29825301 Functions of Commercial Banks

7/31/2019 29825301 Functions of Commercial Banks

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Functions of Commercial Banks

The functions of a commercial banks are divided into two categories:

i) Primary functions, and

ii) Secondary functions including agency functions.

i) Primary functions:

The primary functions of a commercial bank include:

a) accepting deposits; and

b) granting loans and advances;

a) Accepting deposits

The most important activity of a commercial bank is to mobilise deposits from the public. People

who have surplus income and savings find it convenient to deposit the amounts with banks.

Depending upon the nature of deposits, funds deposited with

bank also earn interest. Thus, deposits with the bank grow along with the interest earned. If the rate

of interest is higher, public are motivated to deposit more funds with the bank. There is also safety

of funds deposited with the bank.

b) Grant of loans and advances

The second important function of a commercial bank is to grant loans and advances. Such loans

and advances are given to members of the public and to the business community at a higher rate of

interest than allowed by banks on various deposit accounts.

The rate of interest charged on loans and advances varies depending upon the purpose, period and

the mode of repayment. The difference between the rate of interest allowed on deposits and the rate

charged on the Loans is the main source of a bank's income.

i) Loans

A loan is granted for a specific time period. Generally, commercial banks grant short-term loans.

But term loans, that is, loan for more than a year, may also be granted. The borrower may withdraw

the entire amount in lumpsum or in instalments. However, interest is charged on the full amount of

loan. Loans are generally granted against the security of certain assets. A loan may be repaid either

in lumpsum or in instalments.


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ii) Advances

An advance is a credit facility provided by the bank to its customers. It differs from loan in the

sense that loans may be granted for longer period, but advances are normally granted for a short

period of time. Further the purpose of granting advances is to meet the day to day requirements of

business. The rate of interest charged on advances varies from bank to bank. Interest is charged

only on the amount

withdrawn and not on the sanctioned amount.

Modes of short-term financial assistance

Banks grant short-term financial assistance by way of cash credit, overdraft and bill discounting.

a) Cash Credit

Cash credit is an arrangement whereby the bank allows the borrower to draw amounts upto a

specified limit. The amount is credited to the account of the customer. The customer can

withdraw this amount as and when he requires. Interest is charged on the amount actually

withdrawn. Cash Credit is granted as per agreed terms and conditions with the customers.

b)Overdraft

Overdraft is also a credit facility granted by bank. A customer who has a current account with the

bank is allowed to withdraw more than the amount of credit balance in his account. It is a

temporary arrangement. Overdraft facility with a specified limit is allowed either on the security of

assets, or on personal security, or both.

c) Discounting of Bills

Banks provide short-term finance by discounting bills, that is, making payment of the amount before

the due date of the bills after deducting a certain rate of discount. The party gets the funds without

waiting for the date of maturity of the bills. In case any bill is dishonoured on the due date, the bank

can recover the amount from the customer.


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ii) Secondary functions

Besides the primary functions of accepting deposits and lending money, banks perform a number of

other functions which are called secondary functions. These are as follows Issuing letters of credit, travellers cheques, circular notes etc.

a) Undertaking safe custody of valuables, important documents, and securities by providing safe

deposit vaults or lockers;b) Providing customers with facilities of foreign exchange.

c) Transferring money from one place to another; and from one branch to another branch of

the bank.

d) Standing guarantee on behalf of its customers, for making payments for purchase of goods,

machinery, vehicles etc.

e) Collecting and supplying business information;

f) Issuing demand drafts and pay orders; and,

g) Providing reports on the credit worthiness of customers.

Different modes of Acceptance ofDeposits

Banks receive money from the public by way of deposits. The following

types of deposits are usually received by banks:

i) Current deposit

ii) Saving deposit

iii) Fixed depositiv) Recurring deposit

v) Miscellaneous deposits

i) Current Deposit

Also called 'demand deposit', current deposit can be withdrawn by the depositor at any time by

cheques. Businessmen generally open current accounts with banks. Current accounts do not carry

any interest as the amount deposited in these accounts is repayable on demand without

any restriction.The Reserve bank of India prohibits payment of interest on current accounts or on deposits upto 14

Days or less except where prior sanction has been obtained. Banks usually charge a small amount

known as incidental charges on current deposit accounts depending on the number of transaction.


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ii) Savings deposit/Savings Bank Accounts

Savings deposit account is meant for individuals who wish to deposit small amounts out of their

current income. It helps in safe guarding their future and also earning interest on the savings. A

saving account can be opened with or without cheque book facility. There are restrictions on the

withdrawls from this account. Savings account holders are also allowed to deposit cheques, drafts,

dividend warrants, etc. drawn in their favour for collection by the bank. To open a savings account,

it is necessary for the depositor to be introduced by a person having a current or savings account

with the same bank.

iii) Fixed deposit

The term 'Fixed deposit' means deposit repayable after the expiry of a specified period. Since it is

repayable only after a fixed period of time, which is to be determined at the time of opening of the

account, it is also known as time deposit. Fixed deposits are most useful for a commercial bank.

