RESEARCH PROJECT REPORT

ON

“ALLAHABAD BANK”

1

TABLE OF CONTENT

PAGE NO.

CHAPTER-1 Introduction 1-27

1.1 Introduction 1-1

1.2 About Allahabad bank 1-5

1.3 Principles of lending and priority sector lending 6-

16

1.4 Targets & sub target under priority sector 17-19

1.5 Common guidelines for priority sector advances 20-26

1.6 Advances to priority sector by Allahabad bank. 26-

26

1.7 objectives of the research 27-27

CHAPTER-2 Literature Review 28-

39

CHAPTER-3 Research Design 40-

42

3.1 Research methodology 40-

40

3.2 Research design 41-

41

3.3 Method of data collection 41-42

CHAPTER-4 Data Analysis and Interpretation 43-51

CHAPTER-5 52-54

2

5.1 Findings 52-52

5.3 Conclusion 53-53

5.3 suggestion 54-54

CHAPTER-6 55-55

Bibliography 55-55

LIST OF TABLE

PAGE NO.

Table no -1 Advance to priority sector. 43-

43

Table no -2 Advances to agriculture sector. 44-44

Table no -3 Direct finance to agriculture sector. 45-

45

Table no -4 Indirect finance to agriculture sector. 47-47

Table no -5 Finance to Micro Small Enterprises Sector. 48-

48

Table no -6 Finance to sector such as housing loan education loan etc. 49-

49

Table no -7 Finance to weaker section.

50-50

3

LIST OF FIGURE

PAGE NO.

Figure no -1 Advance to priority sector. 43-

43

Figure no -2 Advances to agriculture sector. 44-

44

Figure no -3 Direct finance to agriculture sector. 46-

46

4

Figure no -4 Indirect finance to agriculture sector. 47-47

Figure no -5 Finance to Micro Small Enterprises Sector. 48-48

Figure no -6 Finance to sector such as housing loan education loan etc.

49-49

Figure no -7 Finance to weaker section.

50-50

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CHAPTER-1

INTRODUCTION OF THE TOPIC

1.1 Introduction

The research project report on financing to priority sector from Allahabad bank

is taken as a part of my 4th semester course of MBA. Finance to priority sector

is a prime concern for the banks and it is given highest priority .

This chapter contains a brief summary about Allahabad bank and the

research topic. Section 1.2 deals with about Allahabad bank. Section 1.3

deals with principles of lending and priority sector lending. The section 1.4

contains target & sub target under priority sector. The section 1.5 contains

common guidelines for priority sector advances. The section 1.6 deals with

advances to priority sector by Allahabad bank. The last Section 1.7 deals with

objectives of the research work.

1.2 About Allahabad bank

Allahabad Bank was founded by group of Europeans on April 24 1865. The

Allahabad Bank has a history of 3 centuries. The Allahabad Bank is the oldest

joint stock Bank in India. Due to business considerations the head office of

Allahabad Bank was shifted to Calcutta (now Kolkatta) in 1923. In March

2007 the business of Allahabad bank has reached to a mark of 150000

crores.

1

The Allahabad bank has main branches in Kanpur, Lucknow, Nanital,

Kolkatta, Jabalpur, Meerut, Nagpur, Mumbai, and New Delhi. The Chairman

and Managing Director of Allahabad Bank is Sri K.R. Kamath. Sri K.K.

Agarwal and Sri J.P. Dua are the executive directors of Allahabad Bank.

The Allahabad bank offers its services to self-employed persons,

Professionals, salaries employees, businessman. The Allahabad bank offers

three kinds of products Deposit products, Retail Credit Products and Other

Credit Products. The Flexi-fix Deposit, Rs.5 Banking, Tax Benefit Term

Deposit are some of the famous Deposit Products of the Allahabad Bank.

The Allahabad Bank also offers its services to NRI customers. It offers

International Banking facility for its NRI customers. The deposit schemes, tax

benefits schemes, remittance facility, forex services are offered by the

Allahabad Bank. The NRI services are available in 312 branches of the

Allahabad Bank all over the country.

Philosophy of the Bank

The highest standards of ethical conduct and honest.

Accurate, Fair, Full, Sensible and timely disclosures in reports.

Compliance with laws, regulations and rules.

2

Nineteenth Century

The Oldest Joint Stock Bank of the Country, Allahabad Bank was founded on

April 24, 1865 by a group of Europeans at Allahabad. At that juncture

Organized Industry, Trade and Banking started taking shape in India. Thus,

the History of the Bank spread over three Centuries - Nineteenth, Twentieth

and Twenty-First. 

April 24, 1865's The Bank was founded at the confluence city of

Allahabad by a group of Europeans.

Twentieth Century

1920's The Bank became a part of P & O Banking

Corporation's group with a bid price of Rs.436 per

share,

1923 The Head Office of the Bank was shifted to Calcutta

on Business considerations.

July 19, 1969 Nationalized along with 13 other banks, Branches -

151 Deposits - Rs.119 crores, Advances - Rs.82

crores.

October, 1989 United Industrial Bank Ltd. merged with Allahabad

3

Bank.

1991 Instituted Allahabad Bank Finance Ltd., a wholly

owned subsidiary for Merchant Banking.

Twenty-First Century

October, 2002 The Bank came out with Initial Public Offer (IPO), of

10 crores share of face value Rs.10 each, reducing

Government shareholding to 71.16%.

April, 2005 Follow on Public Offer (FPO) of 10 crores equity

shares of face value Rs.10 each with a premium of

Rs.72, reducing Government shareholding to

55.23%.

June, 2006 The Bank Transcended beyond the National

Boundary, opening Representative Office at

Shenzen, China.

Oct, 2006 Rolled out first Branch under CBS.

February, 2007 The Bank opened its first overseas branch at Hong

Kong.

4

Vision

To put the Bank on a higher growth path by building a Strong Customer-base

through Talent Management, induction of State-of-the-art Technology and

through Structural Re-organization.

Mission

To ensure anywhere and anytime banking for the customer with latest state-

of-the-art technology and by developing effective customer centric relationship

and to emerge as a world-class service provider through efficient utilization of

Human Resources and product innovation.

5

1.3 Introduction of priority sector

Disposing of money or property with the expectation that the same thing (or an

equivalent) will be returned . Credit is the provision of resources (such as

granting a loan) by one party to another party where that second party does

not reimburse the first party immediately, thereby generating a debt, and

instead arranges either to repay or return those resources (or material(s) of

equal value)

• Lenders - A loan is a type of debt. Like all debt instruments, a loan

entails the redistribution of financial assets over time

• To provide money temporarily on condition that the amount borrowed

be returned, usually with an interest fee.

