Summer Internship Project Report

On
Lending and Investment Policy
Of
Urban Co-Operative Bank

UNDER THE GUIDANCE OF

MR. R.K MISHRA
BRANCH MANAGER
URBAN CO-OPERATIVE BANK, ROURKELA

INTERNAL GUIDANCE
DHIRAJ BHATTACHARJEE

SUBMITTED BY:
SAGORIKA MITRA
BBA 3rd YEAR
CLASS ROLL NO – 16BBA022

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 DECLARATION

I , Sagorika Mitra , a student of BBA , Ispat Autonomous College, Rourkela bearing roll no –
16BBA022 do hereby declare that the project work entitled “lending and investment policy at
URBAN CO-OPERATIVE BANK UDITNAGAR ROURKELA submitted by me for the
partial fulfillment towards the award of degree of BBA in management is a record of my own
research work.

The report embody the original finding based on my study and observation and has not been
submitted earlier for the award of any degree or diploma to any institute or university.

Place: ROURKELA

Date: Signature

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 CERTIFICATE FROM THE FACUTLY GUIDE

This is to certify that the project work entitled “LENDING AND INVESTMENT POLICIES”,
is a bonafide work carried out by Ms SAGORIKA MITRA, a candidate of BBA with Roll No.
16BBA024, batch 2016-2019 of ISPAT AUTONOMUS COLLEGE, approved by URBAN
COOPERATIVE BANK under my guidance and direction.

Signature of Guide

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 Acknowledgement

The satisfaction that accomplishes the successful completion of any project would be incomplete
without the people whose constant guidance and encouragement crowns all efforts with success.
I convey my sincere gratitude to MR. R.K MISHRA, CEO , Urban Co-Operative Bank ,
Rourkela for giving me an opportunity and his constant inspiration and motivation in preparing
my project work in URBAN CO-OPERATIVE BANK .

I am also thankful to all the faculty and staff of URBAN CO-OPERATIVE BANK,
UDITNAGAR for their unstinted support and cooperation, constructive criticism and valuable
guidance as and when needed during the course of the project work.

Finally I like to say that I have tried heart and soul to prepare this report accurately. However,
there might be some errors and silly mistakes due to our limited aptitude & time constraints. In
this regards, I seek your kind consideration as I am in the process of learning.

Place: Rourkela
Date:

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 CONTENTS

SL.NO TOPIC PG.NO

1. BANKING SYSTEM
1.1 Banking
1.2 Indian Banking System
2. URBAN CO-OPERATIVE BANK
2.1 About The Branch
2.2 Achievements
2.3 Information Sheet On The Working System
2.4 Board Of Management
3. INVESTMENT POLICY OF URBAN CO-OPERATIVE BANK
3.1 Investment
3.2 Investment Committee
3.3 Holding Of Investment
4. LENDING POLICY OF URBAN CO-OPERATIVE BANK
4.1 Lending Policy
4.2 Types Of Customers
4.3 Types Of Loans & Criteria
5. RESEARCH METHODOLOGY
6. DATA ANALYSIS AND INTERPRETATION
7. FINDINGS
8. CONCLUSION
9. BIBLIOGRAPHY
10. QUESTIONNAIRE

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1. Banking Industries

1.1. Introduction
Bank may be defined as a financial institution engaged as a in the business of keeping money for
saving and checking accounts or for issuing loans and credits etc.
The essential function of a bank is to provide services related to the storing of deposits and
extending of credits. Basic function may include credit collection, issuer of banking notes, depositor
of money and lending of loans .now day banking is not in its traditional form with the advancement
of technology it’s focusing on more comfort of customer providing services such as:
 Online banking
 Investment banking
 Electronic banking
 Internet banking
 PC banking/ mobile banking
 E-Banking
The Indian economy is emerging as a one of the strongest economy of the world with the GDP
growth of more than 8 % every year. A strongest banking industry is important in every country and
can have a significant affect in supporting economic development through efficient financial
services. Banking sector play a vital role in growth and development of Indian economy. After
liberalization the banking industry in India has under gone major changes. The process of
liberalization and globalization has strongly influenced the Indian banking sector.

A Banking Sector performs three primary functions in economy, the operation of the payment
system, the mobilization of savings and the allocation of saving to investment products.1 banking
industry has been changed after reforms process.
The Government has taken this sector in a basic priority and this service sector has been changed
according to the need of present days. Banking sector reforms in India Strive to increase efficiency
and profitability of the banking institutions as well as brought the existing banking institutions face
to face with global competition in globalization process. Different type of banks differs from each
other in terms of operations, efficiency, productivity, profitability and credit efficiency.
The banking sector plays a vital role through promoting business in urban as well as rural area in
recent year, without a sound and effective banking system, India cannot be considered as a healthy
economy.2 The main objective of this study to understand of how a bank is able to use the available
resources to increase the profitability and performance of banks and banks in India are performed
well or not.