Since they are repayable only after a fixed period, the bank may invest these funds more profitably

by lending at higher rates of interest and for relatively longer periods. The rate of interest on fixed

deposits depends upon the period of deposits. The longer the period, the higher is the rate of interest

offered. The rate of interest to be allowed on fixed deposits is governed by rules laid down by the

Reserve Bank of India.

iv) Recurring Deposits

Recurring Deposits are gaining wide popularity these days. Under this type of deposit, the depositor

is required to deposit a fixed amount of money every month for a specific period of time. Each

instalment may vary from Rs.5/- to Rs.500/- or more per month and the period of account may vary

from 12 months to 10 years. After the completion of the specified period, the customer gets back all

his deposits alongwith the cumulative interest accrued on the deposits.

v) Miscellaneous Deposits

Banks have introduced several deposit schemes to attract deposits from different types of people,

like Home Construction deposit scheme, Sickness Benefit deposit scheme, Children Gift plan, Old

age pension scheme, Mini deposit scheme, etc.


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Different methods of Granting Loans by Bank

The basic function of a commercial bank is to make loans and advances out of the money which is

received from the public by way of deposits. The loans are particularly granted to businessmen and

members of the public against personal security, gold and silver and other movable and

immovable assets. Commercial bank generally lend money in the following form:

i. Cash credit

ii. Loans

iii. Bank overdraft, and

iv. Discounting of Bills

i. Cash Credit :

A cash credit is an arrangement whereby the bank agrees to lend money to the borrower upto

a certain limit. The bank puts this amount of money to the credit of the borrower. The

borrower draws the money as and when he needs. Interest is charged only on the amount

actually drawn and not on the amount placed to the credit of borrower's account. Cash

credit is generally granted on a bond of credit or certain other securities. This a very popular

method of lending in our country.

ii. Loans:

A specified amount sanctioned by a bank to the customer is called a 'loan'. It is granted for

a fixed period, say six months, or a year. The specified amount is put on the credit of the

borrower's account. He can withdraw this amount in lump sum or can draw cheques againstthis sum for any amount. Interest is charged on the full amount even if the borrower does not

utilise it. The rate of interest is lower on loans in comparison to cash credit. A loan is

generally granted against the security of property or personal security. The loan may be

repaid in lump sum or in instalments. Every bank has its own procedure of granting loans.

Hence a bank is at liberty to grant loan depending on its own resources.

The loan can be granted as:

a) Demand loan;or,

b) Term loan.

a) Demand loan:

Demand loan is repayable on demand. In other words it is repayable at short notice.

The entire amount of demand loan is disbursed at one time and the borrower has to

pay interest on it. The borrower can repay the loan either in lumpsum (one time) or as

agreed with the bank. Loans are normally granted by the bank against tangible

securities including securities like N.S.C., Kisan Vikas Patra, Life Insurance policies

and U.T.I. certificates.


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b) Term loans:

Medium and long term loans are called 'Term loans'. Term loans are granted for more

than one year and repayment of such loans is spread over a longer period. The

repayment is generally made in suitable instalments of fixed amount. These loans are

repayable over a period of 5 years and maximum upto 15 years. Term loan is required

for the purpose of setting up of new business activity, renovation, modernisation,

expansion/extension of existing units, purchase of plant and machinery, vehicles, land

for setting up a factory, construction of factory building or purchase of other

immovable assets. These loans are generally secured against the mortgage of land,

plant and machinery, building and other securities. The normal rate of interest charged

for such loans is generally quite high.

iii) Bank Overdraft:

Overdraft facility is more or less similar to cash credit facility. Overdraft facility is the

result of an agreement with the bank by which a current account holder is allowed to

withdraw a specified amount over and above the credit balance in his/her account. It

is a short term facility. This facility is made available to current account holders who

operate their account through cheques. The customer is permitted to withdraw the

amount as and when he/she needs it and to repay it through deposits in his account as

and when it is convenient to him/her. Overdraft facility is generally granted by bank

on the basis of a written request by the customer. Some times, banks also insist on

either a promissory note from the borrower or personal security to ensure safety of

funds. Interest is charged on actual amount withdrawn by thecustomer. The interest

rate on overdraft is higher than that of the rate on loan.

iv) Discounting of Bills

Apart from granting cash credit, loans and overdraft, banks also grant financial assistance to

customers by discounting bills of exchange. Banks purchase the bills at face value minus

interest at current rate of interest for the period of the bill. This is known as 'discounting of

bills'. Bills of exchange are negotiable instruments and enable the debtors to discharge their

obligations towards their creditors. Such bills of exchange arise out of commercial

transactions both in internal trade and external trade. By discounting these bills before they

are due for a nominal amount, the banks help the business community. Of course, the banks

recover the full amount of these bills from the persons liable to make payment.