Today ,the important types of banks, commercial and merchant banks,

operating under the regulation of the Central Bank. The commercial banks

engage in retail banking services through branch networks and operate with a

broad deposit base consisting of demand and time deposit – they provide

short term lending. On the other hand, merchant banks are licensed to provide

6

wholesale banking, take deposit and arrange syndicated loan facilities for long

terms by pooling, sometimes, a consortium of banks, including other financial

institutions, to finance capital intensive projects. From the foregoing, it is

realized that banks are generally debtors; they borrow money in order to lend

them out to make profit. No bank can ever survive by just being a custodian of

deposit, but they exist by lending from the deposit on fixed interest charged.

Money lent on interest is always supposed to be secured on some guarantees

or security.

Since banks depend largely on lending, the need to adhere to the basic

principles of lending is quite inevitable. The principles, if strictly followed, will

guarantee depositors and shareholders’ funds, increase profitability and make

a healthy turn over. Such advances in turn assist in the transformation of rural

environment, promote rapid expansion of banking habit and improve and

boost the nation’s economy.

The basic considerations in bank lending are the character of the client

seeking loan from the bank. The client must be an honest, upright customer

whose record of transaction with the financial institution or in the society is

remarkable. The information on the character of the borrower could be

obtained through a completed form of his guarantor or his statement of

account.

For effective credit administration, the bank must assign functioning lending

officers, properly trained on lending, to be responsible for evaluation of reports

7

and collection and reporting findings to relevant senior schedule officers, for

further consideration and final approval or rejection

An internal credits/lending policy should be formulated, implemented and

pursued vigorously by the bank to minimize the risk of default from borrowers.

The successful banks operating within the financial system are those that

consider and coordinate basic principles of lending and monitor the activities

of borrowers regularly.

The major business of banking company is to grant loans and advances to

traders as well as commercial and industrial institutes. The most important use

of banks money is lending. Yet, there are risks in lending. While lending loans

or advances the banks usually keep such securities and assets as a supports

so that lending may be safe and secured. Suppose, any particular state is hit

by disasters but the bank shall get advantages from the lending to another

states units. Thus, the effect on the entire business of banking is reduced. So

the banks follow certain principles to minimize the risk. Following are the

important areas to be taken care while lending:

Principles of good lending

Basic principles General principle

Basic principles

8

The success of banks depends upon the basic principles. These are the prime

principles in lending as well as investment

Safety

Liquidity

Profitability

Safety

Normally the bank uses the money of depositors in granting loans and

advances. Because of that while granting loans the banker should think about

the safety of depositor’s money. The purpose behind the safety is to see the

financial position of the borrower, whether he can pay the debt as well as

interest easily. Ensuring safety means reducing risk associated with lending.

The risk involved in lending money is the credit risk.ie the possibility of the

borrower not repaying the amount back on the due date. It is necessary for the

banks to maintain expert staff to appraise every credit proposal received by it.

Market risk also there , it can be avoided by preferring high – grade securities

of short terns.

Liquidity

It is a legal duty of a banker to pay the total deposited money to the depositor

on demand. So the banker has to keep certain percent cash of the total

deposits in hand. Moreover the bank grants loan. It is also for the addition of

short term or productive capital. Such type of lending is recovered on demand.

9

A bank must have sufficient liquid assets to meet the demands of the

depositors .The liquid assets must have posses certain characteristics.

It must be convertible in to cash quickly and easily.

The conversion must be without any loss of value or risk

SLR : The Banking regulation act of 1949 , section 24 . states that every

commercial bank have to maintain liquid assets in the form of cash , gold, and

gilt edged securities – which is not less than 25 % and not more than 40 % of

NDTL ( Net Demand and Time Liabilities )

Profitability

Commercial banks are profit earning institutes; nationalized banks are also not

an exception. They should have planning of deposits in a profitability way to

pay more interest to the depositors and more salary to the employees. Before

taking any decision the banker should make sure that it is profitable.

PRIORITY SECTOR LENDING

The Government of India through the instrument of Reserve Bank of India

(RBI) mandates certain type of lending on the Banks operating in India

irrespective of their origin. RBI sets targets in terms of percentage (of total

money lent by the Banks) to be lent to certain sectors, which in RBI's

perception would not have had access to organised lending market or could

not afford to pay the interest at the commercial rate. This type of lending is

called Priority Sector Lending. Financing of Small Scale Industry, Small

10

business, Agricultural Activities and Export activities fall under this category.

This is also called directed credit in Indian Banking system.

Financing Priority Sector in the economy is not strictly on commercial basis as

not only the general approach is liberal but also the rate of interest charged on

such loans is less. Export finance is, in fact, available at a discount of 20% or

more on the normal rate of interest to Indian corporates. Part of the cost of this

concession is borne by RBI by means of refinancing such loans at

concessional rate. Indian Banks, therefore, contribute towards economic

development of the country by subsidizing the business activities undertaken

by entrepreneurs in the areas which are consider "priority sector" by RBI.

Principles of lending & Priority sector finance in Banks

• Cardinal principles of lending are Safety and liquidity , Profitability and

diversifications of risks and Productive purpose and security

• Liquidity with a banker means Cash on Hand, Cash and Bank balances

and Short term current assets to convert into cash

• Customer profitability analysis means Assess the profitability of

customer’s business

• Banker can reduce risk in lending to a borrower by ensuring that there

will be no default on account of lack of liquidity and lack of willingness to pay

on the part of the borrower

• In banker’s parlance, credit risk in lending refers to default of repayment

by a borrower

11

Priority sector comprise

Broadly, the priority sector comprises the following :

1. Agriculture

2. Small scale industries (including setting up of industrial estates)

3. Small road and water transport operators (owning upto 10 vehicles).

4. Small business (Original cost of equipment used for business not to exceed

Rs 20 lakh)

5. Retail trade (advances to private retail traders upto Rs.10 lakh)

6. Professional and self-employed persons (borrowing limit not exceeding

Rs.10 lakh of which not more than Rs.2 lakh for working capital; in the case of

qualified medical practitioners setting up practice in rural areas, the limits are

Rs 15 lakh and Rs 3 lakh respectively and purchase of one motor vehicle

within these limits can be included under priority sector)

7. State sponsored organisations for Scheduled Castes/Scheduled Tribes

8. Education (educational loans granted to individuals by banks)

9. Housing [both direct and indirect – loans upto Rs.5 lakhs (direct loans upto

Rs 10 lakh in urban/ metropolitan areas), Loans upto Rs 1 lakh and Rs 2 lakh

for repairing of houses in rural/ semi-urban and urban areas respectively].

10. Consumption loans (under the consumption credit scheme for weaker

sections)

12

11. Micro-credit provided by banks either directly or through any intermediaty;

Loans to self help groups(SHGs) / Non Governmental Organisations (NGOs)

for onlending to SHGs

12. Loans to the software industry (having credit limit not exceeding Rs 1

crore from the banking system)

13. Loans to specified industries in the food and agro-processing sector

having investment in plant and machinery up to Rs 5 crore.

