Micro Finance
115
CONTENT
Transcript of Micro Finance
CONTENT
CHAPTER
NO.
TITLE PAGE
NO.
List of Tables Iii
List of Charts 1v
Abstract V
1 INTRODUCTION
1.1 Introduction of the study
1.1.1 Objectives of the study
1.1.2 Scope of the study
1.1.3 limitations of the study
1.2 Industry Profile
1.3 Company Profile
2 Review of Literature
2.1 Micro finance
2.2 Micro Finance Loans
2.3 Principles of Micro Finance
2.4 History of Micro Finance
2.5 Relevance to developing countries
2.6 Features of Micro finance
2.7 Microfinance clients
2.8 Government Role support in Microfinance
2.9 Different from other loans
2.10 Microfinance and Micro credit
3 METHODOLOGY
3.1 Methodology
3.2 Sampling Technique
3.3 Method of Data collections
3.4 Tools of study
4 Analysis and Interpretation
4.1 agriculture loan
4.2 Small scale enterprises
4.3 Micro credit
4.4 Retail Trade
4.5 Education Loans
4.6 Housing loans
4.7 current ratio
4.8 Fixed asset turn over ratio
4.9 working capital ratio
List of tables
S. NO PARTICULARS PAGE NO.
1.1 BRANCH NETWORK – AREA WISE IN INDIA
1.2 Number of branches during the period
4.1 Agriculture loan
4.2 Small scale enterprises
4.3 Micro credit
4.4 Retail Trade
4.5 Education Loans
4.6 Housing loans
4.7 current ratio
4.8 Fixed asset turn over ratio
4.9 working capital ratio
4.10 Long term dept ratio
List of charts
S. NO PARTICULARS PAGE NO.
1.1 BRANCH NETWORK – AREA WISE IN INDIA
1.2 Number of branches during the period
4.1 Agriculture loan
4.2 Small scale enterprises
4.3 Micro credit
4.4 Retail Trade
4.5 Education Loans
4.6 Housing loans
4.7 current ratio
4.8 Fixed asset turn over ratio
4.9 working capital ratio
4.10 Long term dept ratio
ABSTRACT
This project report entitled to “A study on Micro financial analysis of Lakshmi
vilas bank at karur”. The main objective of the study is to analyze the financial position
of the company. It the process of identifying the financial strength and weakness of the
firm properly establishing relationship between the item of balance sheet and profit and
loss account. The details regarding the history and finance details of the bank were
collected through discussion with the Bank officers. Secondary data are based on the
annual reports of 2004-2009.
The various tools used for the study are ratio analysis, comparative balance sheet
and trend percentage. Charts and table are used for better understanding. Through ratio
analysis the company could understand the Profitability, Liquidity, Leverage, Turnover
positions of the company.
CHAPTER-11.1 INTRODUCTION
The word bank is derived from Greek word ‘banque’ i.e. a bench. The German
word ‘banc’ means a joint stock firm. Banks play an important role in the economic
development of a country. The entire industrial and commercial activities are doing well
only because of banks. There may be economic cries in the country if the banks stop
their function even for a few days.
Banking legislations in India refers various acts that regulate banking systems in
India. All the banks have complied with the regulations pertaining to the investment
categorization and reserve requirements stipulated by the Reserve bank of India.
The banking system plays vital role in the economy as it changes the flow
monitory resources from the surplus sources to the need areas.
Banking being an organized sector of the Indian Financial System, comprises of
scheduled commercial banks which can be classified into private sector Banks, Public
sector banks, branches of Foreign Banks, Regional Banks, Rural Banks and Co-
operative sector banks which have been established under respective legislations.
1.1.1 OBJECTIVES OF THE STUDY:
To review the growth and development of the LVB banks in general.
To study pattern of deposit mobilization in the branch.
To understand the pattern of loans and advances given by the Lakshmi Vilas
Bank.
1.1.2 PERIOD OF THE STUDY:
The study at the branch level has been limited to a period of five years from 2003
– 2004 to 2007 – 2008.
1.1.3 PURPOSE OF THE STUDY:
The emerging of new private banks, foreign banks and developing of information
technology in the country has been forced the existing bank to adopt the innovative
strategies for survival, So as to retain its customers and build it among competitors.
To study the various loans and advances in Lakshmi Vilas Bank under micro
finance.
To study about the comparative study of the last five years of the Lakshmi
Vilas Bank Ltd.
To study the performance of Lakshmi Vilas Bank Ltd.
To analyze the improvement of micro finances.
To identify services offered by Lakshmi Vilas Bank Ltd.
1.1.4 LIMITATION OF STUDY:
This study is only a micro study. It covers a period of seven years only.
Cost is one of the important limitations, while doing this dissertation work.
For collecting data, it required more time. But actually got limited period of time.
This study is related to only the various loans and deposits of the bank.
1.2 PROFILE OF THE STUDY
1.2.1 HISTORY OF THE BANK
The Lakshmi Vilas Bank Limited was founded seven decades ago (in 1926) by
seven people of karur under the leadership of shri V.S.N.Ramalinga Chettiar, mainly to
cater to the financial needs of varied customer segments. The bank was incorporated
on November 03, 1926; The Bank obtained the certificate to commence business on
November 10, 1926, the bank obtained its license from RBI in June 1958 and in august
1958, it became a scheduled commercial bank.
During 1961-65 LVB took over nine banks and raised its branch network
considerably. To meet the emerging challenges in the competitive business world, the
bank started expanding its boundaries beyond Tamilnadu from 1974 by opening
branches in the neighboring states of Andra Pradesh, Uttar Pradesh, Karnataka, Kerala,
Maharastra, Madhya Pradesh, Gujrat, West Bengal, Delhi, and
Pondichery.Mechanization was introduced in the head office of the Bank as early as
1977. At present with a network of 232 branches, spread over 10 states and the union
territory of pondichery. The Bank focus is on the customer delight by maintaining high
standards of customer service and amidst all new changes the bank is progressing
admirably.LVB has a strong and wide base in the state of Tamil nadu, one of the
progressive states in the country, which is politically stable and has a vibrant industrial
environment. LVB has been focusing on retail banking and bank assurance, of late the
bank has been drawing fee based income.
The business crossed Rs.7, 829.20 core as on March 31.2008. The bank earned
a net profit of Rs.22.47 core. The net owned fund of the bank reaches Rs.291.05 core.
With fairly good quality of loan assets. The net NPA of the bank was pegged at 1.89%
as on march 31, 2008 down from 4.98% as on March 31, 2007.
1.2.2 NEW IDENTITY
To develop a range of quality services for creating value for customers,
shareholders and the society by motivating people to achieve excellence in
performance leading to sustained profitable growth and in that process build a learning
organization.
1.2.3 SAVINGS BANK
LVB Savings bank is intended to promote the healthy of saving and for the
steady growth of one’s money in the bank. LVB recognizes that Savings bank
customers are the pulse of all banking activity and that a satisfied customer at the SB
counter is the best advertisement to the bank.
Savings bank is then, the landing ground for all deposits and its customer are the
opinion leaders. Therefore, LVB attaches a lot of importance to the efficient functioning
of the savings department.
FEATURES
Minimum deposit amount of Rs.100 with cheque book facility at rural branches.
Minimum deposit amount of Rs.500 with cheque book facility at Metro, Urban
and Semi-Urban branches.
Pass book facility available
Standing instruction facility available on nominal charge.
No restrictions o the number or amount of deposits.
Nomination facility is available.
ELIGIBILITY
Individuals in their own names
Two or more persons, payable to any of them / survivor / survivors.
Two or more persons, payable to all of them jointly.
A minor himself / herself if he / she attained the age of 12 years.
Clubs, associations (Registered or Unregistered). Charitable and religious
institutions trusts, local bodies etc., and other bodies of an identical nature.
Illiterate persons.
DOCUMENTATION
All savings accounts need to be properly introduced by someone known to the
bank preferably other SB/CA account holders with the branch.
Latest photographs of the applicants would be necessary to open an account.
Proof of residence and identity should be furnished through any of the
documents such as passports, Driving License, Identity Card issued by
income tax authorities, Voters identity card.
The account opening process starts on submission of the duly filled in application
from along with the initial deposit amount in cash, suitable introduction from a person
known to the bank.
1.2.4 INTEREST BANK
Savings bank account at LVB earns at interest at 3.5% per annum at present.
This may change from time to time as per RBI directives. Such as interest is paid to the
customer twice per year. No T.D.S is deducted for SB Accounts.
1.3 DEPOSITS
1.3.1 FIXED DEPOSITS
Suitable for planned expenditure or savings
Deposit period ranges from 15 days to 10 years with assured regular Monthly /
Quarterly income.
Minimum deposit amount is Rs.100/- with no ceiling for the maximum amount.
Deposit account can be opened individually / jointly and also in the name of
minors.
Quarterly payment of interest or at discounted value at monthly rates.
Loan facility / Nomination facility available.
1.3.2 RECURRING DEPOSIT
Save in dribble – receive a lump sum. Suitable for tax planning, annual payment
commitments like insurance premium, long term requirement like purchase of consumer
articles / durables , house construction, Children education etc.
Minimum deposit amount is Rs.5/- or multiples thereof with no.
Ceiling for the maximum deposit amount.
Deposit period ranges from 12 months to 120 months, Monthly installments will
be repaid on maturity along with accrued interest.
Individual Deposit/Joint deposit/Deposit in the name of minors can be made.
Loan facility / Nomination facility available.
1.3.3 DHANACHAKRA DEPOSIT
Automatic compounding accrued interest which yield higher returns, making your
investments grow faster. Ideal for planning your financial commitments for the future,
Children higher education, yours son’s or Daughter’s marriage, Celebration of
festivals etc.
FEATURES
Deposit period ranges from 6 months to 10 years.
Minimum deposit amount is Rs.100/- with no ceiling for the maximum
Individual Deposit/Joint deposit/Deposit in the name of minors can be
made.
Loan facility / Nomination facility available.
1.3.4 THIRUMAGAL THIRUVIZHA THITTAM
Targets on customer who have to meet various demands at a stipulated time in
the future and save up for the same, over a period of time. Thirumagal thiruvizha thittam
takes away the burden fro the customer so that demands are met with ease.
FEATURES
Minimum deposit amount of Rs.50/- and multiples thereof.
All others benefits and terms and procedures as applicable to recurring
deposit.
Deposit period ranges from a minimum of 6 months to 12 months.
Ideal for saving money for a targeted festive activity, such as marriage.
Ideal for salaried persons.
