Slide 1

ByDheerajPresentation onLoans & Advances

A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.In a loan, the borrower initially receives or borrows an amount of money, called the principal, from the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later time. Typically, the money is paid back in regular installments, or partial repayments; in an annuity, each installment is the same amount.

Loans & Advances

(A)loans and advances can be arranged from banks in keeping with the flexibility in business operations. Traders may borrow money for day to day financial needs availing of the facility of cash credit, bank overdraft and discounting of bills. The amount raised as loan may be repaid within a short period to suit the convenience of the borrower. Thus business may be run efficiently with borrowed funds from banks for financing its working capital requirements.(B) loans and advances are utilized for making payment of current liabilities, wage and salaries of employees, and also the tax liability of business.(C) loans and advances from banks are found to be 'economical' for traders and businessmen, because banks charge a reasonable rate of interest on such loans/advances.

Utility of loans and advances

Demand loan

A Demand Loan is a loan which is repayable on demand by the bank. In other words it is repayable at short-notice. The entire amount of demand loan is disbursed at one time and the borrower has to pay interest on it. The borrower can repay the loan either in lump sum (one time) or as agreed with the bank . For example, if it is so agreed the amount of loan may be repaid in suitable installments. Such loans are normally granted by banks against security. The security may include materials or goods in stock, shares of companies or any other asset. Demand loans are raised normally for working capital purpose like purchase of raw materials, making payment of short-term liabilities.

Types of Loans

Medium and long term loans are called term loans. Term loans are granted for more than a year and payment of such loans is spread over a longer period. Term loan is required for the purpose of starting a new business activity renovation, modernization, expansion of existing units, purchase of their land for setting up a factory, construction, of factory building or purchase of other immovable assets. These loans are generally secured against the mortgage of land, plant and machinery, building and the like.

Term loan

Unsecured loans are those loans which are not covered by the security of tangible assets. Such loans are granted to firms/institutions against the personal security of the owner, manager or director.

Two categories of loan Secured loans are those which are granted against the security of tangible assets, like stock in trade and immovable property. Thus, while granting loan against the security of some assets, a charge is created over the assets of the borrower in favor of the bank. This enables the bank to recover the dues from the customer out of the sale proceeds of the assets in case the borrower fails to repay the loan.

UnsecuredSecured

The advances can be classified two categoriesLoans, cash credits and overdrafts.Bills discounted and purchased.

Forms of Advances

This account is the primary method in which banks lend money against the security of commodities and debt. It runs like a current account except that the money that can be withdrawn from this account is not restricted to the amount deposited in the account.

Cash credits

Overdrafts

The word overdraft means the act of overdrawing from a bank account. In other words, the account holder withdraws more money from a bank account than has been deposited in it..

Bills discounted and purchased

Bank takes the bill drawn by borrower on his(borrower's) customer and pay him immediately deducting some amount as discount/commission

(I) FILLING UP OF LOAN APPLICATION FORM(II) SUBMISSION OF FORM ALONG WITH DOCUMENTS(III) SANCTIONING OF LOAN(IV) EXECUTING THE AGREEMENT(V) ARRANGEMENT OF SECURITY FOR LOAN

Procedure for granting loans and advances: DATA ANALYSIS & INTERPRETATION

Q1. Are you interested in taking loan?

ResponseNo. of responsePercentage %Yes6565No3535Total100100ResponseNo. of responsePercentage % House loan 1515 Educational loan3535 Personal loan 21 21 Vehicle loan2929Total100100

Q2. What kind of loan you want to avail?

ResponsesNo. of responsePercentage % Less than 1 Year1515 1 to 3 Year3535 3 to 5 Year 21 21 More than 5 Year2929Total100100

Q3. For how many years you want to avail loan?

BanksCANARA BankOther Pvt. BanksOther Nationalized BanksNo. of respondents372439Q4. Which Bank is preferred by you for making more transactions relating to loan & advances? OccupationBusinessmanServicemanSelf-employed peopleOthersNo. of respondents35381116

Q5. Which class avail the maximum bank -loan services?

ResponseNo. of responsePercentage % MONTHLY2525QUARTERLY4040 ANNUALLY 35 35Total100100

Q6. How you prefer to pay your installments ?

ResponseNo. of responsePercentage %Public Sector6565Private Sector2525Co-operative Sector 10 10TOTAL100100

Q7. From which sector you will be interested to avail loan ?

Due to inflexibility in account opening it is difficult to convince customers. No authentic evidence of customers is found.No special facilities of loans to businessman are given in semi rural or rural area. The bank is not tapping untapped areas.Lack of communication & delivery channels.Lack of social banking.Loans are not provided without security.Loans are not provided at ease lot of paper work & documentation is involved.The time bound period is the major limitation in research projects.

Limitations

More customer convenienceServices for businessmenService for Self employed & ServicemansRural BankingSocial Banking

Recommendations

The cutthroat competition of 21st century demands not just a satisfied but delighted customer as a key to success in a service industry.Strength, Weakness, Opportunities, threat analysis are apply in the bank to do the work more efficiently. Also, improved advertising efforts, embracement of latest technology, more and more awareness about internet banking thus facilitating customers while providing solutions at their convenience and easy reach.

Conclusion