Project on Credit Management 222

INTRODUCTION TO BANKING

As there is a origin for everything for instance an ancient mused about early of life

philosophy was born. The first roman decided to build a road instead cutting a path through the

jungle. Engineering came in to existence one day is primitive times, A human being lend to

another then passed for money and his original investment plus a little more banking has started.

Banks has business organization selling bank services bank continuously asses and

reassess how a customer view a bank services. What are new and emerging for customer

aspiration and these can be satisfied.

Which nationalization of major bank is 1969, in such serving the socio economic

objective has assume as much importance for the bank as these role of traditional commercial

banker the role and responsibility assume by the banks today are distinctly different from those

of other industries.

Owning to social commitment banks execute service to a large number of customers

without looking in to commercial viability, involvement of banks in social fulfillment, poverty

alleviation programmed, and rural development. Priority sector lending, extending banking to un

banked areas and providing a plethora of services to all segments of the population etc. has thus

largely been successful in meeting the objective of nationalization and natural.

Banks are back bone of society. A bank must meet the financial needs of a customer by

acting as a custodian of his asset. Providing credit facilities and assisting him to speedily out

through financial transaction of one type or another. Banking when you come to think of it. Are

people it is not figure files and ledger.

Bank services need considerable improvement on an emergent basis. And the time has

come for bank to look inward to find out what is the nature and quality of the product they sell,

what is the product is been demanded by the customer.

Banks have a social purpose. Banks have been interested with a worthy cause.

Banks belongs to the nation only through people, banks future prosperity and the extent

for its participation in the country’s economic advancement rest ultimate in customer hands.

A banker is a dealer in money and credit.

The business of banking consist of borrowing and lending. Banks acts as an financial

intermediary between saver(lender) and investor(borrower) by accepting deposits of money from

a large number of customers and key factor will always remain customer. It would be unrealistic

today to believe that banks are mere financial institutions. Working for profit, banks essentially

are now social organization, rendering financial services to sub serving the social economic

objective of the society.

Services to the society means servile to customers present and future from the point of

view, the prime functions of banks of view, the prime functions of banks can be defined as the

creation and delivery of customers needed services in satisfying manner. Therefore a bankers

bank is to identify this customer and these needs.

Lending a major portion of a accumulated “pool” of money to those who wish to barrow.

The Indian companies act defines the term banking as “ accepting for the sake of lending

or investment of deposits of money from the public, repayable on demand or otherwise withdraw

and able by cheque draft or otherwise”.

FUNCTIONS OF BANKING

The main functions under section 5 and 6 act are:

1. Borrowing of money in the form of deposits

2. Lending or advancing of money in the form of different types of loan.

3. The drawing making accepting discounting buying and selling collecting and dealing in

bills of exchange promissory notes coupons drafts bill of lading railway receipts warrens

debentures certificates securities both negotiable and non negotiable.

4. The granting and issuing of credit traveler’s cheque etc.

5. The acquiring holding issuing on commission underwriting. Dealing in stock funds shares

debentures bonds securities of all kinds.

6. The purchasing and selling of bond scrip’s and other forms of securities on behalf or

others negotiations of loans and advances. The receiving of all kinds of bonds or

valuables on deposit or for safe custody or otherwise.

7. Providing safe deposits of valuable.

8. Collecting transmitting of money and securities.

9. Buying and selling of foreign exchange including foreign notes.

IMPORTANCE OF BANKING

The economic importance of banking is as follows

Banks mobilized the small scattered and idle savings of the people make them available

for productive purposes.

By accepting the savings of the people banks provide safety and security to surplus

money for depositors

By offering attractive interest on savings of the people with the banks, banks promote the

habit of thrift and saving among the people.

Banks influence the rate of interest in the money market; through the supply of money

banks exert a powerful influence on the interest rate.

Banks provide a convenient and economical means of payment, the cheque, debit card

and credit card system introduced by bank is of great help for making payments.

Banks provide a convenient and economical means of transfer of funds from one place to

another, banks drafts and demand draft are commonly used for remittance of funds; mail

transfer and telegraphic transfer are also used for transfer of funds.

HISTORY OF MODERN BANKING IN INDIA

Pre-nationalization period: the history of modern banking in India dates back to the last quarter

of 18th century. During this period the English agency house of Bombay and Calcutta started

banking business in India. The set up the bank of Hindustan around 1770 followed by set up of

quasi government banking institution like presidency bank of Bombay is 1840. In 1921 and early

20th century, the Swedish movement inspired starts banks to India. The India banks were

established during this period in 1935 the reserve bank of India was established as central bank

for regulating and controlling the banking business in the country. Soon after independence the

reserve bank was nationalized in September 1948.

Post nationalization period: On account of top sided growth of the banking system and to bridge

the gap between a few industrial houses and banks the scheme of social control was imposed on

banks with effect from Feb.1.1969 it resulted setting up of national credit council for more

equitable distributors of banks more broad based. As a result the government resorted to more

radical measures by nationalizing 14 major banks on July 1969, later on April 1980, six more

banks were nationalized to achieve the objectives.

Present scenario of banking industry: The Indian banking can be broadly categorized into

nationalized (government oriented) private banks and specialized banking institution.

The RBI acts as a centralized body monitoring any discrepancies and short coming is the

system. Since the nationalization of the banks in 1969 the public sector bank have acquired a

place of prominence and has then seen tremendous progress.

The need to become highly customer focused the slow moving public sector banks to

adopt a fast track approach.

NEW GENERATION BANKING:

The liberalized policy of government of India permitted entry of private sector in

banking, the industry has witnessed the entry of new generation private banks. The major

parameter that distinguishes these banks from all the other banks in Indian banking is level of

services that is offered to the customer, verifying the focus has always being centered the

customer understanding his needs and delighting him with various configurations of benefits and

a wide portfolio of production and services. The population of these banks can be gauged by the

fact that is a short span of time these banks gained considerable customer confidence.

INTRODUCTION TO CO-OPERATIVE BANKING

The co-operative credit system was introduced in India in1904, when the co-operative

credit society act was passed. The institutional source of credit for agriculture and related

activities was very inadequate at that time. The money lenders would provide some credit at very

high rates of interest. The co-operative banks were expected to substitute such unorganized

money market agencies and provide short and long term credit at reason rates of interest. It was

expected that they would co-ordinate the activities of unorganized segments of India money

market.

Subsequent to the adoption of economic planning in 1951, co-operative banks were

expected to play a crucial role in achieving agriculture and rural development. Before the

nationalization of commercial banks the co-operative banks were only the substitute for money

lender and other informal sector lenders but after nationalization and creation of regional rural

banks and NABARD their relatives share declined.

Co-operative banks in India,(with their networks spread over remote rural areas and a

large number of smaller towns) have historically played a major role in mobilization of domestic

savings for economic development of country.

They have provided the farmers and non-farmers entrepreneurs with needed credit

support. These institution have also contributed significantly to private formation is agriculture

and accelerated the pace of distribution of farm inspect(NABARD2002)

Co-operative banks are promoted to meet the banking requirements of consumer they are

established not only in the urban areas but also in the rural areas. In rural areas these banks

supply finance to agriculture, while to the urban areas they are started to provide finance to buy a

consumer goods they provide short and medium term loans. They provide loan at a lower rate

comparatively. They are formed a co-operative society principles as such are more services

oriented than profit oriented.

DEFINATION AND MEANING OF CO-OPERATIVE BANKS:

In the words of “ Henry wolf co-operative banking is an agency which is a position to

deal with the small means on his own terms accepting the security he has and without drawing in

the protection of the rich”.

DEVINE “defines a mutual society formed compared and governed by working people

themselves for encouraging regular savings and generating miniature loans on easy term and of

interest and repayment”.

STRUCTURE OF CO-OPERATIVE BANKING IN INDIA:

The co-operative banking is federal in character with three tie linkage between state,

district and village level institutions. At that state level we have development banks (SLDBS). At

district level the central co-operative banks (CCBS) or the district central co-operative

bank(CLDBS) then at the village level the primary agricultural credit societies (PACS) the

primary and development banks(PLDB) and the branches of SLBs.