Loan facility / Nomination facility also available.
1.3.4 LAKSHMI STAR DEPOSIT SCHEME
A novel, convenient and time saving scheme, with an automatic renewal facility
on maturity. Suitable for planning your short-term and long term commitments.
FEATURES
Minimum deposit amount Rs.1000/- and multiples thereof
Automatic renewal period - 15 / 36 / 45 days at the option of the customer.
Interest compounding at shorter intervals – your deposit multiples faster.
Deposit can be made in units of Rs.1000/-
Pre-closure can be made in the units of Rs.1000/- either the pre-closure
procedure applicable only for the number of units pre-closed.
An ideal scheme for individuals / firms/ limited companies/ trust/ HUFs/ and
minors etc.,
Exclusive passbook facility.
Loan facility/ Nomination facility available.
1.3.5 KSHMI KRIPA DEPOSITSCHEME
A unique scheme that combines eases of savings with higher returns. Your long
term commitments like construction of house, Son’s/ Daughter’s marriage, purchase of
high cost vehicles/ Consumer durables etc.
FEATURES
Deposit period ranges from 6 years to 10 years.
The account combines the recurring deposit on maturity with Dhanachakra
Deposit.
Monthly remittance in the recurring deposit for the initial 5 years. When the
recurring deposit has obtained maturity, it is automatically converted into
Dhanachakra Deposit with added benefit of cumulative interest thereafter, till final
maturity.
1.3.6 LAKSHMI LAKHPATHY RECURRING DEPOSIT
FEATURES
Deposit Type: Recurring deposit with additional benefit of General Insurance
coverage cover of Rs.1.20 lakhs on specified times.
Eligibility: Any individual above 18 years – single or jointly.
Period of deposit: Recurring deposit for 78 months.
Amount: Rs.1000/- per month.
Rate of interest: 8.75 % p.a. (No additional interest for senior citizen & staff)
conditions apply.
Maturity value: Rs.1, 03,801/- [one lakh three thousand eight hundred and one]
only is net amount payable. Maturity value is subject to changes depending upon
the change in the interest rate and insurance premium rates.
Nomination: Available as per the norms in force.
Loans against deposit: Available as per the existing norms.
Tax aspect: Interest is exempted from TDS as per existing guidelines.
Premature Closure: Permitted before maturity as per the existing guidelines.
The premium paid towards insurance will be deducted from the proceeds. The
insurance coverage is valid up to the period for which the premium has been
paid.
1.3.7 LAKSHMI BUSINESS CREDIT
This is a convenient loan scheme designed for the trading community for quick
and hassle free loans to meet their financial needs. Lakshmi business credit can be
availed by department stores, wholesalers, Retailors, Distributors, Jewelors, Grocery
merchants and all kind of traders.
SAILENT FEATURES
Quick processing
Minimum formalities
Operational convenience
Competitive interest rates
Security-stock and book debts/ Immovable property/NSC/KVB/ LIC
policies/ Deposits in LVB.
ELIGIBILITY
Suitable for traders with good track record.
Individuals
HUFs
Proprietorship/Partnership (both registered and unregistered)
1.3.8 LAKSHMI HOME LOAN
Individuals and HUFs (operating through kartas) having sufficient income and
who can produce satisfactory proof of such income by way of salary
certificates,I.T,certificates etc., can avail loans under the schemes.
PURPOSE
Construction of new house/ Flat.
Purchase of new house/ flat constructed by reputed promoter/ contractor.
Additional constructions or alterations carried out by the owners of the house.
Purchase of old house.
Purchase of approved flats.
1.3.9 INITIAL PUBLIC OFFEER
PURPOSE
For subscribing to the initial public offering to the companies.
ELIGIBILITY
Salaried employees and other individuals.
1.4.1 LAKSHMI RENTAL LOAN
PURPOSE
Borrowers may utilize the loan facility to meet their personal expenditure
requirements foe investments or for general corporate.
ELIGIBLITY
(a) Borrower: Owner of commercial and residential properties and who receive
rental income thereon viz., individuals, partnership/ proprietorship, trusts and
other legal entities permitted to own properties, receive rentals and borrows
from banks.
(b) Properties: Commercial and residential properties located in semi-urban, urban,
metro centers will be eligible.
1.4.2 LAKSHMI PERSONAL LOAN
PURPOSE
To purchase for own use:
New car/Van/Jeep.
Used car/Van/Jeep.
New two Wheelers.
ELIGIBILITY
a) Salaried persons who are permanent employees of:
State/Central Government.
Public sector undertakings/corporations.
Private sector companies of Repute.
Reputed Establishments.
b) Professionals and self employed persons.
c) Businessmen.
d) Agriculturists (with minimum land holding of 8 acres of irrigated land).
1.4.3 LAKSHMI EASY LOAN
PURPOSE
To meet personal & domestic expenses, make fresh investments including tax
planning investments.
ELIGIBILITY
Individual including persons coming together to avail the loan in joint names
holding National Savings Certificates (NSCs) and Kishan Vikas Patras (KVPs) & LIC
policies in their names.
1.4.4 LAKSHMI PROPERTY POWER LOAN
Lakshmi property power loan is a simplified mortgage loan product available to
individuals and business entities. The product may be availed either as Term Loan or as
Overdraft Limit.
PURPOSE
Individuals may avail the facility for personal expenditure and/ or investments.
Business entities may avail the facility for working capital purposes or for investment in
fixed assets.
1.4.5 LAKSHMI GOLD POWER
The product is available as overdraft against pledge of gold jewels.
PURPOSE
To meet the personal/ agriculture/ business requirements of individuals, Business
entities, etc.
1.4.6 LAKSHMI COMPOSITE BUSINESS CREDIT
The product is available as term loan.
PURPOSE
Individuals, business entities, Commission agents, Contractors, professionals
etc, who are in the business/profession for at least one year, may avail the facility for
working capital purposes or for investments in fixed assets.
1.4.7 VIDHYA LAKSHMI LOAN
The product is available as term loan. To meet the expenses connected with the
pursuit of higher secondary education, specific courses of study at recognized
institutions, including professionals / job-oriented courses, which offer reasonable
opportunity for employment & loan repayment capacity on successful completion.
1.4.8 LOCKER FACILITY
The locker facility enables our customers to store valuable things in a safe place.
We offer our customer to access their lockers after the banking working hours also.
FEATURES
Access your lockers any number of times.
Your vault is equipped with the latest burglar/fire alarm systems.
You can comfortably store important documents, investments, jewelers
and other valuable things.
Nomination facility.
Documentation.
1.5 CHRONOLOGY OF EVENTS: (1926 - 2009)
1. Starting of our Bank on 03.11.1926.
2. First outside branch at Tindivanam on 05.05.1930.
3. First own building (central office) at Jawahar Bazaar, Karur.
4. Silver Jubilee celebration on 11.11.1951.
5. First Bonus share issue during 1956.
6. Included in schedule “B” of RBI in 1958.
7. Taking over of nine small Banks in between 1961 to 1965.
8. First branch at Jayanangar, Karnataka on 09.08.1974 outside the state.
9. First issue of right shares during 1974.
10.Opening of 100th branch at Annasalai, Chennai during 1975.
11. Golden Jubilee celebrations on 03.11.1976.
12. .License obtained to deal In Foreign exchange during 1976.
13.Obtained of “A” class status during 1977.
14.First service branch at Chennai on 01.11.1981.
15.Stations of staff training college (STC) at karur on 26.03.1984.
16. Blossoming of “LOTUS” in house magazine in the garden of LVB during 1986.
17.Diamond Jubilee celebrations during 1986.
18.Dawn of divisional office, first at Chennai on 22.05.1986.
19.Bank’s first extension counter opened at KSR College in Trichengode.
20.First public issue during 1988.
21.Listing with Madras stock Exchange during 1988.
22. Inauguration of Bank’s new Administrative office complex at kathaparai, Karur on
03.11.1991.
23.Launching of co-branded credit card on 16.05.1994
24. Opening of first currency chest at Salem on 26.05.1995.
25.Opening of 200th branch at Tripathi on 27.03.1997.
26. Inauguration of domestic treasury at Mumbai on 04.07.1998.
27.Listing with National Stock Exchange during year 2000.
28. Inauguration of first ATM at Mumbai.
29.The Bank introduced three loans scheme such as Lakshmi Agribike loan,
Lakshmi Consumer Credit, Lakshmi Rental Loan on 03.11.2000.
30. Platinum Jubilee celebrations
a. Inauguration of the platinum jubilee building at Coimbatore.
b. Sri Satyanarayana Pooja held at Administrative office, Karur on
03.11.2001.
31.Shifting of the forex treasury to Mumbai on 2003.
32.Development of a core banking solution jointly with ICICI info tech on 2004.
33.Tie up with M/S. Royal Sundaram Alliance Company Ltd. For distribution of their
general insurance products on 2004.
34.Tie up Reliance mutual fund and Franklin Templeton mutual fund for distribution
of their products on 2004.
35. Tie up with M/S. Royal Sundaram Alliance Insurance Company Ltd. On 2005.
36.Bank has distribution tie up with reliance capital asset management limited and
Franklin limited asset management private limited 2005.
37.The Bank has tie up with Maharastra Gujarat and Karnataka 2006.
38.Bank has tied with M/S .Bajaj Alliance general insurance company limited to
market their general insurance products through the branches 2007.
1.5.1 ADMINISTRATION AND MANAGEMENT
The Lakshmi Vilas Bank Limited is administrated by the Board of Directors
elected by the members. All the members eligible to vote in the election. As per the by –
laws of this bank, Directors are to be elected by the shareholders once in three years.
1.5.2 GROWTH OF THE BANK
Founded on 3rd November 1926, the bank was aptly christened as “The Lakshmi
Vilas Bank Limited”, the abode of prosperity. Social uplift through catering to the
financial needs of the local community remains as avowed objectives of the bank.
Good seed grows and also multiples. That applies to The Lakshmi Vilas Bank
Limited Also. The Bank grew from a seeding into a tree with its second branch being
opened on 05.05.1930 at Tindivanam in south Arcot District. Bank’s branch network
increased considerably not only by the opening of new branches but also by the merger
of 7 banks with it, between 1961 and 1965.
In its quest for new business opportunities and to widen the clientele base and
reach out new markets, the bank has been expanding the network of branches at
important centers where business potential is high.