14. Investment by banks in venture capital (venture capital funds/ companies

registered with SEBI)

‘Direct Finance’ for Agricultural Purposes

Direct Agricultural advances denote advances given by banks directly to

farmers for agricultural purposes. These include short-term loans for raising

crops i.e. for crop loans. In addition, advances upto Rs. 5 lakh to farmers

against pledge/hypothecation of agricultural produce (including warehouse

receipts) for a period not exceeding 12 months, where the farmers were given

crop loans for raising the produce, provided the borrowers draw credit from

one bank.

Direct finance also includes medium and long-term loans (Provided directly to

farmers for financing production and development needs) such as Purchase of

agricultural implements and machinery, Development of irrigation potential,

Reclamation and Land Development Schemes, Construction of farm buildings

and structures, etc. Other types of direct finance to farmers includes loans to

13

plantations, development of allied activities such as fishery, poultry etc and

also establishment of bio-gas plants, purchase of land for agricultural

purposes by small and marginal farmers and loans to agri-clinics and agri-

business centres.

Indirect Finance to Agriculture

Indirect finance denotes to finance provided by banks to farmers indirectly,

i.e., through other agencies. Important items included under indirect finance to

agriculture are as under :

(i) Credit for financing the distribution of fertilisers, pesticides, seeds, etc.

(ii) Loans upto Rs. 25 lakhs granted for financing distribution of inputs for the

allied activities such as, cattle feed, poultry feed, etc.

(iii) Loans to Electricity Boards for reimbursing the expenditure already

incurred by them for providing low tension connection from step-down point to

individual farmers for energising their wells.

(iv) Loans to State Electricity Boards for Systems Improvement Scheme under

Special Project Agriculture (SI-SPA).

(v) Deposits held by the banks in Rural Infrastructure Development Fund

(RIDF) maintained with NABARD.

(vi) Subscription to bonds issued by Rural Electrification Corporation (REC)

exclusively for financing pump-set energisation programme in rural and semi-

14

urban areas and also for financing System Improvement Programme (SI-

SPA).

(vii) Subscriptions to bonds issued by NABARD with the objective of financing

agriculture/allied activities.

(viii)Finance extended to dealers in drip irrigation/sprinkler irrigation

system/agricultural machinery, subject to the following conditions:

(a) The dealer should be located in the rural/semi-urban areas.

(b) He should be dealing exclusively in such items or if dealing in other

products, should be maintaining separate and distinct records in respect of

such items.

(c) A ceiling of upto Rs. 20 lakhs per dealer should be observed.

(ix) Loans to Arthias (commission agents in rural/semi-urban areas) for

meeting their working capital requirements on account of credit extended to

farmers for supply of inputs.

(x) Lending to Non Banking Financial Companies (NBFCs) for on-lending to

agriculture.

Small Scale Industries (SSI)

Small scale industrial units are those engaged in the manufacture, processing

or preservation of goods and whose investment in plant and machinery

(original cost) does not exceed Rs. 1 crore. These would, inter alia, include

units engaged in mining or quarrying, servicing and repairing of machinery. In

the case of ancillary units, the investment in plant and machinery (original

15

cost) should also not exceed Rs. 1 crore to be classified under small-scale

industry.

The investment limit of Rs.1 crore for classification as SSI has been enhanced

to Rs.5 crore in respect of certain specified items under hosiery and hand

tools by the Government of India

‘Tiny Enterprises’

The status of ‘Tiny Enterprises’ is given to all small scale units whose

investment in plant & machinery is upto Rs. 25 lakhs, irrespective of the

location of the unit.

‘Small Scale Service & Business Enterprises’ (SSSBE’s)

Industry related service and business enterprises with investment upto Rs. 10

lakhs in fixed assets, excluding land and building will be given benefits of

small scale sector. For computation of value of fixed assets, the original price

paid by the original owner will be considered irrespective of the price paid by

subsequent owners.

Indirect finance in the small-scale industrial sector include

Indirect finance to SSI includes the following important items:

i. Financing of agencies involved in assisting the decentralised sector in

the supply of inputs and marketing of outputs of artisans, village and cottage

industries.

ii. Finance extended to Government sponsored Corporation/organisations

providing funds to the weaker sections in the priority sector.

iii. Advances to handloom co-operatives.

16

iv. Term finance/loans in the form of lines of credit made available to State

Industrial Development Corporation/State Financial Corporations for financing

SSIs.

v. Funds provided by banks to SIDBI/SFCs by way of rediscounting of bills

vi. Subscription to bonds floated by SIDBI, SFCS, SIDCS and NSIC

exclusively for financing SSI units.

vii. Subscription to bonds issued by NABARD with the objective of financing

exclusively non-farm sector.

viii. Financing of NBFCS or other intermediaries for on-lending to the tiny

sector.

ix. Deposits placed with SIDBI by Foreign Banks in fulfilment of shortfall in

attaining priority sector targets.

x. Bank finance to HUDCO either as a line of credit or by way of

investment in special bonds issued by HUDCO for on-lending to artisans,

handloom weavers, etc. under tiny sector may be treated as indirect lending to

SSI (Tiny) Sector.

Weaker sections within the priority sector

The weaker sections under priority sector include the following:

1. Small and marginal farmers with land holding of 5 acres and less and

landless labourers, tenant farmers and share croppers.

2. Artisans, village and cottage industries where individual credit limits do

not exceed Rs. 50,000/-

17

3. Beneficiaries of Swarnjayanti Gram Swarojgar Yojana (SGSY)

4. Scheduled Castes and Scheduled Tribes

5. Beneficiaries of Differential Rate of Interest (DRI) scheme

6. Beneficiaries under Swarna Jayanti Shahari Rojgar Yojana (SJSRY)

7. Beneficiaries under the Scheme for Liberation and Rehabilitation of

Scavangers (SLRS).

8. Self Help Groups (SHGs)

1.4 Targets under priority sector lending

The targets under priority sector lending would be linked to Adjusted Bank

Credit (ABC) (total loans and advance plus investments made by UCBs in

non-SLR bonds) or Credit Equivalent amount of Off-Balance Sheet

Exposures (OBE), whichever is higher, as on March 31 of the previous

year. Existing investments, as on August 30, 2007, made by banks in non-

SLR bonds held in HTM category will not be taken into account for

calculation of ABC. However, fresh investments by banks in non-SLR

bonds will be taken into account for the purpose. For the purpose of

calculation of credit equivalent of off-balance sheet exposures, banks may

use current exposure method. Inter-bank exposures will not be taken into

account for the purpose of priority sector lending targets/sub-targets.

The targets and sub-targets set under priority sector lending for UCBs are

furnished below:

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 Targets and sub-targets set under priority sector

lending

Total Priority

Sector

advances

40 per cent of Adjusted Bank Credit (ABC) or credit

equivalent amount of Off-Balance Sheet Exposure,

whichever is higher.

Agriculture

AdvancesNo target.