The lower tiers are the members and the share holders of the immediate higher ties

besides, there are urban co-operative banks which are outside the federal structure.

Though federal is its nature the system is integrated vertically on the basis of functional

responsibilities of various components of the system. The SCBs, CCBs, and PAC from the short

term and medium term credit structure and it is the same in all states. The LDBs at various levels

make the long term credit structure which is not uniform in all states.

The state level co-operative banks are said to be the apex institution in their federal

structure, however the apex institution from the point of view of promotions, supply and

supervision are controlled by the government NABARD and national co-operative bank of India,

SCBs and SLDBs are in the immediate position between the institution just mentioned on the

one hand and the co-operative banks on the other.

Te SCBs co-ordinates and regulate the working of CCBs. They act as custodian of

surplus funds of the CCBs and supplement them by attracting deposits and by obtaining loans

from the RBI.

Fig: STRUCTURE OF CO-OPERATIVE BANKING IN INDIA

Source;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;

RBI

NABARD

SCBS

PACS

CCBS CLDBS

SLSDB

BRANCHES OF SLDBS

VCBS

PLDBS

FEATURES OF CO-OPERATIVE BANKS

They are organized and managed on the principle of co-operative self help and mutual

help. They function with rule of “ one member one vote ”

Co-operative banks perform all the main banking function of deposit mobilization supply

of credit and provision for remittance facilities.

Co-operative banks belong to the market as well as the capital markets

Co-operative bank accept current savings fixed and other types of time deposit from

individuals and institutions including banks.

Co-operative banks are the banks which are registered under the Karnataka co-

operative societies act 1959, co-operative banks are a part of the vast and powerful super

structure of co-operative institution which is engaged in the task of production marketing

distribution, servicing, and banking in India.

INTRODUCTION TO FINANCIAL MANAGEMENT

Meaning: financial management is a specialized function directly associated with the

top management in the line but also the capacity of staff is the overall administration of

company.

“financial management is the operation activity of a business that is responsible for

obtaining and effectively utilizing the funds necessary for efficient operation”.

As of financial management:

Anticipating financial needs: the financial manager has to forecast expected events in

business and note their financial implications he anticipates financial needs by consulting an

array of documents such as cash budget, the performa statement of source and uses of funds and

etc. the total funds requirements can be prepared by collecting the information from all the heads

of the department about their needs, this is planning for subsequent steps for financial

management.

Acquiring financial resources:

The implies knowing when, where and how to obtain the funds which a business needs

funds should be acquired well before the need for them is actually felt. The finance manager

should known how to tap the different sources of funds, careful selection of the source is another

important aspect of financial management.

Allocating funds in business:

Allocation of finance here refers to investment of financial or finance on assets. It may

be fixed or current asset or both. Scientific allocation is very essential because each source of

fund is directly associated with the cost it is the basic goal of financial manager to recover the

cost of funds and offer fair percentage of returns to equity shareholders.

Administrating the allocation of funds:

Once the funds are allocated on various investment opportunities it is the basic

responsibility of the finance manager to watch the performance of each rupee that has been

invested. He has to adopt close relationship and marketing of flow of funds. This will ensure

continuous flow of funds as per the requirements of the organization. This helps the management

to increase efficiency by reducing the cost of operations and earn fair amount of profit out of

investments.

Analyzing the performance of finance:

Once the funds are administered it is very comfortable tor the finance manager to take

decisions. Through the budgeting, he will be able to compare the actual with standards. The

returns on investments must be continues and consistent, the cost of each financial decision and

returns if each investment must be analyzed. Where ever the deviations are found, necessary step

of strategies are to be adopted to overcome such events. This helps in achieving liquidity of a

business unit.

Accounting and reporting to management:

The departmental of finance has gained substantial recognition. He not only acts as line

executive but also as staff, he has to advice and supply information about the performance of

finance to top management, he is also responsible for marinating up to date records of the

performance of finance decisions, the financial manager will have to keep its assets intact which

enable a firm to conduct its business.

Asset management has assumed an importance role in financial management, although

a business failure may not always be the result of financial failure “financial failure does

positively lead to business lead to business failures”.

Hence accounting and reporting of the performance of finance is an importance aspect

of financial management.

FUNCTIONAL AREAS OF FINANCIAL MANAGEMENT

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ESTIMATION OF THE FINANCIAL MANAGEMENT

SELECTION OF RIGHT SOURCE OF FUNDS

ANALYSIS AND INTERPRETATION

CAPITAL BUDGETING

ANALYSIS OF COST-VOLUME-PROFIT

ALLOCATION OF FUNDS

FAIR RETURNS TO THE INVESTOR

PROFIT PLANNIG AND CONTROL

WORKING CAPITAL MANAGEMENT

MAINTAINING LIQUIDITY AND WEALTH MAXMIZE

1. Estimation of the financial requirements: The requirements of finance to a business

concern in continuous, it is needed in all the stages of business cycle namely, initial

growth saturation and declining stages funds account needed to establish the industry

both for meeting capital expenditure and reserve expenditure.

2. Selection of the right sources of funds: After estimating the total funds of business

concern, it is the second important step of the finance manager to select the right type of

source of funds at the right time at right cost. Each financial instrument is associated with

different types of costs.

3. Allocation of funds: After mobilizing the total funds of a firm, it is the responsibility of

finance manager to distribute the funds to capital expenditure and reserve expenditure.

4. Analysis and interpretation of financial performance: It is another important task of

finance manager. He is expected to watch the performance of each portfolio that can be

measured in terms of profitability and returns on the investments.

5. Analysis of cost volume profit: It is another important tool of financial management that

helps the management to evaluate different proposal of investment make or buy decision.

6. Capital budgeting: It is a technique through which a finance manager evaluates the

investment proposals. In how many years the original investment can be recovered at

what percentage.

7. Working capital management: It is rightly an adjust of fixed capital investment it is a

financial lubricant which keeps business operation going. It is the life blood of a firm.

8. Profit planning and control: It is another important function of financial management.

Profit planning guide the management in attaining the corporate goals.

“INTRODUCTION TO CREDIT MANAGEMENT”

While business firms would like to sell on cash, the pressure of competitions and the

force to custom persuade them to sell on credit. Firms grant credit to facilitate sales. It is

valuable to the customers as it arguments their resources.

It is particularly appealing to these customers who cannot borrow from other sources or

find it very expensive or inconvenience to do so.

“Credit allows the customer to buy now pay later” so also credit constitutes the major

business activity of the bank i.e., lending loans and advances of all the function of modern

banking, with or without security is by far the most important function.

Advances comprise a very large portion of total bank asset and form the bank is thus

primarily judged by the soundness of its advances. A wise and prudent policy is regard to

advance is considered an important factor inspiring confidence is the depositor and the

prospective customer of bank.

“MEANING OF CREDIT MANAGEMENT”’;

Credit management can be defined as “ management of loans and advances in banks”.

In other words credit management means successfully managing the credit by paying the

debt obligations on time for the amount required.

FUNDS FOR LENDING

A study of balance sheet reveals that main sources of funds available for lending and investment

are:

Paid up capital

Reserve

Deposit and other accounts

Borrowing from the RBI

Undistributed profits

Participation certificates

Re-finance loan the industrial development bank, agricultural re-finance and

development etc.

Other financial institution.

Classification of credit: bank credit is classified according to security, maturity and method of re-

payment, origin and purpose. The bank advances in country are classified into:

Secured and Unsecured

Loans

Overdraft

Cash credit

Bills discounted

Bills purchased

Term loans

The brief explanation of the above is as follow.

Secured and Unsecured: secured loans are those loans which are granted only with its security.

Unsecured loans are those loans which are granted without any security or which are

sanctioned or which are sanctioned against personal security of one or more members.

Loans : A loan account represent one way of lending money to a customer. In case of loan, the

banker advances a lump sum for a certain period at a agreed rate of interest. The entire amount is

paid either in cash or by credit to his current account, which he can draw at any time. The

interest is charged for the full amount sanctioned.