1.6 BRANCHES
The first branch of the bank was opened on 05.05.1930 at Tindivanam, where
there was no banking facilities to the public expect for a co-operative society. Today the
bank has 239 branches throughout Tamil Nadu and also has extended its activities to
other states like Andra Pradesh, Maharastra, Orissa, Rajasthan, Hariyaaana, Jharkand
and Delhi. During the year the bank network by opening 6branches in Tamilnadu.
TABLE – 1.1
BRANCH NETWORK – AREA WISE IN INDIA
DURING THE YEAR (2008 – 2009)
SL.NO AREA WISE NO.OF BRANCHES
1 RURAL 45
2 SEMI – URBAN 94
3 URBAN 65
4 METRO 35
TOTAL 239
TABLE 1.2
THE NUMBER OF BRANCHES DURING STUDY PERIOD
(2004 – 2009)
AREA
WISE
NO. OF BRANCHES IN STUDY PERIOD
2004-05 2005-06 2006-07 2007-08 2008-09
METRO 30 43 43 45 45
URBAN 60 92 92 94 94
SEMI –
URBAN92 60 61 65 65
RURAL 42 30 31 32 35
TOTAL 224 225 227 236 239
Source: Annual Reports
1.6.1 ATM SERVICES
In future banking sector bill bring out 4000 ATM facilities. If the customer has
accounting facilities in any other banks, he can to use that particular ATM centre
otherwise they will charge for Rs.10, where as the LVB account holders can use any
other ATM centre, because the management itself pay the money.
1.6.2 ATM FACILITIES
Dhanalakshmi Bank
Bank of Rajasthan
City Union Bank
Karnataka Bank
Yes Bank
Bank OF India
Union Bank OF India
Dena Bank
Indian Bank
Syndicate Bank
Indian Overseas Bank
United Bank Of India
ATM has access to 4500 ATMS across the country through LVB ATM cash TREE.
VISA tie up for withdrew
1.6.3 MERGER
At present the following banks have been merged with this bank.
The Karur Mercantile Bank
Kanniwadi Bank Limited
The Trichirapalli Vysya Bank limited
The Trichirapalli Bank limited
The Salem Gugai Sri Krishna Bank Limited
Sri Nadiambal Bank Limited
The Kattuputhur Bank Limited
Salem National Bank Limited
The Salem Sri Ramasamy Bank
1.6.4 BOARD OF DIRECTORS
1. Mr.R.M.Nayak Chairman & Chief Executive Officer
2. Mr.D.L.Suresh Babu
3. Mr.K.P.Krishnan
4. Mr.M.P.Shyam
5. Mr.R.Dhandapani
6. Mr.K.Balaji
7. Mr.E.Sreedhar
8. Mr.N.Saiprasad
9. Mr.G.Sudhakara Gupta
10.K.Ravindra Kumar
1.6.5 GENERAL MANAGERS
1. Mr.R.Sridharan
2. Mr.Naganna Prabhakaran
3. S.R.Narayana Moorthy
4. Mr.B.Murali Nair.
1.6.6 DEPUTY GENERAL MANAGERS
1. Mr.S.Ravishankar
2. Mr.JV.S.Chetty
3. Mr.V.Sekar
4. Mr.L.Sadanandam
5. Mr.R.V.Raman
6. Mr.S.Suresh Babu
7. Mr.A.K.Ramakrishnan
1.6.7 ASSISTANT GENERAL MANAGERS
1. Mr.B.Kalayana Vengatraman
2. Mr.S.Elangoavn
3. Mr.T.B.Sathyanarayanan
4. Mr.M.Sethuraman
5. Mr.RM.Kumaraippan
6. Mr.N.Duriarajan
7. Mr.B.Rajanbabu
8. Mr.S.Knnan
1.7 INFORMATION TECHNOLOGY
The banking industry is undergoing a sea change from the olden methods to the
hi-tech ‘e-banking’ and Lakshmi Business Solution (LBS). the LVB Ltd is alive to the
sweeping changes that are taking place in the technological front. The bank entered
that the era of centralized and network banking system. As on 31st March 2007, CBS
software has been implemented, covering substantial portion of Bank’s business.
The introduction of core banking has also enabled the bank to obtain real time
information for decision support.
The bank has set up its own website on the internet to disseminate information
on its products & services.
1.8 HUMAN RESOURCE DEVELOPMENT
In the wake of increasing competition and newer challenges, the bank continues
its focus in the area of trading. During the year total number of employees of the bank
stood at 1926. focusing on training it is employees on a continuous basis, training
programs are being conduced by the bank with internal and external facilitity.
1.9 RISK MANAGEMENT
The major risk confronted by the banks is credit risk, interest rate risk, liquidity
risk, price risk, Exchange risk, etc. The policy frame work has been reviewed
periodically for exchanging the scope of risk management process in the bank.
The integrated risk management committees of the board and of the top
management undertake the supervisory review of the risk management commission of
the bank.
1.9.1 BANCASSURENCE –CORPORATE AGENCY:
Under the Lakshmi Vilas Bank Limited LVB) is the “Corporate Agent” for world
renewed “AVIVA Life Insurance Company India (P) Limited” for distributing that life
insurance products in India, through bank’s select branches LVB has obtained the
license for “Corporate Agency” from IRDA on 4/12/2002 for distributing of AVIVA life
insurance product without any risk and equity partice potion.
The new scheme of life insurance products viz Easy life plus, pension loan, Amar
Suraksham, Secure Life, Life Bond are being launched which takes cares of life
protection, savings and investment element besides tax planning.
A specially designed life insurance product is being designed exclusively for the
members of Swll Help Groups (SHG) in Tamilnadu and Andrapredsh. The scheme
offers life coverage to the members of SHG with accident coverage and creditor product
at confessional premium.
1.9.2 VISION & MISSION
Every organization communicates its purpose of existence and operations
through its Vision and Mission statement. The difference between a vision statement
and mission statement is that while vision statement focuses on organization’s future,
and long term goals, mission statement focuses on its present state and near term
objectives.
Our bank’s vision statement and mission statement are spelt out below:-
VISION
The vision to be a sound and dynamic banking entity providing financial services
of excellence with pan India presence.
MISSION:
The mission to develop a range of quality financial services and products to
create value for customer, shareholders and the society, to motivate people to achieve
excellence in performance leading to sustained profitable growth and build a vibrant
organization.
CHAPTER-2REVIEW OF LITERATURE
2.1 MICRO FINANCE
Microfinance is often considered one of the most effective and flexible strategies
in the fight against global poverty. It is sustainable and can be implemented on the
massive scale necessary to respond to the urgent needs of those living on less than $1
a day, the World’s poorest.
Microfinance consists of making small loans, usually less than $200, to
individuals, usually women, to establish or expand a small, self-sustaining business.
"Microfinance is the supply of loans, savings, and other basic financial services to
the poor." As the financial services of microfinance usually involve small amounts of
money – small loans, small savings etc. – the term "microfinance" helps to differentiate
these services from those which formal banks provide.
“Microfinance” is often defined as financial services for poor and low-income
clients. In practice, the term is often used more narrowly to refer to loans and other
services from providers that identify themselves as “microfinance institutions” (MFIs).
These institutions commonly tend to use new methods developed over the last 30 years
to deliver very small loans to unsalaried borrowers, taking little or no collateral. These
methods include group lending and liability, pre-loan savings requirements, gradually
increasing loan sizes, and an implicit guarantee of ready access to future loans if
present loans are repaid fully and promptly.
Micro-finance : this covers financial services (loans, savings, insurance,...) for
people barred from the time-honoured system because they cannot offer bank
guarantees.
Microfinance began as a financial system to provide poor families with very
small loans (micro-credit) to help members sustain income-generating activities. Micro-
credit came to fore-front in the 1970s, through the efforts of Mohammad Yunus, a
microfinance pioneer and founder of the Grameen Bank of Bangladesh.
The definition of microfinance has since broadened, and includes savings,
insurance, and money transfer vehicles; the industry has realized that those who do not
have access to traditional formal financial institutions actually require and desire a
variety of financial products.
Micro-credit has largely been directed by the non-profit sector, but recently we
see, the emergence of “for-profit” MFIs. In India, these ‘for-profit’ MFIs are referred to as
Non-Banking Financial Companies (NBFCs).
More broadly, microfinance refers to a movement that envisions a world in
which low-income households have permanent access to a range of high quality
financial services to finance their income-producing activities, build assets, stabilize
consumption, and protect against risks. These services are not limited to credit, but
include savings, insurance, and money transfers.
Sometimes called “banking for the poor,” microfinance is an amazingly simple
approach that has been proven to empower very poor people around the world to pull
themselves out of poverty. Relying on their traditional skills and entrepreneurial
instincts, very poor people, mostly women, use small loans (usually less than US$200),
other financial services, and support from local organizations called microfinance
institutions (MFIs) to start, establish, sustain, or expand very small, self-supporting
businesses. A key to microfinance is the recycling of loan dollars. As each loan is repaid
—usually within six months to a year—the money is recycled as another loan, thus
multiplying the value of each dollar in defeating global poverty, and changing lives and
communities.
Microfinance is the provision of a broad range of financial services such as
deposits, loans, payment services, money transfers and insurance products to the
poor and low-income households, for their micro enterprises and small businesses, to
enable them to raise their income levels and improve their living standards.
2.2.1 Definition of Microfinance loans
Micro financing loans are small loans granted to the basic sectors, on the
basis of the borrower’s cash flow and other loans granted to the poor andlow-income
households for their microenterprises and small businesses toenable them to raise their
income levels and improve their livingstandards. These loans are typically unsecured
but may also be securedin some cases.
2.2.2 Level of Microfinance Loan
Average microfinance loan of an NGO microfinance institution or of a
Cooperative bank or credit union in the Philippine case is about P25,000 (from a low of
P2,000 to P5,000). To be realistic, the maximum principal amount of a microfinance
loan can be pegged at P150, 000. This is equivalent to the maximum capitalization of a
micro enterprise under R.A.8425.
2.2.3 Collateralization of Microfinance Loan
A microfinance borrower is not likely to be able to borrow from a large
commercial, thrift or rural bank but from an NGO microfinance institution or perhaps
from a small rural or cooperative bank. Thus, microfinance loans are typically
unsecured, for relatively short periods of time (180 days) with monthly (or more
frequent) amortizations of interest and principal, and often featuring a joint and several
guarantee of one or more persons and, certainly, seldom with tangible collateral. But in
some cases, they can also be secured, depending on the capacity of the borrower to
offer collaterals acceptable to the lending institution.