Small

Enterprise

advances

Advances to small enterprises sector will be reckoned in

computing performance under the overall priority sector

target of 40 per cent of ABC or credit equivalent amount of

Off-Balance Sheet Exposure, whichever is higher.

Micro

enterprises

within Small

Enterprises

sector

(i) 40 per cent of total advances to small enterprises sector

should go to micro (manufacturing) enterprises having

investment in plant and machinery up to Rs 5 lakh and

micro (service) enterprises having investment in

equipment up to Rs.2lakh;

ii) 20 per cent of total advances to small enterprises sector

should go to micro (manufacturing) enterprises with

investment in plant and machinery above Rs 5 lakh and up

to Rs. 25 lakh, and micro (service) enterprises with

investment in equipment above Rs. 2 lakh and up to Rs.

10 lakh.(Thus, 60 per cent of small enterprises

19

advances should go to the micro enterprises).

Advances to

weaker sections

Of the stipulated target for priority sector advances,

at least 25% (or 10% of the ABC or credit equivalent

amount of Off-Balance Sheet Exposure, whichever is

higher) should be given to weaker sections.

Advances to

Minorities.

Within the overall target for priority sector lending and the

sub- target of 25 per cent for the weaker sections,

sufficient care may be taken to ensure that the minority

communities also receive an equitable portion of the credit.

The targets and sub-targets set under priority sector lending for domestic

and foreign banks operating in India are furnished below :

  Domestic banks (both public sector and private sector banks)

Foreign banks operating in India

Total Priority Sector advances

40 percent of net bank credit

32 percent of net bank credit

Total agricultural advances

18 percent of net bank credit

No target

SSI advances No target 10 percent of net bank credit

Export credit Export credit does not form part of priority sector

12 percent of net bank credit

20

Advances to weaker sections

10 percent of net bank credit No target

1.5 COMMON GUIDELINES FOR PRIORITY SECTOR ADVANCES

Common guidelines for priority sector advances are following:-

MODE OF DISBURSEMENT OF LOAN:

Banks may disburse all loans for agricultural purposes in cash.

REPAYMENT SCHEDULE:

Repayment program should be fixed taking into account the sustenance

requirements, surplus generating capacity, the break-even point, the life of the

asset, etc., and not in an "ad hoc” manner.

RATES OF INTEREST:

The rates of interest on various categories of priority sector advances will

be as per RBI directives issued from time to time.

PENAL INTEREST:

21

The issue of charging penal interests that should be levied for reasons such

as default in repayment, non-submission of financial statements, etc. has

been left to the Board of each bank.

Banks will be free to levy penal interest for loans exceeding Rs 25,000

SERVICE CHARGES / INSPECTION CHARGES

No service charges/inspection charges should be levied on priority sector

loans up to Rs. 25,000/-.

For loans above Rs. 25,000/- banks will be free to prescribe service charges

with the prior approval of their Boards

PHOTOGRAPHS OF BORROWERS

There is no objection to taking photographs of the borrowers for purposes of

identification, banks themselves should make arrangements for the

photographs and also bear the cost of photographs of borrowers falling in the

category of Weaker Sections.

DISCRETIONARY POWERS

All Branch Managers of banks should be vested with discretionary powers to

sanction proposals from weaker sections without reference to any higher

authority.

MACHINERY TO LOOK INTO COMPLAINTS

There should be machinery at the regional offices to entertain complaints from

the borrowers if the branches do not follow these guidelines, and to verify

periodically that these guidelines are scrupulously implemented by the

branches.

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AMENDMENTS

These guidelines are subject to any instructions that may be issued by the RBI

from time to time.

Common Guidelines/Instructions for lending to MSME Sector

Common guidelines for Instructions for lending to MSME Sector are

following:-

1. Processing of Applications

i. Loan Application

Revised Simplified application form will be used for Micro and Small

Enterprise. The existing Common loan Application form applicable to all loans

irrespective of limit, will be applicable for Medium Enterprises sector.

ii. Issue of Acknowledgement of Loan Applications:

Each branch will issue an acknowledgement for loan applications received

from the borrowers towards financing under this sector and maintain the

record of the same.

iii. Disposal of Applications:

In case of Loans up to Rs.25000/- : Within 2 weeks

In case of Loans above Rs.25000 : Within 4 Weeks

(Provided the loan applications are complete in all respects and accompanied

by a 'check list' enclosed to the application form).

iv. Register of Receipt/Sanction/Rejection of Applications:

a. A register should be maintained at branch wherein the date of receipt,

sanction /disbursement, rejection with reasons, should be recorded. The

23

register should be made available to facilitate verification by the Bank’s

officials including Zonal Manager during visit to the branch.

b. Branch Manager may reject application (except in respect of SC/ST). In the

case of proposals from SC/ST, rejection should be done at a level higher than

Branch Manager.

c. The reason for rejection will be communicated to the borrower in line with

stipulation mentioned in the Fair Practice Lenders Code.

v. Photographs of Borrowers

While there is no objection to take photographs of the borrowers, for the

purpose of identification, branches themselves should make arrangements for

the photographs and also bear the cost of photographs of borrowers falling in

the category of Weaker Sections. It should also be ensured that the procedure

does not involve any delay in loan disbursement.

2. Composite Loan

A composite loan with maximum limit upto Rs.1.00crore may be considered by

bank to enable the Micro and Small Enterprises {both for manufacturing and

service sector} to avail of their working capital and Term loan requirement

through Single Window.

3. Types of Loans

The Bank may provide all types of funded and non funded facilities to the

borrower under this sector viz, Term Loan, Cash Credit, Letter of Credit, Bank

guarantee, etc.

24

4. Margin

Loan Size Minimum Margin

Up to Rs.25000.00 Nil

Above Rs.25000.00 As per lending policy of the Bank

i. While considering proposals under MSME sector, the book debt upto six

months may be treated as a current assets, for the purpose of computation of

permissible bank finance and drawing power calculation.

ii. The margin on the book debts may also be considered at 20% to 25% on

merit of the case.

iii. In regard to age of the book debts, a certificate preferably from Auditors

/Chartered Accountant to be obtained.

iv. All book debts more than 180days are to be treated as Non-current asset.

5. Security

5.1 No collateral or Third party guarantee for advances up to Rs.5.00 Lacs.

5.2  In case of good track record of the borrower Collateral Security and or

third party guarantee may be waived beyondRs. 5.00 Lac but up to Rs.100.00

Lacs, where guarantee cover of 62.50% of the amount of default is available

from CGTMSE, in respect of term loan and/or working capital facilities

extended to new and existing entrepreneur. It has also been stipulated by

CGTMSE that all proposals of sanction of Guarantee approvals for credit

25

facilities above Rs.50.00 Lacs and up to Rs. 100.00 Lacs will have to be rated

internally by MLIs and should be of investment grade. Accordingly, all

proposals above Rs. 50 Lacs are to be rated on Credit Risk Grading (CRG 2)

as per applicable internal rating modules prescribed under Bank’s Credit Risk

Management Policy and proposals rated as AB-1 to AB-7 would only be

considered as investment grade subjected to other stipulated norms in

relevant policies / guidelines. The commission of CGTMSE will be borne by

the borrower

5.3. In case of Loan up to Rs.25000.00, minimum Asset Coverage Ratio

(Primary Security /Loan amount) would be 1:1. However, in case of schematic

lending/specified scheme, the guidelines as applicable will be complied with.