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Agency and General Utility Services provided by

Modern Commercial Banks

Besides the two main activities, commercial banks also render a number of ancillary services.

These services supplement the main activities of the banks. They are essentially non-banking innature and broadly fall under two categories:

i) Agency services, and

ii) General utility services.

i) Agency Services

Agency services are those services which are rendered by commercial banks as agents of their

customers. They include :

1. Collection and payment of cheques and bills on behalf of thecustomers;

2. Collection of dividends, interest and rent, etc. on behalf of

customers, if so instructed by them;

3. Purchase and sale of shares and securities on behalf of customers;

4. Payment of rent, interest, insurance premium, subscriptions etc. on

behalf of customers, if so instructed;

5. Acting as a trustee or executor;

6. Acting as agents or correspondents on behalf of customers for other banks and financial

institutions at home and abroad.

ii) General utility services

General utility services are those services which are rendered by commercial banks not only to

the customers but also to the general public. These are available to the public on payment of a fee

or charge. They include :a) Issuing letters of credit and travellers' cheques;

b) Underwriting of shares, debentures, etc.;

c) Safe-keeping of valuables in safe deposit locker;

d) Underwriting loans floated by government and public bodies.


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e) Supplying trade information and statistical data useful to customers;

f) Acting as a referee regarding the financial status of customers;

g) Undertaking foreign exchange business.


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DEPOSIT PRODUCTS:

Flexi-FixDeposit

1. Introduction:

1.1 The scheme gives maximum return without sacrificing the liquidity.

2. The Scheme:

2.1 Salient features and Rules of the Scheme are as follows :

y It is a running account consisting of multiple units of simple or compound interest

fetching Term Deposit Accounts like normal Fixed Deposit or Double Deposit Planrespectively.

y No Term Deposit Receipt will be issued for the deposits. Instead, a specially designed

pass book will be issued to the depositor, in which all the particulars regarding deposits,withdrawals, interest credit/ debit are recorded. However, the account under the scheme

will be linked to a base account, which may be a Savings Bank or Current Account. Forpayment of interest or the maturity amount of a unit or at the time of premature

withdrawal of a unit, as the case may be, the proceed thereof, net of TDS, as and whereapplicable, will be automatically swept to the base account for making the funds available

at the disposal of the depositor/s.

y Under the scheme, a depositor is required to make an initial deposit of Rs.25,000/- ormore in multiples of Rs.5,000/- as Fixed Deposit/ Double Deposit Plan for a fixed period

of one year. Thereafter, the depositor can make any number of deposits in multiples ofRs.5,000/- each at any time in the account for a period of one year. Every Rs.5,000/- in

the account will be treated as a separate unit of deposit.

y The depositor will be required to maintain a minimum principal outstanding ofRs.25,000/- i.e. 5 units of Rs.5,000/- each at all points of time. In case of fall in principal

outstanding in the account below Rs.25000/-, the facility of further deposit of units in theaccount will stand withdrawn.

y The depositor is free to withdraw any amount of the principal in multiples of Rs.5,000/-

at any time before maturity without affecting the remaining units of deposit. However,the depositor will be required to maintain a minimum principal outstanding of

Rs.25,000/- i.e. 5 units of Rs.5,000/- each at all points of time, as statedhereinabove.There will be no penalty for the prematurely withdrawn units.


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y The rate of interest for the units will be the rate prevailing on the date of deposit of theindividual unit/s for the period of one year. In case of premature withdrawal of a unit,

interest due, if any, will be paid net of TDS, as and where applicable, at the rateprevailing on the date of deposit of the unit for the period for which the deposit remained

with the Bank No interest will be paid for premature withdrawal of a unit if the deposit

remains with the Bank for a period less than 15 days. The balance units remaining in theaccount will continue to earn interest at the contracted rates for the individual units.

y Usual account opening procedures and formalities including observance of KYC andAML guidelines will be followed. In addition, a special letter for opening account under

the scheme will be obtained from the depositor/s.

y No loan will be allowed against this deposit.

RE

TAIL CRED

IT PROD

UCTS:

Allahabad Bank Housing Finance Scheme

Target Group:

Permanent salaried employees, Professionals & Self-Employed Persons, Businessmen,

having regular income to liquidate the loans.