Overdraft: overdraft is an arrangement between a banker and his customer by which the latter is

allowed to withdraw over and above his credit balance in the current account up to an agreed

limit.

Cash Credit: A cash is an arrangement by which the customer is allowed to borrow money up to

a certain limit. The customer need not draw the sanctioned amount at once but draw the amount

as and when required and can save the interest by reducing the debit balance whenever he is a

portion to do so. They are granted personal security.

Bill Discounted: Bills maturing within 90 days are discounted by banks for approved parties. It

constitutes clear advances against two or more signature of independent parties, one that of

endorses and the other that of drawer bank rely on credit worthiness standing and means of the

customers.

Bills Purchased: Bills clear or documentary are sometimes purchased from approved customer is

whose favor regular limits are sanctioned. In case of documentary bill, the drafts are

accompanied by documents of title to goods. Such as railway receipt or bill of lading.

Term loans: since some times, bankers have started lending large amount for fairly long period to

industries and agriculture on the security of fixed asset term loans basis. Such loans is repayable

by installment over a No of years ranging from 3-10 years and sometimes more.

Consumer credit:

The five C’s of credit: Mutual confidence and clear understanding are the basis of good

lending knowing the borrower means, knowing him, vis-à-vis his business are very important,

man behind the advances needs to be the guiding principle to the lending banker.

1. Character

2. Capacity

3. Capital

4. Conditions

5. Collateral

The explanation of the five C’s are as follows:

1. Character: Banks want to put their money with their clients who have the best credentials

and references. The way you treat your employees and customers, the way you take

responsibility, your timeless is fulfilling obligation that’s character.

2. Capacity: What is your companies borrowing history and track record of repayments.

How much debt can your company handle these are numerous financial bench marks

such as debt and liquidity ratio that banks use before advancing funds.

3. Capital: How well capitalized is your company? How money have your invested in the

business? Banks want to see that you have a financial commitment, that you have put

yourself at risk in the company.

4. Conditions: What are the current economic conditions and how does your company fit is

it? If your business is sensitive to economic downturns. That bank wants to know that

you are good at managing productivity and expenses.

5. Collateral: while cash flow will early always be the primary source of repayment of a

loan, bankers look at what they call a secondary source of repayment. Collateral

represents assets that the company pledges as an alternate repayment source for the loan.

Hand assets, most collateral is in the form of real estate and office or manufacturing

equipment, your accounts receivable and inventory can also be pledged collateral.

Lending principles:

Safety

Liquidity

Profitability

Purpose

Safety: Safety is another important principle of lending. Safety of advance means that

borrower is in a portion to repay the loan with interest according to the terms of lending.

The repayment depends on these capacity and willingness to repay. If the borrower

invest, the money in an speculative venture or the borrower himself is dishonest; the

advance would be in jeopardy.

Purpose: Advances can be safe and required only when it is granted for productive

purpose and used only for the purpose for its borrowed. Advances permitted for

speculative purpose; even if the borrower is prepared to pay higher rate of interest is

against the principle of bank lending.

Liquidity: It is not just sufficient of advances are safe. Money should come back on

demand or in accordance with the repayment that has been programmed. This is possible

only when the borrower has used the funds for the purpose for which he has borrowed.

Profitability: Banks must deploy the funds in a profitable way and should maximize

returns through profitability is very important for the sake of higher profitability the

banker should not grant advances to an unsound party, though they are ready to pay

higher rate of interest.

Lending policy: The principle of a loan policy is to arrive at tradeoff between returns and

risk with the broader frame work of the strategy plan of the bank in fact, loan policy

should by such as to maximize returns while minimizing risk and substantially non-

funded business.

Portfolio consideration

Marketing of funds

Terms and condition

Funds position

Portfolio consideration: Aggregate development of funds has to be done is such a manner that

the sudden change in environment should not after the funds adversity. The object of any bank is

to maximize safety of funds and yield these on and in the process reach acceptable standard for

the deployment of funds keeping the long range view.

Marketing of funds: any approach to lending has to be done from the point of view of achieving

desirable ends, lending should be done after deciding on new activities, areas an types of

borrowers.

Terms and conditions: The terms and conditions should create a confidence between the

borrower and the holder. The terms and conditions have to be acceptable and advantages,

encompassing the duties of the lender and the obligation of the borrower, and also must disclose,

financial information of borrower, and the information must be directed towards the end use of

funds that is utilization of borrowed funds for purpose which it is obtained.

Fund position: The lending policy of a bank depends on the market conditions which reflect on

the funds deployment opportunities available to the bank besides lending over a period of time

and deposits mobilization possibilities during the period.

Use of funds by the borrower and security available: Mostly lending is done against the security

of some sort of the other in the form of tangible assets provided by the borrower.

Risk and banking: Risk was still in recently a concept alien to Indian bank. Risk management

was never their domain because returns have never been their major concern. Accounting

policies did the job for them. But the situation has now transformed beyond recognition,

prudential accounting standards capital adequacy, income recognition and assets classifications

norms, provisioning requirement on bad debt and depreciation caused by marketing a part of

securities investment portfolio to market value created awareness to manage credit risk

effectively through various measures.

Risk Assessment and Management: Risk is inherent in banking and for every market is every

business. The task of assets and liability management through cannot be as low as possible and

manage it and keep different types of risks with an acceptable level banks are exposed to

different risks. Though risk in business cannot be avoided the banker his doing his business of

banking is expected to take minimum calculated risk.

Credit risk

Liquid risk

Currency risk

Interest risk

Credit risk: Credit risk refers to the risk of default on loans and advances granted by the banks

while timely repayments principle and interest or both is threatened due to in ability or un

willingness of the borrower.

Liquidity risk: Liquidity risk refers to the risk of meeting the maturity liabilities and not finding

enough maturing assed to meet these liabilities. This risk arises because bank mobilizes deposits

for different maturities in the form of demand and time deposits, and locks them up by lending at

different maturities. Liquidity gap also arises due to up unpredictability of deposits withdrawals.

Currency risk: This risk is resulted of foreign currency exposure and changes in the rate of

exchange of a given in terms of or a given currency in term of both the domestic and foreign

currencies. A bank engaged in international operation to such risks.

Interest rate risk: Refers to the risk of changes in interest rates subsequent to creation of the

assets and liability at fixed rates freedom is given to co-operative banks to fix up rate of interest

on advance. Regional rural banks and commercial banks, which they need to, do depending on

cost of their deposit.

“Credit management in India”

How is credit managed in India?

These broad areas are:

Credit policy

Credit analysis

Control of account receivable

Credit policy: Very few banks have attempted a systematic articulation and formulations of these

credit policies. Generally credit policies have ensured as unstated conventions.

The credit policy measures may include some or all of the following measures depending upon

the prevailing situations.

o Reserve banks expectation of deposit growth and to achieve the targeted growth rate.

o Measures to control liquidity in the banking system which may include CRR, SLR and

curtailment of re-finance facilities.

o Measures to promote agricultural growth and rural development.

o Change in re-financing and bills are discounting facilities.

Credit analysis and credit investigation:

Credit analysis: It is the process of assessing the risk of lending to a business or an individual.

The so called credit risk must be evaluated against the benefits the bank expects to derive from

making a loan a bank risk exposure is determined by its portfolio of its assets liabilities and

capital.

Credit risk is the risk that the counter party will to perform on an obligation to the bank

credit risk constitutes the critical portfolio which has to be managed well by the banks.

Credit risk management has quantities and qualitative dimensions, the qualitative

dimension of risk are generally more difficult to assets. The two basis steps involved in this

process are.

1) Obtaining credit information

2) Analysis of credit information

Obtaining credit information: The first step is credit analysis is obtaining credit information

which forms a basis to evaluate the credit worthiness of customer. The sources of information

may be:

a) Internal

b) External

INTERNAL: Banks usually require their customers to fill various forms and

documents giving details of its financial operations. They are also requiring

functioning trade references with which banks can have contact to judge the credit

worthiness of the customer. Another source of credit information is derived from the

records of the banks contemplations on the extension of credit.

