Project Report on NPA Policies of Bank of Maharashtra

8/11/2019 Project Report on NPA Policies of Bank of Maharashtra

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TABLE OF CONTENT

CHAPTER NO. CHAPTER NAME PAGE NO.

1 INTRODUCTION 2-3

1.1 SCOPE OF THE STUDY 4

2 OBJECTIVES 5-6

3 RESEARCH METHODOLOGY i

7-8

3.1 LIMITATION OF THE STUDY 9

4 COMPANY PROFILE 10-21

5 LITRATURE REVIEW 22-40,.

6 DATA PRESENTATION 41-67

7 FINDINGS 68-69

8 CONCLUSION 70-71

9 SUGGESTION 72-73

10 ANNEXURE 74-75

11 BIBLIOGRAPHY 76-77


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EXECUTIVE SUMMARY

During summer training at bank of Maharashtra I have tried to cover the glimpse of

working of credit lending department of bank. Bank of Maharashtra is one of the

major nationalize banks in India which was established in 1935.

This report talks about company first.

Afterward it proceeds towards the theoretical aspect of the project and about various

research method used for the data collection.

This project includes a procedure regarding Home Loan, Vehicle Loan and Education

Loan.

Further its discussed about the documentation for taking loan from the bank.

It also includes case studies of education loan, home loan, vehicle loan.

Report also explains number of loans sanctioned by Branch, Net Income of bank of

Maharashtra and NPA for last 3 years.

Lastly at the report, it talks about findings, conclusion of the project.


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INTRODUCTION

The recent financial crises have become the main cause for recession which was

started in 2006 and was spread across the world. The world economy majorly affected

from crises. The securities in stock exchange have fallen down drastically which has

become the root cause of economic and financial crises is credit default of big

companies and the individuals which has badly impacted worlds economy. So in the

present scenario analyzing ones credit worthiness has become very important for any

financial institutions, providing any form of credit facility so that such situation does

not arrives in the near future again.

Asset Liability Management of the Banks

Bank is one of the industries. Every industry has its own assets and liabilities.

Banking is generally known for accept deposits from common people and lends loan

to them as well as provides services such as safe deposits, vault facility to the

customers, underwriting shares, issuing letter of credit etc. therefore A Bank is an

institution which deals in money & credit1, hence for banks deposits are their

liability because they have to return the money to customers fund whereas in case of

when they demand and lending money in the forms of loan is their assets.

Banks provides money to the needed customers and charges interest on them as their

commission. Its the income of the bank. Also the given money to borrower is return

by him to the bank as it is the assets of the bank. There are two types of lending viz.

fund based and non fund based. In fund based facility, the bank is actually parting

with funds whereas in case of non fund based facility there is no necessity to part with

funds. Hence lending the money for specific purpose is a major function of the banks

especially after Nationalization of banks.

Loan given by the banks is known as advances in banking terminology and Retail

lending is one of the portfolios of the advances. While sanctioning the loans to the

customers bank has to follow some rules and conditions for which bank has framed

lending guidelines which are mandatory for each bank to circulate.


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SCOPE OF THE STUDY

The scope of the study is restricted only to retail lending policy which includes

Housing Loan, Education Loan and Vehicle loan for my study. The geographical

scope for the project is NANDURBAR region. The given project does not include

business loans or short term loan (working capital). So that present project is

restricted to retail lending portfolio of the bank which includes only three retail loans

viz. housing loan, education loan and vehicle loan.

Project analysis is based on following points:

The standard loan application submitted by the borrower and scrutiny thereof The

enclosures submitted along with the loan application.

Eligibility of the borrower on the basis of his income.

Repayment capacity of the borrower.

Most important is whether proposal is well within the lending policy of the bank.


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IMPORTANCE OF THE STUDY

It is the requirement of the common man to have own house, own vehicle and to give

higher education to their children. It is practically difficult to raise the funds easily

and here the banks plays important role. In order to go in detail credit appraisal of the

large borrowers, we have concentrated our exercise on retail lending portfolio in the

bank and that too with specific reference to housing loan, vehicle loan and education

loan. Moreover retail lending is considered as priority sector by government as well as

reserve Bank of India.

PRIMARY OBJECTIVES:

To study the basics of lending policies of bank of Maharashtra.

To study various loan cases (credit appraisal) in bank of Maharashtra.

To study various document required for loan procedure in bank of

Maharashtra.

To study last three years loan disbursement from bank of Maharashtra &

contribution to bank income.

SECONDARY OBJECTIVES:

To study the last three years NPA accounts. To study profile of bank of

Maharashtra.

To study concept of banking.

To study the concept of credit appraisal.

To study concept of NPA.


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PROBLEM STATEMENT

Study of retail lending policy and lending proposal of the bank of

Maharashtra.

RESEARCH DESIGN

The data of the present project is descriptive in nature.

SOURCE FOR DATA COLLECTION Primary data:

Informal interviews with assistant general manager, senior branch manager

and other staff members at BANK OF MAHARASHTRA, NANDURBAR

branch, Nandurbar.

Secondary data:

Bank circular on lending policy and loan review policy.

Database at bank of Maharashtra.

Internal reports of the banks.

Websites.


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DATA PRESENTATION AND ANALYSIS

The collected data is tabulated and analyze with the help of necessary statistical

methods diagrams and graphs. The data was collected by interview of respondent

from bank of Maharashtra.

Analysis and interpretation of the data was done with the help of frequency tables

which helped to come out with findings. The conclusion and suggestion were drawn

on the basis of findings of study.

LIMITATIONS

As the credit rating is one of the crucial areas for any bank, some of thetechnicalities are not reveled which may have cause destruction to the

information and our exploration of the problem.

Credit appraisal system includes various types of detail studies for different

areas of analysis, but due to time constraint our analysis was of limited areas

only.


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HISTORY OF BANK

Banking sector p ays an important part in financing the various business and

household sector. Whether the business is small scale or major industry finance for

various purposes is needed to meet the requirement. Due to government interface this

sector has flourished. In older days due to Zamindari and Savkari system of lending

money, many people were exploited and were forced to go by lenders decision. But

due to RBI and various governing bodies the working of banks is smoothened.

The latest trend of banking is e-banking. There are various generations of banking.

First dealing started through baiter system. In this there was no interference of third

party sue as bank. People used to meet their requirement bv exchanging their goods

and m exchange used to take goods they required.

but after some time when the markets began to spread in all the directions, it was not

easy to carry the huge quantity of goods from one place to another

therefore the new generation took place and what was a coin of various precious

metals and this was the first introduction of money. there after a new improvements in

forms of money were introduced.

During all this economical and financial changes India was improving its position

rapidly in tie as years of independence. India became developing country from

underdeveloped country. Much technological, financial, economical change took

pace, ten so oo mg towards the world have been changed due to globalization in

1990s.6


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HISTORY OF THE BANK OF MAHARASHTRA

PRE NATIONALISATION

Bank of Maharashtra is a common mans bank. It was registered on 16

th

September1935 with an Authorized capital of Rs. 10.00 lakhs, by a group of visionaries with the

objectives to serve the common man from Pune who were till then neglected by the

Banking System. The Bank started functioning on 8 th February 1936. In July 1969

when it was nationalized with 13 other major Banks, The banks had developed its

roots in entire Maharashtra and continued to have the support and patronage of the

common man. Right from its inception, the focus of the Bank has been to assist small

business enterprises, traders, self-employed and other commonly known as Priority

Sector Category.

POST NATIONALISATION

After Nationalization, the Bank expanded rapidly in other states. At present the Bank

has 1361 branches and 13 Extension counters in 22 states and 2 Union Territories of

which 45% of the branches are in rural centers and 15% in semi urban centers. In the

state of Maharashtra the Bank is a force to reckon, with more than 900branches - the

largest network of branches by any Public Sector Bank in a state. Bank of

Maharashtra started firstly at Bajirao Road Swargate Pune. It had business around

50,000 cr. in the year 2006.