Purpose:

y

For construction of residential house on land already owned.y For purchase of plot by salaried persons from Govt. Agency / Development

Authority or any Govt. recognized agency (viz., HUDA, HOUSEFED) andconstruction of residential house thereon.

y For purchase of house/flat to be used for residential purpose.y For renovation / extension / repair of residential house already owned.

y For purchase of unfinished / old house(maximum 20 year old) andy Renovation /extension / repair of the same.

y For taking over of housing loans from other finance companies / financialinstitutions / banks.

y Bank finance extended to a person who already owns a house in town / villagewhere he resides, for buying / constructing a second house in the same or other

town / village for the purpose of self occupation.y Bank finance extended for purchase of a house by a borrower who proposes to

let it out on rental basis on account of his posting outside the headquarters or

because he has been provided accommodation by his employer.y Bank finance extended to a person who proposes to buy an old house

(Maximum 20 years old) where he is residing as a tenant.


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Supplementary finance:

y Additional finance may be granted by the bank within the overall ceiling forcarrying out alterations/ additions/repairs to the house/flat.

y Bank finance to individuals who have raised funds for construction / acquisition

of accommodation from other sources and need supplementary finance fromour bank after creating pari-passu charge over the property mortgaged in favourof other lenders and/or against such other security.

Eligibility:

Housing Loan may be sanctioned to those who have regular income sufficient enoughto liquidate the loan alongwith interest within stipulated period of repayment.The

employees who have availed of housing loan from their own organisations may alsoavail of loan from the Bank under this scheme if they are having regular income

sufficient to liquidate the loan within the stipulated period and are able to comply with

other stipulations of the scheme.

However, special facility is also available as under

a. Repayment Option for salaried persons desirous to extend the repayment period

beyond the date of retirement under Public Housing Loan Scheme of the Bank will beeligible upto 5 years after the date of retirement.

b. Availability of Progressive monthly installments (PMI) options under public housingloan scheme.

Nature of Loan: Term Loan

Loan amount:

a. In case of salaried persons: The loan amount will be restricted to 60 times ofmonthly gross salary last drawn subject to the condition that it is within the project cost

less stipulated margin and Total deductions including EMI of proposed loan should notexceed 40% of the Gross monthly salary of the applicant.

b. In case of others: The loan will be restricted up to 4 times of gross Income average

shown in last 3 years Income Tax Assessment Order/ acknowledged copy of income

tax return subject to the condition that it is within the project cost less stipulated marginand Total deductions including EMI of proposed loan should not exceed 40% of theGross monthly income of the applicant as per IT Returns.

Income Tax returns will be got verified by engaging services of Chartered

Accountant.

For repairing/furnishing of house/flat: Maximum loan for Repairing/ Furnishing of


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existing House/ Flats will be 75% of the estimated expenses or Rs 3, 00,000 which everis low subject to the condition that borrower has sufficient repaying capacity as per

income criteria given hereunder: The minimum take home monthly salary/incometaking into account all deductions (including EMI of proposed loan) should not be less

than 40% of last month's gross salary in case of salaried persons & 50 % of average

gross monthly income as per average of last three years IT Return in case of others.

4.3 For application money raised by Housing Boards/ Development Authorities:

Permissible Loan amount for Application Money raised by local Housing Boards/Development Authorities will be 75% of application amount or Rs 3,50,000/- which

ever is lower subject to the condition that the borrower has capacity to repay the loanwithin stipulated repayment period.

4.4. For Joint Borrowers: While computing repaying capacity in case of joint

borrowers*, income of all borrowers may be clubbed. Joint borrowers may be the co-owner of the property or they may not be co owner (but must be legal heirs of owner of

the property / PF nominee / Spouse having future interest in the property) but theirincome is to be considered as one of the source of loan repayment. (*However, Income

of Co- borrower / (s) will be clubbed only if source of income of co-borrower is salaryand co-borrower / (s) is a permanent employees of Government / Semi Government /

Public SectorUnit/ Multinational Corporate Houses/ Blue Chip Companies / reputedcompanies.)

Note: Income Tax return must be obtained in all cases including salaried persons.

Margin:

y

25 % of project cost andy in case of repairing / furnishing 25% in all categories (including salaried class)

Project cost will consist of -

y Purchase price of land/ house/ Flat, plusy Cost of construction/ renovation/ extension (if applicable) plus

y Stamp duty and registrations charges, as applicable plus Accrued Interestamount of moratorium period, if proposed to be capitalized

y It will be ensured that margin at all stages has been contributed by theborrower upfront where disbursement is to be made in phases.

Fixed rate of interest will be subject to following conditions:

y Subject to "interest rate reset" clause in terms of which fixed rates may be resetat the end of every three years on the basis of interest rate prevailing at that

time.y Subject to "force maejure" clause in terms of which Bank is authorized to revise

fixed interest suitably and prospectively in the event of major volatility in


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interest rates.y Borrower of housing loan may exercise the option to switch over at any point of

time from floating to fixed or vice versa on the condition that borrower has topay as under:

From Fixed to Floating- 2% of outstanding balance for exercising the option FromFloating to fixed- 0.50% of outstanding balance for exercising the option

Security:

Primary:

y Equitable/ Registered mortgage of the property or

y Pari- passu charge over the property if the borrower (salaried person) hasalready availed loan from his organisation.