5.4. In case of Loan above Rs.25000/- and up to Rs.10.00 Lacs, a minimum

asset coverage ratio must be 1.25:1.

5.5. In case a loan is not covered under CGTMSE scheme for valid reasons,

the Security coverage Ratio for such loan above Rs.10.00 Lac will be based

on the Risk Rating status of the borrower.

Rating Grade 

(As per our Rating module)

Minimum Security Coverage Ratio**

AB-1 1.25:1

AB-2 1.5:1

AB-3 1.75:1

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Other rated accounts 2.00:1

** In each of the above case, Primary + collateral Security /Loan

amount should not be less than 1.25:1 so as to ensure the minimum

stipulated margin.

1. Nevertheless, availability of collateral security shall not be the mere criterion

for arriving at credit decision.

2. In case of loan accounts not covered under CGTMSE scheme, it may be

explored as far as practicable that the credit facilities/loans extended, are

supported by collaterals in the form of liquid securities or fixed assets,

immovable properties, based on the credit Risks perception.

3. Collateral security shall not be insisted upon in those cases where the RBI

directives specifically advised the banks not to insist on obtaining Collateral

security /third party guarantee, in certain priority sector credit or Government

sponsored schemes.

4. The other guidelines/amendments as per lending policy of the Banks should

be closely observed.

1.6 Advances to Priority Sector by Allahabad Bank

27

Advances on Priority sector:-

Priority

sector/Schemes

March 2008 March 2009 March 2010

Amount(Rs. crores)

Amount(Rs. crores)

Amount(Rs. crores)

a. Priority

sector

18,774 20,435 24,279

i. Agriculture 9,146 9,568 11,567

- Direct 6,571 7,306 8,340

- Indirect 2,575 2,262 3,227

ii. Micro small

enterprices

3,530 4,593 8,188

iii. Other 6,098 6,275 4,524

b. Weaker Section

4,455 5,010 6,150

(Source of information- Allahabad bank annual report)

1.7 Objectives of the study

The study has been undertaken with the following objectives :

1) To evaluate the growth of the Allahabad bank

2) To study of priority sector

3) To analyse the progress made by the Allahabad bank in the various

components of the priority sector lending i.e. agriculture, small scale industries

28

and other priority sector advances comprised of weaker section, education,

housing etc.

4) To make an in-depth study of the priority sector lending of the selected

bank.

5) To analyze targets achieved by Allahabad bank

6) To suggest ways and means for improving the quality of lending to this

sector.

CHAPTER-2

Literature Review

The primary objective of social control and nationalisation is to ensure a better

alignment of the commercial banking system to meet the needs of the

29

economy. It is the duty of the banks to see that credit flows into channels,

which are most productive and most helpful to our growth and development.

To promote the welfare of the people who are socially and economically

backward, the concept of priority sector lending was evolved.

Quantitative targets were set for lending to priority sector and separate

subtargets were also set for lending to agriculture and weaker sections of the

society. As a result, lending to the borrowers in priority sectors have increased

substantially. Increased flow of credit to the different sectors assisted the

developmental activities and thereby expanded the income as well as the

standard of living of the people.

Several studies on this subject in a restricted sense have been undertaken by

particular bank/group of banks, individuals and organisations. Number of

Committees appointed by the Govemment of India and RBI have also studied

the banking problems of the country. Reviews of such available literature are

presented below.

V. V. Bhat (1970) proposed a scheme of appoved dealers to assist the Lead

Banks in providing finance and guidance to far1ners and small industrialists.

In providing finance and guidance effectively, the banks would have to collect

the required information, ensure recovery of loans and interest, assist in

obtaining after sales service and keep a watch on the working of the assisted

enterprise. This work can be made easier by creating and supporting a set of

approved dealers.

30

P. N. Joshi (1972) requested the RBI to give clear and specific definition of the

different components of priority sectors. Some of the bankers are not clear

about the precise scope of agricultural lending. Guidance from the RBI would

help them to increase their involvement in farm credit on right lines.

M. A. Oommen (1972) found that among the institutional sources of finance to

SSI in Kerala, commercial banks provided the lion’s share. The assistance of

commercial banks in Kerala stands at par with some advanced countries.

M. C. Purohith (1973) conducted a survey in Jaipur city to examine the

potential of small artisans in relation to bank financing. The survey revealed

that the average amount borrowed per artisan from bank was Rs. 1,040 and

from non-institutional source was Rs. 3,133. The maximum amount borrowed

by an artisan from a commercial bank was Rs. 2,000 and from non-

institutional source was Rs. 17,000. The small artisans therefore were denied

sufficient funds from the commercial banks forcing them to borrow from non-

institutional sources at higher rates of interest. Due to lack of adequate

financial accommodation from the banking system, the artisans buy raw

materials through other financiers at higher prices and sell the product to the

same agency at a low price. With the financial assistance from the banks, this

vicious circle can be broken up.

31

N. K. Thingalaya (1974) conducted a study among the village artisans of

Kamataka and found that they are receiving an insignificant per cent of their

total credit requirements from banks. Thus artisans are living under the

influence of moneylenders.

Vadilal Dagli (1975) is of the opinion that the aim of the banking policy should

be to uplift the under privileged class of the society in rural India from

subsistence existence to surplus existence. The concept of priority sector

should include only the real poor of the country and by providing them

necessary financial assistance; they can be lifted from the pitches of animal

existence to the heights of human existence.

R. K. Hazari (1976) made it clear that institutional financing does not mean

replacing individual moneylenders with institutionalised moneylenders.

Institutional financing should enable the agriculturists to move on to a level of

new technology that will increase agricultural output and employment. This

means productivity of both land and human beings. Data relating to finance

must be able to provide a basis for assessing how much financing has really

contributed to additional output and employment.

P. C. D. Nambiar (1977) pointed out that the role of commercial banks in the

priority sectors is not confined merely to the provision of finance. They have to

evaluate the feasibility of the project and assist the entrepreneurs to select the

32

right type of project. He also emphasised the need for proper co-ordination

between govemment agencies and banks for better results in the development

of priority sectors

S. L. Shetty (1978) in his study on the achievement of commercial banks since

nationalisation has found that the banks, which have relatively low priority

sector lending have been the ones with higher than the average credit deposit

ratios. Another finding noticed among the banks is that in regard to the priority

sectors, a few branches of banks achieved impressive ratios, to the neglect of

the rest of the areas. Again there is considerable concentration of priority

sector advances in a few a States.

