SUMMER PROJECT LOANS AND ADVANCES DONE BY AISHWARYA PARTHASARATHY
Transcript
1. LOANS AND ADVANCES DONE BY AISHWARYA PARTHASARATHY
2. PROJECTSUMMITTEDBYAISHWARYA
3. INTRODUCTION Meaning of Loans and Advances The term "loan"
refers to the amount borrowed by one person from another. The
amount is in the nature of loan and refers to the sum paid to the
borrower. Thus, from the view point of borrower, it is borrowing
and from the view point of bank. it is lending. Loan may be
regarded as credit. granted where the money is disbursed and its
recovery is made on a later date. It is a debt for the borrower.
While granting loans, credit is given for a definite purpose and
for a predetermined period. Interest is charged on the loan agreed
rate and intervals of payment. Advance on the other hand, is a
credit facility granted by the bank. Banks grant advances largely
for short-term purposes
4. UTILITY OF LOANS AND 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
5. 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.
6. Term loan 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.
7. NATURE AND SECURITY: To ensure the safety of funds lent, the
first and most important factor considered by a bank is the
capacity of borrowers to repay the amount of Loan, the Bank
therefore, realize primarily on the character capacity, and
financial soundness of the borrowers. But the Bank can hardly
afford to take any risk in this regard and hinds it also has the
security of tangible assets owned by the borrower. In case the
borrower fails to repay the loan, the bank can recover the amount
by attaching the assets.
8. TWO CATEGORIES OF LOAN Thus from the view point of security
of loans, we can divide the loans into two categories: A)secured,
(B) unsecured.
9. TWO CATEGORIES OF LOANUNSECURED SECURED Unsecured loans are
those loans Secured loans are those which which are not covered by
the are granted against the security security of tangible assets.
Such of tangible assets, like stock in trade and immovable
property. loans are granted to Thus, while granting loan
firms/institutions against the against the security of some
personal security of assets, a charge is created over the owner,
manager or director. 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.
10. Procedure for granting loans and advances: (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
11. SCOPE OF THE STUDY: The purpose of preparation of the
report is to focus on the lending function of banks with specific
reference to Indian overseas bank with specific reference to
ashoknagar branch The about different types of advances that are
financed by the banks and their classification into fund and
non-fund based advances. It also helps us to study the risk
involved in sanctioning of advances to a borrower. This makes us to
analyze the credit worthiness of the prospective borrower and
estimate the net worth of the assets owned by him, which assists
the bank to ascertain the amount that can be sanctioned to the
borrower. To study the securities that can be used against lending
and the calculation of equated monthly installments.
12. OBJECTIVE OF THE STUDY PRIMARY OBJECTIVE To study different
types of the loans and advances made by IOB with specific reference
to ashoknagar branch To make suggestions on the basis of the
analysis. To study in detail the various types of loans and
advances offered by IOB with specific reference to ashoknagar
branch.
13. SECONDARY OBJECTIVE To study the process involved in
sanctioning loans and advances to a customer. To assess the banks
contribution towards fulfilling the requirements of the borrower.
To assess the satisfaction level of the borrowers in terms of their
being benefited by the timely financial accommodation by the IOB
with specific reference to ashoknagar branch .
14. INDUSTRIAL PROFILE BANKING INDUSTRY Banks are the financial
backbone of any countrys economy. Without a sound banking system a
country cannot have a healthy economy. A bank is a financial
institution which deals with money and credit. It accepts deposits
from individuals, firms and companies t a lower rate of interest
and gives it at a higher rate of interest to those who needs them.
The difference between the terms at which it borrows and which it
lends forms the source of profit, thus bank being a profit earning
institute.
15. INDIAN OVERSEAS BANK Indian Overseas Bank Established in
1937, Indian overseas Bank (IOB) is a leading bank based in
Chennai, India. IOB had the distinction of simultaneously
commencing operating in three branches at karaikudi, Chennai and
Yangon (Myanmar). Since IOB aimed to encourage overseas banking
foreign exchange operations, it soon opened its branches in Penang
and Singapore. Today, Indian Overseas Bank boasts of a vast domain
in banking sector with over 1400 domestic branches and 6 branches
overseas. IOB was the first bank to venture into consumer credit,
as it introduced the popular Personal Loan scheme
17. NEED FOR THE STUDY To identify the role of the IOB bank is
providing assistance to the borrower. To assess the financial
benefits derived by borrower with regards to the term loan. To
suggest strategies for improving return on investment towards the
profitability of the bank through term Loan To assess the borrower
Loyalty towards the IOB bank.