2.2.4 Interest on Microfinance Loans
Old approach
The old (and by now highly discredited as ineffective) approach to loans for low-
income borrowers emphasized subsidized interest rates. It did not recognize that
subsidized below-market interest rates do not necessarily result in opening up access to
financial services for low-income households and microenterprises.
New Approach
The new approach which has been demonstrated by global experience is
characterized by a market-based interest rate regime which permits the institution
providing microfinance services to cover administrative costs, provisions for loan losses
and intermediation/funding costs. This basis is consistent with financially sustainable
rural finance and microfinance. Invariably, the global
experience continues to validate the proposition that what matters most to the
poor and undeserved segments is access to financial services rather than their interest-
rate cost – most especially because microenterprise and small business borrowers will
take a microfinance loan whose repayment periods match the additional cash flows they
hope to generate.Therefore, interest on such microfinancing loans shall be reasonable
but shall not be lower than the prevailing market rates.
This is to enable the lending institution not only to recover the financial and
operationalcosts incidental to this type of microfinance lending but also to realize
some bottom line gains.
2.2.5 Segments of Demand for Micro-credit
(1) The landless who are engaged in agricultural work on a seasonal basis and
manual laborers in forestry, mining, household industries, construction and transport;
requires credit for consumption needs and also for acquiring small productive assets,
such as livestock.
(2) Small and marginal farmers, rural artisans, weavers and those selfemployed
in the urban informal sector as hawkers, vendors and workers in household micro-
enterprises: requires credit for working capital, including a small part for consumption
needs. This segment largely comprises the poor but not the poorest.
(3) Medium farmers/small entrepreneurs who have gone in for commercial crops
and others engaged in dairy, poultry . Among non-farm activities, this segment includes
those in villages and slums engaged in processing or manufacturing activity. These
persons live barely above the poverty line and also suffer from inadequte access to
formal credit.
2.3 PRINCIPLES OF MICRO FINANCE
Some principles that summarize a century and a half of development practice were
encapsulated in 2004 by and endorsed by the leaders at the G8 Summit on June 10,
2004Poor people need not just loans but also savings, insurance and money transfer
services.
Microfinance must be useful to poor households: helping them raise income,
build up assets and/or cushion themselves against external shocks.
“Microfinance can pay for itself. from donors and government are scarce and
uncertain, and so to reach large numbers of poor people, microfinance must pay
for itself.
Microfinance means building permanent local institutions.
Microfinance also means integrating the financial needs of poor people into a
country’s mainstream financial system.
“The job of government is to enable financial services, not to provide them.
“Donor funds should complement private capital, not compete with it.
“The key bottleneck is the shortage of strong institutions and managers Donors
should focus on capacity building.
Interest rate ceilings hurt poor people by preventing microfinance institutions
from covering their costs, which chokes off the supply of credit.
Microfinance institutions should measure and disclose their performance – both
financially and socially.
The poor needs access to appropriate financial services
The poor has the capability to repay loans, pay the real cost of loans
and generate savings
Microfinance institutions must aim to provide financial services to an
increasing number of disavantaged people
Microfinance can and should be undertaken on a sustainable basis
Microfinance NGOs and programs must develop performance
standards that will help define and govern the microfinance industry
toward greater reach and sustainability
Employment in informal sector; low wage bracket
Lack of physical collateral
Closely interlinked household/business activities
Lending Technology __Prompt approval and disbursement of micro loans
Lack of extensive loan records
Collateral substitutes; group-based guarantees
Conditional access to further micro-credits
Information-intensive character-based lending linked to cash flow analysis and
group-based borrower selection
Risk heavily dependent on portfolio management skills
Remote from/non-dependent on government
Cost recovery objective vs. profit maximizing
Insufficient external control and regulation
Capital base is quasi-equity (grants, soft loans)
Microfinance can also be distinguished from charity. It is better to provide grants
to families who are destitute, or so poor they are unlikely to be able to generate the
cash flow required to repay a loan. This situation can occur for example, in a war zone
or after a natural disaster.
2.4 HISTORY OF MICRO FINANCE
Microfinance is not a recent development, and neither is the development of
regulation andsupervision of microfinance institutions (MFIs). Every now developed
country has its ownhistory of microfinance. It is important to recognize this because it
presents a view differentfrom that of many in the microfinance community who
associate microfinance with creditNGOs and believe that microfinance was invented in
Bangladesh some 20-odd years ago.Attributing the origin of microfinance to recent
initiatives misses not only the historical depthand scale of microfinance, but also
centuries of experience, which means: learning from trialand error, failure and success.
The beginnings in Europe were all informal and small-scale,including informal savings
clubs, among them the box clubs in England during the 18thcentury.
The case of Ireland, 1720-1950: How self-help and legal backing created a mass
microfinance movement, until a cap on interest rates brought it down The birth of
microfinance in Europe dates back to tremendous increases in poverty since the 16th
century. In Ireland, loan funds emerged in the 1720s, using peer monitoring to enforce
the repayment in weekly instalments of initially interest-free loans from donated
resources.
After a century of slow growth, a boom was initiated by two events: (a) a special
law in 1823, which turned the charities into financial intermediaries by allowing them to
charge interest on loans, enabling them at the same time to collect interest-bearing
deposits; and (b) the establishment of a Loan Fund Board in 1836 for their regulation
and supervision. Around 1840, around 300 funds had emerged as self-reliant and
sustainable institutions, generating their own resources through deposit collection and
providing small loans to the poor. Financing their expansion from profits and deposits,
their outreach eventually covered 20% of households in Ireland.
The funds offered three times higher deposit rates than commercial banks and
started cutting into their core business. This brought the commercial bankers onto the
barricades.
They used their clout to stop the growth of the Loan Funds: through financial
repression, by getting the government to put a cap on interest rates in 1843. The Loan
Funds lost thus their competitive advantage, which caused their gradual decline during
the second half of the 19th century, until they finally disappeared in the 1950s.
This history of the Irish Loan Funds thus comprises three phases: a century of
gradual growth as informal institutions; a few decades of rapid expansion as formal
institutions in a conducive regulatory environment; and a century of decline due to
financial repression. The case of Germany, 1778-now: How self-help, regulation and
supervision created the world’s largest microfinance system Microfinance with the poor
in Germany has three roots, all informal at origin: communitybased savings funds; and
two movements of savings and credit cooperatives, one rural and one urban.
The community-owned financial institutions started during the latter part of the
18th century. Having learned from the early Irish charities that charity is not sustainable,
the first thrift society was established in Hamburg in 1778 and the first communal
savings fund (Sparkasse) in 1801. As the movement spread, the influx of savings forced
the savings funds (now usually called savings banks in English) to expand their credit
business, including agricultural lending. The Prussian state responded with regulation,
passing the first Prussian Savings Banks Decree in 1838.
After the hunger year of 1846/47, Raiffeisen and Schulze-Delitzsch reinvented
the wheel ofmicrofinance: the former in rural areas, creating rural savings and credit
cooperatives, originally called credit associations (Darlehnsvereine), later known as
Raiffeisenkassen and now Raiffeisenbanken; the latter establishing urban savings and
credit cooperatives, now called Volksbanken (people’s banks). With the help of
contributions of some wealthy people, Raiffeisen started by establishing a rural charity
association in Weyerbusch in 1847, bringing in grain from non-affected areas. Within a
few months, this brought down the price of bread by 50 percentage..
This was paralleled by Schulze-Delitzsch’s first urban credit association in 1850,
who insisted on self-help without charity from the beginning. Raiffeisen had to realize
that charity did not lead to sustainable institutions. In response, he established the first
rural credit association (Darlehnskassen-Verein) in Heddesdorf in 1864, following
Schulze-Delitzsch’s example. For the next twenty years, the initiative turned into a
movement, but growth was slow, reaching not more than 245 rural cooperatives in the
mid-1880s.
The turn-around came in 1989, when both the rural and the urban networks of
credit associations were brought under the law: the Cooperative Act of the German
Reich, the first cooperative law in the world. At the same time, joint liability, which had
kept back the growth of the system, was replaced by limited liability. Until 1914, the
number of rural cooperatives in Germany increased to more than 15,000 and spread to
many other countries.The spectacular success of microfinance in Germany, which
pushed moneylenders and most private banks out of business, is due to several factors:
self-help and self-reliance, based on savings mobilization
local outreach with lasting house-banking relationships
the evolution of a legal framework: 1838 first Prussian savings banks decree;
1889first Cooperative Act; 1934 Banking law covering all financial institutions
including savings funds (or savings banks) and cooperatives, which are now
cooperative banks.
abandoning joint and several liability of cooperative members in favor of limited
liability as part of the cooperative act of 1889
Effective delegated supervision through own apexes, so-called auditing
federations,
2.4.1 Evolving in four stages:
1860s-80s voluntary auditing, emergence of cooperative auditing federations;
financial difficulties during the 1880s due to inadequacies in auditing.
In 1889, as part of the new cooperative law, mandatory auditing, but optionally
by cooperative auditing federations or freelance auditors, resulting in financial
difficulties of cooperatives under freelance auditors during the 1920s
In 1934 mandatory auditing by separate auditing federations for all banking
networks including cooperatives and savings banks; the auditing federations are
in turn supervised by the Bank Superintendency
In1971 DGRV as national cooperative auditing federation with 11 regional and 6
specialized auditing federations; paralleled by DSGV for savings banks
2.4.2 Results:
This has resulted in a financial system in Germany dominated by these
former microfinance institutions (1997 data), with:
39,000 branches (49% cooperative banks, 51% savings banks)
75 million customers (40% cooperative banks, 60% savings banks)
51.4% of all banking assets (28% cooperative banks, 72% savings banks)
64% of all financial intermediation.
2.4.3 The conclusion:
Microfinance is not a poor solution for poor countries.
Savings-driven microfinance institutions in cooperative or community ownership
are equally feasible in rural and urban areas.
In 1866, Raiffeisen published his first cooperative handbook (Die
Darlehnskassen-Vereine), which went through several revised editions until
1887, reflecting the trials and errors of the movement.
It has lost little of its actuality and could teach many a microfinance expert a
lesson, eg, when and whennot to use joint and several liability as a collateral
substitute; and how to avoid moral hazard in setting up cattle insurance
schemes.
If properly regulated and supervised, they have great potential in poverty
alleviation and development, both in rural and urban areas.
2.5 .Relevance to developing countries
What distinguishes a developed country like Germany from many developing
countries is not the prevalence of self-help and informal finance at an earlier time.
Community- and memberbased as well as other informal financial institutions are
exceedingly widespread throughout the word.