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INSTANT ACCOUNT DEPOSITS ACCOUNT:

Term Deposits Account:

In this type of account the money is not required for the daily transaction. Not only that the
money is not likely to be required for quite some time.

Foreign Currency Account :

This account is required when an entrepreneur wishes to trade in a foreign country.

Loan Account:
Whenever an entrepreneur is intending to take a loan for business purpose.

Merchant Account:
With the help of merchant account, on is able to carry out
Transactions involving credit card and debit cards.
There are some banks which impose fees and charges for every transaction made. There are yet
others whose fee system may be different.

Changing Banking According To One Convenience:

In the event when some is not happy with the service of existing banking services, one may at
once change banks for better services.

Transaction with foreign currency:

If an individual needs to constantly deal with foreign currency as part of one’s business
Requirement; one should check as to how the bank offering business banking facilities with
regard to the following matters, offers guidance with to dealing with one’s business product in the
light of foreign countries as well as foreign currency. How one should restructure ones strategy with
currency rates and the risks involved in the same. The utilities in carryingout transactions with
foreign currency.

Providing credit cards and debit cards for ones business:

The bank providing debit card and credit cards which are universally accepted. Business banking
industry requires that the bank should provide debit cards or credit cards to individuals offering the
maximum or optimum advantages as per the requirements of the business banking holders.

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1.2. indian banking system

Reserve Bank of
India

Development Banks
Commercial Banks Co-operative Banks

Nationalized Private Short-term Long-term

credit Credit

Agricultural Credit Urban Credit EXIM Industrial Agricultural

8
2. Urban Co-operative bank

2.1 About The Branch [Urban Co- Operative Bank Ltd.]

The urban cooperative bank limited, Rourkela is a primary urban cooperative bank registered
under state Orissa cooperative societies act 1962 (act 2 of 1963) having regd.no.1/sg dated
10.5.1988 and functioning likes a commercial bank under the total control of reserve bank of
India and govt., of Odisha. The banking license was obtained from the reserve bank of India in
the year 1989 and started its banking business on 24.09.1990.

During short period of functioning of the bank has achieved the norms of viability and could be
able to obtain branch license for 5 years in the year 1995 and out of which four branches were
opened in the same year. One branch license for Sundargarh location was surrendered due to
distance factor. During this span of functioning, the bank could be able to establish its
remarkable growth and for which it has been awarded as the best urban cooperative bank of the
state for last decade. The area of operation at the registration stage was whole revenue district of
Sundargarh and thereafter it has been extended to the adjoining revenue districts like Jharsuguda
and Keonjhar. Till 31.03.2010.

The membership position is at 15466 as against the paid-up share capital of rs 441.59lacs. The
bank is functioning on the cbs platform and could be able to provide alluring package of
services/products to the customers. Since inception, the bank is earning profit and paying
dividend to the share holders @12% which is at per the maximum capital fixed under the Ocs
act. Like other commercial banks, the remittance facilities like Rtgs and issuance of draft etc. For
places like all over India are available in the entire branches n tie up arrangement with other
market players. Also the bank is a leading player in the local; clearing house as direct members
and posses proportionate market share in business of the locality.

Ad a token of social responsibility and commitment the welfare activities like construction of
souchalaya in the campus of Rgh, Rourkela, providing of medical equipments to hospitals and
books for libraries etc. Had been undertaken by us out of common goodfund created on
appropriation of profit.

The term urban co-operative banks (Ucbs) through not formally defined, refers to primary co-
operative banks located in urban and semi-urban areas. The banks, till 1996, were allowed to
lend money only for non-agricultural purposes. This distinction does not hold today. These banks

9
were traditionally centered on communities, localities work place groups. They essentially lent to
small borrowers and businesses. Today, their scope of operations has widened considerably.

