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
 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 it’s 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.

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 one’s 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 bank’s 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. It’s 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.
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.
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.

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.
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 the
technicalities 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.
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 lender’s 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
1990’s. 6
HISTORY OF THE BANK OF MAHARASHTRA

PRE NATIONALISATION

Bank of Maharashtra is a common man’s bank. It was registered on 16 th

September
1935 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 8th 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 900 branches - 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.
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.
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 customers
since 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 under
computerized. 583 Rural and Semi urban branches are computerized with a bilingual

TBA (BIBAS) solution.

Toady 100% of bank’s 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 Computer
Technology.

EMBLEM The Deepmal

With its many lights rising to greater heights The Pillar

Institution- Symbolizing strength.

The Diyas

Branches- Symbolizing service.

The 3 M’s Symbolizing-

-Modernization of methods.

-Mobilization of money.

-Motivation of staff.
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. It’s
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”,
 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.
 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 Bank’s Central Office -
Honble Finance Minister, Shri Pranab Mukherjee visits Lokmangal, the
Bank’s Head quarters in Pune on 7-11 -2011.
2012 : : Hon’ble Union Finance Minister Shri P Chidambaram inaugurates the
Bank’s 1624th branch at Rajgambiram on 25.08.2012.
Sept 2012: Bank’s 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.
 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 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 Bank’s Central Office - Honble Finance
Minister, Shri Pranab Mukherjee visits Lokmangal, the Bank’s Head quarters in Pune
on 7-11-2011.

2012 :Hon’ble Union Finance Minister Shri P Chidambaram inaugurates the Bank’s
1624th branch at Rajgambiram on 25.08.2012.

Sept 2012: Bank’s 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

Award 2012 as Best Public Sector Bank under the category “Asset Quality”. BoM
hosted Bancon 2012 in Pune on 24th-25th November 2012. Hon’ble Union Finance
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)

MAHABANK SAVINGS ACCOUNTS SCHEMES

MAHABANK CURRENT ACCOUNT SCHEMES

MAHABANK TERM LOAN PRODUCT/SCHEME

TERM DEPOSIT SCHEME
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.
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 customer’s 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
loan, the borrower needs to be very careful in planning his financing modes. However

Page | 23

integrity of borrower and his capability to run the activity (in case businessman) and
adequate 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
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 011 types 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
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.
> THEORETICAL BACKGROUND OF RETAIL LENDING

Brief overview of loans:

Lending of money in the form of loans is the main and important function of every
bank. 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 Sanctioning powers(in rupees)

the field

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. The

new proposed 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 sanctioning powers of GM(credit. priority and

mid corporate) for GM heading the relevant function shall seek approval on
proposal from credit approval grid.
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 pricing
policy.

❖ 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.

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.

S Housing loan to individual - 12.50%

S Commercial real estate — 10%

S Indirect real estate - 10%

❖ Infrastructure sector - 40%

S Power sector - 20%

S Road - 6%

S Telecommunication - 5%

S Residual infrastructure - 9%

❖ Non fund business-30%

❖ Ceiling for industries

Sugar industries - 2%

Textile industries — 5%

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 director’s.

• 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
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 (SPV’s) 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:
❖ Fund base loans means

The bank is actually parting with funds. It includes

s Working 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%.

S Bill 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.

S Letter 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.

S Sanction amount is Rs. 500 lacs or above the documents must vetted by law officer
or advocate or panel before disbursement.

S If 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.
S Responsibility of maintaining documentation shall rest with the bank manager or
concern credit officer.

S Documents should renew within one year.

S Data 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

■S 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.

S 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.

S No lending below base rate.

S Base 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.

■f Sanction amount is Rs. 500 lacs or above the documents must vetted by law officer
or advocate or panel before disbursement.

S If 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.

v'' Responsibility of maintaining documentation shall rest with the bank manager or
concern credit officer.

S Documents should renew within one year.

S Data 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.

S No lending below base rate.

S Base 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
shall be restricted to 2%.

Revised
❖ rate of interest
Fixed option

Bank of Maharashtra head office provides with the effect from 26th august 2013, the
revised 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 Up to Above Above Rs.75.00 lakh

Rs.25.00 lakh &
amount Rs.25.00 Rs.30.00
and up to
above
lakh Rs.30.00 lakh lakh & less
 than
Floating option
Rs.75.00

lakh

Up to and Base Rate Base Rate Base Rate + Base Rate +

inclusive (10.25%) (10.25%) 0.50% 0.75%

of 5 years (10.75%) (11.00%)

Above 5 years Base Rate + Base Rate + Base Rate + Base Rate +
and 0.20% 0.25% 1.00% 1.25%

up to and (10.45%) (10.50%) (11.25%) (11.50%)

inclusive

of 10 years

Above 10 years Base Rate + Base Rate + Base Rate + Base Rate +
but 0.30% 0.50% 1.25% 1.50%

below & (10.55%) (10.75%) (11. 50%) (11.75%)

inclusive of

20 years

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 11.45% 12.45% 12.70%

of 5 years

Above 5 years and up 11.95% 12.70% 12.90%

to and inclusive of 10
years
❖ Fixed option
Above 10 years but

below & inclusive of

20 years

For repair / Base rate + 1.25% (11.50 %)

renovation

❖ 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
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 ITI’s ITC's, polytechnics and other technical’s
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 10lh class 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.

S Course 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.

S Age 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.
S Quantum of loan

For courses of duration up to one year Rs. 50000/- for courses of duration above one
year Rs. 150000/-

S Margin

NIL

S Rate 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.