In Nigeria for example, they date back to the 15th and 16th century from where
they were carried by slaves as part of their social capital to the Carribbean, where both
the institution and the original Yoruba term, susu, are still found today.
The major difference seems to be the legal recognition given to informal finance in
Germany and the protection of the institutions through prudential regulation and effective
supervision. While there are some examples of limited magnitude of upgrading informal finance
in developing countries, there is no case where a modern financial system has been build on
indigenous institutions. In the microfinance community, the importance of an appropriate legal
framework and regulation.
2.6 FEATURES OF MICRO FINANCE
Microfinance is often considered one of the most effective and flexible strategies
in the fight against global poverty. It is sustainable and can be implemented on the
massive scale necessary to respond to the urgent needs of those living on less than $1
a day, the World’s poorest.
Microfinance consists of making small loans, usually less than $200, to
individuals, usually women, to establish or expand a small, self-sustaining
business. For example, a woman may borrow $50 to buy chickens so she can sell
eggs. As the chickens multiply, she will have more eggs to sell. Soon she can sell the
chicks. Each expansion pulls her further from the devastation of poverty.
Microfinance, the Grameen way, includes several support systems that
contribute greatly to its success. Microfinance institutions offer business advice and
counseling, while clients provide peer support for each other through solidarity circles.
For example, if a client falls ill, her circle helps with her business until she is well. If a
client gets discouraged, the support group pulls her through. This contributes
substantially to the extremely high repayment rate of loans made to microfinance
entrepreneurs.
An equally important part of microfinance is the recycling of funds. As loans
are repaid, usually in six months to a year, they are re-loaned. This continual
reinvestment multiplies the impact of each dollar loaned.
Microfinance has a positive impact far beyond the individual client. The vast
majority of the loans go to women because studies have shown that women are more
likely to reinvest their earnings in the business and in their families. As families cross
the poverty line and micro-businesses expand, their communities benefit. Jobs are
created, knowledge is shared, civic participation increases, and women are recognized
as valuable members of their families and communities.
2.7 Microfinance Clients
microfinance clients are poor and low-income people that do not have access to
other formal financial institutions. Microfinance clients are usually self-employed,
household-based entrepreneurs. Their diverse “microenterprises” include small retail
shops, street vending, artisanal manufacture, and service provision. In rural areas,
microentrepreneurs often have small income-generating activities such as food
processing and trade; some but far from all are farmers.
Hard data on the poverty status of clients is limited, but tends to suggest that
most microfinance clients fall near the poverty line, both above and below. Households
in the poorest 10% of the population, including the destitute, are not traditional
microcredit clients because they lack stable cash flows to repay loans. Most clients
below the poverty line are in the upper half of the poor. It is clear, however, that some
MFIs can serve clients at the higher end of the bottom half. Women often comprise the
majority of clients.
Over the past decade, a few MFIs have started developing a range of products to
meet the needs of other clients, including pensioners and salaried workers. Although
little is known about the universe of potential clients, the number of households without
effective access to financial services is enormous.
Most microcredit borrowers have microenterprises—unsalaried, informal income-
generating activities. However, microloans may not predominantly be used to start or
finance microenterprises. Scattered research suggests that only half or less of loan
proceeds are used for business purposes.
The remainder supports a wide range of household cash management needs,
including stabilizing consumption and spreading out large, lumpy cash needs like
education fees, medical expenses, or lifecycle events such as weddings and funerals.
The impact of microcredit has been studied more than the impact of other forms
of microfinance. Microcredit can provide a range of benefits that poor households highly
value including long-term increases in income and consumption. A harsh aspect of
poverty is that income is often irregular and undependable. Access to credit helps the
poor to smooth cash flows and avoid periods where access to food, clothing, shelter, or
education is lost. Credit can make it easier to manage shocks like sickness of a wage
earner, theft, or natural disasters. The poor use credit to build assets such as buying
land, which gives them future security. Women participants in microcredit programs
often experience important self-empowerment.
Empirical studies on the impact of credit are difficult and expensive to conduct
and pose special methodological problems. Most impact studies to date have found
significant benefits from microcredit. However, only a few studies have made serious
efforts to compensate for the methodological challenges. In fact, many studies would
not be regarded as meaningful by most professional econometricians. A new wave of
randomized trial studies is now in process, which should yield a more definitive picture.
Even so, there is a strong indication from borrowers that microcredit improves
their lives. They faithfully repay their loans even when the only compelling reason is to
ensure continued access to the service in the future.
Other microfinance services like savings, insurance, and money transfers have
developed more recently, and there is less empirical research on their impact. Client
demand indicates that poor people value such services. MFIs that offer good voluntary
savings services typically attract far more savers than borrowers.
Financial services, particularly credit, are not appropriate for all people at all
times. For loans that will be used for business purposes, microcredit best serves those
who have identified an economic opportunity and can capitalize on it if they have access
to a small amount of ready cash.
.
Regardless of how loans are used, MFIs can provide long-term, stable credit
access only when clients have both the willingness and ability to meet scheduled loan
repayments.
Microfinance is particularly inappropriate for the destitute, who may need grants
or other public resources to improve their economic situation. Grants are a more
efficient way to transfer resources to the destitute than are loans that many will not be
unable to repay. Too much risk is placed on the MFI and client, when the only way a
client can repay a loan is by starting a successful business. Basic requirements like
food, shelter, and employment are often more urgently needed than financial services
and should be appropriately funded by government and donor subsidies.
Governments and development agencies often use microfinance as a tool to
address socio-economic problems such as relocation of refugees from civil strife,
generating employment among demilitarized soldiers, or assistance following a natural
disaster. Microfinance may or may not be able to respond to these situations effectively,
and certainly not as a stand-alone intervention. Implementing a successful microfinance
program to address these types of situations depends upon a number of factors, the
most important of which is a client base capable of making regular repayments.
2.8 The government’s role in supporting microfinance
Government’s most important role is not provision of retail credit services, for reasons
mentioned in. Government can contribute most effectively by:
Setting sound macroeconomic policy that provides stability and low inflation
Avoiding interest rate ceilings - when governments set interest rate limits, political
factors usually result in limits that are too low to permit sustainable delivery of
credit that involves high administrative costs—such as tiny loans for poor people.
Such ceilings often have the announced intention of protecting the poor, but are
more likely to choke off the supply of credit
Adjusting bank regulation to facilitate deposit taking by solid MFIs, once the
country has experience with sustainable microfinance delivery,
Creating government wholesale funds to support retail MFIs if funds can be
insulated from politics, and they can hire and protect strong technical management
and avoid disbursement pressure that force fund to support unpromising MFIs.
2.8.1 Why would poor people need financial services?
"The great challenge before us is to address the constraints that exclude people
from full participation in the financial sector... Together, we can and must build inclusive
financial sectors that help people improve their lives."
It's easy to imagine poor people don't need financial services, but when you think
about it they are using these services already, although they might look a little different.
"Poor people save all the time, although mostly in informal ways. They invest in
assets such as gold, jewelry, domestic animals, building materials, and things that can
be easily exchanged for cash. They may set aside corn from their harvest to sell at a
later date. They bury cash in the garden or stash it under the mattress. They participate
in informal savings groups where everyone contributes a small amount of cash each
day, week, or month, and is successively awarded the pot on a rotating basis. Some of
these groups allow members to borrow from the pot as well. The poor also give their
money to neighbors to hold or pay local cash collectors to keep it safe.
However widely used, informal savings mechanisms have serious limitations. It is
not possible, for example, to cut a leg off a goat when the family suddenly needs a small
amount of cash. In-kind savings are subject to fluctuations in commodity prices,
destruction by insects, fire, thieves, or illness (in the case of livestock). Informal rotating
savings groups tend to be small and rotate limited amounts of money. Moreover, these
groups often require rigid amounts of money at set intervals and do not react to
changes in their members' ability to save. Perhaps most importantly, the poor are more
likely to lose their money through fraud or mismanagement in informal savings
arrangements than are depositors in formal financial institutions.)
2.8.2 The solution to poverty
"My own view is that we have to approach extreme poverty a little like the way in
which a doctor might approach a patient. By that I mean do a diagnosis and understand
what is it that is really ailing the particular country, the particular region. Sometimes its
terrible governance and the question is how to improve the governance and the hope
for the kind of change that is needed. In other places it's the terrible burden of disease
that may be addressable by good public health measures. In other places it is to show
how to grow more food. In other places its how to get business going and microfinance
has proven to be an incredibly powerful tool.
Once the basics are in place, the people are eating and can survive, then
microfinance can play a huge role in helping a poor community find ways through the
market to get new opportunities, to earn new income, to start saving, making
investments and start the process of climbing the ladder of economic development in
your children, in your business or your farm and continuing up the process of improving
skills, specialisation, new business ventures and so on. We've learnt that microfinance
can be a wonderful tool for that."
The Earth Institute at Columbia University, Director
No. Microfinance is but one strategy battling an immense problem.
"In the last two decades, substantial progress has been made in developing
techniques to deliver financial services to the poor on a sustainable basis. Most donor
interventions have concentrated on one of these services, microcredit. For microcredit
to be appropriate however, the clients must have the capacity to repay the loan under
the terms by which it is provided. Otherwise, clients may not be able to benefit from
credit and risk being pushed into debt problems. This sounds obvious, but microcredit is
viewed by some as "one size fits all." Instead, microcredit should be carefully evaluated
against the alternatives when choosing the most appropriate intervention tool for a
specific situation.
Microcredit may be inappropriate where conditions pose severe challenges to
standard microcredit methodologies. Populations that are geographically dispersed or
nomadic may not be suitable microfinance candidates. Microfinance may not be
appropriate for populations with a high incidence of debilitating illnesses (e.g.,
HIV/AIDS). Dependence on a single economic activity or single agricultural crop, or
reliance on barter rather than cash transactions may pose problems.
The presence of hyperinflation, or absence of law and order may stress the
ability of microfinance to operate. Microcredit is also much more difficult when laws and
regulations create significant barriers to the sustainability of microfinance providers (for
example, by mandating interest-rate caps).
2.8.3 The effects of Microfinance
"Several years ago two friends of mine were speaking with a group of 40 clients
at a micro-bank in South Asia. Through the translator, they asked the 40 women what
impact the bank had had on the husbands of the non-borrowers; not their husbands, but
the husbands of women who are not with the bank. The clients said, 'Before we took our
loans, our husbands were day-labourers, working for others whenever they could find
work. When we took our loans our husbands stopped being day-labourers and worked
with us - bicycle rickshaw, husking rice, growing garlic on leased land. This caused a
shortage of day-labourers in this area, so the husbands of the non-borrowers who were
day-laborers-their wages went up.' That was the impact of this bank on the husbands of
the non-borrowers."
Microcredit Summit Campaign, Director
"Comprehensive impact studies have demonstrated that:
o Microfinance helps very poor households meet basic needs and protect
against risks;
o The use of financial services by low-income households is associated with
improvements in household economic welfare and enterprise stability or
growth;
o By supporting women's economic participation, microfinance helps to
empower women, thus promoting gender-equity and improving household
well-being;
o For almost all significant impacts, the magnitude of impact is positively
related to the length of time that clients have been in the programme.
"Poor people, with access to savings, credit, insurance, and other financial
services, are more resilient and better able to cope with the everyday crises they face.
Even the most rigorous econometric studies have proven that microfinance can smooth
consumption levels and significantly reduce the need to sell assets to meet basic needs.
With access to microinsurance, poor people can cope with sudden increased expenses
associated with death, serious illness, and loss of assets.
Access to credit allows poor people to take advantage of economic opportunities.
While increased earnings are by no means automatic, clients have overwhelmingly
demonstrated that reliable sources of credit provide a fundamental basis for planning
and expanding business activities. Many studies show that clients who join and stay in
programs have better economic conditions than non-clients, suggesting that programs
contribute to these improvements. A few studies have also shown that over a long
period of time many clients do actually graduate out of poverty.
By reducing vulnerability and increasing earnings and savings, financial services
allow poor households to make the transformation from "every-day survival" to "planning
for the future." Households are able to send more children to school for longer periods
and to make greater investments in their children's education. Increased earnings from
financial services lead to better nutrition and better living conditions, which translates
into a lower incidence of illness. Increased earnings also mean that clients may seek
out and pay for health care services when needed, rather than go without or wait until
their health seriously deteriorates.)
"Empirical evidence shows that, among the poor, those participating in
microfinance programs who had access to financial services were able to improve their
well-being—both at the individual and household level—much more than those who did
not have access to financial services.
In Bangladesh, Bangladesh Rural Advancement Committee (BRAC)
clients increased household expenditures by 28% and assets by 112%.
The incomes of Grameen members were 43% higher than incomes in
non-program village.
In El Salvador, the weekly income of FINCA clients increased on average
by 145%.
In India, half of SHARE clients graduated out of poverty.
In Ghana, 80% of clients of Freedom from Hunger had secondary income
sources, compared to 50% for non-clients.
In Lombok, Indonesia, the average income of Bank Rakyat Indonesia
(BRI) borrowers increased by 112%, and 90% of households graduated
out of poverty. In Vietnam, Save the Children clients reduced food deficits
from three months to one month.)
2.9 Different from other loan programs
Unlike other loan programs, clients are not required to provide collateral to
receive loans. This allows people who would not qualify for loans at traditional financial
institutions to receive credit. MFIs are also very client-friendly; most usually go to their
clients to provide loans and receive payments, rather than requiring their clients to come
to them. A few of them also use focal centers where clients gather to conduct financial
transactions and receive other social services.
The peer support system practiced by many microfinance programs is another
unique feature. When clients gather weekly at “center meetings” to make loan
payments, or informally in smaller support groups, they share successes and discuss
ideas for solving business and personal problems. Maybe most importantly, they
empower each other to stay on the path out of poverty. This mutual support strengthens
their resolve.
In addition, MFI staff members share vital information and resources to improve
their clients’ well being. This might include bringing in local nurses to provide health and
nutrition counseling, or providing help with literacy
2.10 Micro Finance and Micro Credit
Microcredit refers specifically to loans and the credit needs of clients, while
microfinance covers a broader range of financial services that create a wider range of
opportunities for success. Examples of these additional financial services include
savings, insurance, housing loans and remittance transfers. The local MFI might also
offer microfinance plus activities such as entrepreneurial and life skills training, and
advice on topics such as health and nutrition, sanitation, improving living conditions, and
the importance of educating children.
Get out from poverty
Microfinance is not a silver bullet. It will not defeat global poverty by itself. But, it
is an important part of the solution. Microfinance provides a stable and sustainable
source of income that enables clients to climb steadily out of poverty, while providing
better living conditions and opportunities for their families. For some, that progress
means moving from a house made of mud to one made of wood. For others, it means
better nutrition and the money to finally send their children to school. A 1998 World
Bank study showed that, in Bangladesh, Grameen Bank’s clients were escaping poverty
at the rate of 10,000 per month.
CHAPTER-3RESEARCH METHODOLOGY
3.1 METHODOLOGY
The study is exclusively based on secondary data. The annual report and
platinum jubilee records on the basic sources for evaluating the performance of The
Lakshmi Vilas Bank Ltd. More over relevant information required for the has study has
also been obtained by consulting the officials of the Lakshmi Vilas Bank Limited. The
data obtained have been properly processed and tabulated with the help of the balance
sheet, profit and loss account with the ratio.
3.1RESEARCH DESIGN
Different types of research designs have emerged on account of the
different perspectives from which a research study can be viewed frequently
used classification system is to group research designs under three broad
categories.
DESCRIPTIVE RESEARCH
Descriptive study is a fact finding investigation with adequate
interpretation. It is the simplest type of research. Is is framed to gather
descriptive information and provides information for formulating more
sophisticated studies.
The descriptive study is interested in knowing the characteristics of certain
groups such as age, sex, educational level, occupation or income, a descriptive
study may be necessary other cases when a descriptive study could be taken up
are when is interested in knowing the proportion of people in a given population
who have behaved in particular manner, making projection of a certain thing.
Descriptive study are well structured. Descriptive research was carried out
for the purpose of this study on Marketing Strategy. Data are collected by using a
questionnaires.
3.2 SAMPLING TECHINIQUE:
Sampling techniques involves two types viz. Probability sampling and Non-
Probability Sampling.
Convenience sampling:
This method of convenience sampling is also called the chunk. A chunk is
a fraction of one population taken for investigation because of its convenient
availability. Thus, a chunk is selected neither by probability nor by judgement but
by convenience. A sample obtained from readily available lists, such as
telephone directories or automobile registrations, is a convenience sample and
not a random sample, even if the sample is drawn at random from the lists.
3.3 METHOD OF DATA COLLETIOBN:
There are two techniques for collecting the data
a) Primary Data Collection Technique
b) Secondary Data Collection Technique
a) Primary Data
Primary data are measurement observed and recorded as part of an
original study. When the data is required for a particular study can be found
neither in the internal records of the enterprise, nor in published sources, it may
become necessary to collect original data, i.e., to conduct first hand
investigation. Time, money and manpower available for the study usually limit
the work of collecting original data. The researcher adopted questionnaire and
interview method to collect the primary data collection.
b) Secondary Data:
When an investigator uses the data, which has already been collected by
others, such data is called secondary data. The information was collected from
the company and competitors in the form of leaflets, pamphlets, brochure,
journals etc.
The company’s website is also used to get more information about the
history of the company.
3.4 TOOLS OF THE STUDY:
Tools of analysis:
The statistical tools used for the purpose of the study are percentage method and
weighted averaged mean.
1) Weighted Average
Total Weight
Weighted Average = -------------------------------------
No of Respondents
2) Percentage Analysis
The collected data are classified and suitable tables are formed in analyzing the
data, the following tools are used. Percentage (or) Descriptive analysis.
No. of Respondents
Percentage= ---------------------------------------------- × 100
Total No. of Respondents
3) RATIO ANALYSIS:-
The most important tools used for anlaysis is ratio analysis. Mathematical
expression of the relationship bet5weemn the two figures is called ratio. It helps to
evaluate the financial condition and performance of the firm. Some important ratios are
applied as a measure of working ratios have been calculated with the help of annual
published financial statements of the sample unit. The calculated ratios have been
compared with previous periods and norms, deviations from the norms are analysed.
3.1 Liquidity ratio: [short term solvency ratios]
Liquidity ratios measure the firm’s ability to meet its current obligations i.e. ability
to pay its obligations as and when they become due. They show whether the firm can
pay its short term obligation out of short-term resources or not. Liquidity ratios establish
a relationship between cash and other current assets to current obligations.
3.2 Current ratio:-
Current ratio is used to measure the liquidity position and it shows the short term
solvency of the firm. The ratio explains the relationship between the current assets and
current liabilities. The desirable ratio of the firm is 2:1. A high current ratio is an
indication that the firm is more liquid and ability to meet its current liabilities. A low
current ratio indicates that the firm is in difficulty to pay its current obligation.
Current Ratio = Current asset / current liabilities.
Current asset includes cash, marketable securities, B/R, sundry debtors, stock,
work in progress etc., current liabilities are those obligations which are payable within a
short period of time.
3.3 Fixed assets turnover Ratio:
The express the number of times fixed assets are being turned over in a stated
period. The ratio is calculated as under.
Fixed asset Turnover Ratio = Sales / Net Fixed Asset
3.4 Sales to working capital:
The ratio shows the number of times working capital is turned over in a stated
period. It is calculated as under.
Sales to working capital Ratio = Sales / Net working capital
Net working capital = Current assets - current liabilities.
The higher is the ratio, the lower is the investment in working capital and greater
are the profits.
However a very high turnover of working capital is a sign of overtrading and may
put the concern into financial difficulties. On the other hand, a low working capital
turnover ratio indicates that the working capital is not efficiently utilized.
3.5 SOLVENCY RATIO – [LONG-TERM]
Solvency ratio assess the long-term financial condition of the firm. Bankers and
creditors are most interest in liquidity. But shareholder, debenture holders and financial
institutions are concerned with the long-term financial prospects.
A. Debt-Equity ratio:-
The debt-equity ratio establishes the relationship between shareholders funds
and outsider’s funds. Outsider’s fund include long-term debts, while share holders
funds consists of preference share capital, equity share capital and reserve and surplus.
Debt equity Ratio
= Debt / equity of outsiders funds / shareholders funds.
Shareholders fund = share capital + Reserve and surplus.
A debt-equity ratio 1:1 is considered desirable. It gives an idea of the amount of
capital supplied by the owners. It indicates the availability of assets to long-term
creditors at the time liquidation.
CHAPTER-4
ANALYSIS AND INTERPRETATION
4.1 AGRICULTURE
DIRECT FINANCE
Finance to individual farmers [including Self Help Groups (SHGs) or Jointly
Liability Groups (JLGs), i.e. groups of individual farmers, provided bank maintain
disaggregated data on such finance] for Agriculture and Allied Activities
(dairy,fishery,piggery,poultary,bee-keeping,etc.)
The following are the some of the guidelines given by RBI for Agriculture direct
finance advances.
Short - term loans for raising crops, i.e. for crop loans. This will include traditional
/ non-traditional plantations and horticulture.
Advances up to Rs.10 lakh against pledge/hypothecation of agriculture produce
(including warehousing receipts) for a period not exceeding 12 months.
Working capital and term loans for financing production and investment
requirements for a agriculture and allied activities.
Loans to small and marginal farmers for purchase of land for agriculture
purposes.
Loans to distressed farmers indebted to non-institutional lenders, against
appropriate collateral or group security.
Loans granted for pre-harvest and post-harvest activities such as spraying,
weeding, harvesting, grading, sorting, processing, and transporting undertaken
by individuals, SHGs and co-operatives in rural areas.
Finance to others [such as corporates, partnerships firms and institutions] for
Agriculture and Allied Activities (dairy, fishery, piggery, poultry, bee-keeping etc.)
Finance up to an aggregate amount of Rs.one crore per barrower for the
Agriculture purposes.
One third of loans in excess of Rs.one crore in aggregate per barrower for
agriculture and Allied activities.
INDIRECT FINANCE
Two third of loans to entities covered in excess of Rs. One crore in aggregate per
barrower for agriculture and allied activities.
Loans to food and Agro-based processing units with investments in plant and
machinery up to Rs.10 crore, undertaken by those other than SHGs and Co-
operative in rural areas.
Credit for purchase and distribution of fertilizers, pesticides, seeds, etc.Loans up
to Rs.40 lakh granted for purchase and distribution of inputs for the allied
activities such as cattle feed, Poultry feed etc.
Finance for setting up of Agriclinics and Agribusiness Centre.
Finance for hire purchase schemes for distribution of agricultural machinery and
implements.
Loans to farmers through Primary Agricultural Credit societies (PACS), Farmers
Service society (FSS), and Large-sized Adivasi Multi purpose Societies
(LAMPS).
Loans for constructing and running of storage facilities (warehouse, market
yards, go downs, and soils), including cold storage units designed to store
agriculture produce / products, irrespective of their location.
If the storage unit registered as SSI unit / micro or small enterprise, the
loans granted to such units may be classified 1under advances to small
Enterprises Sector.
Finance extended to dealers in drip irrigation / sprinkler irrigation / agricultural
machinery, subject to following condition :
The dealer 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.
A ceiling of up to Rs.30 lakh per dealer should be observed.
Fifty percent of the credit outstanding under loans for general purposes under
General Credit Cards (GCC).
TABLE NO:4.1.
AGRICULTURE
(Rs. In Lakhs)
YEARAMOUNT OF
LOANSACTUAL
PERCENTAGE
OF PREVIOUS
YEAR
PERCENTAGEOF
CHANGE BY
TAKING 2004-2009
2004-2005 389.5 - - 100
2005-2006 327.29 62.21 15.97 115.97
2006-2007 418.35 91.06 27.82 143.79
2007-2008 530.30 111.95 26.76 170.55
2008-2009 520.28 9.72 1.83 172.38
INTERPRETATION
From the above table, it is evident that the percentage during 2004 – 2005 is 100
and it has increased to 115.97 during 2005 – 2006. In 2006 – 2007 it has increased to
143.79 in 2007 – 2008 the percentage has been increased to 170.55 and the ratio again
increased to 172.38 in the year 2006 – 2007.
INFERANCE
From the above table, it is inferred that the percentage of the company highest
percentage is 172.38 and the lowest perventage is 100 during the period
2004 – 2005. The percentage increased steadily.
CHART NO.4.1
AGRICULTURE
4.2 SMALL ENTERPRISES
4.2.1 DIRECT FINANCE
a) Small Manufacturing Enterprises
Enterprises engaged in the manufacture / production, processing or preservation
of goods and whose investment in plant and machinery [original cost excluding land and
building and item specified by the Ministry of Small Scale Industries vide its notification
does not exceed Rs.5 crore.
b) Micro Manufacturing Enterprises
Enterprises engaged in the manufacture / production, processing or preservation
of goods and whose investment in plant and machinery [original cost excluding land and
building and such items] does not exceed Rs.25 lakhs irrespective of the location of the
limit.
c) Small Service Enterprises
Enterprises engaged in providing / rendering of services and whose investment
in equipment (original cost excluding lad and building and furniture, fittings and other
items not directly related to the service rendered or as may be notified under the
MSMED Act, 2006) does not exceed Rs.2 crore.
d) Micro Service Enterprises
Enterprises engaged in providing / rendering of services and whose investment
in equipment (original cost excluding lad and building and furniture, fittings and such
items does not exceeds Rs.10 lakh.
The small and micro service enterprises shall include small road and water
transport operators, small business, professional & self – employed persons, and
all other service enterprises.
4.2.2 INDIRECT FINANCE
Indirect finance to the Small manufacturing as well as service enterprises sector
will include credit to:
Persons involved in assisting the decentralized sector in the simply of inputs to
and marketing of outputs of artisans, village and cottage industries.
Advances to cooperatives of producer in the decentralized sector viz. artisans
village and cottage industries.
Investments made by banks in special bonds issued by NABARD with the
objective of financing, exclusively non-farm sector may be classified as indirect
finance to small enterprise sector.
The deposit placed with SIDBI by foreign banks, having offices in India, on
account of non-achievement of priority sector lending targets/ sub-targets and
outstanding would be eligible for classification as indirect to small enterprises
sector.
Loans granted by banks to NBFCs for on lending to small and micro
enterprises (manufacturing as well as service sector).
4.2.3 SERVICE SECTOR
Advances granted to retail traders dealing in essential commodities (fair price
shops), consumer co-operative stores, and Advances granted to private retail traders
with the credit limits not exceeding Rs.20 lakhs.
TABLE NO.4.2
SMALL SCALE ENTERPRISES
(Rs.in Lakhs)
YEAR
AMOUNT
OF LOANSACTUAL
PERCENTAGE
OF PREVIOUS
YEAR
PERCENTAGE
OF CHANGE
BY TAKING
2004-2009
2004-2005 32.73 - - 100
2005-2006 37.31 4.58 13.98 113.99
2006-2007 38.48 1.17 3.13 117.12
2007-2008 34.16 4.32 11.23 128.35
2008-2009 42.54 8.38 24.53 152.88
INTERPRETATION
From the above table, it is known that the amount of loans during 2004 -2005 is
32.72 lakhs and it has also likely increased 37.31 lakhs. During 2005 – 2006 it has
increased to 38.48 lakhs in 2006 – 2007 the amount has been decreased to 34.16 and
the amount has again increased 42.54 lakhs in the period of 2008 – 2009.
INFRANCE
From the above table, it is inferred that that the amount of loans of the company
highest amount is 42.54 during the period 2008 - 2009 and the lowest amount is
32.73bduring the period 2004 – 2005.
CHART NO.4.2
SMALL SCALE ENTERPRISES
4.3 MICRO CREDIT
Loans to very small not exceeding Rs.50, 000/- per borrower provided by
banks either directly or indirectly through a SHG / JLG mechanism or to NBFC / MFI for
on lending up to Rs.50, 000/- Per barrower.
Loans to distressed persons (other than farmers) to prepay their debt to non
institutional lenders, against appropriate collateral or group security, would be eligible
for classification under priority sector.
TABLE NO4.3
MICRO CREDIT
(Rs. in Lakhs)
YEARAMOUNT
OF LOANSACTUAL
PERCENTAGE
OF PREVIOUS
YEAR
PERCENTAGE
OF CHANGE
BY TAKING
2004-2009
2004-2005 2.86 - - 100
2005-2006 2.17 0.71 24.82 124.82
2006-2007 3.08 1.11 51.15 130.97
2007-2008 3.64 0.64 20.77 151.74
2008-2009 3.23 0.21 5.76 207.50
INTERPRETATION
In 2004 – 2005 the amount of loans was 2.86 lakhs. In 2005 – 2006 it was
decreased to 2.17 lakhs and there after the amount was increased till end of 2007–
2009. In 2008 – 2009 the amount again fall down to 3.23 lakhs
INFERANCE
From the above table, it is inferred that that the amount of loans of the company
highest amount is 3.64 during the period 2007 - 2008 and the lowest amount is 2.17
during the period 2005 – 2006.
CHART NO.4.3
MICRO CREDIT
4.4.RETAIL TRADE
Advances granted to retail traders dealing in essential commodities (fair price
shops), consumer co-operative stores, and;
Advances granted to private retail traders with credit limits not exceeding Rs 20
lakh. Retailers including selling the agricultural products.
TABLE NO.4.4
RETAIL TRADE
(Rs. In Lakhs)
YEARAMOUNT OF
LOANSACTUAL
PERCENTAGEOF PREVIOUS
YEAR
PERCENTAGEOF CHANGEBY TAKING2004-2008
2004-2005 11.73 - - 100
2005-2006 18.80 7.17 40.43 140.43
2006-2007 12.50 6.30 33.51 173.94
2007-2008 16.17 4.47 35.76 190.70
2008-2009 9.74 7.63 47.18 237.88
INTREPRETATION
From the above table, it is evident that the amount during 2004 – 2005 is 11.73
lakhsand it has increased to 18.80 during 2005 – 2006. In 2006 – 2007 it has decreased
to 12.50 lakhs in 2007 – 2008 the percentage has been increased to 16.17 lakhs and
the ratio again decreased to .74 in the year 2006 – 2007.
INFERANCE
From the above table, it is inferred that the amount of loan of the company
highest percentage is 18.80 lakhs and the lowest perventage is 9.74 lakhs during the
period 2008 – 2009. The percentage increased steadily.
CHART NO.4.4
RETAIL TRADE
4.5 EDUCATION
Educational loans granted to individuals for educational purposes up to
Rs.10 lakhs for studies in India and Rs.20 lakhs for abroad studies. Loans granted to
institutions will not be eligible to classify as priority sector advances.
Loans granted by banks to NBFCs for on-lending t individuals for educational
purposes up to Rs.10 lakhs for studies in India and Rs.20 lakhs for studies abroad.