18. LIMITATION The following are the limitation faced The
personal details of the borrower have not been revealed as per the
norms of the bank. The secondary data collected includes details
published through magazines journals and websites. It also includes
data collected and observed during the daily functioning of the
branch. This branch deals only with certain types of loans and
advances. Certain loans like Agriculture, Insurance etc have not
been covered under this branch.
19. RESEARCH DESIGN It is the arrangement of conditions for
collection and analysis of data in manner that aims to combine
relevance to the research purpose with economy in procedure. It is
a master plan specifying the methods and procedure for collecting
and analysis is made on this primary data and secondary data
collected for this project study. It is based on the descriptive
research techniques employing survey method and the analysis is
made on the both primary and secondary data collected for this
project study.
20. TYPE OF STUDY Descriptive research includes survey and fact
finding enquiries of different kinds. The major purpose of
descriptive research is description of state of affairs, as it
exits at present ; the methods of research utilized in descriptive
research are survey of all kinds including comparative method. The
advantage of descriptive research is that they provide a quick
,inexpensive , efficient and accurate means of assessing
information about the population.
21. METHODS LF DATA COLLECTION Secondary data The secondary
data was collected through company profile, journals and internet.
Through secondary data was collected through company profile,
Journals and internet. Through Secondary data basic information
about the organization was known. Primary data The primary data are
those that are collected fresh and thus happen to be original in
character; these are several methods of collecting primary data
Interview method Questionnaire method
22. SAMPLE SIZE Sample size was arrived at 50 after discussion
with Company guide College guide and also taking into consideration
the time constraint. By dividing the time available for the
project.
23. tool used Tools used Percentage analysis Tables and charts
Percentage analysis In case of multiple choice questions the
response were categorized based on the nature and percentage is
calculated for each category. To find the percentage of responses
in each category the number of response for each category is used.
The percentage is calculated by dividing the number of responses by
the total number of respondents. Percentage =number of respondents
/Total number of respondents *100
24. Data analysis For making the analysis the study include
both primary and secondary data . Based on the information
available , data will be analyzed and suggestions will be
recommanded.
25. FINDINGDS From the study that it is found that the interest
rate charged on loans (term loans) has been showing constant
increasing trend and the bank gains more profit through the
interest charged on loans and cash credit. Among the total
advances, the term loan contributes lions share throughout the
period.. Jewel loan is applicable to note that the bank is helping
the middle by granting loan against jewellary at a very reasonable
interest and loais sanctioning by the bank keeps on increasing
from55% in the year 2008 to 122% in the year 2011 which shows the
growth of the bank and that is more needy benefited by the bank The
present NPA(Non performing assest) of the branch is Rs 49 lakhs
which is only 0.84% of total advances..
26. FINDINGDS The total profit earned by the bank keep on
increasing from the year from 46.84 in the year to 130.98 in the
year 2011 to which shows that the income of the bank by way of
interest on loans and advances and by the way of commission
increased year after year. Most of the people lack knowledge about
credit facilities. About 34% of the respondents have availed loan
from IOB bank for the expansion of business. 24% of the respondents
are associated with the bank for the period of 9-15 years. Many
customers are very satisfied by the service provided by the
bank
27. SUGESSIONS Any changes in the interest rate must be
informed to the customers. Before sanctioning any loan the bank
must clearly explains to its borrowers the consequence for any non
repayment. Monitoring progress and strict adherence to payment
schedule by the borrowers so as to ensure reasonable NPA (non
performing assets). As a result of personnel survey conducted it
was found that most of the customers are in favor of higher amount
of limits at lower rate on interest. Just like Life Insurance of
Corporation (LIC) IOB may also follow dual Interest rate system on
housing loan.
28. CONCLUSION: Loans are to be processed faster by extending
faster and efficient customer oriented service. They should educate
customers about credit facilities in the bank. This will create
greater confidence among the interested parties which will help
them to choose the most suitable scheme. The IOB Ashok nagar branch
is able to enjoy appreciable return from loan segment by winning
the appreciation of the customers.
29. This research will be useful to the bank to understand
itscustomers position of awareness of its loans and advancesamong
customers