2.2 ACHIEVEMENT

2.3 information sheet on the workers of The urban co-operative bank ltd., Rourkela
SL. As on As on As on As on As on
NO. Particulars 31.03.14 31.03.15 31.03.16 31.03.17 31.03.18
(prov)
1 Paid Up Share
Capital
A Individual 570.09 586.38
members 493.50 551.97 558.20
B Government 1.00 1.00 1.00 0.00 0.00
2 Deposits 9391.34 10138.66 10639.03 10834.15 10521.57
3 Loans & 10834.15 10521.10 10962.81 12367.00 12495.48
Advances
4 Borrowings 0.00 0.00 10.00 0.00 0.00
5 Investment 4660.69 4664.39 5817.25 6208.28 5588.71
6 Working Capital 15564.30 16020.97 16661.53 18943.58 18866.45
7 Reserves 1203.70 1203.75 1337.26 1383.99 1456.75
8 Provisions 2634.64 3286.19 3244.02 3529.55 3434.52
9 Profit (+)/ Loss (-) 68.69 -57.65 122.10 141.14 235.38
a Before tax (PBT)
b Net Profit after tax 48.35 0.00 104.38 95.78 -
(PAT)
10 CRAR (%) 17.79% 17.79% 21.82% 19.76% 16.04%
11 Cost of 2.89% 2.40% 2.95% 2.69% 2.84%
Management
12 Per Employee 219.30 219.64 220.62 252.51 270.92
Business
13 Return on assets 0.30 0.00 0.61 0.50 1.23
14 Gross NPA (%) 15.55% 29.93% 27.40% 22.08% 1436.41
17.17%
15 Net NPA (%) 3.22% 15.55% 11.06% 6.31% 331.60
4.57%
16 % of collection 87% 87% 89% 89%
17 CD ratio 68.01% 69.10% 63.01% 61.30% 66.94%
18 No of employees 78
19 Year of 1988
establishment
20 No. of branches+ 5+1
HO
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 URBAN BANK ROAD, UDITNAGAR
ROURKELA- 769012.

1. Name of the bank with address: the urban co-operative bank ltd. Rourkela urban road,
Uditnagar, Rourkela- 769 012

2. Registration no. & date: 1/sg dtd. 10.05.1988.

3. A. Area of operation: the area of operation of bank was confined to the whole revenue
district of sundargarh and in pursuance to amendment registered vides regn. No. 96/bcs.
Orissa, the area of operation of the bank has been extended to two neighbor districts namely
jharasuguda & keonjhar.
B. Branch Expansion: During the year 1995-96 new branch offices at 4 centers have been
opened.

Name Of The Branch Date Of Opening

Main Branch Of Uditnagar 24.09.1990
Mid-Town Branch At Plant Site Road 31.05.1995
Steel City Branch At Shaktinagar 22.10.1995
Fertilizer Township Branch At Fertilizer Township 01.11.1995
Rajgangpur Branch At Raijgangpur 14.11.1995

4.Commencement of banking business: the bank started it’s functioning on 25th august 1988.
Due to want of banking business immediately after final organization. However the bank started
banking business from 24th September 1990 after obtaining license from reserve bank of India on
06.09.1989.

5. Membership & share capital: as per bye-law provision no. 8 the authorized share capital of
the bank was at Rs. 2.00 cr. And pursuance to amendment registered vides order no. 96/rsc dtd.
05.02.04 of rcs, Orissa, the authorized share capital of the bank is at Rs. 10.00 cr. Made up
50,00,000 share of Rs 20.00 each.

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 2.4 board of management Management:

The election to the office of management was held on 25.01.2015 and the elected management took
over the charge w.e.f. 06.02.2015 and continued till date.

The names of the member of the board of management are as follows:

SI.NO. Name Designation

1. Sri Rajesh Mohapatra President
2. Smt. Purnima Kerketta Vice President
3. Sri. Rabindra Kumar Mishra Chief Executive

Alone with these 3 there are also 14 other member who are part of the board of management for
a tenure 5 years.

3. Investment policy of urban co-operative bank

3.1 Investments

A bank makes investment for the purpose of earning profits. First it keeps primary and secondary
reserves to meet its liquidity requirements. This is essential; to satisfy the credit needs of the
society by granting short term loan of its customers. Whatever is left with the bank after making
advances is invested for long period to improve its earning capacity.

Before discussing the investment policy of a commercial bank, it is instructive to distinguish

between a loan and an investment because the usual practice is to regard the two as synonyms.
The bank gives a loan to a customer for a short period on condition of repayment.

It is the customer who asks for the loan. By advancing a loan, the bank creates credit which is a
temporary source of fund for the bank. An investment by the bank, on the other hand, is the
outlay of its funds for a long period without creating any credit. A bank makes investments in
government securities and in the stocks of large reputed industrial concerns, while in the case of
a loan the bank advances money against recognized securities and bills. However, the goal of
both is to increase its earnings.

Since the objective of profitability conflicts with those of safety and liquidity, the wise
investment policy is to strike a judicious balance among them. Therefore, a bank should lay
down its investments policy in such a manner so as to ensure the safety and liquidity of its funds
and at the same time maximize its profits. This requires adherence to certain principles

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Cash Reserve Ratio (CRR)

Scheduled commercial banks in India are required to hold a certain proportion of the demand and
time liabilities with RBI as per section 42(1) of the Reserve Bank of India act, 1934. This
minimum ratio is stipulated by the RBI and is known as the CRR or cash reserve ratio. It is the
tool used by RBI to control liquidity in the banking system. The present cash reserve ratio was
quoted as 4% on Monday February 22. When a bank’s deposits increases by Rs 100, and if the
cash reserve ratio is 9%, the banks will have to hold Rs 9 with RBI and will be able to use only
Rs 91 for investment purposes.