Collateral Security:

y Personal Guarantee of one person of means and standing acceptable to the Bankwill be taken in all cases. However, in case of delay in creation of mortgage

Personal Guarantee of two person of means and standing will be taken, wheredelay over 6 months in creation of equitable mortgage of the property to be

financed by the Bank is expected. In case of delay in creation of equitablemortgage of the property beyond 6 months, collateral security to the extent of

loan amount in the shape of immovable property or financial securities orpersonal guarantee of two persons of means & standing acceptable to the Bank

will be taken. However, the same will not be needed where a property is being

purchased from seller/builder as mentioned hereunder:o Housing Board/ Development Authority /Govt agencyo Good rated /reputed housing company / builder/developer well known at

national / state level (VIZ: Ansal, Gujarat Ambuja, Bengal Ambuja,Bengal Peerless, Sahara Housing). List of such reputed housing

companies/ developers will be circulated by respective Zonal Officesafter its careful scrutiny and a copy will be endorsed to Retail Credit

Section, Head Office.o Approved Housing Societies notified by Zonal Offices.

o Builders/Developers whose project has been approved by the Bank asper bank's guidelines. (Approval of housing projects for the purpose of

tie-up arrangement for loan to their prospective buyers wherebuilder/developer is not seeking finance from the bank for the housing

project may now be accorded by the Zonal Head).

Documentation: In a booklet form complete in all respect.

Documentation Charge: Actual expenses / charges incurred for creation of mortgage.


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Disbursement:

In case of purchase of flat / House payment should be made direct to seller / promoters/ societies by DD/ Banker's cheque and should be issued in the name of builders with

Bank account number on it. Bank's official should be sent for delivering the cheque /

draft to the builders / sellers property at the registered addressed mentioned in the titledeed.

In case of construction of new house / flat, loan will be disbursed in a phased manner,in 4 or more installments. Each such installment will be released only after verification

of end use of funds already released by the bank.

Repayment Period & Moratorium:

a Repayment Period:-

y

For construction of House &/ or Purchase of House/ Flat/Residential Plot: Forsalaried Persons-- Maximum 25 years or length of remaining service,whichever is less. For Others -- Maximum 20 years or remaining period in

attaining an age of 65, which ever is earlier.y For Repairing/ Furnishing of House/ Flat: For salaried Persons-- Maximum 7

years or length of remaining service, whichever is less. For Others -- Maximum7 years or remaining period in attaining an age of 65, which ever is earlier.

y For Application Money raised by Housing Board/ Development Authority: 12Months or receipt of refund order, which ever is earlier.

y Other Norms on Repayment Period:Repayment period will be exclusive ofmoratorium period.If the borrower desires to repay the loan in shorter period,

he/she may be allowed to do so and monthly installment will be fixedaccordingly. Interest will be realised on monthly basis during the moratorium

period. However, in case of salaried persons the interest amount may becapitalised (i.e. included in project cost) on request of the borrower.

i) Loan Repayment Options is available.

a) Repayment option for salaried persons desirous to extend the repayment period

beyond the date of retirement under Housing Loan Scheme:

y To extend repayment period of housing loan to salaried persons upto 5 years

after the date of retirement subject to the condition that EMI will be within 60%of their estimated post retirement monthly earnings (pension plus ascertainable

other income such as rental earnings, income from investment insecurities/LIP/NSC etc.., if any) as also existing net take home salary after

taking all deductions will not be below 40% of gross salary.y There will also be flexibility to consider some lump sum / bullet payment of

full or part of the loan outstanding out of future sources of fund and draw the

repayment schedule accordingly.


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y If post retirement EMI is more than stipulated norms, pre-retirement EMI maybe proportionately increased with borrower's consent.

b) Offering progressive monthly instalments (PMI) options

y

Under the plan, the initial monthly instalments for the first 5 years shall be keptlower i.e., 80% of normal EMI and it will gradually go up to 90% of EMI pluswhatever shortfall during the first 10 years shall be realized after 10th year of

loan. Accordingly, a three-tier repayment schedule will be drawn up.y Borrowers will have also option for 2 tier repayment structure (with first tier

not above one third of repayment period)y Borrowers may also get higher amount of progressive monthly instalments

(PMI) than the above norms by opting higher %of EMI for PMI calculation.Existing borrower or Bank's employees also can exercise options (a) & (b).

y Minimum 24 PDCs will be obtained before releasing of fund except salary tied-up cases.

Prepayment Penalty

y If liquidated within 1 year: 2% of outstanding balance If liquidated after 1year: 1.50% of outstanding in case of takeover.

Special Package to Housing Loan Scheme (Public)

All new Housing Loans (upto Rs.20.00 Lac for maximum period of 20 years) availedupto 31st December 2009 and shall not apply to swapping (takeover/ renewal) of loan

w.e.f. 17/12/2008.