EXTERNAL: The second source of information is external. The availability of

information from this source to assess the credit worthiness of customer depends on

the develop of institutional facilities and industry practices depending upon the

availability the following sources may be employed.

a) Financial statement

b) Bank reference

c) Trade reference

d) Credit bureau report

Analysis of credit information: Once the credit information has been collected from

different sources it should be analyzed to determine the credit worthiness of the applicant,

although these are not established procedure to analyze the information the firm should

cover two aspect.

a) Quantitative

b) Qualitative

Quantitative : The assessment of the quantitative aspect is based on the factual information

available from the financial statement the past records of the firm. The first step involved in this

type of assessment is to prepare agency schedule of the accounts payable of the applicant as well

as calculate average age of the account payable.

Qualitative: The qualitative assessment should be supplemented by a qualitative interpretation of

the applicant credit worthiness. The subjective judgments cover aspects relating to the quality

management.

Control of receivable: maintaining and controlling of account receivable is neither through not

systematic, do very few firms have well defined system of monitoring and controlling account

receivables.

Its finally helps to classify the customer in to several credit categories:

1) Completely reliable customer

2) High reliable customer

3) Slightly reliable customer

4) Doubtful customer

Credit investigation:

After having obtained the credit information the firm will set on idea regarding the matter which

should further investigated the factors that affect the extend and notice credit investigation are :

1) The type of customer, whether new or existing

2) The customers business lines back found and related trade risk

3) Size of customer order and inspected further volume business with him.

4) Company credit policy

Credit terms: After the credit standards have been established and the credit worthiness of the

customer has assessed, the management of a firm must determine the terms and conditions on

which trade credit to be made available. The stipulations under which the goods are sold on

credit are referred to as credit terms.

These credit terms have three components:

1) Credit period

2) Cash discount

3) Cash discount period

Follow up supervision and control of bank credit: No doubt, credit disbursals are made by after

careful evaluation and appraisal of loan proposals to determine their bank ability. On the basis of

principles of bank of the lending banker is to follow up supervise the use of bank credit to verify

credit to verify first whether the assumptions on which lending decision was taken continue to

hold good both in regard to business operations and environment and second the end is according

to the purpose for which it was given.

When money has been lent, the bank can reduce the risk of not getting repaid by

checking up on how the money has been used and what the customer is doing about repayment.

Any diversion of funds and deviation by the borrowers from terms and condition stipulated by

bank has to be noticed and timely action has to be taken.

Control at the branch level: Branch manager are expected to examine common sense and proper

case in handling advances whether sanctioned by them or any appropriate authority.

Security: The branch manager should ensure that security is properly valued, is easily salable, the

margin is properly maintained.

Financial position: The financial position of borrower and guarantor must be received from time

to time, at least once in a year. Companies must send copies of audited balance sheet.

Purpose: The amount of the advances should be applied to the purpose for which it is taken. In

practice it may be difficult for the banker to supervise affecting that is done. Experience in this

regard is the best guide.

Limitation: The period of limitation in any accounts must be watched from time to time.

Miscellaneous: It should be ensured that an advance does not contravene any provision of law, a

directive of the Reserve Bank on lending policy laid down by the central office.

Control at regional or central office:

Returns and statement: All branches submit to the regional or central office reports on advances

at regular interval by means of these reports. The executive at regional office and central office

are able to assess the cause and safety of the banks advances.

Review of advances: All advances are ordinarily required once in 12 months.

Periodical inspections: Braches are periodically inspected by internal and external auditor.

CONTROL BY THE SUPERINTENDENT OF ADVANCES:

The superintendent of advances exercises his control is a variety of ways. Proposals, reports and

day to day correspondence are placed in his hands for consideration after security in his

department routine reposts on branch advances throughout the year are padded on to him and

action is taken on his authority.

CONTROL BY CHAIRMAN AND GENERAL MANAGER:

The chairman is the arbiter so far as the practical application of the board’s policy is concerned.

He consulted on all matters involving policy and all large advances are subjected to his scrutiny.

Some of the functions of the chairman are delegated to the general manager.

CONTROL BY BOARD OF DIRECTORS:

The board of directors of bank determines the general lending policy of the bank taking

into account directors of the central governments, public interest, directors, surplus or paucity of

funds with the bank and general condition of the money market. The board also periodically

reviews the larger and the more difficult advances to which its alternation is drawn by the

general manager or the chairman.

In addition to the above mentioned steps to supervise and control the bank credit. There

are the recommendations of the study group of frame guidelines for follow up of bank credit

(Tendon committee). Which have been, by large the suggested procedure as a regular part of

their follow up machinery. The steps described essential of follow up and control of advances

and borrower accounts is to be successful and the safety of bank advances is to be ensured

without any under emphasis on physical security.

In summary the appraisal-cum-follow-up procedure as laid down by the Tendon committee will

be as under.

Detailed credit analysis at the time of sanction of the advances, with suitable terms and

condition.

Monthly stock statement in the revised form

Periodically stock inspection

Quarterly performance budget information.

Half yearly balance sheet and profit and loss account within 60 days.

Annual audited accounts within 3 months

Annual review-cum-detailed credit appraisal and a system of borrower classification

CREDIT MANAGEMENT

While business firms would like to sell on cash, the pressure of competitions and the

force to custom persuade them to sell on credit. Firms grant credit to facilitate sales. It is

valuable to the customers as it arguments their resources. It is particularly appealing to these

customers who cannot borrow from other sources or find it very expensive or inconvenience to

do so.

“Credit allows the customer to buy now pay later” so also credit constitutes the major

business activity of the bank i.e., lending loans and advances of all the function of modern

banking, with or without security is by far the most important function. Advances comprise a

very large portion of total bank asset and form the bank is thus primarily judged by the

soundness of its advances. A wise and prudent policy is regard to advance is considered an

important factor inspiring confidence is the depositor and the prospective customer of bank.

Advances not only play an important role in gross earnings of banks, but also promote the

economic development of the country.

All type of business, activity including trade industry and agriculture depend on bank

finance is one form or other. Banks by channelizing accumulated savings of the nation into

productive uses help both depositors and borrowers.

Bank assist in creating more avenues of employment and thus helps increasing the

standards of living of the people creditability of a bank is one of the most important criteria is

establishing the credit worthiness of a bank. Loans and advances constitute lending loan from the

major business activity of a bank and they need to be liquid and easily realizable as a bank is

obligated to repay the depositors as and then they are due for major payments paid of the bank

income is earned from the interest on the advances. So there is a need for proper management of

loans and advances of all functions of modern banking, lending with or without security is by far

the most important functions. Loan and advances constitute lending. Loans and advances from

the major activity of the bank. They need to be required and easily realizable as the bank is

obliged to repay the depositors as and when they are due to payment. And major part of bank

incomes is earned interest earned on advances. The proper management of loans and advances is

known as management of loans and advances in banks.

STATEMENT OF PROBLEM

Finance is the life blood of all business organization and even for banks also the credit

borrowers come to bank to avail financial assistance from the ban for their business requirement.

Lending is the most important function of bank because it forms sole earning power of

banking system. The strength of banking system primarily depends upon the soundness of its

credit system.

The bank has to look at the credit worthiness of the borrower before lending to ascertain

the risks or otherwise.

The progress and development of the bank depends on how the credit is imaged so a

study entitled at Amanath co-operative bank Bangalore has been proposed to observe the

problems is credit management problems.

Scope of the study:

The study covers operational territory of Amanath co-operative bank Bangalore. The

period of study 1 month

Objective of the study:

1. To understand the prevailing credit management system.

2. To highlight the pros and cons of credit management.

3. To find out reasons for weak credit management.

4. To give suggestions on the basis of findings of the study.

Research methodology:

Sources of data

Primary data

Secondary data

Primary data: The data will be extracted from the employees or the officers of the bank with the

help of interview schedule………………………….delete……………………….

Secondary data: This data will be obtained from annual reports financial statement bank records

etc.