Every bank is required to maintain at the close of business every day, a minimum proportion of
their net demand and time liabilities as liquid assets in the form of cash, gold and un-encumbered
approved securities. The ratio of liquid assets to demand and time liabilities is known as statutory
liquidity ratio (SLR). RBI is empowered to increase in SLR also restricts the bank’s leverage
position to pump more money into the economy. The present SLR as recorded on 2016 i9s
21.5%.

Cash, or in gold valued at a price not exceeding the current market price, or in un-encumbered
investment in the following instruments:

Treasury bills of the government of India

State development loans

Any other instruments as may be notified by the Reserve Bank of India. Maximum limit of SLR
is 40%. Procedure for computation of statutory liquidity ratio broadly is similar to the procedure
followed for CRR process. Include inter-bank term deposits/term borrowings liabilities of all
maturities in ‘liabilities to banking system.

Demand liabilities
This include liabilities that are payable on demand.

Current deposits, 25% of savings bank deposits, margins held against letter of credit/guarantees,
balances in overdue fixed deposits, cash certificates and cumulative/recurring deposits,
outstanding telegraphic transfers mail transfer, demand drafts, unclaimed deposits, credit
balances in the cash credit account and deposits held as security for advances which are payable
on demand.

Time liabilities
Time liabilities are those which are payable otherwise than on demand. Fixed deposits, cash
certificates, cumulative and recurring deposits, 75% of savings bank deposits, staff security
deposits, margin held against letters of credit, gold deposits and other payables.

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RBI uses CRR to release funds for the growth of the economy from time to time. Higher the
ratio, the lower is the amount that banks will be able to use for lending and investment. This
power of RBI to reduce the lendable amount by increasing the CRR makes it an instrument in the
hands of a central bank through which it can control liquidity in the banking system.

3.2 Investment committee

A committee consisting of the following members shall function as investment committee and
meet on every Saturday to review the fund position.

 President /management in charge

 CEO
 Manager accounts
 Manager system
 Branch manager, main branch

Powers and responsibility of investment committee:

The investment committee so constituted is vested with powers of sanction for investment/
securities transaction within the limit and parameters as discussed hereafter.

Powers and responsibility of chief executive:

 The chief executive shall act as the head of the investment committee and monitor all
transactions as supervisory personal on behalf of the management.
 Furnish the summary of the transactions to the management on each board meeting.

Basic rules to be remembered while taking decisions:

These are considered as prime because the success of the bank depends upon these principles.
They include:

 Safety: A bank is a dealer in other people’s money. So, it cannot indulge in reckless risk.
It should ensure the safety of funds while taking decisions regarding leadings and
investments. To avoid credit risks, the bank may call for acceptable securities, which will
give full values on maturity.
 Liquidity: This means the ability of a bank to meet the demand of customers for his
money.

o It should be convertible into cash quickly and easily.

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 o It should be convertible into cash without any risk of loss of value.

 Profitability: While making investment bank should satisfy himself that the investment
is profitable to the bank should satisfy himself that the investment is profitable to the
bank after compliance of all guidelines of RBI and RCS as well as law of the land.
Investment management should not be considered as a mechanism merely for
maintenance of SLR but should result in efficient funds management and thus improve
banks profitability.

3.2 HOLDING OF INVESTMENT

 The securities may be held in any of the three forms via.

(a) Physical script form

(b) Subsidiary general (SGL) account and
(c) In a dematerialized account with depositories (NSDL/CDSL, NSCCL).

In respect of securities with SGL facilities, the SGL account can be maintained in the bank
own name directly with the reserve bank of India or in a constituent SGL account opened
with any scheduled commercial bank/state cooperative bank/primary dealer or Stoke holding
corporation of India Ltd. SHCIL primary (urban) cooperative bank are not allowed to open
maintain CSGL a/c of other PCBs other entities like charitable trusts, institutions etc.

Non-scheduled primary (urban) cooperative banks with DTL of RS.25 cores and above and
all scheduled primary cooperative banks are required to maintain investments in government
securities only in SGL account with PDs, scheduled commercial, and SHCIL.
 Bank should not undertake double ready forward deals in government securities
including the treasury bills. No ready forward and double ready forward deals should be
put through among banks and even on their investments accounts in other securities such
as public sector bonds, units of UTI, etc.
 Non-scheduled bank my place deposits with strong schedule primary co-operative banks,
fulfilling following norms.

✓The bank is complying with the prescribed level of CLEAR

✓ Net NPA of the bank is less than 7%

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✓The bank has not defaulted in the maintenance of CARE/SLR requirements for the last two
years.

✓The bank has declared net profits for the last three consecutive years.

✓The bank is complying with prudential norms on income recognition, asset classification and
provisioning, exposure ceiling and loan advances to the directors.

 Conditions to be fulfilled before making non-SLR investments.