■S Processing charges NIL S Security

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
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:

S Photocopy of PAN card.

S Last three years tax paid return.

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

y Address proof latest light bill/ telephone bill.

S Search and title report on banks panel.

S Photos.

S Visit 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

S Photocopy of PAN card/ election card.

S Address proof.

•S Last 3 years tax paid return form no. 16 (saral form 11).
S Latest 3 months pay slip in case of service.

S Photos.

CASE STUDY

Proposal under Mahabank Housing Loan scheme for public

Branch Nandurbar,Nandurbar

Name Mr. Mahindra gaikvvad

Co-applicant Mrs. Sushila Mahindra gaikwad

Residential Surya plaza, Nandurbar.

address

Business/ office 56, Girija, Vardhana Nagar. 425412 . Nandurbar

Address

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 15 years

business/

Service

PAN No. ABxxxxxxxxxxxxx

Purpose Purchase of flat no. xyz 2nd floor, at Devi Ahil iyabai Chowk,
Near Halt Darwaja . 425412 . Nandurbar admeasuring 1090 ft.

(purpose is eligible to be covered under the scheme)

Eligibility of Applicant is running business in the name of the and style as
applicant 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/
enhanced. Operations are

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 CC facility of Rs. Xyz/- lacs; BD facility Rs. Abe/- lacs and term
facilities from loan Rs. Pqr/- to M/S superheat inspection service, proprietor of the
our bank 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.

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 30

(including

depreciation)
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 No limit

property in urban area (A)

Maximum limit of finance in view of 15.00

margin requirement of 25 % for
construction new flat (75% of 40.00 lacs.)
(B)

Loan applied for requested by the 15.00

applicant (C)

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

in personal
Incomename
(NPAT + depreciation) as per IT returns

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 builder’s 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%)
Vehicle loan

To have an own vehicle it’s 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 vehicle
loan 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 •S Identity proof like photo
copy of PAN card, election card.

S Address proof like ration card, electric bill, telephone bill etc.

S Pay slips for last three to four months.

S Income tax return.

■S Quotation of vehicle

v' Amount paid receipt of vehicle if given earlier.

■S Photos.

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

certificate etc.

S Hypothecation 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

Date of birth 12-5-1975

Age 38

Business/activity/service Working in reliance communication

KYC Norms Complied salary A/C No. 6432xxxxxx

with our branch.

Remark Mr. Bhosle is working as manager in

Reliance telecommunication. Their
dealing of account is good.

Eligibility

Income Gross income for April 2013 of

Rs.55000/- p.m. net income of
Rs.35000/-

18 times gross emolument Rs.990000/-(A)

Cost of vehicle Rs.6.00 lacs

Minimum margin 15% Rs.l50000/-(actual 25%)

Loan amount Rs.450000/-(B)

Loan applied for Rs.450000/-(C)

Loan eligible(minimum of above) Rs.450000/-(75%)

Eligibility as per norms in r/o deductions from Rs.

income
Gross income of applicant A 55000

Proposed 10125 -
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

Other 2000

deductions

Installment

of existing
loan of
other bank

Total B 42875

deduction
% of B to 77.95%
A

Thus the percent of total deduction(including proposed EMI) to gross

monthly 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.
 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 10/05/1978

or PAN No. or ADxxxxx

Address House No.

45
Nandurbar,
Nan durbar-,
425419

Phone No. 02569-xxxxx

Repayment 60 months
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.
Education loan

(Under model educational scheme)

Education is most important now a days and it is the need of the today’s 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:

S Identity proof like PAN card, college identity card.

•S Address proof like electric bill or telephone bill or ration card etc.

■S Photo copy of passport (in case of abroad)

•S Photo copy of visa (in case of abroad)

•/ Residential agreement(in case of abroad)

S Domicile certificate

S Pay slip in case of applicant is in is in service S Academic 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

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 Result

passing

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

Name of the Indra college Pune
institution

Duration of course Two years

Expenditure 2.5 lacs.

involved

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
 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 Not required

verification

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

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 250000

1,11, and IV)

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.
He is eligible for finance under our banks model education loan scheme.

The applicant is expecting to generate adequate income out of job/profession to meet

the above repayment obligation after completion of the course.

In the view of above, proposal is recommended for sanction on follow ing terms
and condition

Facility Term loan under model educational loan

scheme

Amount 250 000

Purpose For pursuing an education in India

Security Nil-clean

Guarantor Nit

Rate of interest Base rate+1.75%=T2.00%

Rate of interest will be applied on simple

interest basis p.a. during moratorium
period and compounding on monthly rest
there after

Processing fees Nil

Moratorium/holiday There is an initial moratorium (for

repayment of both principle and interest )
of course period +1 year or 6months from
the date of getting employment
whichever is earlier.

Repayment There is an initial moratorium (for

repayment of both principle and interest)
of course period +1 year or 6months from
the date of getting employment
 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
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 eight
loans are sanctioned. And in 2012-2013 fourteen loan are sanctioned.

Net income of bank of Maharashtra

Year Net income (in crore’s)

2010-2011 330.39

2011-2012 430.83
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 crore’s)

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

S Up 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%.

S At present base rate is 10.25%.

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.

S For 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.

S For 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.

S Rs. 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 to
calculate 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 doesn’t sanction
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.
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 form
of 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

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

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

S Second 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
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 for
sanctioning loan. It also includes that how banks takes decision for financing the retail
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 Maharashtra’s 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 today’s 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 -
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