I. G. Patel (1979) reminded the banks about their socio-economic

responsibility in the up-liftment of the poorest strata of the society. A

substantial portion of the people live in abject poverty and the first priority

should be to provide productive employment opportunities to the very poor-

whether they are in rural or urban areas. Banks should equip themselves fully

to serve as instruments of development for the poorer sections of people.

Singh and Balraj (1979) conducted a study on commercial bank lending in

Hissar district of Haryana and concluded that villagers are relieved from the

exploitation of moneylenders by the operation of a nationalised bank. At the

same time they also reported other problems such as uneasy, untimely and

33

non-availability of loans, expensive and cumbersome procedures, excessive

and useless formalities, unsuitable procedure of loan repayment and the

absence of easy accessibility of banking facilities.

L. D’Mello (1980) is very much doubtful about the capacity and suitability of

commercial banks to provide large amount of credit to the priority sectors.

Since banks are high cost organisations, existing developmental agencies can

be used by commercial banks to reduce the cost and to improve efficiency in

the use of credit.

C. L. Khemani and K. V. Balakrishnanu (1981) are of the opinion that if the

borrower selected under IRDP is made to approach the money lender for his

very genuine consumption needs, then the very objective of institutional

finance for priority sector will be defeated. Consumption credit granted on the

basis of specific needs of the target groups are not going to cause problems.

The actual consumption loans will have to be related to their minimum needs

and their capacity to repay.

A. R. Patel and M. R. Patel (1983) proposed the need for assigning the task of

evaluating the working of various schemes under the 20-point programme to

outside agencies not connected with its implementation. This will result in

correct evaluation of the role played by implementing agencies, benefits

34

derived by the beneficiaries and deficiencies noticed in the plamiing and

implementation process.

V. B. Angadils (1983) observed the concentration of priority sector advances

in general and agricultural advances in particular in a few States. The reasons

for such concentration are number of bank offices, deposit mobilisation, total

cropped area, land under certain food and cash crops, extent of irrigated land

in respective States, adoption of high yielding varieties, the availability of co-

operative credit and the level of political awareness in these States.

Senior Executive Seminar on Priority Sector Financing (1983) organized by

NIBM advised the banks to remember the philosophy behind the policy

towards priority sector and to develop faith in this philosophy. Priority sectors

should be looked upon as opportunities of developing the banks’ business.

B. K. Sarkarl (1983) is of the opinion that to launch a successful marketing

drive for the target groups in the priority sector, the environment pertaining to

each segment of the society has to be carefully scanned and vital information

relevant to market decisions such as ignorance, unwillingness, poverty,

political interference etc. have to be analysed. The best result can be derived

only if the customer and his real need situations are assessed in a meaningful

way.

35

A. R. Patel (1984) conducted a survey on public sector banks to assess their

performance under DRI scheme. The study revealed that the banks had

positively responded to the increasing needs of SC/ST borrowers in respect of

DRI loans and had been able to increase their share of SC/ST borrowers, both

in terms of number of borrower accounts and the amount outstanding. At the

same time, banks are finding it extremely difficult to finance all those eligible

identified beneficiaries who approach them in view of the limited loanable

funds available under the scheme. Thus, demand and supply forces in respect

of this scheme have created problems at the branch level as well as the

beneficiary level. While large numbers of deserving eligible beneficiaries have

so far remained out of the fold of this scheme, a good number of influential

and well to do persons have taken advantage of this scheme.

K. V. Patel and N. B. Shete (1984) analysed the behaviour of weaker section

accounts particularly with reference to their repayment behaviour by

examining 1,554 accounts operated by seven branches of three commercial

banks located in five backward districts in the states of Raj asthan, Madhya

Pradesh and Kamataka. The study brings out the very positive aspects of

borrowers’ willingness to repay and the bankers’ promptness in making efforts

for recovery. The analysis helps in clearing some of the misgivings in weaker

sections financing and in improving the image of development banking.

36

K. V. Patel and N. B. Shete (1984) analysed the priority sector lending by

commercial banks in India from 1969 to 1980 and concluded that

quantitatively a very impressive coverage is achieved during the period of

twelve years. The total priority sector advances have gone up by more than

fourteen times. But the credit absorption capacities of the weaker sections are

constrained by a variety of factors, which may not be under the direct control

of the banking industry. Therefore, the co-coordinated efforts of executives

and developmental agencies require special care and attention in this matter.

I. Satya Sundaram (1984) opines that there is no point in setting up more and

more credit agencies to help the rural poor. The presence of numerous

agencies is creating confusion in the filed of rural credit. What is required is

the proper co-ordination among the various agencies in implementing the

schemes that will be useful to the rural poor.

Raut (1984) conducted a study on the scope and problems of financing tribal

farmers and concluded that the problem of overdues was mainly due to the

misutilisation of loans by the tribal farmers. The tendency to misutilise the loan

was due to the fact that the consumption priorities of tribal farmers were of

more urgent nature than asset building priorities.

Balishter and Roshan Singh (1984) found in their study of IRDP financed by

SBI in Bichpuri Block of Agra district that the recovery of loans advanced by

37

the bank under IRDP was satisfactory in all categories of families and this

nullified the common impression that advancing of loans to weaker sections

would lead to accumulation of bad debts.

Anil Kale and Namdeo Mali (1984) conducted a study in some of the drought-

affected villages of Pune and Nagar districts among the farmers and landless

labourers. From the analysis of data collected it is found that the poor people

in rural areas are subjected to various kinds of exploitations by the very

developmental agencies, which were created by the society or Govemment for

their upliftment.

B. S. Viswanathan (1985) stated that the overdues to a large extent were on

account of wilful default, which was either due to ineffective recovery

machinery or because of unfavourable recovery climate.

D. P. Khankhoje and V. T. Godse (1985) found that procedural flaws and gaps

cause delays in the process of loaning activity in the priority sector. So the

systems and procedures adopted by banks particularly with reference to

documentation and accounting have to be simplified. But the simplification of

systems and procedures should not weaken the follow-up, supervision and

control.

38

U. C. Kulshresth (1985) conducted a survey in the Western Region of Uttar

Pradesh to review the progress and working of the Lead Banks and concluded

that the banks which were assigned the lead role undoubtedly made

considerable efforts in their lead districts in conducting of economic surveys,

preparing Credit Plans, branch expansion, deposit mobilisation and credit

deployment to priority sectors. Thus the Lead Bank Scheme holds out the

promise to attain socio-economic objects in the society and to develop the

rural economy at the district level.

S. B. Dangat, S. R. Radkar and M. P. Dhongade (1986) conducted a micro

level study into the borrowings and utilisation of medium and long term loans

in Ahmednagar district and reported that the medium and long term loans

were diverted for conduct of marriages, for consumption and for construction

of residential buildings in all the size group of holdings in both developing and

underdeveloped regions. Proper appraisal of loan proposals, follow-up and

supervision after the disbursement of loans were suggested for effective

financing of agriculture.