(i) Interest Rate: -

Tenure Existing Revised

Floating Fixed Upto Rs.5.00Lac

Over Rs.5.00

Lac to Rs.20.00

Lac @

Upto 5 years PLR-3.75% 11.00%

8.50% (Fixed)

pawmr. *

9.25% (Fixed)

pawmr. *

Above 5 years and

upto 10 yearsPLR-3.25% 11.50%

Above 10 years and

upto 15 years PLR-3.00% 11.75%Above 15 years andupto 20 years @

PLR-2.75% 12.25%

*The rate of interest will be reset after 5 years from the date of withdrawal of the first

installment and the borrower will then have the option for going for a fixed rate or afloating rate of interest.


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@ If Housing loan is sanctioned for tenure above 20 years to 25 years and/ or amountabove Rs.20.00 Lac, existing instructions/ guidelines will remain unchanged.

(ii) Margin: -

Existing Revised

25%

Upto Rs.5.00 Lac Over Rs.5.00 Lac

to Rs.20.00 Lac

10% 15%

(iii) Processing fee: -

Existing Revised

0.50% of loan amount, maximum

Rs.10000/-


to Rs.20.00 Lac

NIL NIL

(iv) Prepayment charges: -

Existing Proposed

2% of outstanding balance only in case

of takeover


to Rs.20.00 Lac

NIL NIL

(v) Free Life Insurance cover for the entire amount of outstanding loan will be

provided to the borrower.

OTHER CREDIT PRODUCTS:

Kisan Credit Card

A unique scheme for farmers under which they can draw loan amount in cash for crop production as wellas domestic needs from the card issuing branch within the sanctioned limit. The details are as under:

1. Eligibility : Farmers having agricultural land, Pattaholders (i.e. land allotees) and Tenants Farmers

forming Joint Liability Group are eligible.

2. Loan Limit : Limit is fixed to meet the cost of cultivation of crops based on land holding and also for

domestic needs. There is no minimum or maximum loan limit.

3. Card :A common card named Kisan Credit-cum-Kisan Shakti Card is issued to the farmers on

fixation of loan limit.


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4. Rate of interest :

i) Upto Rs.50,000/- 9.75% (fixed)

ii) Above Rs.50,000/- & upto Rs.2.00 lacs 2% below PLR

iii) Above Rs.2.00 lacs & upto Rs.5.00 lacs 0.50% below PLR

iv) Above Rs.5.00 lacs 0.50% above PLR

However, as per Union Budget Announcement for2008-09, interest will be charged @7% p.a. forShort Term Crop Loan under KCC upto Rs. 3.00 lac disbursed from 01.04.08.

5. Security :

a. For loans upto Rs.50,000/- : Hypothecation of crops & movable assets.

b. For loans above Rs.50,000/-:

i. Hypothecation of crops & movable assets.

ii. Mortgage of land or charge on land as per Agricultural Credit Operation Act of the states concerned.

Or

Charge/ lien over liquid securities in the form ofFixed Deposit/ NSC/ Kisan Vikash Patra etc. providing fullcover to the limit granted.

6. Repayment :

i. The aggregate credit into the KCC account during the 12 months period should at least be equal to themaximum outstanding in the account

And

ii. No drawal in the account shall remain outstanding for more than 12 months

1. Validity : Card is valid for 3 years subject to annual review.

2. Features :

y No admission/membership fee is levied by the Bank.

y A pass book is issued along with card to record transactions.

y Cardholders are covered under Personal Accident Insurance Scheme with sum assured forRs.50,000/- against death/permanent total disability/ loss of two limbs/ eyes or one limb & oneeye and Rs.25,000/- for loss of one limb/eye on payment of premium of Rs.5/- p.a by thecardholder.


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y Specified crops in notified areas grown under Kisan Credit Card is covered under Rashtriya KrishiBima Yojna subject to notification issued by the State Government concerned.

INTEREST RATES:Deposit Schemes

It has been decided by the Bank to revise interest rates on Domestic Term Deposits of

below Rs.1.00 crore with effect from 23.11.2009 and Rs.1.00 crore & above witheffect from 18.11.2009. The revised interest rates are as under :-

Tenor Existing Interest Rate p.a.(%)

Revised Interest Rate p.a. (%)

For

below

Rs. 1

cr

For Rs. 1

cr to less

than Rs.

10 cr

For

Rs.10 cr

& above

For below

Rs. 1 cr(w.e.f.

23.11.09)

For Rs. 1 cr to

less than Rs.

10 cr(w.e.f.

18.11.09)

For Rs.10 cr

& above

(w.e.f.

18.11.09)

7 daysto

14 days

NA 1.50 1.50 NA 1.50 1.50

15 daysto

29 days

3.00 2.00 2.00 3.00 2.00 2.00

30 daysto

45 days

3.00 2.25 2.25 3.00 2.25 2.25

46 days

to60 days

4.00 2.75 2.75 4.00 2.75 2.75

61 days

to90 days

4.00 2.75 2.75 4.00 2.75 2.75

91 days

to179 days

5.25 3.25 3.25 5.00 3.25 3.25

180 daysto

269 days

6.00 4.25 4.25 5.50 4.25 4.25

270 daysto

364 days

6.00 5.00 5.00 5.50 5.00 5.00

1 yearto

7.00 5.75 5.75 6.50 6.00 6.00


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less than2 years

2 years

toless than

3 years

7.00 5.75 5.75 6.75 5.50 5.50

3 years

toless than

5 years

7.25 5.50 5.50 7.00 5.50 5.50

5 yearsand

upto10 years

7.50 5.50 5.50 7.25 5.50 5.50

The above rates will be applicable for fresh deposits and renewal of deposits and ratesare subject to revision at any time.

The existing interest rate for AllBank Baalika Mangal Yojana Deposit Scheme will

continue till further instruction.

Existing additional interest rate for senior citizens will be continued.

PENAL RATE OF INTEREST FOR PREMATURE

WITHDRAWAL OF DOMESTIC TERM DEPOSITS

Period ofDeposit Amount ofDeposit

Penal Rate ofInterest

1. Premature closure of termdeposits for reinvestment in

our bank

Anyamount

No penal rate to becharged

2. 15 days and upto 1 (one)year*

Anyamount

No penal rate to becharged

3. All others All others 1 % penal interest tobe charged

*The period of Deposit agreed upon at the time of making the deposit.

Non Resident (External) Rupee Savings Deposit Account (NRE-SB)

Interest Rate % p.a.

(unchanged since 18.11.2005)


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3.50

Non Resident (External) Rupee Term Deposit Account (NRE)

With effect from 01.04.2010

PeriodExisting rate % p.a.

w.e.f 1st

March,

2010

Revised Rate % p.a.w.e.f 1

stApril,

2010

1 year to less than 2 years 2.59 2.67

2 years to less than 3

years 2.83 2.99

3 years only 3.44 3.59

Non-Resident (Ordinary) Rupee Term Deposits & Saving Bank A/c:

The Interest rates ofNRO deposits is at par with the Interest Rates for Domestic Deposits.

Differential Rate of Interest/ Additional Rate for Senior Citizens:

No Differential Rate on interest as also Additional Interest for Senior Citizens is allowed forNon-Resident Deposits as advised vide our Instruction Circular Nos. 6942/Foreign/2001-202/03

& 8144/Foreign/2004-05/04 dt. 03.09.01 & 07.05.2004 respectively

Foreign Currency Non-Resident (FCNR (B)) Account and Resident Foreign Curency

(RFC) accounts with effect from 01.04.2010

Fixed Deposit Existing Rate % p.a.(w.e.f. 01.03.2010)

Revised Rate % p.a.(w.e.f. 01.04.2010)

USD GBP EUR CAD AUD USD GBP EUR CAD AUD

1 year to < 2 years 1.84 2.30 2.20 2.25 6.05 1.92 2.32 2.19 2.31 6.30

2 years to < 3 years 2.08 2.57 2.45 2.37 5.99 2.24 2.60 2.49 2.88 6.37

3 years to < 4 years 2.69 3.11 2.85 2.94 6.22 2.84 3.10 2.85 3.41 6.57

4 years to < 5 years 3.20 3.58 3.18 3.36 6.50 3.34 3.55 3.16 3.78 6.81

5 years only 3.62 3.94 3.47 3.69 6.65 3.75 3.86 3.42 4.04 6.92


21/29

Credit Schemes:

Benchmark PRIME LENDING RATE

BENCHMARK PLR 12.00%p.a.

(w.e.f. from

01.07.2009)

--Retail Scheme--

For Interest Rates please refer schemes under Product > Retail Credit Products

MSME Finance

Micro & Small Enterprises Advances (Secured):

S.No. Parameters Micro EnterprisesSmall

Enterprises

A Loan up to Rs.50000/- 8.75% (Fixed) 9.25% (Fixed)

B Above Rs.50000/- to Rs.2.00 lacs. PLR 3.00% PLR 2.50%

CAbove Rs.2.00 lakh to Rs.10.00lacs.

