A STUDY ON Credit Risk Analyses of Business Entity OF (Varachha Co-Operative Bank Limited, Surat)

THE VARACHHA CO-OPRATIVE BANK LTD. SURAT.
A STUDY ON Credit risk analyses of business entity OF (Varachha co-operative bank limited, Surat) In partial fulfillment of the requirements for the award of the degree of MASTER OF BUSINESS ADMINISTRATION SUBMITTED BY: MAHENDRA MALANI ENROL. NO.117920592035 (M.B.A.SEM-2)
Under the guidance of PROF.DEVANG KALE
Submitted to: PARUL INSRITUTE OF MANAGEMENT AND RESEARCH VADODARA
1 PARUL INSTITUTE OF MANAGEMENT AND RESEARCH - VADODARA
BANK CRTIFICATE:
Preface:
Banks are regarded as the blood of the nations economy without them one cannot imagine economy moving. Therefore banks should be operated very efficiently, cooperative banks although a small part of whole banking system in India but they are very important not only from economical point of view but also from social point of view as it is more concerned about common peoples welfare and development.
Advance is heart and recovery is oxygen for the bank and for the bank to survive it is necessary to give advances and recover the amount at the appropriate time. Through credit management I have tried to cover the various aspects like credit appraisal. NPA management, recovery management, etc. E.g. credit management covers all the areas right from the beginning like inquiry till the loan has been paid up.
Though credit risk analyses of business entity, a very last topic, I have tried to incorporate to the best of my capacity from all possible aspects in this project.
I do better try that institution will appreciate this project.
ACKNOWLEGMENT:
I believe an ocean is filled by drops and each and every drop should count, similarly I should count favor of all my helpers here but this not possible. So forgive me for the same.
First of all I would like to thank to all the member of board of directors and especially to Mr. Kanjibhai Bhalala who has given me the advice and permission for training.
I am thankful to manager Mr.Sureshbhai kakadiya who has also given me permission for the summer training.
I want to express my sincere obligation to all the staff member of Varachha cooperative bank; I worked so long in a homely pleasant atmosphere.
I am thankful to Mr. Murty sir (principal of our collage) and Mr. Devang kale for their guidance and for the arrangement of summer placement.
Last but not least my family and my friends, who is always behind me in my work for support any time.
INDEX:
TOPIC BANK CERTIFICATE ACKNOWLEGMENT INTRODUCTION OF BANK INDUSTRIES: OVERVIEW OF BANKING INDUSTRIES INTRODUCTION OF VARACHHA COOPRATIVE BANK HISTORY OF VCB THE VCB PROVIDE BANKING SEVICE VARIOUS TYPES OF DEPOSIT IN VCB VARIOU TYPES OF LOANS OBJECTIVE OF VCB PROJECT ON CREDIT RISK MANAGEMENT TYPES OF CREDIT RISK CREDIT POLICY RESEARCH METHODOLOGY RESEARCH OBJECTIVE RESEARCH DESIGN DATA COLLECTION BENEFIT OF STUDY LIMITATION OF STUDY VARIOUS LOAN AND CREDITS INTEREST OF VARIOUS LOAN ALL TYPES OF CREDIT DATA ANALSIS AND OBJERVATION LOAN SANCTIONAL IN VCB CREDIT APPRAISAL APPRAISAL FORMAT FIANANCIAL MASUREMENT OF LOANEE MACHINERY LOAN APPRAISAL FORMAT OBSERVTION AND FINDINGD AND SUGGESTION CREDIT MONITORING, FOLLOW UP AND REVIEW PAGE NO. 2 3 7 8 13 14 16 19 23 24 26 28 36 36 37 37 37 37 37 37 37 38 52 55 57 59 62 63 70 72
THE VARACHHA CO-OPRATIVE BANK LTD. SURAT. CREDIT MONITORING SYSTEM IN VCB FOLLOW UP ACTION FOR CREDIT MONITORING IN VCB OBSERVATION FINDING AND SUGGESTION NON- PERFORMING ASSEST MEANING OF NPA IDENTIFICATION OF NPA PROVISION OF NPA IN VCB RECOVERY MANAGEMENT PROCESS OF RECOVERY LOAN RECOVERY MANAGEMENT IN VCB FINDING AND OBSERVATION CONCLUSION BIBLIOGRAPHY 73 74 76 77 77 78 79 80 82 82 83 84 73
INTRODUCTION:
Current time bank is crucial part of business and it is furnished services to connecting businessmen for urging dealing. Banking has played a very important role in the economic development of all the nations of the world. In fact, banking is the lifeblood of modern commerce is. So depend upon banking that any cessation of banking activity. Even for a day or two. This completely paralyzes the economic life of a nation.
OVERVIEW OF BANKING INDUSTRY:

The word bank has been derived from the Latin word bancus or from banque. Which mean a bench in English? The early bankers transacted their business at benches in a market place. When banker failed his bench was broken up by the people. According to some authorities derived from the German word bank was meaning a joint stock fund Italianated into banco when the German were masters of a great part of Italy, In India, the Hilton young commission recommended that word bank or banker should be interpreted as meaning every person, firm or company accepting deposits of money subject to withdrawal by cheque, draft or order. The Indian Banking Companies Act. 1949 define a Banking company as a company which transacts the business of banking in any State of India.
In the economic development of a nation banks occupy an important place. Banking institutions from an important part of the money market comprises both organized as well as unorganized sectors. The unorganized
sector includes moneylenders and indigenous bankers and largely caters to the needs of persons living in villages and small town. It is estimated that about one third of the total credit requirements of the country are met by the unorganized sector. Financial Institution in the organized sector have grown significantly in the last institutions in the organized sector of the Indian Money Market commercial bank and co-operative banks have been in existence for a petty long time. Besides the co-operative banks are Commercial banks and regional Rural Banks. A variety of specialized financial institutions have been setup in the country to cater to the specific needs of trade, commerce, agriculture, industry and other activities. In the field of agricultures finance and allied activities. Co-operative credit societies and central co-operative have been in operation since long. After nationalization in a 1969. Commercial banks also have expanded their activities to rural areas and provide finance for agriculture and allied activities. Thus quantitatively as well as qualitatively there banking instructions have increased their services tremendously in recent years.
STRUCTURE OF CO- OPERATIVE BANK:
Primary Co-operative Bank
Central Co-operative Bank
State Co-operative Bank
CO-OPERATIVE BANKS:
Farmers in India are scattered all over the country and need short-term small borrowing for agricultural purpose. This need is not fulfilled by commercial banks, which are unsuited for financing agriculture accepted as security by commercial banks. Therefore special types of banks are necessary for the financing of agriculture. Co-operative banks are best suitable for this purpose. The objective of co-operative banks is to offer banking facilities to persons of limited means requiring credit for productive purpose in the use of the land and labor at their disposal. The co-operative banking structure in India may be divided into their component part. Primary Co-operative Banks or Credit Society (PCS)
1.
The primary co-operative credit society is an association of borrows and non-borrows residing in a particular locality. The funds of the society are derived from the share capital and deposits of members and loans from central co-operative banks. The borrowing power of the members as well as of the society is fixed. The loans are given to members for the purpose of cattle, folder fertilizer, pesticides, implements, etc.
2. Central Co-operative Banks (CCB):-
There are the federations of primary credit societies in a district and are of two types- those having a membership of primary societies only and those having a membership of societies as well as individuals. The funds of the bank consist of share capital, deposits and overdrafts from state co-operative banks and joint stocks. These banks finance member societies within the limits of the
borrowing capacity of societies. They also conduct all the business of a joinstock bank.
3. State Co- Operative Banks (SCB):-
The state co-operative bank is a federation of central co-operative banks and acts as a watchdog of the co-operative banking structure in the state. Its funds are obtained from share capital from the Reserve Bank of India. The state co-operative banks lend money to central co-operative banks and primary societies and not directly to farmers. The principle one being the institution of provincial co-operative banks to serve as apex banks in the hierarchy of cooperative pyramid.
Role of Co-operative Banks in India and its structure:

Co-operative banking came into vogue in India in 1904 when the first Cooperative Credit Society Act was passed. The main function of a co-operative Credit Society was to provide cheap credit to the members who are small people with small means and small needs and finance. Another object was to inculcate the saving habit among the agriculturists and make them take advantage of cooperation from fellow members of the society. We could bring green revolution in agriculture sector only due to co-operative activities. There is a state co-operative bank in each state co-operative as an apex institution, advancing short term and medium term agriculture credit is three tier one: a state co-operative bank (SCB) at an apex level in each state, the at the district level and the primary and society (PCS) in the village, and urban banks (UB) and other non-agricultural credit societies (NACS) in cities and towns. The structure of co-operative banks.
As I discussed the co-operative societies came into existence when the co-operative societies act, 1904 was enacted. These societies, however could not mobilize enough resources as compared to the loans demanded by its members. This led to the enactment a new act in 1912. The various sections of this act are as follow: 1) To keep watch over the activities of the primary co-operative societies and to assist them the required monetary help and they guidance district central co-operative banks are established. 2) Establishing of non-leading societies along with the loan-giving (lending) societies. 3) The difference between the village societies and urban societies is removed and the type of societies maintain are only of two types. (i) (ii) Societies having limited responsibility. Societies having unlimited responsibilities.
In 1919, the Nontague Chemsford Act made co-operative societies and banks co-operative society acts have been passed by all the state government. From April 11966 the co-operative banks came under the preview of banking lagh a paid up capital of Rs. 1 lakh or more have come under the control of Reserve Bank of India. From above discussion, we see that the co-operative banks in India have shown very good progress since their establishment but in spite of showing very much progress there still exists a number of defects in such co-operative societies and banks. This has led qualitative improvement to suffer.
HISTORY:
The Varachha Co-operative Bank submitted the application for beginning of the bank and also registered to the Surat District Registration Department on 27th January, 1995 with registered no SA2914 and the registered office of the bank is at Affil Tower, Lambe Hanuman Road, Surat-395006. Within the period of five-month obtaining license from Reserve Bank of India, on 1 st July, 1995 with license number as UBD Guj1153 P after finishing has started its working on dated 16th August 1995. By gliting of lamp with inauguration of the bank was done by the Swami Sachidanand.
Board of Director: Shree P.B.Dhakesha Shree Kanjibhai bhalala Shree Prabhudas T. Patel Shree Lavjibhai M Nakrani Shree Kanjibhai R. Vadariya Shree Vallabhbhai P. Savani Shree Jivarajbhai K. Patel Shree Babubhai V. Mangukiya Shree G.R.Aashodariya Shree Vimalaben R. Vaghani Shree Smrutiben L. Dobariya (FOUNDER CHAIRMEN) (CHAIRMEN) (VICE CHAIRMEN) (DIRECTOR) (DIRECTOR) (DIRECTOR) (DIRECTOR) (DIRECTOR) (DIRECTOR) (DIRECTOR) (DIRECTOR)
A.D.Bhalani V.B.Dhanani
GENERAL MANAGER ASST.GENERAL MANAGER
S.D.Kakadiya
ASST.GENERAL MANAGER
P.D.Kelavala
ASST.GENERAL MANAGER
D.S.Bhuva
BRANCH MANAGER
T.P.Vora S.M.Chhaniyora
CREDIT MANAGER EDP MANAGER
CHAIRMEN P.B. Dhakecha
VICE CHAIRMEN Bhupendrabhai K. Ribadiya
MANAGING DIRECTOR Bhavanbhai B. Navapara
BOARD OF DIRECTOR
GENERAL MANAGER A.D.Bhalani
Branch Manager A.D Bhalani
Ring Road Branch Girishbhai patel
Katargam Branch Mukeshbhai Malviya
Punagam Branch B.J. Sovatiya
Sachin Branch S.L. Bhut
Kamrej Branch Kaniyalal Dobriya
Kadodara Branch D.B. Sorathiya
Kapodra Branch B.C. Sorthiya
Ahmedabad Branch Arvindbhai patel
DEVELOPMENT:The development of The Varachha Co- Operative Bank was continuously increasing after two and half year from establishing of Head Office. We can know more above bank from given a table of Branch establishment. The Varachha Co- Operative Bank was not need take loan from government sector and other. For Developing and Vested its branch so progress table as under. Branch Ahmedabad Address Pancham shoping moll, Near Jivan vadi, Nikol gam road, Ahmedabad. R-16 square, jaldhara chok, valiya Ankleshvar road, Ankleshvar Date 1-4-2012
23-6-2012
Amazing development of bank. To achieve in year 2000-2001. Because period of one year. The Varachha Co-operative bank was set up the three Braches within the short time to its evident to rapid development of the Varachha Co-operative Bank.
TH
VARACHHA
CO-OPERATIVE
BANK
ESPECIALLY BANKING SERVICES:
1. Tele-Banking Cum Fax Services:
By using tele-baking services, customer can take information about personal account ledger (PLA) and its transaction. And bye using fax services. Customer can take statement of last fifteen day on fax services.
2. Vat Machine: Visual Account Teller Machine i.e. called VAT Machine. Customer can see his statement, balance sheet, and other information by just entering his account number and PIN number and this facility is very popular in customers.
3. M.I.C.R. Cheque. Magnetic Ink Character Recognition that is known as M.I.C.R. This crucial technology is also adopted by The Varachha Co-Operative Bank for rapidly work with a view to speeding up the Cheque clearing process both local as well as intercity, under this system; the Cheque are processed at high. Speed on machines. Bank issue Cheque, draft and other payment instrument in M.I.C.R. Format using the special quality paper and printing specifications. On M.I.C.R. instrument there is code line at the bottom containing information printed in magnetic ink, which is required for mechanical processing. The code line contains the following information. First six number indicate the Cheque number Next three number indicate city code Next three number indicate bank code Next three number indicate branch code After some space three is the number for transaction code M. I. C. R. cheque should not be a folded pin, staples, etc. should only be used on top left hand corner of the Cheque. Signature of the drawer, rubber stamp, etc. should be affixed above the code line. Nothing should be written on the code line. In place of the counterfoils M.I. C. R. chequebooks provide for Record Slip. At the ends, which are used for recording the details of every cheque, issued.
4. Teller Payment Service:
Cashier furnishes this service if amount is not exceeding of 20,000 in Current Account and 10,000 in Saving Account so customer can draw directly through this service.
5. Other services:
a) Senior citizen For senior citizen Bank gives half percent more in Fixed Deposit to them whose age is above 60 years
b) Full Day Banking Services: Monday to Friday Saturday 10:00 a.m. to 6:00 p.m. 10:00 a.m. to 2:00 p.m.
c) Safe Deposit Vault services: Just open in Branch Kapodara Branch Katargam Branch Kamrej Branch d) N.R.I. (Non Resident in India) N.R.I. individual can open his account in The Varachha Co-operative Bank because The Varachha Co-operative Bank is granted through Reserve Bank of India
VARIOUS TYPES OF DEPOSIT ACCOUNTS IN VARACHHA BANK: Bank Account:
The bank accepted deposits from the public and offers facilitates to the public according to their requirements and economic status. Though bank accepts deposits as a fund-raising device. Its primary aim is to serve the society as financial institution and lend its might to strengthen the capital market. Keeping all these in video a bank usually offers three types of accounts in which it accepts deposits. 1) Fixed Time Deposit Account 2) Saving Deposit Account 3) Current Account
Details in Deposit Accounts:
1) Fixed Time Deposit Account:-
Fixed deposit accounts are made with the bank for a fixed period which is specified at the time of making the deposit. This account attracts those customers who have money to invest for a longer period but do not want to take much of risk. The interest rate varies from one period to another. A deposit of 15 days attracts a smaller rate of interest and deposits for 5 or more years the highest rate. Fixed deposit accounts are usually opened by the following kinds people.
1) Middle Income People. 2) Religious Societies 3) Trustee 4) Educational Institutions 5) Others who want to invest but at no risk at all.
2) Saving Deposit Account:The banks with a view to developing the peoples habit of savings the bank accept saving deposits. Normally people having fixed income belonging to middle class, deposit their savings in their accounts and the banks provide them facilities so that they may earn interest. Saving account open with minimum amount is Rs.1000 and the interest rate is 3.5%.
3) Current Account:-
Current accounts are also known as demand deposit accounts current account is running an active account which may be operated upon any number of times during a working day. There is no restriction on the number and the amount of withdrawals from a current account. Current account deposit is known as bankers demand liability and in order to fulfill its liabilities he keeps sufficient cash ready every moment. Function of Current Account Individual Account Proprietary Account Private account Hindu Undivided Family (HUF)
To encourage saving habits in general public and mobilize savings in the country for her development plans. So the bank offering. (i) Recurring Deposit Accounts: The recurring deposit account has gained wide popularity these days. Under this the depositor is required to deposit a fixed amount of money every month for specific period of time. Each installment may vary from Rs.5 to Rs.500 or more per month and the total period of account varies from 12 months to 10 years. After completion of the specified period, the customer gets back all his deposits along with the cumulative interest occurred on them. This type of accept is very popular amongst the salary people since it provides them an opportunity to raise the enough funds. So that they can utilize it in the purchase of some useful household good, the purchase of which otherwise it impossible.
MANAGEMENT DISTRIBUTION
Net Profit
TOWARDS
PROVISION
FOR
PROFIT
Deducted Provision Reserve Fund Share Dividend Dividend Equalization Fund Education Fund Building Fund Total Distribution Profit = DP Rest Profit = Net profit (DP) Rest Profit Deduction as per subrule: Accident annual fund Other activity fund Donation fund Rebate Interest Fund Jubilee Festival Fund Staff Benefit Fund Member welfare Fund 5% 20 % 10 % 20 % 10 % 10 % 20 % 25 % 15 % 02 % -
Co-operative Propaganda 05 % Fund Total 100 %
BANKERS:Bankers I.D.B.I BANK AXIES BANK Location Surat Surat
STATE BANK OF INDIA Chawlk Bazar Surat Nanpura BANK OF BARODA TAMILNADU MERCENTILE BANK KOTAK MAHINDRA BANK YES BANK H.D.F.C. Bank Ltd. I.C.I.C.I. Bank Ltd. Surat Surat Surat Surat Surat Surat
BANK PROVIDES VARIOUS TYPES OF LOANS:

1) Mortgage Loan 2) Consumer Loan 3) Vehicle Loan 4) Cash Credit Loan 5) Machinery Loan 6) Term Loan 7) Self-employee Loan 8) Loan on National Saving Certificate 9) TUF Loan (Textile Up gradation Fund ) 10) Gold Loan 11) Housing Loan
OBJECTIVE OF THE VARACHHA CO-OPERATIVE BANK

To encourage thrift and mutual Co-operating among its members. To create funds to be lend at moderate of interest to the members of the bank in accordance with the processor specified in these byelaws To undertake the management of trust and for that to accept any office of trustee, executors or office to perform duties of such a confidence nature either independently or jointly with some other person as the board deems fit. To undertake every kind of banking and sheriff business and also to undertake giving bank guarantee and letter of credit on behalf of members. To do every kind of trust and agency business and particularly do the work investment of funds, sale of properties and of recovery or acceptance of money. To give possible help and necessary guidance to traders, artisans etc. who are members of this bank in the conduct of their business.
PROGRESS OF THE VARACHHA BANK:
(Rows 2to 6 are in Crores)

No Contents No. of 1. Share Holders 2. Share Capital Total Deposit Total Loans Net Profit Working Capital No. of Depositor No. Of 8. Loan accepter 9. Dividend 12% 12% 12% 12% 15% 15% 6534 8999 9215 7739 6593 7972 4.31 4.63 5.24 5.91 7.29 7.90 10717 11569 12669 13566 17192 18837 03/07 3/08 3/09 3/10 3/11 3/12
3.
162.9
168.3
171.6
224.2
273.9
289.7
4. 5. 6.
73.26 1.51 208.3
80.23 2.81 221.2
92.3 3.02 226.9
94.89 3.15 320.4
115.88 4.05 347.1
155.88 5.06 374.31
7.
95783 99907 105674 115528 121922
132277
Basic information about topic: Credit risk refers to the risk that a borrower will default on any type of debt by failing to make payments which it is obligated to do. The risk is primarily that of the lender and includes lost principal and interest, disruption to cash flows, and increased collection costs. The loss may be complete or partial and can arise in a number of circumstances. For example:
A consumer may fail to make a payment due on a mortgage loan, credit card, line of credit, or other loan
A company is unable to repay amounts secured by a fixed or floating charge over the assets of the company
A business or consumer does not pay a trade invoice when due A business does not pay an employee's earned wages when due A business or government bond issuer does not make a payment on a coupon or principal payment when due
An insolvent insurance company does not pay a policy obligation An insolvent bank won't return funds to a depositor A government grants bankruptcy protection to an insolvent consumer or business
To reduce the lender's credit risk, the lender may perform a credit check on the prospective borrower, may require the borrower to take out appropriate insurance, such as mortgage insurance or seek security or guarantees of third parties, besides other possible strategies. In general, the higher the risk, the higher will be the interest rate that the debtor will be asked to pay on the debt.
Types of credit risk