The Bank has been operating in three-tier system i.e. corporate office, regional office

and branches. The bank has now totally 1361 regional offices and branches in which,

588 rural branches, 201 semi-ur4an branches, 287 urban branches and 256

metropolitan branches.

AUTONOMY

The Bank is rated as one of the progressive Nationalized Banks that achieved

autonomy in the year 1998 and continues to enjoy the status by virtue of good

performance. The Bank has been earning net profit for the last nine years

consecutively.


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SOCIAL BANKING

The Bank excels in social Banking having good share of priority sector lending of

more than 40% of total advances. Bank enjoys the overwhelming support & loyalty of

more than 10 million clientele. The Bank provides a wide range of banking services

that satisfy the changing needs of depositors as well as small, medium and

big/corporate borrowers as well. The Bank undertakes all kinds of traditional/non-

traditional banking activities including financing of exports/imports and different

kinds of foreign exchange transactions.

The Bank has established two Rural Development Centers, one at Hadapsar and the other at Bhigwan

in Pune district to cany out research, technical support, education, demonstration and rural development

activities. These centers have taken a lead in promoting micro-finance to weaker sectors through Self

Help Groups.

The Bank has set up Mahabank Self Employment Training institute (MSETI) at Pune, Nagpur, and

Aurangabad in co-ordination with NABARD and Government of Maharashtra which have become

fully operational. The institutes train urban unemployed youth to take up self-employment ventures in

industry, services and business sector.

The Bank is first and foremost in establishing a Trustee Company as its subsidiary known as The

Maharashtra Executor & Trustee Co. ltd.

CONVENER OF STATE LEVEL BANKERS COMMITTEE

The Bank is successfully acting as the convener of state level bankers committee for

the state of Maharashtra as also for Rajbhasha. The Bank has lead bank responsibility

in six districts namely Aurangabad, Jalna, Nasik, Pune, Satara and Thane. The Bank

has sponsored Three Regional Rural Banks with their head quarters at Nanded,

Aurangabad and Thane in Maharashtra.

MOU WITH EXIM BANK

The Bank signed a MOU with EXIM Bank of India in February 2000for co-financing

of project exports under which arrangement, EXIM Bank will accord preferential

Status to Bank of Maharashtra for specific project/export proposals.


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DEPOSITORY SERVICES

Realizing the requirements of customers and keeping pace with changing times, the

bank is offering Depository Services and Demat Facilities to the investor customerssince September 99. The Bank is a Depository Participant (DP) of Central Depository

Services (India) Ltd. The Services were initially provided in Mumbai and steps are

initiated to offer services through all 500 WAN enabled branches.

COMPUTERISATION

The Bank has the distinction of being the first among the Public Sector Banks to start

a computerized branch in as early as 1982. All the branches of the bank are undercomputerized. 583 Rural and Semi urban branches are computerized with a bilingual

TBA (BIBAS) solution.

Toady 100% of banks business is under computerization. The Bank has introduced

facilities like ATM, Tele-Banking, Query Terminal, Touch Screen etc. at various

Branches/offices. A specialized In-house Training Institute has been established at

Pune for imparting training to officers to upgrade skills in usage of ComputerTechnology.

EMBLEM The Deepmal

With its many lights rising to greater heights The Pillar

Institution- Symbolizing strength.

The Diyas

Branches- Symbolizing service.

The 3 Ms Symbolizing-

-Modernization of methods.

-Mobilization of money.

-Motivation of staff.


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The Bank aims to cater all types of needs of the entire family, in the whole country.

Its dream is One Family, One Bank, Bank of Maharashtra. The health of the

economy is closely related to the soundness of its banking system. Bank of

Maharashtra is playing very important role in the economic life of the nation. Its

borrowing, lending and related activities facilitate the process of production,

distribution, exchange and consumption of wealth. In this way Bank of Maharashtra is

becoming very effective partners in the process of economic development. The bank

is mobilizing the savings of the people for the investment purposes, for catering the

needs of its customers and the utilization of the resources of the country.

MILESTONE

1936 : Commenced operations on 08-02-1936 in Pune.

1938 : Second branch of the bank was opened in 1938 at Fort, Bombay.

1940 : Third branch came up at Deccan Gymkhana, Pune.

1944 : Status as Scheduled Bank obtained.

1946 : Deposits crossed Rs One crore marks.

Formed fully owned subsidiary, The Maharashtra Executor & Trustee

Company.

First branch outside Maharashtra opened in Hubli (Mysore Starte, Now

Karnataka).

1949 : Expansion to AP: Flyderabad branch opened

1963 : Expansion to Goa: Panjim Branch opened

1966 : Expansion to Madhya Pradesh: Indore branch opened.

Entered in Gujarat: Baroda branch opened.

1969 : Nationalised alongwith 13 other Banks.

Entry in Delhi by opening Karolbagh branch on 19-12-69.

1974 : Deposit base crossed Rs. 100 Crore mark.

1976 : Marathwada Grameena Bank, first RRB established on 26-08-1976.

1978 : New Head Office building inaugurated by Hon'ble Prime Minister of India

Shri. Morarji Desai

Deposits crossed the figure of Rs.500 Crores

1979 : Mahabank Agricultural Research and Rural Development Foundation,


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registered as a public trust, was established for undertaking research and

extension work and to provide more extensive services to farmers.

Golden Jubilee Year Celebrations launched at the hands of Dr.

Mannnohan Singh, Governor Reserve Bank of India.

1986 : Thane Grameena Bank sponsored.

1987 : The 1000th branch of the Bank was inaugurated at Indira vasahat,

Bibwewadi, Pune at the auspicious hands of Dr.Shankar Dayal Sharma,

the Honourable Vice President of India.

1991 : : "Mahabank Farmer Credit Card was launched. Entered in to Domestic

Credit Card Business. Main Frame Computer installed.

Became member of the SWIFT.

1995 : : Diamond Jubilee Celebrations - Dr C Rangarajan the RBI Governor was

the Chief Guest.

Deposits crossed Rs 5000 crore mark.

1996 : : Moved into A category from, the earlier C category. Autonomy

obtained.

2000 : : Deposits crossed Rs 10000 crore marks.

2004 : : Public Issue of Shares - 24% owned by Public. Listed in BSE and NSE.

2005 : : Bancassurance and Mutual Fund distribution business started.

2006 : : Crossed total business level of Rs.50, 000 Crore. Branch CBS Project

started.

2009 : : Entered in to 75th year of dedicated service to the Nation.

Adopted 75 underdeveloped villages for integrated overall development.

2010 : : 100% CBS of branches achieved Total Business crossed Rs One lakh

crore. Opened 76 branches in the Platinum Year taking the total to 1506. ,

Platinum Jubilee Year concluding ceremony at the hands of the then

Finance Minister, Shri Pranab Mukherjee held at Vigyan Bhavan, New

Delhi.

New initiatives like Mahachetana, opening of E-lounges in Pune, Mumbai

and Delhi, Micro Asset Recovery cells were implemented.

2011 : : First SHG Branch opened in Pune.

Bank sponsored Maharashtra Gramin Bank achieved 100% CBS in record

77 days.


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77th anniversary of Foundation day celebrations at the hands of Honble

Finance Minister, Shri Pranab Mukherjee dedicating 5 specialised

branches to SHGs and opening of 5 Mid-Corporate branches on the

occasion.

First ever visit of Union Finance Minister to Banks Central Office -

Honble Finance Minister, Shri Pranab Mukherjee visits Lokmangal, the

Banks Head quarters in Pune on 7-11 -2011.

2012 : : Honble Union Finance Minister Shri P Chidambaram inaugurates the

Banks 1624th branch at Rajgambiram on 25.08.2012.

Sept 2012: Banks total business crossed Rs. 1,50,000 cr and reached the

level of Rs. 1,51,320 crore.

Bank of Maharashtra awarded Best Banker - Customer Friendliness for

2012 by The Sunday Standard.

Received the Dun & Bradstreet - Polaris Financial Technology Banking

Listed in BSE and NSE.

Bancassurance and Mutual Fund distribution business started.

Crossed total business level of Rs.50, 000 Crore.

Branch CBS Project started.

Entered in to 75th year of dedicated service to the Nation.

Adopted 75 underdeveloped villages for integrated overall development.

100% CBS of branches achieved Total Business crossed Rs One lakh crore. Opened

76 branches in the Platinum Year taking the total to 1506. ,

Platinum Jubilee Year concluding ceremony at the hands of the then Finance

Minister, Shri Pranab Mukherjee held at Vigyan Bhavan, New Delhi.

New initiatives like Mahachetana, opening of E-lounges in Pune, Mumbai and Delhi,

Micro Asset Recovery cells were implemented.


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First SHG Branch opened in Pune.

Bank sponsored Maharashtra Gramin Bank achieved 100% CBS in record 77 days.

77th anniversary of Foundation day celebrations at the hands of Honble FinanceMinister, Shri Pranab Mukherjee dedicating 5 specialised branches to SHGs and

opening of 5 Mid-Corporate branches on the occasion.

First ever visit of Union Finance Minister to Banks Central Office - Honble Finance

Minister, Shri Pranab Mukherjee visits Lokmangal, the Banks Head quarters in Pune

on 7-11-2011.

Honble Union Finance Minister Shri P Chidambaram inaugurates the Banks1624th branch at Rajgambiram on 25.08.2012.

Sept 2012: Banks total business crossed Rs. 1,50,000 cr and reached the level of Rs.

1,51,320 crore.

Bank of Maharashtra awarded Best Banker - Customer Friendliness for 2012 by

The Sunday Standard.

Received the Dun & Bradstreet - Polaris Financial Technology Banking

2012 :


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Award 2012 as Best Public Sector Bank under the category Asset Quality. BoM

hosted Bancon 2012 in Pune on 24th-25th November 2012. Honble UnionFinance

Minister Shri P. Chidambaram inaugurated the Conference.

Journey of the bank under the leadership of:

Prof. V. G. Kale (1936 to 1943)

Shri. D. K. Sathe (1943 to 1953)

Shri. V. P. Varde (1954 to 1966)

Shri. S. L. Kirloskar (1966 to 1967)

Shri. C. V. Joag (1967 to 1973)

Shri. V. M. Bhide (1973 to 1977)

Dr. M. V. Patwardhan (1977 to 1983)

Shri P. S. Deshpande (1983 to 1989)

Shri. T. K. K. Bhagavaft (1989 to 1993)

Shri. P. B. Kulkarni (1993 to 1995)

Shri. S. A. Kamath (1995 to 1997)

Shri. T. S. Raghavan (1997 to 1998)

Shri. M. M. Vaish (1998 to 2000)

Shri. S. C. Basu (2000 to 2005)

Shri. M. D. Mallya (2006 to 2008)

Shri. Allen C. A. Pereira (2008 to 2010)

Shri. A. S. Bhattacharya (2010 to 2012)

Shri. Narendra Singh (2012)


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MAHABANK SAVINGS ACCOUNTS SCHEMES

MAHABANK CURRENT ACCOUNT SCHEMES

MAHABANK TERM LOAN PRODUCT/SCHEME


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TERM DEPOSIT SCHEME


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PRODUCT/SERVICES

Mahabank Gold Coin

ATM Services

DEMAT Services

Distribution of Mutual Funds

Capital Market Application fASBA)

Executors and Trustee Services

RTGS/NEFT

Mahabank Swasthva Yoina Maha Griha Suraksha E Payment Taxes

Mahabank Swarna RD Scheme

Credit Card

Bancassurance

Western Union Money Transfer facititv ASBA PLUS Mahabill Pay

MAHAeTRADE (On line Share Trading Facility')

Maha Suraksha Yoiana New Pension Scheme Govt Business

Door Step Banking

What is bank?

Finance is the life blood of trade commerce and industry. Now a days ,banking sector

act as a back bone of modern business. Development of any country mainly depends

upon the banking system.


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The term bank is derived from the French word Banco which means a Bench or

Money exchange table. In olden days, European money lenders or money changers

used to display coins of different countries in big heaps (quantity) on benches or

tables for the purpose of lending or exchanging.

A bank is a financial institution which deals with deposit and advances and other

related services. It receives money from those who want to save in the form of deposit

and lend money to those who need it.

Definition of bank

Oxford dictionary defines a bank as an establishment for custody of money, which it

pays out on customers order.

> Features of bank

1. Dealing in money

2.

Individual/firm/company

3. Payment and Withdrawal

4. Connecting link

5. Banking business

6. Ever increasing functions

7.

Profit and service orientation

8.

Giving Advances

> WHAT IS CREDIT APPRAISAL?

Credit appraisal is a process by which a lender appraises the technical feasibility,

economic viability and financial viability including credit worthiness of the

prospective borrower. Credit appraisal process decides the capability of a customer to

repay the loan amount in the stipulated time period or not. It is determined in terms of

the norms and standards set by banks. Being a very crucial step in the sanctioning of a


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loan, the borrower needs to be very careful in planning his financing modes. However

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integrity of borrower and his capability to run the activity (in case businessman) andadequate cash generation for repayment of loan in cease of salary employed plays

important role. The need to be cautions and here the credit appraisal plays important

role. All bands evaluate the credit worthiness of their customers.

>

Two types of Lending:

1. Short Term Loan or Term loans:

If repayment periods is less than one year it called as short term loan where as loan

repayment period exceeding one year is known as long term loans. It is for fixed

period ranging from 3to 5 years. In case of housing loan minimum repayment period

is 5 year and maximum is 20 years.

2. Working capita) facility

It is generally assessed for a period of one year review/renewal is taken of the

account. Bank provides the facility in the form of cash credit limit or in the form of

non fund based facility viz. Bank Guarantee or Letter of Credit.

> WHAT IS NPA?

A non performing asset (NPA) is defined as a credit facility in respect of which the

interest and/or installment of principal has remained past due for a specified period

of time.

All those assets which generate periodical income are called as Performing Asset

(PA).while all those assets which do not generate periodical income are called as

Non-Performing Assets (NPS).

If a customers do not repay principal amount and interest for a certain period of time

then such loans become non-performing assets. Thus non-performing assets are

basically non-performing assets loans.

> Identification


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NPA is classification used by financial institutions that refers to loans that are in

jeopardy of default. Once the borrower has failed to make interest or principle

payments for 90 days the loan is considered to be a non-performing asset. Non-

performing Assets ate problematic for financial institutions since they depend on

interest payments for income. Troublesome pressure from the economy can lead to a

sharp increase in non-performing loans and often results in massive write.

> Types of NPA NPA have been divided or classified into following four types, 1.

Standard Assets:

A standard asset is a performing asset. Standard assets generate continuous income

and repayment as and when they fall due. Such assets cany a normal risk and are not

NPA in the teal sense.

2. Sub-standard Assets:

All those assets (loans and advances) which are considered as non-performing for a

period of 12 months are called as Sub-Standard Assets.

3. Doubtful Assets.

All those assets which are considered as non-performing for period of more than 12

months are called as Doubtful Assets.

4. Loss Assets:

All those assets which cannot be recovered are called as Loss Assets.

These assets can be identified by the Central Bank or by the Auditors.

> Provision 011types of assets

SR.NO TYPES OF ASSETS PROVISIONS

l Standard assets 0.25% for all types Standard

Advances

2 Sub-Standard Assets 10%for all types of Standard

Advances


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3 Doubtful assets

-Up to one year 100% of Unsecured Advances

and 20% of secured advances

-one to three years 100% of Unsecured Advances

And 30% of Secured

Advances

-more than three years 100% of Unsecured Advances

And 100%of Secured

Advances

4 Loss Assets 100% of Unsecured Advances

And 100%of Secured

Advances

> SARFAEST Act 2002

The securitization And Reconstruction of Financial Assets and Enforcement of

Security Interest Act.

This act follows bank and financial institution to auction properties (residential and

commercial).When borrowers fail to repay their loans, it enables bank to reduce their

non-performing assets (NPA) by adopting measures for recovery or reconstruction.

If borrower defaults on repayment of his/her home loan for six months at stretch, bank

give her/him a 90-days period to legalize the repayment, that is, start repaying. On

failure to do so, bank declare the loan an NPA and auction it to recover the debt.

The price of the property is depends on the market value of the property. Professional

values determine the property value based on which bank fix a reserve or minimum

bid price. The valuation tends to be on the conservative side as it is a distress sale. If

the price fetched exceeds the banks dues. The excess amount is given to the borrower.


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> THEORETICAL BACKGROUND OF RETAIL LENDING

Brief overview of loans:

Lending of money in the form of loans is the main and important function of everybank. Every branch has right to sanction the loan up to Rs.2lacs considered the branch

is large. For the lending purpose lending purpose branch do the risk analysis because

while giving bank money to the other person it in involve risk.

A.

Sanctioning power in the hands of the different authorities in

different branches of bank of Maharashtra:

General manager(credit)& GMS in

the field

Sanctioning powers(in rupees)

Dy. General managers 2.00 lacs

Asst, general managers 1.00 lacs

Chief manager 0.50 lacs

Branch manager in scale III 0.20 lacs

Branch manager in scale II 7500

Branch manager scale I 4000

1.

Proposals within the delegated sanctioning powers of GM and above. Thenewproposed for credit limit of above as 10 Cr. Falling within the powers of GM

and above shall be vetted by NBG at central office.

2. Proposals falling within the sanctioningpowers of GM(credit. priority and

mid corporate) for GM heading the relevant function shall seek approval on

proposal from credit approval grid.


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Objectives of lending policies

Due to compliance of all regulatory requirements such as exposure norms,

prudential norms, asset liability management by government of India, RBI and bank

board of director.

To ensure planned lending and healthy growth of loan portfolio and achieve

lending targets as per the corporate plans. NPA level should be minimum.

To include improvement of system procedure and decentralized decision

making ensuring expeditious decision making.

To have a well balanced and diversified loan portfolio with a proper pricingpolicy.

Special emphasis on flow of credit towards segment of priority sector i.e.

agriculture, MSME, retail trade, export.

To enlarge client base through aggressive credit marketing and meets the

diverse needs of the customer through product mix or development innovation.

To improve (he non fund business.

Strategies

Borrower identification and design of specialized products.

Adherence to risk management policy.

Intensive and focused credit marketing.

Validity of any of the sanctions.

Diversification of credit portfolio

Thrust area

Industries/sectors under low priority areas.

Credit approval grid.


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B. Exposure ceiling

Exposure ceiling means the sanction limit or outstanding limit which can bank

reckoned for giving loans. Bank has to follow the capital fund limit ratio while

sanctioning the loan. Exposure includes:

Credit exposure:-

It includes all types of funded and non funded credit limit.

Investment expo sure:-

It includes investment in share and debentures, PSU bonds, commercial

papers.

Exposure ceiling for:

Normal borrower

15% of capital fund for single borrower and 40% for group.

For infrastructure project

20% of capital for single borrower and 50% of capital for group.

For partnership

5% of bank net worth and for company 10% of net worth

Sectorial ceiling for different sectors

Real estate sector 32.50% of gross credit of immediate preceding quarter.

SHousing loan to individual - 12.50%

SCommercial real estate10%

SIndirect real estate - 10%


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Infrastructure sector - 40%

SPower sector - 20%

SRoad - 6%

STelecommunication - 5%

SResidual infrastructure - 9%

Non fund business-30%

Ceiling for industries

Sugar industries - 2%

Textile industries5%

Film industries - 1%

Software industries - 5%

Auto and auto ancillary - 10%

Any other industries - 10%

C. Statutory and other restriction on lending

Statutory restriction

Advances against banks own share shall not grant any loan and advances on

the security of its own shares.

Restrictions to giving the advances to the batik directors.

Restriction on credit to companies for buyback of their securities.

Regulatory restriction

Granting loans and advances to the relatives of the director.

Restrictions on grant of loan and advances to officers and relative of senior officers of


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bank.

/Loan and advances to officer of the bank. Officer himself cannot grant or sanction

loan for himself or for his/her relatives,

Loan against certificate of deposits. No loan granted.

Bank finance to non banking financial institutions.

Criteria for financing

Amount should be sanctioned within the overall ceiling of the prudential exposure

norms given by RBI.

Develop requisite expertise for apprising technical feasibility, financial viability and

bank ability of projects with reference to risk analysis and sensitivity analysis.

For public sector term loan granted only for corporate entity.

For public sector bank provides special purpose vehicle loan (SPVs) by extending the

given or investing in bonds.

Availability of state government securities may not take as a substitute for satisfactory

credit appraisal.

Condition for financing

Funded exposure of at least 10% of the exposure granted.

Approval from credit approval grid.

Report to the next higher authority.

All banks guarantors should be in conformity with all other internal requirement in

terms of ghosh committee recommendation.

Relaxation permitted under FEMA, as per guidelines.

D. Types of loan

Loans are of two types Fund base and Non Fund base:


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Fund base loans means

The bank is actually parting with funds. It includes

sWorking capital or credit lending: - it means running account facility. Purpose of

this lending is to meet the working capital requirements. It is for maximum one year.

S Term loan: - term loan is given for fixed period of time and repayment in

installment over a fixed time. Amount is generally give 75% of the cost of

maintaining a margin of 25%.

SBill discounting: - it is the nature of post sales limit. Amount is generally up to

specified percentage of the value of the bill. Its discounting under L/C of firm order.

Non fund base means

In case of non fund based facility there is no necessity to part with funds. Banks keep

certain amount in the name of the borrower in form of the letter of the credit (LC) or

bank guarantee.

SLetter of credit facilitates purchase of material or goods.

S Bank guarantee facility for the issuance of guarantee in the nature of bid bonds,

performance bonds, etc.

E. Documents standards

Bank give due importance in improving the quality of documentation by the means of

issuance of instructions.

SSanction amount is Rs. 500 lacs or above the documents must vetted by law officer

or advocate or panel before disbursement.

SIf amount is Rs. 50 lacs and above but less than 500 lacs security is to be completed

before disbursal the document must be vetted within three months from the date of

disbursement and any other rectification.


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SResponsibility of maintaining documentation shall rest with the bank manager or

concern credit officer.

SDocuments should renew within one year.

SData should be properly updated in front office of core banking system on renewal

of documents.

F. INTEREST RATE POLICY

While charging the interest on loans bank follows the base rate system

Base rate system is aims at enhancing the transparency in lending rates of banks and

enabling better assessment of transmission of monitory policy. RBI decides each bank

base rate on the basis of their whole expenditure. Bank of Maharashtra's base rate for

the year 2013-2014 is .10.25%.

Applicability of base rate

SBase rate could also serve as the reference benchmark rate for floating rate loan

product apart from external market benchmark rate. The floating interest rates based

on the external benchmark should be equal to or above the base rate at the time of

sanctioning of renewal.

SChanges in base rate shall be applicable in respect of all existing loans link to the

base rate in the transparent and non discriminatory manner.

SNo lending below base rate.

SBase rate is applicable to old and new loans.

Bank give due importance in improving the quality of documentation by the means of

issuance of instructions.

fSanction amount is Rs. 500 lacs or above the documents must vetted by law officer

or advocate or panel before disbursement.

SIf amount is Rs. 50 lacs and above but less than 500 lacs security is to be completed

before disbursal the document must be vetted within three months from the date of


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disbursement and any other rectification.

v'' Responsibility of maintaining documentation shall rest with the bank manager or

concern credit officer.

SDocuments should renew within one year.

SData should be property updated in front office of core banking system on renewal

of documents.

F.

INTEREST RATE POLICY

While charging the interest on loans bank follows the base rate system

Base rate system is aims at enhancing the transparency in lending rates of banks and

enabling better assessment of transmission of monitory policy. RBI decides each bank

base rate on the basis of their whole expenditure. Bank of Maharashtra's base rate for

the year 2013-2014 is. I 0.25%.

Applicability of base rate

v/

Base rate could also serve as the reference benchmark rate for floating rate loan

product apart from external market benchmark rate. The floating interest rates based

on the external benchmark should be equal to or above the base rate at the time of

sanctioning of renewal.

^ Changes in base rate shall be applicable in respect of all existing loans link to the

base rate in the transparent and non discriminatory manner.

SNo lending below base rate.

SBase rate is applicable to old and new loans.

Allowing reduction in applicable rate of interest is in the hands of

higher authority at central office.

Penal interest is applicable when there is a defaulted installment at repayment by the

borrower. Penal interest is charged over & above the normal applicable rate of interest


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Fixed option

shall be restricted to 2%.

Revised rate of interest

Bank of Maharashtra head office provides with the effect from 26

th

august 2013, therevised rate of interest for housing loan, education loan and vehicle loan. They are as

follows.

For Education loan

Loan sanctioned under the model education loan scheme, the revised rate of interest

given by the bank of Maharashtra head office is as follows.

(Base rate @ 10.25%)

Loans up to Rs. 4.00 lac (Base Rate + 1.75%)

Loans above Rs. 4.00 lac (Base Rate + 2.75%)

Simple interest during moratorium period, there after compounded monthly

1% interest concession may be provided to the loanees if the interest is serviced

regularly as and when applied during the study period when repayment holiday is

specified for interest/ repayment under the scheme. Interest concession is available

only for moratorium period.

For housing loan

For housing loan BOM provides two options for ROI i.e. floating options and fixed

option. FLOATING option means the ROI change according to changes in the base

rate. As the base rate change the ROI is changed. FIXED OPTION means there is a

fixed ROI. There is no any change in ROI because of change in base rate of the

banks. (Base rate @ 10.25%)

Tender

amount

Up to

Rs.25.00

lakh

Above

Rs.25.00 lakh

and up to

Rs.30.00 lakh

Above

Rs.30.00

lakh & less

Rs.75.00 lakh

&

above


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Floating option

than

Rs.75.00

lakh

Up to and

inclusive

of 5 years

Base Rate

(10.25%)

Base Rate

(10.25%)

Base Rate +

0.50%

(10.75%)

Base Rate +

0.75%

(11.00%)

Above 5 years

and

up to and

inclusive

of 10 years

Base Rate +

0.20%

(10.45%)

Base Rate +

0.25%

(10.50%)

Base Rate +

1.00%

(11.25%)

Base Rate +

1.25%

(11.50%)

Above 10 years

but

below &

inclusive of

20 years

Base Rate +

0.30%

(10.55%)

Base Rate +

0.50%

(10.75%)

Base Rate +

1.25%

(11. 50%)

Base Rate +

1.50%

(11.75%)

Up to Rs. 30 00 Abobe Rs. 30 lakh Rs. 750.00 lakh

lakh and less than Rs and above

75.00 lakh

Up to and inclusive

of 5 years

11.45% 12.45% 12.70%

Above 5 years and up11.95% 12.70% 12.90%


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Fixed option

to and inclusive of 10

years

Above 10 years but

below & inclusive of

20 years

For repair /

renovation

i

Base rate + 1.25% (11.50 %)

For vehicle loan

The revised rate of interest for vehicle loan is given by bank of Maharashtra head

office is as follows (Base rate @ 10.25%)

/ When borrower takes a loan and makes a repayment within 3 years the ROI is Base

rate + 1.25% (I 1.50%).

^ When repayment period is above 3 years the ROI is Base rate + 2.25% (12.50%).

If borrower takes a loan to purchase second hand vehicle then the ROI is Base rate

+ 5.00% (15025%).

G. Brief overview on education loan, housing loan and vehicle loan

Banks provides money to the people for their education, to built or purchase their own

house or to purchase own vehicle. It is difficult for common man to raise such large

amount from their own source. To fulfill their need banks helps them in form of

lending that is giving money to them.

Education loan under model education loan scheme for vocational courses

Existing model education loan scheme caters to the student pursuing higher education,but vocational course are not covered in this scheme. For that purpose the model


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education loan scheme for vocational courses has been developed as an extension of

the existing model education loan scheme for pursuing higher education in India and

abroad, to support the national initiatives for skill development. The focus was mainly

on technical and professional courses in recognize college and universities.

The vocational courses offered by ITIs ITC's, polytechnics and other technicals

institutions and bodies were not covered in the model education loan scheme. The

model education loan scheme for vocational courses aims at providing financial

support from the banking system to those who, after passing 10lhclass wants to pursue

employment oriented skill development courses offered by recognized institutions.

^Student eligibility

The student should be Indian national.

Student should have passed I0,h standard examination conducted by state or central

board.

Have secured admission to a government recognized vocational training course,

which is employment oriented.

SCourse eligibility

Vocational skill development courses of duration from 6 month to 3 years leading to

certificate or diploma offered by a recognized state / central government institution or

statutory / technical body or training department of government, etc. the vocational

courses offered by ITTs, ITC's, polytechnics and other technical institution will come

under the eligibility criteria. Banks are free to add other skill development program

me having regard to employability.

SAge limit

There is no specific age limit for student for education loan under the model

educational loan scheme for vocational courses. If the student is minor and the parent

has executed document for the loans the banks will obtain a letter of rectification from

him/her upon attaining majority.


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SQuantum of loan

For courses of duration up to one year Rs. 50000/- for courses of duration above one

year Rs. 150000/-

SMargin

NIL

SRate of interest

Rate of interest will be parity with model education loan scheme that is base rate +

1.75% (Base rate is 10.25%).

Note: servicing of interest during study period and moratorium commencement offer

payment is optional for student.

1% interest concession provided by the bank if interest is serviced during the study

period and subsequent moratorium period prior to commencement of repayment.

SProcessing chargesNIL SSecurity

No collateral or third party guarantee will be taken. However, the parent will execute

loan document along with the student borrower's as joint borrower.

Moratorium period

For courses of duration up to one year is 6 months from the completion of

course.

Repayment

Repayment period will be for the course up to one year the repayment period is 3 to 5

years.

For the courses above one year the repayment period is 5 to 7 years.

Other terms and condition

Other terms and conditions as applicable to the model educational loan scheme for


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pursuing higher education in India and abroad will be applicable to the scheme also.

Case studies

(For various loans) Housing loan

It is a requirement of common man to build own house or purchase flat. Banks

provides money in the form of home loan to the borrower. Housing loan is most

important as it lias national level priority. As housing loan is term loan, the repayment

period for housing loan is maximum 20 years. To got one housing loan proposal daily

it is an ultimate aim of the bank of Maharashtra.

Documents needed and submitted by the applicant:

SPhotocopy of PAN card.

SLast three years tax paid return.

/Pay slips of at least 3 months in case of borrower is in service.

yAddress proof latest light bill/ telephone bill.

SSearch and title report on banks panel.

SPhotos.

SVisit report.

/ Builders document like agreement, sanction building plan, commencement

certificate of PCMC/ PMC, completion certificate issued by PMC/ PCMC, no

objection to mortgage the flat given by the builder, index II of the aforesaid

agreement, registration receipt of the aforesaid agreement.

Documents submitted by GUARANTOR

SPhotocopy of PAN card/ election card.

SAddress proof.

SLast 3 years tax paid return form no. 16 (saral form 11).


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SLatest 3 months pay slip in case of service.

SPhotos.

CASE STUDY

Proposal under Mahabank Housing Loan scheme for public

Branch Nandurbar,Nandurbar

Name Mr. Mahindra gaikvvad

Co-applicant Mrs. Sushila Mahindra gaikwad

Residential

address

Surya plaza, Nandurbar.

Business/ office

Address

56, Girija, Vardhana Nagar. 425412 . Nandurbar

CC A/c No. Xxxxxxxxxxxxxx with bank of Maharashtra kondhwa branch &

presently avails CC facility of Rs. Xx lacs. Account operations are

satisfied.

Phone No. 99xxxxxxxx / 020 xxxxxxx

Date of Birth 10/06/1963

Age 50

Occupation Business

Length of

business/

Service

15 years

PAN No. ABxxxxxxxxxxxxx


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Purpose Purchase of flat no. xyz 2ndfloor, at Devi Ahil iyabai Chowk,

Near Halt Darwaja . 425412 . Nandurbar admeasuring 1090 ft.

Eligibility of

applicant

Applicant is running business in the name of the and style as

superheat inspection services is our valued client and are

enjoying CC facility with our branch since last 6 years. Last

review was on 20/04/2013 when the CC limit was enhance

from Rs. Xxx/- to Rs. Xyz/-. He is also availing BD limit Rs.

Abe/- and term loan of Rs. Pqr/- lacs. With outstanding

balance Rs. Abe/- lacs when CC facility was reviwed/

satisfactory. Therefore applicant is eligible to avail loan under the

scheme.

Age criteria Being in business complied as for professional, the upper age limit

is 55 years.

KYC norms Various accounts with credit facility at our branch.

Existing

facilities from

our bank

CC facility of Rs. Xyz/- lacs; BD facility Rs. Abe/- lacs and term

loan Rs. Pqr/- to M/S superheat inspection service, proprietor of the

firm Shri. Mahindra gaikwad

Remark

CRR The borrower is rated AA (low risk, high safety)

CIBIL Reference is made to CIBIL. No adverse comments observed. Copy

of report enclosed.

Cost of property to be constructed and means of finance Rs. In Lacs.


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Cost of flat 20.00

Other payments towards maintenance charges, electricity, water

and connection charges.

Stamped duty( 1.93 lacs) not considered from stamp duty -

Total cost 25.00

Means

Bank loan 15.00

Own contribution 5.00

Total means of finance 20.00

Computation of income A Y 2012- 2013

Applicant Co-applicant Rs. In lacs max.

eligibility

Net income 20 ... 65.00

Gross cash accrual

(including

depreciation)

30


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Income (NPAT + depreciation) as per IT returns

A.Y 2010-2011 14.55 lacs.

A.Y 2011-2012 24.66 lacs

A.Y 2012-2013 30.00 lacs

14.55 +24.66 + 30.00 - 69.21 lacs.

Average for three years = 69.21 / 3 = 23.07 lacs

Eligibility of loan Rs. In lacs

Maximum limit of finance for house

property in urban area (A)

No limit

Maximum limit of finance in view of

margin requirement of 25 % for

construction new flat (75% of 40.00 lacs.)

(B)

15.00

Loan applied for requested by the

applicant (C)

15.00

Amount 4 times of average income (D) 92.28

Lower of the above A, B, C, D 15.00

Eligibility as per R/O reduction from income

Average gross income of applicant and coapplicant A 23.07 lacs.

Proposed EMI of loan 16628 * 12 1.995 lacs

Installment of existing other loan Nil Nil


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Income (NPAT + depreciation) as per IT returns in personal name

Proposed deduction 16628 * 12 1.995 lacs

Total monthly deduction B ] .995

% of B to A 8.68%

Thus the % of total deduction (including proposed EMI) to net total income falls

within the permissible limit of 65% as per the norms of the scheme.

In the view of above, proposal is recommended for sanction on following terms

and condition.

Margin 25%

Repayment Repayment is commencing immediately from July 2013 to

June 2028. We recommend period of 180 months for

repayment of loan which is per request of the applicant and

eligible under the scheme. EMI to start w.e.f. July 2013 to

June 2028.

Search report Title report from builders advocate is held on record.

Condition of getting search and title report from panel

advocate is stipulated.

Security The primary security is the form of equitable mortgage of

flat valued of Rs. 20.00 lacs. Thus sufficient security support

available for the loan Rs. 15.00 lacs.

Guarantor As per norms of scheme no guarantor is required.

Facility Home loan 15.00 lacs

Rate of interest Base Rate + 0.30% = 10.55% p.a. floating rate, (at present

base rate is 10.25%)


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Vehicle loan

To have an own vehicle its a dream of every common man. But it is not possible for

him to raise such a large fund to buy vehicle. In that case banks provides the vehicleloan with some terms and condition for purchasing a new vehicle whether it is two

wheeler or four wheeler.

Documents needed and submitted by the applicant SIdentity proof like photo

copy of PAN card, election card.

SAddress proof like ration card, electric bill, telephone bill etc.

SPay slips for last three to four months.

SIncome tax return.

SQuotation of vehicle

v' Amount paid receipt of vehicle if given earlier.

SPhotos.

/ Guarantors details with supporting proof like residential, employment, income

certificate etc.

SHypothecation charge with RTO authorities.

Case study

Branch Nandurbar branch.

Name of the applicant Santosh bhosle

PAN number XYxxxxxxxx

SB A/C No. 6432xxxxxx with our branch.

Address Fait no. 10 sun plaza, nandurbar, 425419

Phone No. 02569-xxxxx


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Gross income of applicant A 55000

Proposed

EMI of

proposed

loan (EMI

fir the

purpose of

deciding

eligibility is

calculated

presuming

rate of

interest as

12.5% p.a.)

Rs.10125

for 60

months

period

10125 -

Other

deductions

2000

Installment

of existing

loan of

other bank

Total

deduction

B 42875


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% of B to

A

77.95%

Thus the percent of total deduction(including proposed EMI) to grossmonthly income falls well within permissible limit of 60% as per the norms

of the scheme.

Scheme requires one guarantor. The applicant has offered one guarantor as below.

Guarantor Name Mr. Manoj

friend of the

applicant has

offered his

guarantee for

the loan. He

is employed

at FebTech

projects and

engineers ltd.

His drawing

monthly

salary of Rs.

3 0000/- and

net salary is

Rs. 23000/-

form No. 16

for year

ended 31- 3-

2012 with the

salary of

income of

Rs.4.2 lacs.


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Condition of

submission

of IT returns

for F.Y.

2012-2013 &

2011-2012

within

months

stipulated.

Means and

worth of the

proposed

guarantor is

commensurat

e with the

size of

advance.

Hence the

guarantee of

Mr. Manoj is

acceptable.

Date of birth

or PAN No.

10/05/1978

or ADxxxxx

Address House No.

45

Nandurbar,

Nan durbar-,

425419

Phone No. 02569-xxxxx

Repayment 60 months


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period

Proc. Fees 2000 + service tax (subject to banks latest processing charges)

In the view of above, the proposal is sanctioned as per the following terms and

condition.

Facility Vehicle loan for four wheeler

Amount Rs. 450000/-

Purpose Purchase of Maruti Ertiga petrol Ixi, white as per the quotation of

M/s wonder cars.

Security Hypothecation of vehicle to be purchase.

Guarantor Mr Manoj .

Margin 25% in banks favor.

Rate of interest Base rate + 2.25% = 12.5% p.a. at present.

Processing fees 2000 + service tax

Documentation 1 125

Repayment EMI of Rs. 10125/- to commence from the next month of

disbursement of the loan.

Any charges other than interest such as insurance etc. should be

recovered immediately as and when incurred applied, separately in

addition to EMI.

Entire repayment within 60 months from the date of full

disbursement.


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Education loan

(Under model educational scheme)

Education is most important now a days and it is the need of the todays era. Every

common man things to study high or it is a dream of every parent to give their

children higher education. For education common man needs money and it is not

possible for him to raise such high amount from their own source. For that purpose

banks help them by giving education loan for two purposes. One is for higher studies

i.e. degree courses like MBA, BE, MCA, etc. under the model education loan scheme.

Document required and submitted by the applicant:

SIdentity proof like PAN card, college identity card.

SAddress proof like electric bill or telephone bill or ration card etc.

SPhoto copy of passport (in case of abroad)

SPhoto copy of visa (in case of abroad)

/Residential agreement(in case of abroad)

SDomicile certificate

SPay slip in case of applicant is in is in service SAcademic documents like SSC and

HSC mark sheets.

Case study

Branch Nandurbar branch

Applicant student Syed Ehsan

Co applicant(father) Syed Zai nullah

Permanent address Ward No. 3 laxmi area nandurbar

A/C No. Applicant 564xxxxxxxxx


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Phone No. 9862xxxxxxxxxx

Occupation of father Business

Age of co applicant 45

PAN No. of co applicant 689xxxxx

Date of birth of co applicant 14-5-1665

Particulars of students

Name Syed Ehsan

Date of birth 04-07-1990

Age 23

Educational qualification

Name of examination Month and years of

passing

Result

SSC March 2007 Pass - 74.61 %

HSC Feb 2009 Pass-68.61%

BBA April 2012 Pass - 65%

Details of the course to which admission is sought

Name of the course MBA


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Name of the

institution

Indra college Pune

Duration of course Two years

Expenditure

involved

2.5 lacs.

Present request

Loan total on margin

Course fees 1.6lacs

Facility Term loan

Amount 2.5lacs

Purpose For pursuing higher studies

Security Nil

Guarantor Nil

CIBIL No adverse remark

CRR AAA- Minimal risk

Repayment 60 month

Course eligibility The student is pursuing MBA in finance from the Indra college,

Pune a reputed university affiliated to Pune university. At

present he has completed Is' year of the course.

Student eligibility The student is Indian national and perusing MBA course.

Presently he is studying in the second year from a recognized

college. He secured his admission through CAP round. Hence

the proposal eligible under the scheme of model education loan


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of bank.

Due diligence ID proofs like ID card issued by the college authorities were

duly verified.

KYC norms The applicant is an SB account holder. The KYC norms are

duly complied with.

Pre disbursement

verification

Not required

Details of the course to which admission is sought

Remark

Particulars Rs.

Tuition fees 145000

University fees 3000

Living expenses

Purchase of instruments 30,000

Other fees 25,170

Hostel fees 46,730

Mess fees

Total 2,50,000

Eligibility for loan Rs.

Cost of education 250000

Maximum eligibility for loan (I) 250000


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Outer limit of finance outside India(II) NA

M.V security offered (111) NA

Loan applied for/ recommended by branch(IV) 250000

Loan considered for recommendation (lower of the

1,11, and IV)

250000

Rate of interest Base rate + 1.75?/o = 12.00% P.a. at

present base rate is 10.25%

Processing fees NIL

Delegation Sanctioned falls within the

sanctioning power of the assistant

general manager Nandurbar

branch,Nan durbar as per latest H.O

norms(model II branch)

Observ ation of student

Mr. Syed Ehsan has completed his first year MBA course. He has paid first year fees

from his own sources. He has requested for payment of fees for next year of the

course. The academic record of Mr. Syed Ehsan is good.

He has secured his admission for higher study in MBA from the Indra College of

management, Pune through merit channel.

The fees structure as per latter submitted by the college is Rs. 149270 P.a. but the

applicant requires hostel and mess charges. Student also required a laptop costing

Rs.30000 for project evaluation/submission of other thesis. He has submitted the

relevant quotation the total cost of education is Rs.250000.


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whichever is earlier.

Repayment will be at Rs.5561 EMI for 60

month

Loan sanctioned by the branch in fast three years:

Education loan

Education loan

Year Sanctioned loan

2010-2011 10

2011-2012 08

2012-2013 12

Interpretation:

The above graph represents the sanctioned of education loan is last three years that is

for 2010-11, 2011-2012, 2012-2013. In the year 2010-2011 the ten education loan are

sanctioned. While in the year 2011-2012 only eight loans are sanctioned. And in

2012-2013 maximum number of loan are sanctioned that is 12.

Housing loan

Housing loan

Year Sanctioned loans

2010-2011 25

2011-2012 33


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2012-2013 29

Interpretation:

The above graph represents the sanctioned of Housing loan is last three years

that is for 2010-11, 2011-2012, 2012-2013. In the year 2010-2011 the 25 Housing

loan are sanctioned. While in the year 2011-2012 maximum number of loan are

sanctioned that is 33. And in 2012-2013 29 loan are sanctioned.

Vehicle loan

Vehicle loan

Year Sanctioned loan

2010-2011 16

2011-2012 08

2012-2013 14

Interpretation:

The above graph represents the sanctioned of Vehicle loan is last three years that

is for 2010-11, 2011-2012, and 2012-2013. In the year 2010-2011 the maximum

number of loan are sanctioned that is 16. While in the year 2011-2012 only eightloans are sanctioned. And in 2012-2013 fourteen loan are sanctioned.

Net income of bank of Maharashtra

Year Net income (in crores)

2010-2011 330.39

2011-2012 430.83


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2012-2013 759.52

Interpretation:

From the above graph it is seen that the income of bank of Maharashtra is

continuous increasing year by year .in 2010-2011 income of bank of Maharashtra

is 330.39 crores, in 2011-2012 the income is 430.83 crore and in 2012-2013

income is 759.52 crores.

Net NPA of bank of Maharashtra for last three years

Year Net NPA (in crores)

2010-2011 618.95

2011-2012 469.57

2012-2013 392.93

Interpretation:

In the year 2010-2011, there is maximum net NPA that is Rs. 618.95 crores. But

after that in the year 2011-2012 it reduced up to 469.57 crores. And in the year

2012-2013 it is again reduced up to 392.93 crores which is good indication for the

bank as it helps to increased to help the profit of the bank.

Margin:-

Different margin for educational loan in India and outside India


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SUp to 4.00 lacs - Nil Above 4 lacs-

S For studies in India- 5%

S For studies in abroad- 15%

Disbursement:-

For educational loan disbursement is made in installment. It means loan will be

disbursed in stages as per requirement / demand by effecting payment to university,

vendors etc. to the extent possible.

Security:-

Up to 4 lacs there is no need of security.Above Rs. 4

lacs and up to Rs. 7.5

lacs collateral in the form ofsatisfactory third party guarantee.

Repayment:-

Tlie applicant will get a repayment holiday of one year after completion of the course

selected or six months after getting job whichever is earlier. The loan is then to be

repaid in five years from commencement of repayment. If the amount of the loan is

more than 4 lacs the repayment period is more than 10 years.

Conditions for education loan

Rate of interest:-

For education loan rate of interest is charge on base rate.

^Up to Rs. 4 lacs rate of interest is base rate + 1.75%.

^Above Rs. 4 lacs rate of interest is base rate + 2.75%.

SAt present base rate is 10.25%.


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Conditions for Housing loan:

Eligibility

For housing loan there is eligibility for sanctioning loan. That is salaried persons,

professionals, businessman with sufficient disposable income. Farmers having

minimum five acres of integrated land holding. Non resident Indians are also eligible.

Age criteria:-

There are age criteria for sanctioning home loan.

S Minimum 21 years- maximum 50 years for salaried

persons.

S Minimum 21 years- maximum 60 yearsfor other than salaried

person.

Quantum of loan:-

S For salaried class: 50 times of gross salary or 60 times of net monthly salary

whichever is higher subject to applicable margin.

SFor businessmen: equal to average annual income (net profit + depreciation) of last

3 years * 4 times (B/S, IT returns). Also note repayment of any other term liabilities.

SFor farmers: 4 times of average annual net income. Cross check gross income, land

holding, cropping pattern, sugar factory/APMC/other agencies bills etc. ensure for

repayment capacity and repayment experience. If jointly owned consider joint holders

income.

Maximum loan quantum:

y No maximum limit for Metro/ Urban Area.

S Rs. 15 lakh in Semi urban/ rural area.


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SRs. 5 lakh for repairs/ renovation in all areas.

Equated monthly installments:

EMI is calculated on the basis of disburse amount. Every bark has own format tocalculate EMI. It is in form of the chart in which only rate of interest and sanctioned

amount is needed.

Margin:

Conditions and requirements for vehicle loan

Conditions and requirements for vehicle loan

For home loan borrower has to give some % of margin in favor of bank. For housing

loan 25% should be the margin of actual rate of the house or flat in the favor of the

bank and banks provides the 75% of actual cost in the form of loan. 25% is the

minimum margin which is compulsorily borrower has to provide. Borrower can give

more than 25% of the margin according to his income.

Eligibility:

Eligibility is necessary for sanctioning loan, without eligibility bank doesnt sanct ion

the loan. Eligibility for vehicle loan is salaried persons, permanent in service or

profession and businessman.

Security:

For sanctioning vehicle loan banks require the security. It is in the form of

hypothecation of vehicle purchased. Also bank requires one guarantor of sufficient

income acceptable to the bank.

Minimum annual gross income:

Vehicle loan from the bank given for the 2 wheeler and 4 wheeler. So that for 2

wheeler minimum annual gross income is Rs. 2.00 lacs and for 4 wheeler it is divided

into two parts.


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For salaried person minimum gross annual income is Rs. 3.50 lacs. And ^For others

Rs. 2.00 lacs.

Maximum limit:

Maximum limit for sanctioning loan amount for 2 wheeler is Rs.0.50 Lacs. And for 4

wheeler is Rs. 15.00 lacs.

Margin:

For vehicle loan borrower has to give some % of margin in favor of bank. For vehicle

loan 15% should be the margin of actual cost of the vehicle whether 2 wheeler or 4

wheeler in the favor of the bank and banks provides the 85% of actual cost in the formof loan. 15% is the minimum margin which is compulsorily borrower has to provide.

Borrower can give more than 15% of the margin according to his income.

Repayment period:

For two wheeler loan there is maximum period of 60 months and in case of 4 wheeler

there is maximum period of 84 months.

Processing fees:

In case of two wheeler there is processing fees is Rs. 500/- and of four wheeler there

is processing fees is Rs. 2000.

Rate of interest:

Rate of interest is charged on basis of base rate system. For vehic le loan if

SRepayment period is up to 3 years then the ROI is base rate + 1.25%.

SRepayment period is above 3 years then the ROI is base rate + 2.25%.

SSecond hand vehicles irrespective of tenor then the base rate + 5.00%.

FINDINGS FROM CASE STUDIES

Home loan is cheaper than education loan and vehicle loan. It. means rate of interest

on housing loan is less than education loan and vehicle loan, because home loan is


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comes under priority sector.

Mortgage papers are checked and approved by chief manager and not by branch

manager or assistant general manager.

Term loan has maximum repayment period is 7 years but for home loan it is 15 to 20

years.

More documentation is required in housing loan than education loan and vehicle loan.

In education loan up to Rs. 4 lacs banks does not take any securities. So that before

repayment banks keep equal amount of loan as reserve which helpful in case of non

repayment of borrower.

If the borrower has existing loan from any other bank, the bank before sanctioning of

loan bank take over that amount with the permission of applicant and existing bank.

Then bank add both loan amount, existing and present one and sanction the 75% of

that amount after deducting margin of 25%.

For education loan disbursement is made in installments. For other loans lum sum

amount may disburse to the borrower.

For education loan if student is unable to pay interest during education then he can

pay interest at the time of repayment i.e. with principle amount.

From the sanctioned number of housing loan we can find that sanction number of

housing loan is much than education loan and vehicle loan. This is because today the

real estate sector grown rapidly and rates are also high. So many people turns to bank

for finance and it is good income of bank.

CONCLUSION

The project includes the study on retail lending policies. Retail lending policies

includes the education loan, home loan and vehicle loan to which bank give priority.

This project includes the detail study regarding the documentation required by the

bank, conditions for taking the loans, guidelines given by RBI regarding loan to the

bank, objectives of lending, strategies, norms and rules followed by bank forsanctioning loan. It also includes that how banks takes decision for financing the retail


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loans to the customer.

As the lending is assets of the bank it helps to increase the income of the bank. Every

bank face the problem for recovery of loans, if there is no recovery of loan then it

converts into NPA accounts which reduce the income. The project includes last 3

years bank of Maharashtras NPA which reduces every year. It also includes the

income of last 3 years. So it is concluded that retail lending is very crucial area where

bank has to be very careful while lending. As retail lending is considered as priority

sector by Government as well as Reserve Bank of India.

Suggestions

There is too much manual documentation for loan. As todays world is technological

world, so it is possible to do online documentation. It reduces the bourdon on the

customer.

Sanctioning of loans takes lots of time. If there is have online documentation and

process, it will help to reduce the time.

Bank should help customers if there is urgency of the loan by taking less time for

sanctioning, by verifying all documents and followed by all steps.

There should be some subsidy on interest rates for retail loans like home loan,

education loan and vehicle loan if customers do the regular payment of the interests. It

will attract more customers.

ABBREVIATION

BOM - Bank of Maharashtra RBI - Reserve Bank of India H.O - Head Office MD -Managing Director GM - General Manager AGM - Assistant General Manager BM -

Branch Manager CBS - Core Banking Solution KYC - Know Your Customer MSME

- Micro Small Medium Enterprises EMI - Equated Monthly Installments SPV -

Special purpose Vehicle ROI - Rate of Interest AY- Assessment Year F Y - Financial

Year L/C - Letter of Credit BG - Bank Guarantee NPA - Non Performing Assets CC

- Cash Credit CRR - Credit Risk Rating

CIBIL-Credit Information Bureau India Limited NPAT - Net Profit after Tax RRB -


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Regional Rural Bank NEFT-National Electronic Funds Transfer RTGS - Real Time

Gross Settlement NRI - Non Resident of India

SARFAESI - The Securitization and Reconstruction of Financial Assets and

Enforcement of Securities Act BD - Bank Draft

WEBSITES

www.rbi.gov.in

www.bankofmaharashtra.in

www.monevcontrol.com

www.google.com

www.sulekha.com

BOOKS

Banking principles and operations By: M.N. Gopinath '

Banking Function

By: Vandana Darmadhikari

Research Methodology By: C.R. Kothari
http://www.rbi.gov.in/http://www.rbi.gov.in/http://www.bankofmaharashtra.in/http://www.bankofmaharashtra.in/http://www.monevcontrol.com/http://www.monevcontrol.com/http://www.google.com/http://www.google.com/http://www.sulekha.com/http://www.sulekha.com/http://www.sulekha.com/http://www.google.com/http://www.monevcontrol.com/http://www.bankofmaharashtra.in/http://www.rbi.gov.in/

Project Report on NPA Policies of Bank of Maharashtra

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Transcript of Project Report on NPA Policies of Bank of Maharashtra