Plans to analysis:

The data collected from records of the bank and executive will be systematically and orderly

arranged to facilitate analysis. The analysis will be made with the help of statistical tools such as

ratio, percentage, average etc. the analyzed data is presented in the form of labels, charts, graph,

etc………………………..delete;;;;; irrelevant statistical tools and mention only what is

used????????????????????????????

Limitations:

1. Time constraints

2. The study is one side i.e., only annual record of the bank and the opinion of the bank is

taken .

3. The study does not predict the future performance of the bank based on the added

records.

4. The study does not claim completeness and accuracy in the findings because it is made

by referring the annual reports.

Over view of the chapter scheme

Chapter 1: INTRODUCTION

It contains the general introduction to banking introduction to co-operative bank and introduction

to finance and theoretical back ground of the study, which describes about the theory behind

credit analysis.

Chapter 2: Research Design

It contains the design of the study which gives information the data? Used for the study,

objective, scope, method of data collection statement of the problem plan analysis, limitation of

the study etc.

Chapter 3: profile of bank

It contains the profile of the Amanath co-operative bank. In this chapter we can understand all

the operations of services and performance of the bank achievement, schemes, code of conduct

etc.

Chapter 4: Analysis and interpretation

Analysis and interpretation which includes sources and application of bank fund position of

different loans and advances grated, status of NPAs recovery method etc.

Chapter 5: Findings, conclusions and suggestions:

It contains the summary of findings, suggestions and conclusions.

PROFILE OF AMANATH CO-OPERATIVE BANK LTD

On 13th January 1977, Dr. Mumtaz Ahmed Han and janab K Rahman Khan founded the

Amanath Co-operative bank with in short span of 30 years; the bank has attained the status of

Karnataka’s first schedule urban co-operative bank with a small capital of 3 lakhs, the bank has

grown to be the largest urban co-operative bank in the state, with a deposit of Rs.505 cores and

net owned funds of Rs.29.53 cores.

The bank that began with just 3000 members, now boasts of nearly 41474 members. The

depositors and account holders, who exceeds 2.34 lakhs is numbers, are serviced by the 15

branches in the state. Many more branches are scheduled to open shortly with the aim of

extending the areas of operation to the entire state.

Amanath co-operative bank ltd. Offers ATM facility at 8 of its branches. The bank has

stepped into the new millennium incorporating the latest development in banking and

information technology with a resolve to make banking with Amanath a pleasure.

The microcosm of its objective “MASS BANKING” right from its inception. Hence the

major thrust of the bank has to inculcate the banking habits among middle and lower strata of the

society, mostly in hitherto unbanked under banked areas.

Keeping this objective in view, Amanath Bank opened branches in such areas which are

predominantly resided by middle lower income group and the areas concentrated by minorities

and backward classes.

The bank has, therefore adopted a selective policy in the opening of branches by

identifying the centre where there is a good potential a for inculcating the habit savings amongst

the people and at the same time, proving much needed finance to these people not only to meet

their domestic needs but also for developing their business, and in the process helping them

become self sufficient.

Keeping this objective in view, bank has introduced a scheme called micro credit for the

benefits of poorest among poor by involving SHG, and NGO’s who are working for the

economic upliftment of the poor.

The bank has 419 employees on its roll, including 74 officers, human resources being the

most important asset of the bank; all out efforts are made to enhance the motivational level and

efficiency of the employees in house capabilities for impaling adequate training to the employees

continued to be a major strength of the bank.

Training is being provided to make them more competitive and customer oriented.

The bank has established a training college of its own on august 22.1988 here the banks

is first among the UVB in Karnataka to have established a staff training college of its own.

These achievement have extending credit to small trader, foot path vendors, fruit and

vegetable vendors, hawkers fall under priority sector.

The bank has made advances to a large number of three wheelers, self employed owners

and thus has extended self. Employment opportunities to a large number of people with small

means.

The bank has bagged the ‘Best urban co-operative bank’ award for the second successive

year from the Karnataka state co-operative federation and Karnataka state urban banks

federation.

The Reserve bank of India conferred the “scheduled status” on Amanath bank effective

from 29th January 2000 and has included the name of the bank in the second schedule to the

reserve bank of India act,1934. The bank became the first urban co-operative bank in Karnataka

to be awarded this prestigious status. The conferment of “ scheduled status” will enable it

The bank has also excelled in the field of sports by winning both the “inter-bank cricket

tournament” organized by the canara bank and the “inter co-operative bank cricket tournament”

in 2000.

OBJECTIVE OF THE BANK:

The main objective is “MASS BANKING” right from its inception.

The major thrust of bank has been inculcating the banking habits and savings among

middle class and lower class section of the society.

Establishing bank’s presence in all the district of Karnataka.

Sustained growth, services and profitability to sustain future development.

To professionalize the work force and to meet the challenges ahead.

FUTURE PLANS ANDPROSPECTS:

1) Installation of ATM for better customer services.

2) Installation of more added services such as home banking, telebanking network services

and E=-banking.

3) Expansion of credit for medium scale industries.

4) Foreign exchange business.

5) Reduction in cost of funds and yield assets to march the industry level trend.

6) Opening of currency chart and small coin deposit.

7) Innovation of schemes and for financing priority sectors.

8) Expansion of credit with proper professional appraisal will be adopted to reduce the

incidences of loan falling in NPA category.

9) Extension of area of operation of the bank to entire state of Karnataka.

10) Opening of “ ladies branches “ in minorities concentrated residential areas.

NEW PRODUCTS AND SERVICES OFFERED BY THE BANK:

1. Amanath co-operative bank ltd., (ACBL) flexi deposits

2. Loan linked deposits

3. Limit linked deposits

4. Cumulative fixed deposit

5. Yearly planning deposit

6. Gift cheques

7. Deposit services

8. Credit cards

9. Foreign exchange

10. Internet banking

11. Networking of ATM’s

12. Any where banking

13. ACBL has entered into an agreement on referral basis, with M/s. kotak insurance to

provide life insurance policies to their customer.

SCHEMES OFFERED BY THE BANK:

1. ATM’s facility round the clock banking service to the customers

2. Attractive rate of interest

3. payment if interest on term deposit at the choice of the depositors that is monthly,

quarterly etc.

4. facility for immediate with drawal before maturity in case of needs.

5. On spot loan facility at a margin of 15% of deposits.

6. Lucrative schemes suited to clientele like Rozana Bachath, recurring deposits term

deposits, cash certificate etc.

7. Nomination facility for all deposit accounts.

CUSTOMER SERVICE:

The bank is known for its customer friendly approach. The bank is taking a number of

measures to improve the quality of customer service. The branches customers contract

programmers are conducted. Customer compliant is redressed without delay.

POLICIES OF BANK:

To deliver the quality of services to the customer

To frequently supply RBI with essential data.

Employees may not accept gifts, entertainment from any one seeking a contact.

To have a diverse credit portfolio

To provide middle and lower class people with cheaper finance.

To keep in view the national policy attached to housing sector and liberalize the finance

for construction. Renovation, acquisition of residential houses based on the repaying

capacity of the borrower.

Committed to the compliance of law and regulation formed by the government.

TECHNOLOGY UPGRADATION:

The bank created a departure of information technology at its corporate office. Earlier it

was called the computer department the primary objective of this department is to promote

computer literacy among the employees to upgrade communication and information technology

and to develop electronic banking capabilities all the branches are computerized from late 1890s.

HUMAN RESOURSE DEVELOPMENT:

The branches have an enlightened HRM policy a great deal of emphasis is given on

training. The total strength of bank is 440 employees. Women employees are more than 55% of

total strength. Periodical discussion is held with the representative of trade union of workers and

officers contributing healthy industrial relatives in the bank also with the concern department.

WORKING RESULTS:

The banking gas an embarked upon several measures to bring about improvement in the

profitability. the bank indicated several action to set up deposits mobilization credit expansions

recovery of NPA effectively supervision control over advances improving funds management

etc.

LOANS AND ADVANCES OFFERED BY THE BANK:

Business loans:

To traders, workshops hotels and other business venture.

Industrial loan:

To start small scale and medium scale industries.

Vehicle loans:

15% loan against the cost of vehicle (two three and four wheeler) with repayment as per

repayment capacity.

Personal loans:

For petty trade, education, housing, marriage, and other ceremonial purposes.

Housing loans:

For construction/acquisition of homes repairs renovation etc;

Consumer loan:

For purchase of household articles like T.V. fridge, furniture, computer etc.

Education loan:

For student pursuing higher education like MBA, MCA, MBBS, ENGINEERING etc.

Professional loan:

For doctors chartered accountants to set up their officers.

Other loans:

Against tangible securities gold ornaments , NSC, LIC, KVP,IVP, etc.

FUNCTIONAL DEPARTMENTS OF THE BANK:

The bank has a total of 11 functional departments which are as follows:

1. Accounts department

2. Credit management department

3. General administrative department

4. Human resource department

5. Inspection department

6. Investment and treasury department

7. Funds management department

8. Information technology department

9. Legal department

10. Recovery department

11. Planning and development department

12. Central clearing department.

ACCOUNTS DEPARTMENT:

1) The accounts are maintained with software installed in all the branches which has

been purchased from Infosys india ltd..

2) Consolidated accounts like preparation of balance sheet, final accounts are

maintained by central office and double entry system is followed.

3) The daily recording of transactions in the branches are to be submitted to the central

office.

4) Every Friday a weekly trail balance, p/L accounts are submitted by the branches of

the central office an on the last Friday form No.9 (i.e, assets and liabilities) is

submitted to RBI registrar of co-operative societies.

5) The CRR and SLR are maintained by this department on daily basis. This department

controls the deposit and advances in all the branches and the surplus amount of cash

and funds are submitted to the central office.

6) All the assets of the braches and central office are insured by the central office with

oriental india insurance and the premium is debited to the branches.

7) Internal audit is done by the employees of the bank is consolidation with the auditors.

Statutory audit is conducted yearly for the financial year ending.

CREDIT MANAGEMENT DEPARTMENT

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,--------------------…………………..

1. Credit management is based on the paid up capital. Reserve, deposits, advances and

working capital.

2. The main reason for accepting deposit is to provide loans.

3. The criteria s for loan are exposure norm, deposit position, quantum basis.

STANDARDS OF CONDUCT:

Amanath co-operative bank ltd, follows certain standard of conduct or ethical

principles that will be enforced equitably at all organizational levels.

They are:

TOWARDS CUSTOMERS

1. Quality service

2. Error reconciliation

TOWARDS EMPLOYEE

1. Equal employment opportunities

MANAGER

SENIOR ASSISTANT

JUNIOR

ASSISTANT

JUNIOR

ASSISTANT

JUNIOR

ASSISTANT

2. Good work place environment

3. Employee privacy

4. Open communication

5. Employee development

6. Compensation and benefit

TOWARDS SHARE HOLDERS

1. Good return on investment

2. Protection of assets

3. Intellectual property

4. Accuracy of records

5. Share holder communication

SIGNIFICANT FACTORS OF SUCCESS:

1. Quality of services

2. Low rate of interest

3. Opening banks is unbanked under banked areas

4. Various form of deposits and loans offered to suit the needs of different people

5. Customer friendly atmosphere maintained in the bank

6. Providing ATM’s and other advanced technology services

7. Efficient and well qualified employees.

THE TREND SETTER:

The following are first to its credit.

1. The first urban co-operative bank in Bangalore to admitted as a direct member of

Bangalore bankers clearing house.

2. The first urban co-operative banks in Karnataka to computerized all its operation and

introduced wide area network (WAN).

3. The first urban co-operative bank in Karnataka to establish its own staff training college.

4. The first urban co-operative bank in Karnataka to install ATM facility for its customer.

Amanath co-operative bank ltd. Is now the first co-operative bank in Karnataka to get schedule

status.

BRANCHES

The bank has head office at Shivajinagar it’s main branch is at N.R.ROAD other than the main

branch it has 10 branches in Bangalore.

The location of branches in Bangalore are:

1. Shivajinagar

2. Siddaiah road

3. Tannery road

4. Ganganhalli

5. B.V.K iyengar road

6. Brigade road

7. R.V road

8. J.J.R nagar

9. Ilyas nagar

10. Austin town

The outstation branches:

1. Belgaum

2. Mysore

3. Mangalore

4. Gulbarga

This are the branches of Amanath co-operative bank

ANALYSIS AND INTERPRETATION

4.1 Table showing total deposits of the bank

YEAR AMOUNT(Rs In Crore)

PERCENTAGE%

INCREMENTAL GROWTH

2008 33213 100 -2009 34898 105.07 5.07%2010 33049 99.50 (-)5.57%2011 33163 99.84 (-)0.34%

Formula:

CalCULATION OF THE INCREMENTAL GROWTH:

…….CURRENT YEAR / BASE YEAR X100

.

ANALYSIS: From the above table we can see that there is increase in percentage of deposits in

the year 2009 it has increaseD to 5.07% as compare to previous year and in the year 2010

decreased by 5.57% and in the year 2011 there was increase of 0.34 compared to previous year

2010.

Graph 1 showing total deposit of the bank

2008 2009 2010 2011-5000

0

5000

10000

15000

20000

25000

30000

35000

40000

AMOUNT(Rs.In Crore)PERCENTAGE%INCREMENTAL GROWTH

Inference:

The reason………………………change…………. for the details in total deposits are:

The interest-…………………correcxt----capital levied by RBI

The high cost deposits bearing interest rate from 11% to 16.5% by the bank were prematurely

withdrawn to increase the profitability.

Table showing total fixed deposits of the bank

YEAR AMOUNT(Rs In Crore) PERCENTAGE%

INCREMENTAL GROWTH

2008 20128 100 -2009 18813 93.46 (-) 6.542010 16655 82.74 (-)10.742011 15608 77.54 (-)5.2

ANALYSIS:

From the above table it is observed that there is a decrease in the percentage of fixed

deposits in year 2009 it is reduced to 6.54 % as compared to previous year in the year 2010

further reduced by 10.74% compared to previous year , in year 2011 there was of 5.2% compare

to 2010.--------------bring out the impact…. On the overall reduction in the rates of interest.

Graph 2 showing total fixed deposits of the bank:

Inference:

From the above table it is inferred the total fixed deposit of the bank decreases year by year

This is due to lack of customers and the customers have lost faith in the maintenance of the bank

because of the recent fraud of Rs. 300crore.

2008 2009 2010 2011

-5000

0

5000

10000

15000

20000

25000


Table No:03

Table showing total saving of bank deposits.


INCREMENTAL GROWTH

2008 10072 100 -2009 11679 115.95 15.952010 12102 120.15 4.22011 13215 131.20 11.05

Analysis:

From the above table it is observed that there is a increase in the percentage of total savings bank

deposits in the year 2009 there was increase of 15.95% as compared to previous year and in the

year 2010 increase of 4.2% and again in the year 2011 increase of 11.05 % compared to previous

year.

Interpretation :

Graph 3 showing total savings of bank deposits:

2008 2009 2010 20110

2000

4000

6000

8000

10000

12000

14000


Inference:

From the above table it is inferred that total savings bank deposit year by year.

This shows bank is only working on the interest of savings customers accounts.

Table No:4

Table showing total current bank deposits


INCREMENTAL GROWTH

2008 30122 100 -2009 44049 146.23 46.23%2010 42915 142.47 3.76%2011 43397 144.07 1.6

Analysis:

From the above table it is observed that there is increase in the percentage of total current

deposits in year 2009 there was an increase of 46.23% and than there was a slight decrease of

3.76% and in the following year there was increase of 1.6%.

Inference

Graph 4:

showing total current bank deposits.

2008 2009 2010 20110

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000


Inference:

From the above table it is inferred that there is an increase in the year 2009 than there was a

down fall in year 2010 and than the bank further saw increase of 1. 6% in the year 2011.

This shows that the efforts are made to control and reach towards a sustainable position.

Table No: 5

Table showing total capital of the bank.