Credit risk can be classified in the following way:
Credit default risk - The risk of loss arising from a debtor being unlikely to pay its loan obligations in full or the debtor is more than 90 days past due on any material credit obligation; default risk may impact all creditsensitive transactions, including loans, securities and derivatives.
Concentration risk - The risk associated with any single exposure or group of exposures with the potential to produce large enough losses to threaten a bank's core operations. It may arise in the form of single name concentration or industry concentration.
Country risk - The risk of loss arising from sovereign state freezing foreign currency payments (transfer/conversion risk) or when it defaults on its obligations (sovereign risk).
Forms of credit/ advances: 1) Loan (term) 2) Cash credit and overdrafts 3) Purchase/ discounting of bills 4) Bank guarantee Loan or term loan: In case of a loan a specified amount is sanctioned by the banker to the customer, who may either draw the amount in case immediately or may like the amount to be credit to his current account. But legally it is presumed that he has withdrawn the amount from the bank and deposited it in his current account. He is required to pay interest on the full amount from the date of sanction. A loan may be repayable in installments or in lump sum. Cash credit: A cash credit is a short-term cash loan to a company. A bank provides this type of funding, but only after the required security is given to secure the loan. Once a security for repayment has been given, the business that receives the loan can continuously draw from the bank up to a certain specified amount. The customer is required to provide tangible assets as security to cover the amount borrowed from the banker. The borrower is charged interest on the actual amount utilized by borrower and for the period actually utilized only. Overdrafts: Overdraw" redirects here. For overdraw in computer graphics, for overdraw in harmonica playing, see Overblowing. For the term in hydrology,
An overdraft occurs when money is withdrawn from a bank account and the available balance goes below zero. In this situation the account is said to be "overdrawn". If there is a prior agreement with the account provider for an overdraft, and the amount overdrawn is within the authorized overdraft limit, then interest is normally charged at the agreed rate. If the negative balance exceeds the agreed terms, then additional fees may be charged and higher interest rates may apply. Interest is charged on the exact amount overdrawn by the customer and for the period of its actual utilization. Bills discount: In case of bills discounting, a bank credit the amount of the bill to the drawers account before the realization of the bill and thus lends its funds to him after deduction his charges. The bills purchased and bills discounted by a bank are, therefore, shown in its balance sheet as part of loans and advances. in case of bill maturing after a period of time maximum for 180 day in RNSB, the banker retains the bill for that period and realizes the amount of bill from the drawer on its due date. This practice is called discounting of the bill. Bills purchase: The banker credits customers account with the amount of the bill after deduction his changes. As the demand bills are repayable on demand and there is no maturity, the banker is entitled to demand their payment immediately on presentation before of drawer. Their practice adopted in the case of demand bills is known as purchase of bills. Bank guarantee: It is a contract to perform the promise or discharge the liability of third persons in case of his default. In case of guarantee, bank is taking responsibility to pay the amount to seller if buyer will not pay amount in time.
Literature review outlines:
Risk management in banks attracted several researchers worldwide with different arguments, this section briefly review arguments as follows: Ariffin (2009): He investigated the risk management techniques of twenty eight banks through examining the perception of senior banker toward risk. This study covers 14 countries using a questionnaire and the result reveled that, banks are typically exposed to the same types of risk in conventional bank with different levels of the risk. Khan and Ahmed (2001): They investigate risk management practices in 17 Islamic financial institutions across 10 countries. Data has been collected using questionnaire and field level interview. The result revealed that, the most significant factor in risk management is rate of return risk as the general from murbaha contract cannot be hedged through conventional banking tools like interest rate swap and other derivatives tools which obstruct risk management in Islamic financial institution. Santomero (1996): He argued that all financial institution facing three types of risk: 1) Risk that cans be eliminated or avoided by simple business practices. 2) Risk that can be transferred to other participants, and 3) Risk that must be actively managed at the firm level. Oldfield and santomero (1997): They suggest four steps for risk management system as follows: 1) Standard and reports, 2) Position limits or rules, 3) Investment guidelines or strategies, and
General eligibility criteria for credit in VCB: As per the rules of co-operative, anyone who wants to avail finance has to become a member. As a shareholder of the bank, he/she have to make compulsory deposit of Rs 25000 or the payment of deposit as per rules and regulations of the bank and thereafter, he/she can submit the application for loan. In all the practice with the bank, you are known by bank through your compulsory deposited number. The application will have to be submitted in the prescribed form, where all details and particular will have to be furnished as demanded in the form. He/she has to submit further particulars as may be asked by the bank. The loanee will be advanced loan against the security and he/she has to submit 1 or 2 guarantors, who will be the recognized member and accepted to the bank and who must be shareholders of the bank in case of housing and machinery loan. The interest will be calculated on day to day basis. Taking in view the total amount of loans taken for different purpose by the firm or individuals, the interest will be calculated at the same rate on the entire advance. It will be necessary to make payment of share deposited or loan deposit at the rate of 2.5% of the sanction in case of secured loan and 5% of sanctioned loan or in case of unsecured loan. The minimum share deposited accepted of Rs.25000 and additional deposit over Rs.25000 will be accepted as loan deposit. The rate of interest on share deposit is 8.5% and that on loan deposit is different rate.
The company, who wants to take loan from bank, has to get its name registration for the said loan purpose with the registrar of companies and has to submit the documents of registration charge to the bank. Sometime a property which given in mortgage by borrower is already put before the bank in case of loan as a security at that time equitable mortgage is already done by party so there is no need of equitable mortgage again but th equitable extension is only needed. In case of immovable property or new purchase of machinery, equipment, etc. insurance of same amount and in case of old machinery, goods stock, etc. Twice of the price insurance is needed. In case of education loan, the life insurance of student is required. Margin money means gap between purchase value and bank finance. Bank always does payment directly to the seller. So loanee has to deposit the margin money in the bank. Scrutiny of credit: While scrutinizing an application from the bank takes into consideration safety, liquidity, purpose profitability, security and spread of advance. Safety Bank has to see that the prospective borrower is a reliable user of the finance and banks money is safe in his hands.
Liquidity Bank has to find out that the borrower is quite capable in repaying the finance within reasonable period. Purpose The purpose for the finance should not be illegal. It should be creative, service oriented. Development oriented and like bank should check end use of funds. Profitability If the prefect or the purpose of the finance is not profitable in the hands of the borrower than he will not be in a position of repaying the amount to bank. It should be profitable enough to generate the income to satisfy his needs and banks dues. Security The bank has to take into consideration the character, capacity and capital of the prospective borrower. Bigger advances and cash credit are to be secured with collateral security over and above prime security. Spread of advances For having balanced economy the bank should choose to spread the finance amongst various sectors of the society, so that the risk of incoming bad advances is minimized. Concentration on one type of advances may turn into bad advances if the scheme becomes ineffective due to some natural calamities or government rules or change in taste or demands of the society, by and large.
THE VARACHHA CO-OPRATIVE BANK LTD. SURAT. Compararision of loan data and risk schemes at Varachha:
1) RESEARCH PROBLEM:
Study on credit risk analyses and how to recover of loan and other risk amount of Varachha cooperative bank ltd.
2) RESEARCH OBJECTIVE:
To study the performance of loan of Varachha bank ltd. To study which are necessary document required for loan and which is the process of loan. To find out which bank is functioning well in providing loans.
VARIABLE UNDER STUDY: a) Interest rate b) Document c) Repayable d) Rebate
3) RESEARCH DESIGN:
Here descriptive research design is opted. In descriptive research, the cross sectional research design is selected because the sample taken out of the population is analyzed only once at a particular time interval. The data of Varachha bank about the loans which has given to the customers for 2 year will be analyzed.
4) POPULATION:
The population consists of the banks and their branches situated in Surat city.
5) SAMPLING:
Frame: All cooperative bank and their branches situated in Surat city.
THE VARACHHA CO-OPRATIVE BANK LTD. SURAT. Technique: To take sample, judgment method is used and compares the data of loan rate and rate and non-performing assets of bank. Samples: The data of loan schemes of VCB for last two year has been used.
6) DATA COLLECTION:
Types of data: All the data required to carry out the research will be obtained through secondary resources. So this research is purely based on secondary data and there is no use of primary data.
Instruments used: Annual reports Internet Newspapers
8) SCOPE OF FUTURE STUDY:

In this project, only comparison between Varachha bank is considered for the analyses. Further study can also be done by considering other cooperative bank. As the analysis is based on 2 years i.e. from 2010 to2011, it can also be done by longitudinal research for the analysis.
9) BENEFITS OF STUDY:
Research has always some benefits in some sense to some body. This study has helped the researcher as well as can benefits others too like investors, students.
Benefits to researcher: It may help in getting practical knowledge of banking system It may help to understand which bank is performing well in sanctioning of loan. It may help the researcher to learn how to conduct researcher and how prepare a report.
THE VARACHHA CO-OPRATIVE BANK LTD. SURAT. It also helps to learn how to apply the theoretical concept in practice. It prepares for the future and gave a lot of exposure. Benefits to others:
It may help the customers in taking decisions while taking loans which bank is better in giving loans and recover the amount of which bank is better. To student for reference in their study.
10)
LIMITATION OF RESEARCH:
Every project has its own limitation. As every study has some benefits, limitations is not exemption to the study: Findings and analysis is relevant only for the given period of time and its usefulness change with time. The time period for the analyses is not sufficient for detailed analysis this may be limitation for the study. Due to lack of experience on researchers side there is an element of error. Effects of various political, legal and other macro environment factors are ignored. The limitation of tools used in the project is also the limitation of report.
Interest rate on various advances: Particulars Vehicle loan Two wheeler Four wheeler Surety loan, home appliances Gold loan Up to 1,00,000 1,00,000 to 5,00,000 Land and building Staff surety loan loan against fixed deposit cash credit Self-employed loan Machinery loan Consumer loan Term loan Mortgage loan 11% 12% 14% 11% More than 2% of F.D 13% 12% 14% 14% 14% 15% _ 1% 1% 1% 1% 1% _ 1% 1% 13% 13% 12% 1% 1% 1% Interest Interest rebate
Types of credit: 1) Surety loan 2) Machinery loan 3) Cash credit loan 4) Vehicle loan 5) Gold loan 6) Bankable loan 7) Over draft 8) Fixed deposit loan 9) Bills purchase loan 10) Bank guarantee
Different types of staff loans 1) Staff surety loan 2) Staff vehicle loan 3) Staff domestic appliances loan 4) Staff housing loan
Explanation of all types of credit:
Surety loan: Purpose Limit Rate of interest Period Security Personal use 500000 14% 50 months Personal guarantee of two members of the bank. Documents Loan applies form, letter of guarantee, DP notes and letter of sanction. Submit paper In case of service person pay sleep, in case of business person last yearly business report.
Other term: When person will take loan that time put the 25% fixed deposit of loan amount. If the death of the loanee under the surety loan occurs, in the said circumstances, in remaining loan in his account will be credited from this account under his loan account and an amount as assistance will be paid to the heirs of the loanee immediately from this fund. The confirmed government employee can be granted a loan on acceptance letter taken from his employer to the effect that they will deduct the installment from his salary every month regularly and remit the same of bank. Machinery loan: Purpose For purchasing new machineries/furniture for business
purpose. Limit Rate of interest Period Security As per requirement 14% In normal 50 months 1) Existing old machineries 2) Equitable mortgage of land and building 3) Guarantee of two members of the bank as guarantors Documents Loan application form, letter of guarantee, DP notes, hypothecation of machineries old/new, insurance policy, letter of sanction. Submit paper Last three year business report, shop act license, SSI license, elec. Connection proof, IT return. If applicant is a partnership firm Partnership deed copy, reg., of firm. If applicant is a limited company Resolution of getting loan, memorandum of association, articles of association. Letter of assurance for registration in reg. of companies.
Other term: The payment of this kind of loan is given to the seller directly by bank. In case of mortgage of old security the insurance of the double amount of old security and about new security, the insurance of the value of purchase price is required
to the taken out from the insurance company recognized by bank and the said insurance policy is required to be recognized to be assigned in favor of the bank.
Vehicle loan: Purpose Purchase of new two wheeler or four wheeler Limit Margin Period Rate of interest Security No limit 25% F.D. of amount 36 month 13% (rebate: 1%) Hypothecation of the vehicle, two guarantors as a collateral security immovable property of loanee or guarantor. Documents Copy of registration of vehicle in RTO in particular city, higher purchase agreement in favor of bank, loan application form, vehicle dealers guarantee letter, letter of sanction, insurance policy, equitable mortgage or extension of property.
Submit paper
In case of service person pay sleep, in case of business person last yearly business report, IT return, quotation of vehicle
Other term:
It is necessary to take full comprehensive insurance for the vehicle, for which the higher purchase agreement is done in favor of the bank. The above insurance will have to be taken from the insurance company recognized by bank and will have assign in favor of the bank. Bank shall make direct payment to the dealer/seller.
Gold loan: Purpose Limit Period Rate of interest Personal use 500000 1 year but renew at every year. Up to 100000----11% 100000 to 500000-------12% Security Gold silver ornaments or items on repledge Documents Submit paper Loan application form, DP note In case of service person pay sleep and residency proof.
Other terms: This kind of loan is given on the re-pledge of ornaments or items of silver. This kind of loan is not available to the merchants of gold- silver for the purpose of buying selling. The purity of the ornaments or items of gold, which is given on re-pledge, be minimum 24 carets. In limit 10 grams for men 14000 and women 15000.
Bankable loan: Purpose To assist the small scale industry
Limit Margin Period Rate of interest Security
500000 25% 40 months 13% As a collateral security house property of loanee or guarantor or fixed deposits or national saving certificates as a mortgage 70% of sectioned loan, guarantee of two guarantors.
Documents
Equitable mortgage of property, loan application form, letter of guarantee, DP note, letter of sanction, insurance policy.
Submit paper
Shop act license, SSI license, elec. Connection proof, rent receipt, project report.
Other term: This loan is sectional on the recommendation of district industrial center after security and taking in view the value of security given against loan and particular of guarantor. Amount of subsidy given and sanctioned to the application is credit in his loan account. The payment except amount, which is sanctioned against working capital, of this loan is made directly to the party who has given the quotation.
Over draft: Purpose T fulfill the need of working capital of business Limit Margin Period As per requirement 25% Up to 1 year and if required then renew every year Rate of interest Security 13% Hypothecation of goods stock and equitable mortgage of property guarantee of two guarantors Documents Overdraft application form, letter of guarantee, equitable mortgage of property, DP note, letter of continuity, letter of sanction, insurance policy Submit paper Last 3 year business report, rent receipt, IT return, shop act license
Cash credit: purpose To meet the need of working capital business unit Limit 70% of stock of goods which are maintained in stock statement Margin Period Rate of interest Security 30% 12 month 13% a) As a prime security
hypothecation of goods stock. b) As a collateral security machinery, furniture equipment, fixed deposit, national saving certificate, equitable mortgage of immovable property. c) Guarantee of two guarantors. Document Cash credit application form, agreement letter, equitable mortgage of property, letter of sanction, letter of continuity, DP note, hypothecation of goods, insurance policy.
Other term: Loanee has to submit the stock statement to the bank every month regularly. Loanee has to submit the copy of income tax return or income tax assessment order every year. In the cash credit account facility, the turnover will to be done their of the sectional facility within 6 month and the same will have to be done five time of the sectioned facility within one year. As per the norms of the reser bank of India, a borrower cannot operate two cash credit account at time with two different banks.
Fixed deposit loan: Purpose To grant loan/overdraft to an individual or a firm against F.D.R. LIMIT Margin Period Rate of interest Security Document 75% of F.D.R 50% or less Till due date of F.D.R 2% more than F.D.R Duly discharge F.D.R DP note, duly discharge F.D.R, form of application Other term Lien should be noted in the FDR account and on the back of the FDR duly discharged
Bills purchase: Purpose To assist the customer for their short term need of working capital Limit Rate of interest Period Charges Documents As per required by applicant 18% 90 day maximum As per expenses DP note. Letter of guarantee, letter of continuity, agreement letter
Different types of staff loans: Staff surety loan: Purpose Limit Rate of interest Security Personal use 100000 6% Personal guarantee of two staff members of the bank Documents Application form, letter of sanction, DP note, letter of guarantee
Staff vehicle loan: Purpose To purchase a new two/four wheeler for personal use Limit Rate of interest Security As per requirement 6% Hypothecation of vehicle to be purchased Documents DP note, letter of guarantee, hypothecation of vehicle, insurance policy
Staff housing loan: purpose To construct/purchase residential building Limit For officer and other upper cadre: Rs.1200000 For clerk: Rs.800000 For peon and other: Rs.400000
Period Rate of interest Security
20 years 6.75% Equitable mortgage of property, two staff members guarantee
Documents
DP note, letter of guarantee, letter of sanction, insurance policy, equitable mortgage of property
BENEFITS OF THE STUDY: It provides the knowledge how these banks manage its credit risk and keeps them within tolerance level as per the RBI norms. It helped to know what strategies these banks adopt to reduce its risk when the bank feels that recovery is impossible. It gives the knowledge about the reasons for the rising credit risk in cooperative sector bank.
Data analysis and observation and suggestions: Though Varachha bank provides me good support and guidance for effective project work, yet as a student of management and at a neutral position I would like to suggest to Varachha bank for effective banking operation and take off high growth.
Presence of loan policy: In the VCB before eight year there was not proper policy for loan, but separate circular for each loan. But at present VCB have its own loan policy and criteria to sensor the loan. Coincidently, RBI also declared in near, each and every bank should bank should have its own loan policy. This is the point, which is striking us the foresightedness of the bank management and also loan manager of that time.
Varachha bank should be more customers segmented by providing better services immediately, so customer can save their time and satisfied by bank.
second thing is that bank should make reliable and necessary documents for opening account, it should be not strict the amount of deposits in comparison of other co-operative bank is high, so it should be low as suitable to customer
Bank not should but must start modern service for standing with competitor like ATM, credit card, debit card internet banking etc.
Loan policy cover: Delegation of lending power, method for assessment of working capital, rating of borrowers, loan pricing Delegation of lending power:
In the past time. VCB had given delegation of lending power to its selected branch office but at present RBI hurdle against this, by effect of it, VCB cancel all the delegation power of its branch office and burden of the head office given in written in language of suggestion that what should be the decision? And head office only complete fulfills the legal of formality to sanction the loan. However it takes more time for sanctioning loan but by the practical approach bank can solve this difficulty.
Loan pricing: VCB always give more interest on deposit than other bank in Surat district to attract the market, effects the loan pricing. So loan rate of VCB is higher. Though VCB get customer because of its services, its speedy process, practical approach and its reliability in market. But here one possible is also that the payer of higher interest is sometime reason for future loss or burden on bank. So try to get deposit at lower rate to reduce the loan pricing. It is also fact in this critical situation of cooperative bank. It is very hard to get deposits from the market but if bank management tries to create trust in public, here one more benefit is that the depositor and the borrower is the shareholder of the bank or say owner of the bank. So it is less hard than other types of bank to create trust.
Monitoring of unduly large exposure to an individual or a group: To stop the unduly large exposure to an individual or a group in VCB loan staff monitors and draw attention of higher authority. Reporting format: Reporting format for excess utilization of lending process by branch manager is now not needed because as per the new guidelines of the RBI, branch of cooperative bank has no power to sanction loan.
Credit rating of loans:

AAA: CASH CREDIT ACCOUNT: In the account, interest is paid regularly; it is paid to the end of every quarter within 10 days. Stock statement is received regularly. Overdraft is paid regularly with its interest. Every document is getting regularly for review and renew of account.
Term loan: In the account interest and installments are paid regularly. Notice is not given on account for any reason.
AA: Cash credit account: In the account which interest is paid regularly; it is paid at the end of the year quarter maximum 30 days. Stock statement is received regularly Overdraft is paid regularly with its interest.
Term loans: Maximum two installments are due but at the end of the year i.e. on 31st march, there is no due installment: Amount of loan sanction Up to 2500000 2500001 to 5000000 Above 5000000 Interest concession 1% 1.5% 2%
LOAN SANCTIONED BY VARACHHA CO-OPERATIVE BANK IN YEAR 2010-11 & 2011-12: (Rs. in Lacs) Sr. No 1 2 3 4 5 6 Types of Loan Term Loan Vehicle Loan CC/OD Loan Machinery Loan FD Loan NSC Loan Govt. 7 Sponsored Scheme Loan 8 9 10 11 Gold Loan Selfemployed Staff Loan Housing
252.22 619.41 35.66
2010-11
Amount Percentage
2011-12
Amount 238.62 4156.78 2573.65 4748.1 Percentage
278.12 2.408799584 2813.5 24.36774641 1940.5
1.535272 26.74457 16.55877
16.8066863
4520.3
39.1503551
90.87 4.03
30.5491 0.584654 0.025929
104.65 0.906374502 5.32
0.046076563
10.06
0.064726
1204.8
10.43478261
2394.70 132.42 160.21
15.40741
0.30885155
0.851985 1.030785
143.42 1.242161788
Loan Personal
242.60
2.184479473
410.74
3.985261
12
Loan Mortgage
4.96
2.101160575
2.93
2.642686
13
Loan
0.0429586
0.018852
Interpretation in graph:
5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0
2010/11 2011/12
Appraisal format
Primary information:
Name of the unit:
Date of establishment of business:
Types of business:
Date of starting of dealing with bank:
Address and telephone no.: office
Godown
factory
Structure of unit:
Proprietorship firm/ partnership firm/ private limited/ public limited
Name of the proprietor/ partners/ directors with compulsory deposit number
Information related to guarantors:
Name of guarantors:
Compulsory deposit number:
Business name:
Annual income:
Land building property:
Information about prevalent loan:
Information about prevalent facility provided by VCB:
Types of facility:
Amount granted:
Due date:
Present balance:
Any other loan a/c in VCB:
About present cash credit facility:
Credit turnover of last year:
Amount of cash credit:

Amount of cash credit with overdraft:
Previous year stock:
Present stock and date:
Measurement Credit balance compare with sale
Ideal 1:1
Performance
To pay off of overdraft/ excess
regular
Submission of stock statement monthly interest payoff
regular
Equated monthly installments on loan
regular
Account overdue( yes or no)
--------
Similarly in stock
10 to 15% difference
Information of collateral security:
Immovable property: Name of owner and designation of him:
Address of property:
Land in square yard:
Construction in square feet:
Estimated price of property:
Other liability on it, mention it.
Machinery/ furniture/ equipment etc.
Amount of property:
Security coverage:
Estimated value of collateral security:
Minus other liability on same property:
Plus other collateral security:
Total collateral security:

Amount of demand/ prevalent facility:
*security coverage: total collateral security/total facility)*100
*accepted measure 50%
Financial measurement of loanee:
Financial measurement
More/less (compare with last year)
Sales
Closing stock
Gross profit
Net profit
Borrowings from relatives
Net worth
(capital + reserve - proprietor / partners directors debt)
Financial measurement
More/ less (compare with ideal)
Current ratio: (current assets/ current liabilities)
Ideal 1.25/ 1 (minimum)
Debt equity ratio: (total debt/*total equity)* borrowings from relatives are included
Ideal 3/1 (maximum)
Format of balance sheet:
Capital and liability Current liability:
Property assets Current assets:
Bank loan CC/OD
Stock
Outstanding expenses
Debtors
Creditors of goods Other
Stores
Cash on hands
Bank balance
Prepaid expenses
Advances
Others
Total (a)
Total (a)
Medium/long term liability
Fixed assets:
Bank loan
Land and building
Finance corp. loan
Machineries
Other debts
Furniture
Rnsb term loan
Vehicle
Borrowing from relatives
Other investments
Others
Total (b)
Total (b)
Capital/ reserve
Proprietor/ partner/ directors debt
Capital
Others
Reserve
Goodwill
Profit
Patent
Other
Loss of previous years
Total (c)
Total (c)
General total (A+B+C)
General total (A+B+C)
Assessment for cash credit:
I. Capital + borrowers from relatives * 3 (As per the last year balance sheet)
----------------
II. Working capital (current assets- current liabilities) * 4 As per last year balance sheet) III. 20% estimated sales (Current year)
-----------
-------------------
Minimum of above three Or Demand/ prevalent facility Or
----------
----------
Maximum permissible finance (Minimum from above two)
-----------
Machinery loan appraisal format:
Information about the machinery to be purchased: Suppliers name: Machinerys name:
Quantity:
Price:
As per margin permissible loan if given:
Margin of permissible finance (working unit):
Margin on amount of demanded loan
Working capital as per last balance sheet:
Estimated reinvestment of the current year profit: Current years estimated working capital (2+3)
Margin of working capital (25%cureent asset of last year)