 Suitable enabling provisions should exist for such investments in the respective state
cooperative societies/multi state cooperative society’s act and a special permission
should be taken from the concerned registrar of cooperative societies of the state.
 There should be no default in maintenance of CARE & SLR.
 The bank should have achieved the targets under priority sectors advance and weaker
section advances.
 Over dues should not be more than 15% of its outstanding loans and advances.
 The bank should comply with the RBI instructions regarding income recognition norms.

 Transactions through SGL account

Bank are required to follow the instructions for purchase/sale of the securities through
SGL A/c under delivery versus payment system where in the transfer of securities take place
simultaneously with the transfer of funds, as under:

 All the transactions in government securities for which SGL facility is available are to
be put through SGL A/c only.
 Under no circumstances, a SGL transfer from issued by bank in favor of another bank
bounce for want of sufficient balance of funds in the current a/c of the buyer.
 The SGL transfer form received by purchasing bank need to be deposited in their
SGL a/c immediately I.e. The date of lodgment of the SGL form with the RBI shall
be within on working day after the date singing of the transfer form.
 No sale should be affected by way of return of SGL form held by the bank,etc

 Use of bank Receipt (BR)

 No BR can be issued under any circumstances in respect of transaction in government

securities for which SGL facility is available.
 No BR can be issued on the basis of a BR ( of another bank ) held by the bank and no
transaction can take place on the basis of a more exchange of BRs held by the bank.

16
  Even in the case of other securities,BR may be issued for ready transactions only
(under certain circumstances)
 BRs could be issued covered covering transactions relating to bank own investments
accounts only and no BR can be issued by the bank covering transactions related to
either the accounts of portfolio management scheme (PMS) clients or other
constituents accounts including brokers.
 No BR remains outstanding for more than 15 days.
 A BR can be redeemed only by actual delivery of scripts by cancellation of the
transactions/set off against another transaction.
 Maintenance of separate register of BRs and banks should also have a proper system
for the custody of unused BR and bank should also have a proper system for the
custody of unused BR forms and their utilization etc.
 Retailing of government securities:
Government securities with non-bank clients subjects to the following conditions:
 Such retailing can be on outright basis and there is no restriction on the period
between sale and purchase.
 The retailing of government securities may be on the basis of ongoing market
rates/yield curve emerging out secondary market transactions.

 Internal control system:

There must be a clear functional separation of

 Trading
 Settlement, monitoring and control.
 Accounting, besides trading and back office functions relating to bank own investments
accounts, portfolio management scheme (PMS) clients accounts and other constituents
accounts.

 Compliance of all other operational instructions in respect of accounting, recording,

reconciliation of balance at quarterly intervals with the balances in the books of PDOs.
 Any bouncing of SGL transfer forms issued by selling bank in favor of the buying bank
may immediately be brought to the notice of the regional office of department of banking
supervision of RBI by the buying bank.
 Banks are required to put in a place a reporting system to report to the top management,
on a weekly basis.
 The bank management is supposed to ensure that they are adequate internal control and
audit procedures for ensuring proper compliance of the instruction in regard to the
conduct of the investment portfolio, etc.
 Limits on banks' exposure to capital market
The aggregate exposure of a bank of the capital markets in all forms (both fund based and
non-fund based) shall not exceed 40% of its net worth as on March 31 of the previous
years on solo basis and 40% on of consolidated net worth in case of on consolidated

17
 basis. Within this overall ceiling, the banks direct investment in shares, convertible
bonds/ debentures, units of equity-oriented mutual funds and all exposures to venture
capital funds( VCFs) { both registered and unregistered} should not exceed 20per cent of
its net worth/ consolidated net worth.

 Classification
The entire investment portfolio the bank (including SLR securities and non-SLR
securities and non-SLR securities) should be classified under three categories, viz.
1. Held to maturity (HTM)
2. Available for sale (AFC)
3. Held for trading (HFT)

 Held to maturity (HTM)

*The securities acquired by the banks with the intention to the hold them up to maturity will be
classified under Held to maturity (HTM). Bank are allowed to include investments included
under category up to 25 percent of the total investments. Bank may hold the following securities
under HTM

* SLR securities up to 25 percent of their DTL as on the last Friday of the second preceding
fortnight.

* Non-SLR securities included under HTM as on September 2, 2004.

* Fresh re-capitalization bonds received from the government of India towards their re-
capitalization requirements and held in investment portfolio.

1. Fresh investment in the equity of subsidiaries and joint ventures

2. RIDF/SIDBI/RHDF deposits.

 Available for Sale

 The securities acquired by the banks with the intention to trade by taking
advantage of the short term price/interest rate movement will be classified under'
held for trading (HFT)'.
 The securities which do not fall within the above two categories i.e. HTM & HFT
will be classified under ' available for sale (AFS)'.
 The banks will have the freedom to decide on the extent of holding under HFT
and AFS considering various aspects such as basis of intent, trading strategies,
risk management capabilities, tax planning, manpower skills, capital position etc

18
  The investments classified under HFT would be those from which the bank expect
to make a gain by the movement in the interest rates/market Reyes. These
securities are to be sold within 90 days. Profit or loss on sale of investments in
both the categories will be taken to the profit & Loss Account.

Shifting among categories

1. Bank may shift investments to/from once a year, normal at the beginning of the
accounting year with the approval of the board of directors.
2. Shifting of investments from HFT to AFS is generally not allowed. However, it will be
permitted only under exceptional circumstances like not being able to sell security within
90 days due to tight liquidity conditions, or extreme volatility.
3. Transfer of script from AFS / HFT to HTM category should be made at the lower of book
value or market value.

19
4. lending policy of urban co-operative bank

4.1 lending policy

A bank is a financial intermediary and money creator that create money by lending money to a
borrower, thereby creating corresponding deposits on the banks balance sheet. Lending activities
can be performed directly by loaning or indirectly by capital markets. Due to their importance in
the financial system and influence on national economies, banks are highly regulated in most
countries. Most nations have institutionalized a system and influence on national economies;
banks are highly regulated in most countries. Most nations have institutionalized a system known
as fractional reserve banking, central banking, under which the bank holds liquid assets equal to
only a portion of their current liabilities.

Sanctioning authority

The power of sanctioning of loan given to the committee of management of the bank. On the
behalf of the management, the president or CEO or any such other officer if authorized in this
behalf shall record the orders of sanction in the loan file.

Exposure limit
The exposure limit shall be fixed by the Board of Management from time to time as per
modalities prescribed by the Reserve Bank of India. Besides the exposure limit, the maximum
amount of loan under different schemes shall be fixed by the Board of Management from time to
time. Provided that in no case, the maximum limit fixed for different category of loan shall
exceed the limit so fixed or the exposure limit.

Loan application
The loan application is to be made by the applicant in the format prescribed for different type of
loan schemes.

All application received by a branch shall be recorded in a register called as ‘loan processing
register’ which could contain the columns like date of receipt, name of the applicant, amount
applied for, date and amount of sanction or rejection, date and amount of disbursement if
sanctioned. This register should be maintained scheme wise.

20
 4.2 Types Of Customer

As per the law of the banks, no finance can be made to the non-members except I case of the
Demand loan, OS loan, and gold loan.

 Minor

o A minor is a person who has not completed 18 years of age. If the guardian is appointed
by the court, the age for majority is 21 years.
o Although a minor can be admitted to the benefits of partnership firms, his liability is
restricted to his share in the firm’s property or profits.
o A minor is not competent to enter any contract and any contract with a minor is void ab-
initio.
So no loans should be granted to any minor. While granting loans to partnership firms in
which a minor enjoys the b3nefits of profit, the above all aspects should be carefully
examined.

 Insolvent

When a person is unable to pay the debts in full and upon his adjust ion as an insolvent, his
attachable property is taken as possession by the official receive or the official assigned under
orders of court. The receiver realizes the debtor’s property and distributes the profits among the
creditors. So the bank should not lend to an un-discharged insolvent or a person against
insolvency proceedings are pending.

 Lunatics

i. This is a person with unsound mind. He can avoid debt if it is provided that he was of
unsound mind at the same time of borrowing.
ii. It’s always safe to avoid lending to persons who fall in this category.

 Sole proprietorship

It is carried by an individual owner in his name or trade name. He is required to take a

declaration in form from the4 sole proprietor that no other person has any interest in the

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 business. He is only person dealing and obligation. Documents required like OST/VAT
registration certificate pump/pry, electricity bill or telephone bill.

 Death or insolvency
When an individual or sole proprietor dies, is adjudged insolvent, the operation of the account
should be immediately stopped and a claim be made against the estate of deceased or insolvent
person.

 Clubs and Institutions

As per the company act 1956 the club and institutions have no legal entity and have no powers to
enter into contractual relations. Generally extending of credit facilities to club and societies
should be avoided.

While granting loans to corporate bodies following rules should be examined:

o The body should be registered.

o The memorandum of association and articles of association should be examined
with a view to ascertain in the scope of borrowings power, purpose for which
advance can be raised etc.
o Generally extending of credit facilities to clubs and societies should be avoided.

Rules for cash credit loans.

1. Cash can be granted only to the person/firms/limited companies etc. engaged in benefited trade
or business or industry.
2. The place of business must be within the area of operation of the bank.
3. Before entering the proposal of cash credit, the transactions of current A/C either with bank or
any other institutions should be examined to know the annual turnover and business trend.
4. The borrower shall maintain 25% and above margin as minimum according to nature of trade
and as shall be determined by the bank.

Term loans

Usually term loans is granted with CC accommodation in case of industrial units which require
fixed assets like infrastructure, work shed and plant machinery for business purposes.

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 Rules for lending term loans are:

1. It should be granted for fixed asset like construction of infrastructure, plant & machinery for
business purposes.
2. Precautions should be taken to avoid purchase of old machinery infrastructure.
3. Coverage of insurance in respect to plant and machinery asset is mandatory.

4.3 Types of Loan and Criteria House Building Loans

Eligibility: Individuals cooperative groups housing societies.

Amount of loans: The maximum amount of loan should be 25lac for residential houses.

Margin: The borrower has to contribute 30% to 40% the margin includes cost of prime land
and the existing infrastructure if any.

Rate of interest: Up to 2lac 12% and above 2lac 12.50%

Consumer durable loans

Eligibility: shareholders/ account holders, state and central government employee. Employee of
RSP/OCL/Ferro scup nigam.

Amount of loans: The maximum amount of loan shall be 3lac.

Margin: The borrower has to contribute 25% of the cost of article as mentioned in the quotation
to be borne by the borrower.

Rate of interest: 15%

Transport loans

Eligibility: The individual/ unemployed educated youths, partnership firm for self help
engagement, car to salaried person for personal use, divers with license having no vehicle.

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Amount of loans: The maximum amount should be 50% of the purchased cost.

Margin: The margin shall be minimum 20%

Rate of interest: up to 5lac 11.50% and above 5lac 12%

Group finance scheme

Eligibility: Small traders/ vendors having allotted/ owned shop.

Amount of loans: The margin shall be minimum 5% of the loan amount

Margin: The maximum amount shall be 50 thousand

Rate of interest: 18%

Two wheeler loan scheme

Eligibility: Employee of RSP and a person who is a member of his bank.

Amount of loans: The maximum amount shall be the cost of the vehicle

Rate of interest: Up to 24 month 14% and above 24 month 15%

Subharna niwas housing loan scheme

Eligibility: The individual who are working under RSP/IDL/FERRO SCAP NIGAM.

Amount of loans: The amount of loan for 7 years 2lac, 7 to 12 years 3lac, above 12 years 3lac

Rate of interest: 13.50%

Personal loan scheme

Eligibility: Should be a member of the bank

Amount of loans: The maximum amount shall be 5lac

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Rate of interest: 16%

Loan against other security

Eligibility: Member of the bank

Amount of loans: Maximum amount shall be 90%

Rate of interest: 13%

5.Research and methodology

This report is based on primary as well as secondary; however primary data collection was given
more important since it is overhearing factor in attitude studies. One of the most important users
of research methodology is that it helps in identifying the problem, collecting the vital
information that is required by the top management to assist them for the better decision making
day to day decision and critical ones.

Data sources:

Research is totally based on primary data. Secondary data can be used only for the reference.
Research has been done primarily by data collection and data has been collected by interacting
with various bank officials. The secondary data has been collected through various websites,
journals, annual reports, interacting with the staffs etc

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 5. Data analysis and interpretation

Paid up share capital

600

580

560

540

520

500

480

460

440
as on 31.03.14 as on 31.03.15 as on 31.03.16 as on 31.03.17 as on 31.03.18

Interpretation: Paid up share capital of urban cooperative bank for the last five years as it has
been increased to 5786.38 as on 31.01.18 from 494.50 as 31.03 .14

Loans and advances

9000

8000

7000

6000

5000

4000

3000

2000

1000

0
as on 31.03.14 as on 31.03.15as on 31.03.16as on 31.03.17as on 31.03.18

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Interpretation : Loans and advances of urban cooperative banks for the last five year as it has
been increased to 8365.01 as on 31.03.18 from 7368.07 as on 31.03.14. It has been decreased to
6907.35 as on 31.03.16.

INVESTMENTS

7000

6000

5000

4000

3000

2000

1000

0
as on 31.03.14 as on 31.03.15 as on 31.03.16 as on 31.03.17 as on 31.03.18

Interpretation: Investment of the urban cooperative bank for the last five year as it has been
increase to 55817.71 as on 31.03.18 from 4660.69 as on 31.03.14. it increases to 6208.28 as on
31.03.17.