TABLE NO:4.5
EDUCATION(Rs.inLakhs)
YEARAMOUNT
OF LOANSACTUAL
PERCENTAGE
OF PREVIOUS
YEAR
PERCENTAGE
OF CHANGE
BY TAKING
2004-2009
2004-2005 4.32 - - 100
2005-2006 5.88 1.56 36.11 136.11
2006-2007 6.96 1.12 19.04 155.15
2007-2008 5.69 1.33 19.1 174.25
2008-2009 7.25 2.44 42.8 217.13
INTERPRETATION
From the above table, It shows that the amount of loans during the period 2004 –
2005 was 4.32 lakhs and it has increased to 5.88 lakhs during the 2005 -2006 In 2006 –
2007 it has decreased to 5.69 lskhs In 2007 – 2008 the amount has been decreased to
5.69 lakhs and the amount again increased to 7.25 lakhs in the year 2008 – 2009.
INFERANCE
From the above table, it is inferred that the amount of loan of the company
highest amount is 7.25 lakhs and the lowest amount is 4.32 lakhs during the period
2005 – 2006. The percentage increased steadily.
CHART NO:’4.5
EDUCATION
4.6.1 HOUSING
Loans up to Rs.20 lakhs, irrespective of location, to individuals for purchased /
construction of a dwelling unit per family, excluding loans granted by banks to their own
employees.
Loans given for repairs to the damaged dwelling units of families up to Rs.1 lakh
in rural and semi-urban areas and up to Rs.2 lakhs in urban and metropolitan
areas.
Assistance given to any governmental agency for construction of dwelling units
or for slum clearance and rehabilitation of slum dwellers, subject to a ceiling of
Rs.5 lakhs of loan amount per dwelling amount.
Assistance given to a non-governmental agency approved by the NHB for the
purpose of refinance of construction / reconstruction of dwelling units or slum
clearance and rehabilitation of slum dwellers, subject to ceiling of loan
component of Rs.5 lakhs per dwelling unit.
TABLE NO:4.6
HOUSING
(Rs. In Lakhs)
YEARAMOUNT
OF LOANSACTUAL
PERCENTAGE
OF PREVIOUS
YEAR
PERCENTAGE
OF CHANGE
BY TAKING
2004-2009
2004-2005 39.63 - - 100
2005-2006 47.17 7.54 19.02 119.02
2006-2007 92.03 5.11 10.83 129.85
2007-2008 55.72 13.69 32.57 162.42
2008-2009 56.58 0.86 1.54 163.96
INTERPRETATION
From the above table, It shows that the amount of loans during the period 2004 –
2005 was 39.63 lakhs and it has increased to 47.17 lakhs during the 2005 -2006 In
2006 – 2007 it has increased to 92.03 lskhs In 2007 – 2008 the amount has been
decreased to 55.72 lakhs and the amount again increased to 56.58 lakhs in the year
2008 – 2009.
INFERANCE
From the above table, it is inferred that the amount of loan of the company
highest amount is 92.03 lakhs and the lowest amount is 39.63 lakhs during the period
2004 – 2005. The percentage increased steadily.
CHART NO : 4.6
HOUSING FINANCE
TABLE NO-4.7Current ratio
YearCurrent assets
[Rs. In Lakhs]
Current liabilities
[Rs. In Lakhs]
Ratio
2004-05 30,568.81 19,547.82 1.56
2005-06 38,540.96 18,812.37 2.05
2006-07 39,633.87 16,513.62 2.40
2007-08 36,790.98 20,855.25 1.76
2008-09 39,051.45 23,450.66 1.66
Source: Annual reports of the company.
INTERPRETATION
In the above said years the ratio is higher than the ideal ratio. It indicated that
more investment is made in current assets. In the year 2005-06. The ratio is equal to
ideal ratio. In the next two years the actual current ratio is lower than the ideal ratio. It
shoes the firm’s inability to pay off some of its debts.
CHART NO-4.7
Figure showing current ratio analysis
Table No: 4.8
Fixed assets turnover ratio
YearSales
[Rs. In Lakhs]
Fixed assets
[Rs. In Lakhs]
Ratio
2004-05 58,359 76,033 0.76
2005-06 66,823 72,836 0.91
2006-07 80,141 81,726 0.98
2007-08 88,040 1,17,782 0.75
2008-09 96,965 1,28,351 0.76
Source: Annual reports of the company
INTERPRETATION
From the year 2004-05, 2005-06, 2006-07 and 2008-09 the level of sales and
fixed assets turnover ratio maintained by the company position is sound and good. In
the year 2006-07 to 2007-08 the solvency ratio is low.
CHART NO-4.8
figure showing fixed assets turnover ratio
Table No-4.9
Sales to working capital ratio
YearSales
[Rs. In Lakhs]
Working capital
[Rs. In Lakhs]
Ratio
2004-05 58,359 11,020.99 5.30
2005-06 66,823 15,377.51 4.35
2006-07 80,141 16,661.48 4.80
2007-08 88,040 10,958.86 8.03
2008-09 96,965 8,003.47 12.11
Source: Annual reports of the company
INTERPRETATION
The working capital credit requirement has been based on the net sales turnover
of the value of each year. A higher ratio indicated efficient utilization of working capital.
The working capital turnover ratio for thee first is high and it has gone down during the
year 2005-06. If the year 2007,2008 it has again increased form 4.80 to 8.03. This
indicates the efficient utilization of working capital.
CHART NO-4.9
Figure showing sales working capital
Table No:4.10
Debt-Equity ratio
YearLong trade debt
[Rs. In Lakhs]
Share holders
fund [Rs. In
Lakhs]
Ratio
2004-05 22,761 44,923 0.51
2005-06 24,948 46,474 0.53
2006-07 18,192 52,212 0.34
2007-08 14,885 57,631 0.26
2008-09 21,788 63,990 0.34
Source: Annual reports of the company
INTERPRETATION
From the table it is inferred that the debt equity ratio was maximum during the
year 2005-06 i.e. 0.53:1 and thereafter it started declining. During the study period the
ownership capital dominated debt capital.
CHART NO-4.10
Figure showing long trade debt ratio
CHAPTER - 5
FINDINGS AND SUGGESTIONS
5.1 FINDINGS
From the foregoing discussions, analysis and observations the followings
findings and suggestions may be drawn.
DESGIN OF THE STUDY:
The first chapter is on the design and execution of the project.
ESTABLISHMENT OF THE BANK:
The Lakshmi Vilas Bank Limited had its birth on 3rd November 1926. at same
time opening of the ;bank and banking industry in the country was in emproyo.
AGRICULTURE:
Finance to individual farmers or Jointly Liability Groups provided upto 10 lakhs
against pledge/hypothecation of agriculture produce for a period not exceeding 12
months.
.SMALL ENTERPRISES
Enterprises engaged in the manufacture / production, processing or preservation
of goods and whose investment in plant and machinery does not exceed Rs. 5
Crore.
5.1 MICRO MANUFACTURING ENTERPRISES
Enterprises engaged in the manufacture / production, processing or preservation
of goods and whose investment in plant and machinery does not exceed Rs. 25 lakhs.
5.2 SMALL SERVICE ENTERPRISES
Enterprises engaged in the manufacture / production, processing or preservation
of goods and whose investment in plant and machinery does not exceed Rs. 2 Crore.
5.3 MICRO SERVICE ENTERPRISES
Enterprises engaged in the providing / rendering of services and whose
investment in equipment does not exceeds Rs.10 Lakhs
6.MICRO CREDIT
Loans to very small not exceeding Rs. 50,000/- per borrower provided by banks
either directly or indirectly through a SHG / JLG mechanism for on lending upto Rs.
50,000/- per barrower.
7.EDUCATION
Educational loans granted to individuals for educational purposes up to Rs.10
lakhs for studies in India and Rs.20 lakhs for abroad studies. Loans granted to
institutions will not be eligible to classify as priority sector advances.
8.HOUSING
Loans up to Rs.20 lakhs, irrespective of location, to individuals for purchased /
construction of a dwelling unit per family, excluding loans granted by banks to their own
employees.
9.WEAKER SECTIONS
Small and marginal farmers with land holding of 5 acres and less, and landless
laborers, share croppers; village and cottage industries where individual credit limits do
not exceed Rs.50,000/-.
10.EXPORT CREDIT
The export credit category unit is an undertaking in which investment in plant and
machinery, does not exceed Rs. 1 crore, expect in respect of certain specified items
under hoistry, hand tools, drugs, and pharmaceuticals, stationery items and sports
goods, where this investment limit has been enhanced to Rs. 5 crore.
5.2 SUGGESTIONS:
The banker may organize the deposit mobilization programme and mobilize more
deposits.
The banker may make the lending process facilities easy.
Special field officers may be appointed exclusively for the; recovery of the loan
amount from door to door.
Proper guidance must be provided by the bank regarding various aspects to the
borrower to make use of their loans effectively.
The company has to increase the advances to micro credit and education it leads
to develop the rural areas .
The company must give special attention to increase the agricultural sectors
The company; should take necessary steps to minimize the cost and earn high
return,
The company has to retain the leader position in the lending sectors and it can
try to get first position in the A Clause scheduled banks.
5.3 CONCULUSION
The Lakshmi Vilas Bank Limited is humbly and proudly catering the needs of
those who are need of financial assistance.
The financial system in the country is under going structural transformation.
Future of the banking industry wills however bank could exploit the technological
advancements to its operational convenience and customer expectations.
The investment operation of The Lakshmi Vilas Bank Limited is expanding with
high value proposals. In view of the continued sluggishness in the demand for
the banks credit and the emerging trend towards very competitive interest rates
demand by highly rated barrowers, the bank is devoting greater attention to
efficient funds and investments management as an alternative to shore up
declining margins.
The Lakshmi Vilas Bank Limited has joined with the elite group of banks offering
online banking conveniences to the customers. A wide area Network will be
established to connect the branches and offices and this network will enable the
facility of anywhere.
The basic philosophy of Corporate Governance in the LVB Ltd is to enhance
share holder value keeping in view the needs and interests ofn other
shareholders.
The bank continues its emphasis on “ Operating profit Approach”. The bank
could record moderated to good performance in terms of various key financial
performances.
The bank has compiled with the regulations pertaining to the Investment
categorization and Reserve requirements stipulated by RBI. The banc assurance
will certainly augment revenue and thereby the profitability. This channel will add
to the Bank’s income streams.
BIBLIOGRAPHY
Financial Management - Chandra Prasanna
Banking Theory Law and practice K.P.M.Sundram and Varshey
Southern Economics R.S.Rmanath
The Economic Chalanger Dr.Bimal Jalan
Micro Economics Saravanavel
SOURCE
Annual Reports - 2004- 2009 (5 years)
LVB website WWW.Lvbank.com
OTHERS
Audited Accounts and loans scheme Details.