Margin for permissible finance (4-5)
Estimated profit and DSCR (debt security coverage ratio)
1) New unit PARTICULAR YEAR 1 1) Production capacity 2) Utilization capacity (%) 3) Production 4) Sales 5) Net profit 6) Depreciation 7) Interest on loan 8) Cash flow (5+6+7) 9) Amount of EMI of demanded loan per annum 10) (8/9) 11) Average DSCR 2 3 4 5 6
DSCR
2) Working capital:
Profit of current year Depreciation of current year Cash profit of current year (1+2) Amount of EMI of demanded loan per annum DSCR (3/4)
Minimum acceptable measure for DSCR 1.5 to 2. Sometimes in case of new unit, project report present unrealistic picture of future. So bank should keep it in consideration at the time of calculation of DSCR. Accepted measure for it is 60%.
Appraisal of immovable property:
Name of owner and designation of him:
Address of property:
Land in square yard:
Proposed construction in square feet:
Plan of construction passed by Municipal Corporation:
Estimated cost of property:
(Amount of land\d is calculated as per the address

+ amount of construction is calculated square feet*400)
Inspection report:
Goods stock Type of business Reporting after checking of accounting books, vouchers, etc. Insurance of stock and mortgaged property is as norms, isnt it? It is proper for sanction?
Department note: Credit deservedness of loanee Name of facility Requested amount for credit Permissible finance as per appraisal
Other criteria: Borrowings from relatives are retained in business. Without permission from bank relative cannot withdraw that amount Immovable property is needed to take as a collateral security. Late/retire partners capital is not withdrawn without permission from bank Current ratio Debt equity ratio Security coverage DSCR
Observation and findings and suggestion: Format for collection of minimum information about potential borrower: It is must for any bank who wants to win market to collect the information about his potential customer. VCB a bank which eager to increase own market share also collect the information about future borrower.
Use of software for credit appraisal: Bank has own computer department to manage and maintain the software for bank but this now in initial stage. Majority time consume work is done by the computer though appraisal of credit is done by manually. Revision in appraisal format during last 78 year. VCB prepared its policy before seven-eight year and decide proper criteria for sanction the loan.
Different appraisal for different loan segment: There is on common format for all loans are not possible because each loan require particular information and calculation. Here in VCB I find different appraisal format for different segment. That we see in above appraisal.
System of fixation of maximum time for loan sanction and sanction within limit: On paper, there is no maximum limit for sanction the loan but generally as per the opinion of officer within ten days loan is sanctions. Sometimes because of careless of the borrow or take time for provided needed documents is reason for delay of sanction the loan.
Practice of rating of borrower and loan pricing: VCB give rating to the borrower on the base of their last year dealing with bank. For that VCB have software which give rating to the borrower. At the time of appraisal, rating is not given. Compliance of terms and conditions proprietors contribution, collateral securities, etc. Before preparing the loan report, it is keeping in view that all types of requirement are fulfilled. Condition letter is given to customer if customer fulfills all the conditions loan is sanctioned by bank.
Computation of customer profitability per borrower: Generally I practice, not a single cooperative bank in Surat is calculating the customer profitability per borrower. If it is calculated bank can know which customers are more beneficial for them so bank can give attention to maintain them and can increase profit.
Sanction of loan: In the cooperative bank, sanctioning power are only in the hands of board of directors so sometime loans are sanctioned on the bases of relation not on the bases of the deservedness of customer. I also consider that the cooperative banks are basically meant for the benefit for the benefit of its embers but within the limit of reserve bank of Indias guidelines. Slight modification in these rules for well-being of members is still allowed.+
Credit monitoring, follow up and review:
When we lend, it is essential for us that to keep watch on it till we recover it. This called credit monitoring in term of banking.
Credit monitoring system in VCB:
In the VCB, there is system for credit monitoring specially account, which is above 100000 rupee is describes below: Find out the list of potential NPA account above 100000 rupees Statement of potential NPA accounts are submitted to head office from branches Head office monitoring this every three months and prepare report on it Report is submitted to board of directors.
Follow up action for credit monitoring in VCB: + Consolidation of data, which comes from the branches and every month, update the data and generate this and use it for follow up Head office directly sends the notice to account holders of such accounts To stop the slippage of the potential NPA accounts, bank organize the committee under authorization of Mr. V.B.dhanani (A.G.M) and Mr.vora sir (loan manager) with the help every branch recovery officers, they try to recover. General manager arranges the meeting for that and gives guidelines to the committee member.
Observation findings and suggestions:
System of loan portfolio review and monitoring: There is system of weekly review and monitoring of loan portfolio in the VCB, very week a statement is prepare be acquainted with the present credit deposit ratio, if this ratio is less than 70% for example 65%, it represent that bank can finance up to 5% at present.
Compliance of prudential guidelines: Exposure ceiling : (a) individual 20% of the total capital fund : (b) group fund Priority sector lending : priority advance : Weaker advance 15% of the total 60% of the total 50% of the total capital
This is followed by the VCB.
Items of priority sector:
Advance to individuals for activities allied to agriculture.
Loans and advance to cottage/small scale industries and equipment system for development of new and renewable sources of energy.
Advance to road and water transports operates for purchase of one vehicle.
Private retail traders dealing in essential commodities (fair practice shop).
Small business enterprise.
Professional and self-employed persons.
Housing loans not maximum criteria
Consumption loan.
Items of weaker section:
Scheduled caste and scheduled tribe
Women and other
Timely renew and review by credit limit:
Every year VCB review cash credit accounts and every 3 year renew that account. At the time of review bank only keep in view the turnover of business, account inspection, field inspection, renew insurance, renew shop act license, proof of rent, income tax return or assessment of income tax, turnover with bank. But process of renew of accounts is totally inspection of party. Bank considers last 3 years business progress of the party and deal with bank also.
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.
Identification:
With a view to moving towards international best practices and to ensure greater transparency, it has been decided to adopt the 90 days overdue norm for identification of NPA, from the year ending March 31, 2004. Accordingly, with effect from March 31, 2004, a non-performing asset (NPA) shall be a loan or an advance where;
Interest and/or installment of principal remain overdue for a period of more than 90 days in respect of a term loan, The account remains out of order for a period of more than 90 days, in respect of an Overdraft/Cash Credit (OD/CC),
The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,
Interest and/or installment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purposes, and
Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts.
Classification:
Banks are required to classify non-performing assets further into the following three categories based on the period for which the asset has remained nonperforming and the reliability of the dues:

1 Sub-standard Assets 2 Doubtful Assets

76
PARUL INSTITUTE OF MANAGEMENT AND RESEARCH - VADODARA
3 Loss Assets
Substandard asset is the asset in which bank have to maintain 10% of its reserves.
PROVISION OF N.P.A. IN VARACHHA BANK AT 31-03-2012: ( AMT IN LACKS) LOAN WILL BE RECOVER TOTAL AMOUNT A/CS 7972 15588.17 7967 15532.48 5 55.62 MAY BE PROVISION 122.01 66.39 55.62 ACTUAL PROVISIN 936.05
Total loan 1) Standard assets 2) Non-performing assets ---sub standard ---doubtful= up to1 year 1 to 3 year 3 year or more ----loss assets PROVISION: 1) Standard assets against 2) Bed & doubtful debt reserve 3) Non-performing assets against TOTAL
55.62
55.62 206.60
360.20
369.25
7972
15588.10
122.01
936.05
Recovery:
Recovery management consist of the functions and activities the bank carries out acquire back what the bank has advanced with principle amount as well as interest on the same. So it is recovery of what the bank advanced to loanee for carrying out their purpose objective of taking a loan.
Process of recovery: If three installments are outstanding, Notice through branch office Personal visit and meeting
If no response Notice through advocate
Through no effect Claim through court if party ready of court settlement otherwise
After completion of formalities Bank will get the order of securities from court to recover their due.
LOAN RECOVERY MANAGEMENT: GROSS NPA YEAR TOTAL TOTAL LONS A/CS 2008 2009 2010 2011 2012 8999 9215 7739 6593 7972 LOAN AMT. 8022.86 9203.17 9488.67 37 31 23 221.02 212.93 222.63 55.84 55.62 2.75 2.31 2.35 .84 .36 454.88 498.54 587 649.11 936.05 A/CS AMOUNT PER. % PROVISION NET OF NPA NPA % 0 0 0 0 0
11587.98 5 15588.10 5
GRAPH DEFINES TO GROSS NPA:

1000 900 800 700 600 500 400 300 200 100 0 1 2 3 4 5 ACCOUNTS AMOUNT PROVISION OF NPA
Finding and observation:

Findings: Provide better a fast service to customer. Bank continues gets audit class A in every year. The bank has fully computerized system. The bank can attract more customers through their well services. A bank is progress in current time because its profit is increase in day to day. The customer can know their balance and other transaction related his account through visual account terminal machine. It has not more than 9 branches in Surat so far the varaccha cooperative bank has to face the competition with other bank because bank provides policies and other facilities.
The accounts, which are not getting benefit of one time settlement: Loans under government directed programmers. Loans due from government department undertakings. Case of willful default, fraud and malfeasance. Loan with tie up arrangement for recovery (e.g. loan avail by salary earners) Loans avail of or guaranteed by directors or by close relatives of director or by firms companies institution in which the directors are the interest are the interest or by ex-directors of respective urban cooperative banks. Loans guaranteed by government (including case where government guarantee has been involved but not honored by the government)
Conclusion: Credit risk an investors risk of loss arising from borrower who does not make payment as promised. Such an event is called a default. Another term for credit risk is default risk. Bank also transfer amount through NEFT and RTGS for I.D.B.I and AXIS bank. This transfer is easy to and short time to transfer amount to one account to another account. The Varaccha bank provides money on credit base to their customer by various ways. In case of credit risk management of the bank get various documents from the customers as legal proof of their credit. Varaccha bank will open new branches in Surat and it is spread in out of Surat like Ahmadabad and Ankleshevar and other city. So we can say that this bank has growth in current time Varaccha bank gives more facility in customer in current time and to give more and better facility in future. Though Varaccha bank provides me good support and guidance for effective project work, yet as a student of management and at a neutral position I would like to suggest to Varachha bank for effective banking operation and take off high growth.
There should be linking of performance and reward for motivate to staff and workers. Top management should provide effective salary to staff members for increase performance.
BIBLIOGRAPHY:
Annual report of bank
Shekhar K.C. banking theory and practices. New Delhi: vikas publishing house pvt. Ltd., 1985
Magazines, newspaper and authors books (I.M Panday)
Internet:
www.google.com
www.varacchabank.com
www.rbi.org.in.com

A STUDY ON Credit Risk Analyses of Business Entity OF (Varachha Co-Operative Bank Limited, Surat)

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A STUDY ON Credit Risk Analyses of Business Entity OF (Varachha Co-Operative Bank Limited, Surat)

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THE VARACHHA CO-OPRATIVE BANK LTD. SURAT.

Under the guidance of PROF.DEVANG KALE

Submitted to: PARUL INSRITUTE OF MANAGEMENT AND RESEARCH VADODARA

1 PARUL INSTITUTE OF MANAGEMENT AND RESEARCH - VADODARA

THE VARACHHA CO-OPRATIVE BANK LTD. SURAT.

2 PARUL INSTITUTE OF MANAGEMENT AND RESEARCH - VADODARA

THE VARACHHA CO-OPRATIVE BANK LTD. SURAT.

I do better try that institution will appreciate this project.

3 PARUL INSTITUTE OF MANAGEMENT AND RESEARCH - VADODARA

THE VARACHHA CO-OPRATIVE BANK LTD. SURAT.

4 PARUL INSTITUTE OF MANAGEMENT AND RESEARCH - VADODARA

THE VARACHHA CO-OPRATIVE BANK LTD. SURAT.

5 PARUL INSTITUTE OF MANAGEMENT AND RESEARCH - VADODARA

6 PARUL INSTITUTE OF MANAGEMENT AND RESEARCH - VADODARA

THE VARACHHA CO-OPRATIVE BANK LTD. SURAT.

OVERVIEW OF BANKING INDUSTRY:

THE VARACHHA CO-OPRATIVE BANK LTD. SURAT.

STRUCTURE OF CO- OPERATIVE BANK:

Primary Co-operative Bank

Central Co-operative Bank

State Co-operative Bank

8 PARUL INSTITUTE OF MANAGEMENT AND RESEARCH - VADODARA

THE VARACHHA CO-OPRATIVE BANK LTD. SURAT.

2. Central Co-operative Banks (CCB):-

9 PARUL INSTITUTE OF MANAGEMENT AND RESEARCH - VADODARA

THE VARACHHA CO-OPRATIVE BANK LTD. SURAT.

3. State Co- Operative Banks (SCB):-

Role of Co-operative Banks in India and its structure:

10 PARUL INSTITUTE OF MANAGEMENT AND RESEARCH - VADODARA

THE VARACHHA CO-OPRATIVE BANK LTD. SURAT.

11 PARUL INSTITUTE OF MANAGEMENT AND RESEARCH - VADODARA

THE VARACHHA CO-OPRATIVE BANK LTD. SURAT.

12 PARUL INSTITUTE OF MANAGEMENT AND RESEARCH - VADODARA

THE VARACHHA CO-OPRATIVE BANK LTD. SURAT.

GENERAL MANAGER ASST.GENERAL MANAGER

CREDIT MANAGER EDP MANAGER

13 PARUL INSTITUTE OF MANAGEMENT AND RESEARCH - VADODARA

THE VARACHHA CO-OPRATIVE BANK LTD. SURAT.

CHAIRMEN P.B. Dhakecha

VICE CHAIRMEN Bhupendrabhai K. Ribadiya

MANAGING DIRECTOR Bhavanbhai B. Navapara

GENERAL MANAGER A.D.Bhalani

Branch Manager A.D Bhalani

Ring Road Branch Girishbhai patel

Katargam Branch Mukeshbhai Malviya

Punagam Branch B.J. Sovatiya

Sachin Branch S.L. Bhut

Kamrej Branch Kaniyalal Dobriya

Kadodara Branch D.B. Sorathiya

Kapodra Branch B.C. Sorthiya

Ahmedabad Branch Arvindbhai patel

14 PARUL INSTITUTE OF MANAGEMENT AND RESEARCH - VADODARA

THE VARACHHA CO-OPRATIVE BANK LTD. SURAT.

ESPECIALLY BANKING SERVICES:

1. Tele-Banking Cum Fax Services:

15 PARUL INSTITUTE OF MANAGEMENT AND RESEARCH - VADODARA

THE VARACHHA CO-OPRATIVE BANK LTD. SURAT.

16 PARUL INSTITUTE OF MANAGEMENT AND RESEARCH - VADODARA

THE VARACHHA CO-OPRATIVE BANK LTD. SURAT.

4. Teller Payment Service:

17 PARUL INSTITUTE OF MANAGEMENT AND RESEARCH - VADODARA

THE VARACHHA CO-OPRATIVE BANK LTD. SURAT.

VARIOUS TYPES OF DEPOSIT ACCOUNTS IN VARACHHA BANK: Bank Account: