of the Canara bank Jorhat Branch from Minimum [1] to Maximum [4]:

[1] [2] [3] [4]

Consumer Loan [ ] [ ] [ ] [ ]

Commercial Loan [ ] [ ] [ ] [ ]

Forex Investment [ ] [ ] [ ] [ ]

Other Investment [ ] [ ] [ ] [ ]

5. Does the Canara Bank take any measure for repayment of loan in time?

Yes [ ] No [ ]

Signature

Canara Bank Project 2 Nam

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Transcript of Canara Bank Project 2 Nam