DEPOSITS

13000
12500
12000
11500
11000
10500
10000
9500
as on 31.03.14 as on 31.03.15 as on 31.03.16 as on 31.03.17 as on 31.03.18

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Interpretation: Deposits of urban co-operative bank for the last five year as it has been
increased to 12495.48 as on 31.03.18 from 10834.15 as on 31.03.14

RESERVES

1600
1400
1200
1000
800
600
400
200
0
as on 31.03.14 as on 31.03.15 as on 31.03.16 as on 31.03.17 as on 31.03.18

Interpretation: It increased to 1456.75 as on 31.03.18 and it was 1203.70 as on 31.03.14

The reserves stayed stagnant as on 31.03.14 and as on 31.03.15

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7. Findings

1. Different bank have different schemes for different age groups. Some banks are giving
privilege to senior citizens; while others to child group etc. Urban cooperative has any such
schemes targeted to different age groups.
2. The formation of a cooperative society is very simple as compared to the formation of any
other form of business organizations. Any ten adults can join together and form a cooperative
society. The procedure involves in the registration of a cooperative society is very simple and
easy. No legal formalities are required for the formation of cooperative society.
3. The membership of the cooperative bank is open to everybody. Nobody is obstructed to join
on the basis of religion, caste, creed, sex, and Colour etc. A person can become a member of
a society at any time he like and can leave the society when he does not like to continues as;
members.
4. The cooperative financial institution is facing server problems which have restricted their
ability to ensure smooth flow of credit. Limited ability to mobilize resources, low level of
recovery, and high transaction of cast, administered rate of rate structure for a long time.
5. Advertising is not appropriate, as many people are not aware of the urban cooperative bank.
6. The cooperative bank is managed by the elected members from and among themselves.
Every member has equal rights through its single vote but but can activate part in the
formulation of the policies of the bank. Thus all members are equally important for the bank.
7. Government put their nominee in the Board of management of cooperative Bank. They
influence the decision of the board which may or may not be favorable for the interest of the
society. Excessive state regulation, interference with the flexibility of its operation affects
adversely the efficiency of the management of the bank.
8. The cooperative bank does not maintain any secrecy in business because the affairs of the
society are openly discussed in the meetings.
9. There is no ATM system of the bank.
10. A cooperative society cannot be dissolved by the death insolvency, lunacy, and
permanent incapability of the members. Therefore, it has stable life are continuing to exist for
a longer period. It has got separate legal existence.
11. The operation carried on by the cooperative bank economical due to the eliminations of
middlemen. The services of middlemen are provided by the members of the society with the
minimum cast.
12. Due to cooperative legislation and administration, government interference has become a
regular feature in the day to day administration of the cooperative institution. Some of the
problem area that arise out of the applicability of the cooperative legislative are, deliberate
control of cooperative by the government, nomination of board of director by the
government, participation of the nominated director by the government, reputation of
government officials to cooperative institution etc.
13. Cooperative banks financial strength depends on the cap contributed by its members and loan
raising capacity from state cooperative banks. The membership fee is limited for which they
are unable to raise large amount of resources as their members belong to the lower and

29
 middle class. Thus, cooperative society is not suitable for large scale business which requires
huge capital.
14. The members may not feel enthusiastic because the law governing the cooperative put some
restriction on the rate of return. Absence of relationship between work and reward discourage
the members to put their maximum effect in the bank.
15. A cooperative society is managed by the members only. They do not possess any managerial
and special skills. This is considered as major drawback of this sector.
16. In cooperative bank members are provided with better good and services at reasonable prices.
17. The society also provides financial help to its members.

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8.Recommendations

 The banks should adopt the modern methods of banking like interest banking, credit
cards, ATM etc.

 The banks should plan to introduce new schemes for attracting new customers and
satisfying the present ones.
 The banks should improve the customer services of the to a better extent.
 The bank must take strong steps in promoting the investments options and generates and
interest towards the products. A complete new market strategy needs to be formulated.
 The banks should target the existing customer base investment plan and try to increase
their awareness levels.

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9.Conclusion

The overall financial performance of the UCBs in all fronts namely, membership, share, capitals,
deposits, loans and advances, profits and reserve funds, working capital, over dues, loans issued
etc. Are showing a significantly and understanding trend through the application of different
statistics tools applied in the study. Therefore it may be undoubted fully concluded that the
UCBs are the road of progress. This also clears that, the UCBs is enjoying a predominant
position in the banking industry.

Every authority concerned with cooperative bank will have to play its part in ensuring that the
aspirations of the urban cooperative banking sector are nurtured in a Manner that depositor's
interest and the public interest at large are protected. The role of RBI could, thus be to frame a
regulatory and supervisory regime that is multi-layered to capture the heterogeneity of the sector
and implement policies that would provide adequate elbow room for the sector to grow in a non-
disruptive manner. The state and central government could recognize that the UCBs are not just
cooperative. They should recognize the systematic impact that inefficient functions of the entities
in the sector if they support, facilities and empower the RBI to put in place the mechanism and
system that would enable these UCBs to perform their banking functions in a manner that is in
the overall interest of the depositor’s and the public at large.

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 10.Bibliography

 www.youarticlelibrary.com
 www.urbanrourkela.org
 Duke University website
 Lending policy:The urban co-operative bank Ltd.
 Programme on credit management for officers of urban cooperative bank
Reserve bank of India
 Reading material of IIBS (India Institute of bank Management).

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