I. Satya Sundaram (1986) pointed out some of the problems facing the DRI

scheme. Funds are allocated, they are officially spent and yet the poor

remains in the same old state. If necessary safeguard are provided, the funds

allocated for this purpose can through up the desired result..

39

Economic Research Department of the State Bank of India, Central Office,

Bombay (1987) conducted a study to observe the impact of bank credit on

weaker sections in Kerala. The study revealed that bank loans enabled the

borrowers to become self-employed businessmen or artisans whereas

previously they were mere wage eamers. The utilisation of bank loans

generally raised the income and employment of the borrowers and thereby

improved the quality of life.

N. J. Kurian (1987) conducted a concurrent evaluation of IRDP and found that

commercial banks account for 69 per cent of the loans, 23 per cent is

accounted by RRBs and the balance 8 per cent is provided by the co-

operatives. The repayment of loans by IRDP beneficiaries is no worse than

that of other debtors who generally are better off economically.

H. C. Malhotra and D. K. Kulshrestha (1987) made an assessment of the

advances by commercial banks to the weaker sections of the society and

concluded that giving advances to them will be of no use, unless it is ensured

that the recipients use these advances for productive purposes.

Suresh Mehta (2000) noticed that though the banks are flush with surplus

funds, they do not find it profitable and safe in lending to the SSI sector

40

because they are already saddled with high NPAs in this sector. To reduce the

NPAs level, banks have to strengthen their appraisal system and credit

monitoring mechanism; and SSI units have to develop capabilities to manage

borrowed funds more prudently and more transparently in business

operations. These arrangements will help both the banks and entrepreneurs to

remain happy and prosperous.

Swami Agnives (2001) delivering the keynote address at a symposium on

“New Economic Policy and Problems faced by Agricultural Sector in Kerala”

alleged that while the banks have given the farmers a raw deal, it had written-

off the loans availed by top industrialists to the tune of rupees one lakh crore

as non- performing assets. The poor farmers’ house and properties are

auctioned for recovering the loan amount by the banks even though it would

be a meagre amount.

A critical perusal and review of the studies reveal that most of these studies

were not scientifically designed and the opinion surveys were not properly

structured. Also most of the findings were just in the fonn of generalised

observations made with out testing the statistical significance.

Despite the availability of sufficient literature on priority sector lending and

rural credit, no comprehensive and schematic effort has been made to

analyse the subject based on the experience of bank managers and

41

borrowers. The available literature on the subject is only descriptive, partial

and often biased. It covers only some micro aspects of priority sector lending.

Priority sector lending is done through District Credit Plans. An analysis of

priority sector lending in the State through District Credit Plans is not

attempted by any scholar so far. This study is also an attempt in this direction.

It is designed to analyse the working of District Credit Plans, the weakness in

the lending procedures, methods of making priority sector lending profitable

and beneficial and the difficulties experienced by the bankers and borrowers

in the implementation of the scheme. Hence in this study, different aspects of

lending to priority sector together with its systematic impact are analysed.

CHAPTER-3

RESEARCH DESIGN

This chapter describe the research methodology, research design, method of

data collection and tools & technique which are used for the better

presentation and right explanation of the data.

3.1 Research Methodology

Research Methodology in a way is systematic representation of research or

any other problem. It is a written game plan for conducting research. It tends

42

to describe the step taken by a researcher in studying the research problem

along with a logical background.

It tends to describe methodology for solution of the problem that has been

taken for the purpose of study this project focuses on the methodology for

technique used for the collection, classification & tabulation of the data. This

plan throws light on the research problem, the objective of study & limitation of

the study. Therefore, in order to solve a problem, it is necessary to design a

research methodology for problem as the same way differs from problem to

problem.

3.2 RESEARCH DESIGN:

Study is all about the research & analysis of credit to priority sector.

Study is being made for the purpose of analysis of credit to priority sector by

the Allahabad bank that predicts the future growth of the bank by providing

better services by bank can earns more profit.

Study will be carried out at Bareilly.

Secondary data is required for analysis of report.

43

3.3 METHOD OF DATA COLLECTION-

The study is totally based on secondary data to be suitably modified.

SOURCE- SECONDARY DATA

The secondary data collected from the already sanctioned annual report. 

Collection of secondary data from Management journals.

Bank Annual Report 2008-09 and 2009-10

Project proposal.

Respective Banks Web Sites & other sites such as www.rbi.org.

Reference from Management Books.

Newspapers and Articles

Tools and Techniques:

As no study could be successfully completed without proper tools &

techniques, same

with this project. For the better presentation and right explanation researcher

used tools of statistics and computer very frequently and Basic tools which

have been used for project are:

-BAR-CHARTS

- TABLES

44

Bar chart is very useful tools for every research to show the result in

a clear, simple way. Because researcher used bar charts in my project for

showing data in a systematic way. So researcher need not necessary for any

observer to read all the theoretical detail, simple on seeing the charts anybody

that what is being said.

Technological Tools:

MS -WORD

MS-EXCEL

CHAPTER-4

DATA ANALYSIS AND INTERPRETATION

1. Financing to priority sector by Allahabad bank .

Table no-1 advances on priority sector

45

Priority

sector/Schemes

March 2008 March 2009 March 2010

Amount(Rs. crores)

Amount(Rs. crores)

Amount(Rs. crores)

Priority sector 18,774 20,435 24,279

18,774

20,435

24,279

financing to priority sector

200820092010

Figure no -1 Advance on priority sector

Interpretation:

Credit to priority sector grew from Rs.18,774 Crore as on March 2008 to

Rs.20,435 Crore as on March 2009 and Credit to priority sector grew from

Rs.20,435 Crore as on March 2009 to Rs.24,279 Crore as on March 2010.

registering an absolute YOY growth of Rs.3844 Crore (18.81 %). Bank has

exceeded the National Goal (40.00%)

by achieving 41.29% as on Mar 10

i. Financing to agriculture sector by Allahabad bank.

46

Table no-2 Advances on agriculture sector

Priority

sector/Schemes

March 2008 March 2009 March 2010

Amount(Rs. crores)

Amount(Rs. crores)

Amount(Rs. crores)

i. Agriculture 9,146 9,568 11,567

9,146

9,568

11,567

financing to agriculture

200820092010

Figure no -2 Advances on agriculture sector

Interpretation:

Agriculture Credit outstanding increased from Rs.9146 Crore as on March

2008 to Rs.9,568 Crore as on March 2009 and Agriculture Credit increased

from Rs.9568 Crore as on March 2009 to Rs.11,567 Crore as on March 2010 ,

registering an absolute YOY growth of Rs.1999 Crore (20.90%). Bank has

47

exceeded the National Goal (18.00%) of Agriculture to ANBC by achieving

18.68% as on Mar’10.

- Direct finance to agriculture sector from Allahabad bank.

Table no -3 Direct finance to agriculture sector

Priority

sector/Schemes

March 2008 March 2009 March 2010

Amount(Rs. crores)

Amount(Rs. crores)

Amount(Rs. crores)

- Direct in

agriculture

6,571 7,306 8,340

6,571

7,306

8,340

direct finance to agriculture

200820092010

Figure no -3 Direct finance to agriculture sector

Interpretation:

48

Direct finance to agriculture of the Bank grew by Rs. 6,571 crores as on

31.3.2008 to Rs. 7,306 crores as on 31.3.2009 and Rs. 7,306 crores as on

31.3.2009 to Rs. 8,340 as on 31.3.2010.

- Indirect finance to agriculture sector from Allahabad bank.

Table no -4 Indirect finance to agriculture sector

Priority

sector/Schemes

March 2008 March 2009 March 2010

Amount(Rs. crores)

Amount(Rs. crores)

Amount(Rs. crores)

- Indirect 2,575 2,262 3,227

49

2,575

2,262

3,227

indirect finance to agriculture sector

200820092010

Table no -4 Indirect finance to agriculture sector

Interpretation:

Indirect finance to agriculture of the Bank grew by Rs. 2,575 crores as on 31

march , 2008 to Rs. 2,262 crores as on 31 march , 2009 and Rs. 2,262 crores

as on 31.3.2009 to Rs. 3,227 as on 31.3.2010.

2. Financing to Micro Small Enterprises Sector from Allahabad Bank.

Table no -5 Financing to Micro Small Enterprises Sector

Priority

sector/Schemes

March 2008 March 2009 March 2010

Amount(Rs. crores)

Amount(Rs. crores)

Amount(Rs. crores)

Micro small enterprises

3,530 4,593 8,188

50

3,530

4,593

8,118

Financing to Micro Small Enterprises Sector

200820092010

Figure no -5 Financing to Micro Small Enterprises Sector

Interpretation:

Credit to Micro and Small Enterprises (MSE) grew from Rs. 3,530 Crore as on March 2008

to Rs.4593 Crore as on March 2009 and grew from Rs.4593 Crore as on March 2009 to

Rs.8,118 Crore as on March 2010, registering an absolute YOY growth of Rs.3595 Crore

(78.27%). Share of Micro Enterprises to total Micro & Small Enterprises has exceeded the

National Goal (60%) by achieving 62.25% as on Mar’10.

3. Financing to other sector such as housing loan education loan etc.

From Allahabad bank.

Table no -6 Financing to sector such as housing loan education loan

etc.

Priority

sector/Schemes

March 2008 March 2009 March 2010

Amount(Rs. crores)

Amount(Rs. crores)

Amount(Rs. crores)

51

Other 6,098 6,275 4,524

6,098

6,275

4,524

financing to other sector

200820092010

Figure no -6 Financing to sector such as housing loan education loan

etc.

Interpretation:

Credit to other sector such as housing loan, education loan etc. grew from Rs. 6,098 Crore

as on March 2008 to Rs.6,275 Crore as on March 2009 but in 2010 credit to other sector

was decline from Rs. 6,275 Crore as on March 2009 to Rs. 4,524 Crore as on March 2010.

52

4. Financing to weaker section from Allahabad bank.

Table no -7 Financing to weaker section

Priority

sector/Schemes

March 2008 March 2009 March 2010

Amount(Rs. crores)

Amount(Rs. crores)

Amount(Rs. crores)

Weaker Section 4,455 5,010 6,150

4,455

5,010

6,150

Financing to weaker section

200820092010

Figure no -7 Financing to weaker section.

53

Interpretation:

Credit to weaker section grew from Rs. 4,455 Crore as on March 2008 to Rs.

5,010 Crore as on March 2009 and credit grew from Rs. 5,010 Crore as on

March 2009 to Rs. 6,150 Crore as on March 2010. Credit to weaker section

from Allahabad bank increased year to year .Credit to weaker section was

10.77% of ANBC as against stipulated norms of 10%.

CHAPTER -5

5.1 Findings

Credit to priority sector increased as on 31 march 2008 to 31 march

2010. Bank has exceeded the National Goal (40.00%) by achieving

41.29% as on Mar 10.

Bank has exceeded the National Goal (18.00%) of Agriculture to ANBC

by achieving 18.68% as on Mar’10

Share of Micro Enterprises to total Micro & Small Enterprises has

exceeded the National Goal (60%) by achieving 62.25% as on Mar’10.

Credit to other section such as housing loan education loan has been

increased as on march 2009 but march 2009 to march 2010 credit to

other section has been decreased.

54

Credit to weaker section from Allahabad bank increased year to

year .Credit to weaker section was 10.77% of ANBC as against

stipulated norms of 10%.

5. 3 Conclusion

My research in the field of financing to priority sector from Allahabad bank and

Allahabad bank has been grew year to year. This has some interesting facts

which can be drawn from the above analysis.

Bank has exceeded the National Goal (40.00%)of priority sector by

achieving 41.29% as on Mar 10

Bank has exceeded the National Goal (18.00%) of Agriculture to

ANBC by achieving 18.68% as on Mar’10

55

Share of Micro Enterprises to total Micro & Small Enterprises has

exceeded the National Goal (60%) by achieving 62.25% as on

Mar’10.

Credit to other section such as housing loan education loan has

been increased as on march 2009 but march 2009 to march 2010

credit to other section has been decreased.

Credit to weaker section from Allahabad bank increased year to year

.Credit to weaker section was 10.77% of ANBC as against stipulated

norms of 10%.

5. 2 Suggestion:

priority sectors are big source of revenue for banks, so bank should

encourage also the unregistered units by providing more facilities like

less paper work.

Bank has to increase their credit limit and also decrease the installment

amount.

The best way to encourage lending to micro small industries is to

improve the ability of existing institution to construct profitable and

efficient lending programmes.

56

Building awareness among small business people about the financial

sources offering by bank. Especially in the case of housing loan and

education loan is must. So there is mutual benefits are possible

While granting the loans the bank does not adhere with the margin.

The process followed by the bank in sanctioning the loan is

unmanageable; hence it is suggested to make the process easier in

sanctioning the credit facilities to the priority sector.

Bibliography

1. E. Gup Benton & W . Kolari James, Commercial Banking 3rd

Edition,Singapore ,John Wiley &sons (Asia) ,2005 .

2. Shekher K C & Shekher Lekshmy , Banking theory and practice 19th

Edition, NewDelhi, Vikas Publishing House ,2007 .

3. Natarajan S & Parameswaran, Indian Banking 5th Edition ,NewDelhi,

Sulthan Chand &Co ltd ,2007 .

57

4. Maheswari S. N & Paul R R,Banking theory &practice 3rd

Edition ,NewDelhi, Kalyani publishers,2006 .

WEBSITES

www.allahabadbank.com

www.banknetindia.com

www.mybankersbank.com

http://www.rbi.org.in

58