ANALYZING REASONS FOR SLOW GROWTH IN PERSONAL AND AGRICULTURAL LOAN IN BORSAD AND ANAND ROAD

BRANCHES OF STATE BANK OF INDIA

Guided by

Dr. Mahesh R Prajapati

Asstt. Professor

SUMMER TRAINING PROJECT PRESENTATION

ON

Presented by

Shashank Jain

04-2062-2012

Content of presentation

• Introduction

• Objectives of study

• Results analysis and discussion

• Conclusion

• Suggestions

• References

Introduction

• The banking sector is the most dominating sector of the

financial system in India. Significant progress has been made

with respect to the banking sector in new economic era (post

liberalization period).

• Deregulation has opened new opportunities for banks to

increase revenue.

• Liberalization has created the more competitive environment

in banking sector.

CONCERNS.....

• The macroeconomic situation continues to raise concerns.

Even as growth has slowed significantly, inflation remains

well beyond the comfort level of the Reserve Bank.

• The impact from domestic and international economic

developments posed challenges to the banking sector during

the year 2012-13

• Higher capital requirements and the need for meaningful

financial inclusion are the primary challenges before banks.

• Under extreme shocks, some banks could face moderate

liquidity problems and their profitability could be affected.

Advances

• India has recorded syndicated loan volume of only $7.2

billion for the first nine months of 2012, just one-third of the

$21.2 billion closed by the end of the third quarter last year.

• Volume has dropped significantly this year in the absence of

large offshore M&A deals, previously a big volume booster.

And deal flow has been muted amid a dramatic slowdown in

economic growth.

Trends in advances

• Over the past 12 months, total bank loans have risen by less than

four percent, while deposits have increased over eight percent.

• The overall loan-deposit ratio for the banking industry is getting

lower.

• Business loans are the fastest growing segment, with real estate

and consumer loans just barely expanding. 

• SBI expects to achieve lower advances growth rate of 16% in

2013 advances as compare to 21% of previous year

Challenges for bank

• Financial inclusion

• Profitability

• Non-Performing Assets

• Credit risk

State Bank Of India - A Brief Introduction

Products Portfolio

• Personal Banking

• Agricultural & Rural Banking

• NRI Services

• International Banking

• Corporate Banking

• Services

• Govt. Business

• SME

Kisan Vikas Patra

• Kisan Vikas Patra is a saving scheme that was announced by

the Government of India that doubles the money invested in

eight years and seven months

• The “kisan” in Kisan Vikas Patra does not mean that only

farmers can buy these saving certificates but means that the

revenue mobilized by this scheme will be used by the

Government of India in welfare schemes for farmers.

OBJECTIVES OF THE STUDY

To find out the reasons behind the slow growth/ negligible growth in personal and

Agricultural loan.

To know the view of people regarding institutional loan and its procedures with

particular emphasis on SBI’s Personal and Agricultural loan.

To know the awareness regarding loan against Kisan Vikas Patra or securities.

RESEARCH METHODOLOGY

• Background of study-

• The growth in retail advances of the bank has become

stagnant. Also the asset quality is getting degraded day by

day; the study aims to identify the reasons which are

responsible for the slow growth in loan segment. The study

is based on analysis of Factors (of bank and customers) and

their linkages, within the research framework of 10 weeks.

Source of data

• Primary data:

Data collected from the bank officials as well as from people

(customers as well as other) through semi structured

questionnaire.

• Secondary data:

Secondary data collected from the bank’s annual reports,

financial journals, economic issues, as well as RBI & SBI

websites

Research design:

Sampling method: Non Probability Sampling

Sampling technique: Convenient Sampling

Sample area: Borsad and Anand region

Sample size: 100

Sampling unit: Customers and non customers of Bank.

Analytical tools: Interpreting using charts, graphs and tables etc.

4. RESULTS AND DISCUSSIONS

FIG 4.1 Deposits v/s Advances

Jan/08 Jan/09 Jan/10 Jan/11 Jan/12 Jan/130

100000

200000

300000

400000

500000

600000

DEPOSIT

ADVANCES

FIG 4.2 Accounts facilitated with followings

11 39 61

144 176

493

FIG 4.3 Regular v/s Defaulted accounts in different facilities

overdraft term loan

agri term loan recalled

assets demand loansagri cash

credit cash credit

0

50

100

150

200

250

300

350

400

450

500

61

493

39

0

144176

11

1 25 53

120

2 115

no of accounts no of NPA accounts

Fig 4.4 Amount disbursed in regular and defaulted accounts

agri term loan4%

demand loans5%

cash credit10%

agri cash credit12%

overdraft 13%

term loan56%

amount in different accounts

overdraft 6%

term loan20%

agri cash credit21%

agri term

loan25%

cash credit29%

Amount in NPA in defaulted account

NPA accounts in

different segments

Agriculture79%

Per-sonal5%

SBF17%

Agriculture57%

Personal

8%

SBF35%

Amount of NPA in segments

FIG 4.5

• ANALYSIS OF CUSTOMER RESPONSES

Occupation

other service agriculture business

7

23

3436

FIG 4.6

Annual income

below 200000 above 1000000 500000 - 1000000 200000 - 500000

8

12

38

42

FIG 4.7

Do you have an account in any bank

yes94%

no6%

FIG 4.8

source of loan

institutional58%

non institutional42%

yes53%

no47%

Taken loan from any where

FIG 4.9

Reason for non institutional

b. flexibility of amount

9%c. personal rela-

tions14%

e. No other op-tion14%

d. timeliness 23%

a. easy availabil-ity

41%

FIG 4.10

Types of institutional loan

home loan27%

Car/vehicle loan12%

Agriculture loan23%

educational loan16%

other22%

FIG 4.11

Source of institutional credit

other10%

private banks13%

Other public sector banks 19%SBI

58%

FIG 4.12

Reasons for choosing SBI loan

transparency13%

Low cost28%

offer from the institute

20%

trustworthyness 34%

other5%

FIG 4.13

Difficulties / Problems of institutional

loanslack of

awareness8%

other10%

more time consuming

22%

heavy paper work61%

FIG 4.14

Start up / continue taking up SBI loan

yes85%

no15%

FIG 4.15

If no then what is the reasonno time-liness 13% inflexibil-

ity of amount

13%

less cooperation 20%

heavy paper work 53%

FIG 4.16

Reason for continuity/starting up loan from SBI

low interest rate 27%

good service 14%

reliability48%

other11%

FIG 4.17

Valuation or scale of finance is satisfactory

yes 12%

no88%

FIG 4.18

Do you know about Kisan Vikas Patra saving?

yes28%

no72%

FIG 4.19

yes72%

no28%

Aware of loan against KVP

no100%

Taken up loan against KVP

FIG 4.20

Conclusion from discussion with bank

• Although the growth in advances is at par with deposits but still

the overall loan deposit ratio is less.

• Rising NPA causing degradation in asset quality hence it is

adversely affecting the lending abilities of bank.

• The recovery of agricultural loan is not efficient in rural areas like

Borsad which is ultimately creating the burden on other segments

e.g. Personal and small financing.

• The officers who process loan is made responsible if it defaults.

• Farmers who own the land jointly with other

family members find it difficult to take the

loan.

• Lack of staff is also causing the loss of

customers as many customers are left

unaddressed of their problems.

Conclusion of customer analysis

• The customer processing time is huge in loan application as an average it

takes minimum 10 days to process a loan from application to final

sanctioning.

• People think that loan from institutions is a tiring procedure and requires

heavy paperwork and lot of time.

• Respondents of semi urban and rural areas were having less awareness

of various schemes and facilities provided by the bank to promote the

advances, as loan against securities and KVP had less impact on the

people.

Recommendations

• Need of little flexibility in terms of amount under

consideration, time and documents requirements.

• Banks should promote the schemes related to loan against

the KVP, property and other collateral according to socio-

economic profile of the region.

• The complaints of customers should address as quickly as

possible.

• The recovery of loan should be done professionally.

• The staff should be given more authority and power to

verify the loan procedure and to recover it, so they can

feel free while sanctioning the loan.

• Employee turnover should be reduced as it takes time to

build the relations again with new staff and customers

Recommendations

REFERENCES• Anonymous; http://data.gov.in/catalogs?page=2&filter=agency%3A1202;

accessed on 18 July 2013.

• Anonymous; www.rbi.org.in; RBI web page accessed on 20 Aug 2013.

• Anonymous; www.sbi.co.in; accessed on 15 July 2013

• Bhatt, O. P.; State Bank of India: Pioneer in Agricultural lending.

• Hunt Robert; Case Study: State Bank of India, World's Largest Centralized

Core Processing Implementation

• Singh Anurag. B.; Priyanka Tandon; “A study of financial performance: a

comparative analysis of sbi and icici bank” International Journal of

Marketing, Financial Services & Management Research; Vol.1 Issue 11,

November 2012, ISSN 2277 3622.