INCREMENTAL GROWTH

2008 49852 100 -2009 58302 116.95 16.95%2010 61584 123.53 6.58%2011 61563 123.49 0.04%

Analysis:

From the above table it is observed that there is increase in the percentage of the total capital of

the bank in the year 2009 increase of 16.95% and again in the year 2010 increase of 6.58% and

in the next year 0.04% in 2011.

Graph 5:

Table showing total capital of bank

20082009

20102011

0

10000

20000

30000

40000

50000

60000

70000


Inference:

From the above it is inferred that total capital of bank increases year by year.

The reason for the increase in the total because of opening of more loan accounts of depositors

Table No. 6

Table showing total reserves of the bank


INCREMENTAL GROWTH

2008 10644 100 -2009 12707 119.38 19.38%2010 13121 123.27 3.89%2011 11726 110.16 -13.11%

Analysis:

From the above table it is observed that there is a increase in the percentage of total reserve in

the year 2009 there was increase of 19.38% as compared to previous year and in the year 2010

increase of 3.89% and in the year 2011 there was a drastic decrease of 13.11% as compared to

previous years.

Graph No 6

Table showing total reserves of the bank

2008 2009 2010 2011

-2000

0

2000

4000

6000

8000

10000

12000

14000

AMOUNTPERCENTAGEINCREMENTAL

Inference:

From the above table it is inferred that the reason for increase the total reserve are

Increase in the statutory reserves, and staff gratuity of the bank and increase in the statutory

reserves and bad and doubtful debt reserve of the bank. In the year 2011 there was decrease of

statutory reserve and bad and doubtful debt of the bank.

Table no : 7

Table showing total investments of the bank.


INCREMENTAL GROWTH

2008 102910 100 -2009 99143 96.33 -3.67%2010 97958 95.18 -1.15%2011 97243 94.49 -0.69%

Analysis:

From the above table it is observed that there is a decrease in the percentage of investment in the

year 2009 there was a decrease of 3.67% as compared to previous year and the year 2010 again a

decrease of 1.15% and in the year 2011 it’s a decline of 0.69% as compared to previous years.

Graph no: 7

Graph showing total investments of the bank.

2008 2009 2010 2011

-20000

0

20000

40000

60000

80000

100000

120000

INCREMENTALPERCENTAGEAMOUNT

Inference:

From the above the table it is inferred that there is a decrease in the percentage of total

investment year by year.

This is due to lack of communication with the clients and no proper communication with the

corporate people.

Lack of maintenance of accounts.

Table no: 8

Table showing total advances of the bank.


INCREMENTAL GROWTH

2008 21511 100 -2009 21362 99.30 -0. 7%2010 18900 87.86 -11.44%2011 18011 83.72 -4.14%

Analysis:

From the above table it is observed that there is a decrease in the percentage of total advances of

the bank deposits in the year 2009 there was a decrease of 0.7% than there was a huge decline of

11.44% in the year 2010 as compared to 2009 and in the year 2011 there was a reduced decline

of 4.14% as compared to 2010.

Graph no: 8

Graph showing total advances of the bank.

2008 2009 2010 2011

-5000

0

5000

10000

15000

20000

25000


Inference:

From the above table it is inferred the reason for decline in the advances of the bank are

improper deployment of funds of the bank

Due to restriction in the growth of advances imposed by RBI.

Table no: 9

Table showing cash balance of the bank.


INCREMENTAL GROWTH

2008 28124 100 -2009 31536 112.13 12.13%2010 35712 126.98 14.85%2011 37822 134.48 7.5%

Analysis:

From the above table it is observed that there is increase in the percentage of total cash balance

of the bank in the year 2009 there was increase of 12.13% as compared to previous year and in

the year 2010 there was a increase of 14.85% and the bank saw a slightly reduced increase of

7.5% as compared to previous years.

This indicates …………………….reasons…………..

Graph no:9

Table showing total cash balance of the bank

20082009

20102011

0

5000

10000

15000

20000

25000

30000

35000

40000


Inference:

The reason for the increase trend of cash balance are as follows

Increase in the liquidity position of the bank

The bank has kept additional cash to cover deposits withdrawals and meet emergency expenses.

Table no: 10

Table showing total balance with other banks


INCREMENTAL GROWTH

2008 12665 100 -2009 27920 220.4 120.4%2010 22681 179 -41.4%2011 32074 253.24 74.24%

Analysis

From the above table it is observed that there is a increase in the percentage of total balance with

other bank in the year 2009 there was a huge increase of 120.4% as compared to previous year

and the year 2010 the bank saw a decline of 41.4% and again in the year 2011 there was a steep

increase of 74.24% as compared to previous year.

Graph no: 10

Graph showing total balances with other banks.

20082009

20102011

-5000

0

5000

10000

15000

20000

25000

30000

35000


Inference:……………….change’’’’’’’’’’’’’’’’’’’’’’

The reason for declining trend in bank balance with other banks are:

Decline in the fixed deposits of the bank with the subsidiaries of SBI and notified bank in

the year 2010

Again in the year 2011 there was increase fixed deposits of the banks with the

subsidiaries of SBI and notified bank

By this we can tell that there was fluctuations in the bank every year from other banks.

Table no: 11

Table showing credit deposit ratio

PARTICULARS 2008 2009 2010 2011CREDIT 21511 21362 18900 18011

DEPOSITS 33213 34898 33049 33163RATIO 64.76 6121 57.18 54.31INCREMENTAL GROWTH

0 -3.55 -4.03 -2.871

Analysis:

The ratio of credit deposit is one of the important ratio to asses the liquidity position the ratio of

credit to deposit of the bank is a fluctuating trend

From the above table it is observed that the credit deposit ratio was 64.76 during the year 2008

which was reduced to 61.21 and during the year 2010 it was further decreased to 57.18 and by

the year 2011 it again saw a decline of 54.31 thus it is not good progress by the bank. In the

following years.

Graph no: 11

Graph showing credit deposit ratio.

credit deposits

ratioincremental

growth

-20000

0

20000

40000

60000

80000

100000

120000

140000

2011201020092008

Inference:

The ratio of credit to deposit of the bank shows decrease trend due to the following reasons

Fall in credit level of the bank

Restriction on the growth of advances imposed by RBI

Increase of liquidity of the bank.

Table no: 12

Table showing investment deposit ratio

PARTICULARS 2008 2009 2010 2011CREDIT 102910 99143 97958 97243DEPOSITS 33213 34898 33049 33163RATIO 30.98 28.40 29.64 29.32INCREMENTAL GROWTH

0 -2.58 -1.24 -0.32

Analysis

From the above table it is observed that the investment deposit ratio was 30.98 in the year 2008

and in the year 2009 it was reduced to 28.40 and again the year 2010 it was recovered to 29.64

and again in the year 2011 it recovered up to 29.32.

Graph no: 12

Graph showing investment deposit ratio.

credit deposits

ratioincremental

growth

-50000

0

50000

100000

150000

200000

250000

300000

350000

400000

2011201020092008

Inference:

From the above table it is inferred that investment deposit ratio decreased year by year.

Table No:13

Table showing statement of loans and advances of the bank

YEAR SHORT TERM MEDIUM TERM

LONG TERM

2008 81743 43482 27257

2009 86868 32389 308192010 70010 26993 284542011 66795 24464 25302

Analysis:

From the above table it is observed that the bank has advanced 81743 crore in the form of short

term loan during the year 2008 it was increased in the year 2009 to 86868 crore then there was a

decline in the year 2010 to 70010 as compared to previous year and in the year 2011 it was

reduced to 66795.

The bank has advanced Rs,43482 crore in the form of medium term loan during the year 2008 it

was saw a huge decline in the year 2009 to 32389 the medium term loan declined consistently in

the following years as compared to previous years.

The bank has advanced Rs.27527 crore in the form of long term in the year 2008 in the year

2009 it saw a raise to 32389 the bank again faced a decline in the year 2010 to 28455 and in the

year 2011 it was reduced to 25302.

Graph no: 13

Graph showing statement of loans and advances of the bank.

2008 2009 2010 20110

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

short termmedium termlong term

Inference:

From the above table it is inferred that the short term loan decrease gradually year by year. Even

the medium term loan has declined marginally very high in the year 2009 when compared to

2008 there after the medium term loan continues decrease gradually. It is also inferred that the

long term loans increases in the year 2009 there after we see that the long term loan decreases

gradually.

The bank should provide more loans skims for customers from the bank so that it can increase

loans and advances of the bank

Table No:14

Table showing working capital position of the bank

YEAR AMOUNT PERCENTAGE% INCREMENTAL

GROWTH

2008 45289 100 -

2009 49740 108.5 8.5

2010 50534 110.2 1.7

2011 53355 116.4 6.2

Analysis:

From the table it is observed that there is an increase in the working capital in the year 2009

increase of 8.5% when compared to previous year in the year 2010 it was further increased by

1.7% in the year 2011it was again increase to 6.2% .

Graph no: 14

graph showing working capital position in the bank.

2008 2009 2010 20110

10000

20000

30000

40000

50000

60000

amountpercentageincremental growth

Inference:

From the above table it is inferred that there is an increment in the percentage of working capital

in the year 2009 it is increased up to 8.5% again in the year 2011 it reached up to 6.2 this shows

that the bank maintains good working capital.

Table No:15

Table showing components of borrowings

YEAR NABARD KARNATAKA APEX BANK

HO(KAB)

KARNATAKA MINORITIES

DEVELOPMENT2008 229.71 229.64 02009 0 765.8 02010 0 195.8 02011 0 0 0

ANALYSYS:

From the table it is observed that the main sources of funds for the bank is the borrowing from

Karnataka state co-operative bank H.O.(KSCAB) it has increased its borrowing in the year 2009

from 229.64 to 765.8 when compared to 2008 where as in the year 2010 it has reduced its

borrowing and in the year 2011 it has not borrowed any amount.

The second main source of borrowing for the bank is from NABARD it has borrowed 229.71

from it in the year 2008 but where as in the following years it has stopped its borrowing .

The bank has not borrowed any amount from Karnataka minorities development.

Graph no: 15

Graph showing components of borrowings

2008 2009 2010 20110

100

200

300

400

500

600

700

800

900

NABARDKABKMD

Inference:

It is inferred that the bank has repaid a major part of its borrowing in the year 2009.

Table No:16

Investment pattern of the bank(Rs. In lakhs)

INVESTMENT 2008 2009 2010 20111.central and

state government securities KSFC

&PD a/c with treasury

9055.21 8678.07 8559.56 8586.04

2. other trustee securities

0 0 0 0

3.shares in co-operative

institutions

30 30 30 30

4.other investment at

KSCAB

998.50 998.50 998.50 998.50

5.Banaglore district co-

operative bank

7.76 7.76 7.76 7.76

6.public sector bank

200 200 200 100

Total 10291.47 9914.33 9795.82 9724.30

Analysis:

From the table it is observed that the total investment has decreased over the years. It may also

be noted that the bank has invested more in the government securities because of less risk and

more safety,

Graph no: 16

Graph showing investment pattern of the bank (Rs in lakhs)

centra

l and st

ate go

vt

other tru

stee

share

and co

.op

orther

investm

ent

BDCB

public sec

tor

0100020003000400050006000700080009000

10000

2008200920102011

Inference:

This shows that the bank has invested more in central and state government securities because

that is less risky and investment is safer than the other securities.

Table No:17

Table showing total NET NPA’S in the bank

YEAR AMOUNT PERCENTAGE% INCREMENTAL GROWTH

2008 9399 100 -2009 4866 51.77 (-)48.232010 2379 25.31 (-)26.462011 9300 98.94 73.63

Analysis:

From the above table it is observed that there is a huge decline in the net NPA in the year 2009

it was to 48.23again in the year 2010 it was reduced to 26.46 and in the year 2011 there was a

tremendous increase to 73.63. it shows that efforts has been taken to control the NPA.

Graph no: 17

Graph showing status of NET NPA’s in the bank

2008 2009 2010 2011

-20000

0

20000

40000

60000

80000

100000

amountpercentageincremental growth

Inference:

From the above table it is inferred there was a huge decline in the NPA’s in the year 2009 it

reached to 48.23 again in the year 2010 it saw a reduce decline to 26.46 but where as in year

2011 it increased very highly up to extend of 73.63.

This shows that the NPA’s has been fluctuating every year.

The bank has to take care of recovery management.

Table No:18

Table showing status gross NPA’S in the bank(Rs. In lakhs)

YEAR AMOUNT PERCENTAGE% INCREMENTAL GROWTH

2008 11403 100 -2009 14696 128.8 28.8%2010 12109 106.1 (-)22.7%2011 10759 94.4 (-)11.7%

Analysis:

From the above table it is observed that there was an increase in gross NPA in the year 2009

28.8% from the year 2010 there was a consistently decline in the following years 2010 & 2011.

Graph no: 18

Graph showing status of gross NPA’s in the bank.

2008 2009 2010 2011-2000

0

2000

4000

6000

8000

10000

12000

14000

16000

amount percentageincremental growth

Inference:

From the above it is inferred that the total gross NPA’s increases in the year 2009 after that we

see a constant decline in the following years. The bank has to take measures to control and take

care of recovery management.

Table No:19

The comparative analysis of the bank for the last four years is furnished below

SL.NO PARTICULARS 2008 2009 2010 20111 SHARE

CAPITAL498.52 583.03 615.85 615.63

2 RESERVE 10644.66 12707.85 13121.08 11726.353 DEPOSITS 33213.39 34898.26 33049.52 33163.424 ADVANCES 21511.45 21362.89 18900.91 18011.395 WORKING

CAPITAL45829.31 49740.36 50534.04 53355.20

6 PROFIT/LOSS -7370.67 -1007.19 -11204.10 -9779.61

Analysis:

The above particulars are evident that the bank has sustained financial growth deposits constrains

both internal and external. The profits earned by all the branches reveal that there has been

growth of business although our main focus was recovery of NPA without paying much attention

in other areas of bank functioning.

Graph No:19

Graph showing comparative position of the bank for the last four years

share capita reserve deposits advances working capital profit/loss

-20000

-10000

0

10000

20000

30000

40000

50000

60000

2008200920102011

Inference:

Decline in the growth of advances was restricted under operational instruction imposed by RBI

in the terms of which the bank is permitted to grant advances against gold ornaments/tangible

securities and advances coming under priority sector or weaker section.

Findings:

The project is related to “A study on credit management at amanath co-operative bank following

are the findings arrived at after the analysis and interpretation.

Amanath bank follows rules and regulations laid by the NABARD for granting loans and

advances.

The credit management system in amanath bank was quite good.

The bank has their own methodology to determine if a borrower is credit worthy or not. It

is determined in terms of the norms and standard set by the banks, such as income of the

applicant/customer, education qualification, professional experience, additional sources

of income assets of the applicants and their financing pattern recurring liabilities etc.

The bank has grown to be the largest urban co-operative bank in the state, with a deposit

of Rs.505 crores and net owned funds of Rs. 29.53crores.

The first co-operative bank in Karnataka to computerized all its operational and

introduced wide area network(WAN)

The first co-operative bank in Karnataka to establish its own staff training college.

The bank has bagged the” best urban co- operative bank” award for the second successive

year from the Karnataka state co-operative federation and Karnataka state urban bank

federation.

The bank has introduced a new scheme called micro credit for the benefits by involving

SHG and NGO ‘s who are working for the economic upliftment of the poor

The bank provides loan for short, medium long term loans for developing business and

becoming self-sufficient

The bank has opened its branches in areas which are pre-dominantly resided by by

middle/ lower income groups and the areas concentrated by minorities and backward

classes.

The Reserve bank of India conferred the :scheduled status” on amanath bank effective fro

29th January2000 and has included the name of the bank in the second schedule the

reserve bank of India act 1934. The bank became the 1st urban co-operative bank in

Karnataka to be awarded this prestigious status. The conferment of “scheduled status”

will enable it.

The major customers of the bank through DCCB’s and PACS are lower and middle

income group

Project on Credit Management 222

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