PLR 2.50% PLR 2.00%

DRs.10.00 lacs & above (Linked to

Rating of the account)

AB1 : PLR 2.5%AB1 : PLR

2.00%

AB-2 : PLR 2.5%AB-2 : PLR 1.50%

AB3 : PLR 1.5%AB-3 : PLR -

1.00%

AB4 : PLR

0.50%AB-4 : PLR

AB5 : PLR+1.00%

AB-5 : PLR+1.50%

AB6 : PLR+2.00%

AB-6 : PLR+2.50%

AB7 : PLR+3.00%

AB-7 : PLR+3.50%


22/29

Medium Enterprises Advances (Secured):

S.No. Parameters

Exposure

(Funded) up toRs.10.00 Cr

Exposure

(Funded) aboveRs.10.00 Cr

A Loan up to Rs.50000/- 9.25% (Fixed) 9.75% (Fixed)

B Above Rs.50000/- to Rs.2.00 lacs. PLR 2.50% PLR 2.00%

CAbove Rs.2.00 lakh to Rs.10.00

lacs.PLR 2.00% PLR 1.50%

DRs.10.00 lacs & above (Linked toRating of the account)

AB1 : PLR 2.50%

AB1 : PLR 1.50%

AB-2 : PLR 1.50%

AB-2 : PLR 1.00%

AB3 : PLR

1.00%

AB-3 : PLR -

0.50%

AB4 : PLR 0.50%

AB-4 : PLR -0.50%

AB5 : PLR

+1.00%

AB-5 : PLR

+1.50%

AB6 : PLR

+2.00%

AB-6 : PLR

+2.50%

AB7 : PLR

+3.00%

AB-7 : PLR

+3.50%

Agriculture Advances

Agriculture Advances (Secured):

S.No. Parameters Rate

1 Up to Rs.50000 .00 9.75% (Fixed)

2 Above Rs.50000.00 & up to Rs.2.00 Lacs PLR-2%

3 Above Rs.2.00 Lacs & up to Rs.5.00 Lacs PLR-0.5%

3.1 Above Rs.5.00 Lacs PLR+0.50% ( for exposureabove Rs.10 lacs will be as

per risk rating of theborrowers)


23/29

4 Above Rs.10.00 Lacs As per risk rating of

borrowers

Cold Storage, Warehouse & Rural Godown

5 (Up to Rs.25.00 Lacs) PLR-1%

6 Financing to SHGs-Up to Rs.50000.00 per

member & upto Rs.5.00 lacs per Group(Maximum)

9% (Fixed)

7 Loans to MFIs Up to

Rs.50.00Lacs

Above

Rs.50.00 Lacs

A AB-1 OR HIGHEST RATING BY

EXTERNAL AGENCY

PLR-2% PLR-2%

B AB-2 OR HIGH RATING BY EXTERNALAGENCY PLR-1.50% PLR-1.00%

C AB-3 OR ABOVE AVERAGE RATING BY

-DO-

PLR-0.50% PLR

D AB-4 OR AVERAGE RATING BY -DO- PLR+0.50% PLR+0.50%

E AB-5 PLR+1.00% PLR+1.50%

F AB-6 PLR+1.50% PLR+2.00%

G AB-7 PLR+3.50% PLR+3.50%

Agriculture Advances(Secured): (Based on the rating of accounts)

S.No. Rating

Grade

Agriculture

(Having Exposureabove 10.00 Lacs)

Poultry


Cold Storage,

Warehouses &

Rural Godown


1 AB-1 PLR PLR-1% PLR

2 AB-2 PLR+0.50% PLR PLR+0.50%

3 AB-3 PLR+1.00% PLR+0.50% PLR+1.00%

4 AB-4 PLR+1.50% PLR+1.00% PLR+1.50%

5 AB-5 PLR+2.00% PLR+1.50% PLR+2.00%

6 AB-6 PLR+2.50% PLR+2.00% PLR+2.50%


24/29

7 AB-7 PLR+3.00% PLR+3.00% PLR+3.00%

Rate of Interest under Retail Credit Products

(Rates applicable after change of PLR to 12.00 % w.e.f 01.07.2009)

Scheme Rate of Interest

AllBank Property PLR+1.50%

All Bank Rent PLR+1.00%

Scheme for O/D in S. B. Accounts PLR+0.50%

All Bank Trade

Upto Rs. 10.00 LacAbove Rs. 10.00 Lac as per Risk Grading

AB-1 & AB-2AB-3

AB-4

PLR

PLR-0.50%

PLRPLR+1%

All Bank Mobike PLR-1.00%

All bank Abhushan PLR

Car Loan

In case of Salary tie-up & Full Collateral security,

Doctors/Medical Practitioners -In case of Others

PLR-1.50%PLR-1.00%

In case repayment is contracted for 24 months or earlier the ROI shall be 0.50%lower.

Saral Loans PLR+1.00%

0.50% rebate in interest rate is allowed if liquid collateral security (FDR / NSC /

LIP / KVP) or Equitable Mortgage of Land / Building for the amount equal to theloan amount is offered.

Additional 0.50% interest rebate may be allowed as under: -(a) Small organisations, where number of permanent employees is upto 50: - Allemployees should draw salary through their respective salary accounts (i.e. accounts

of individual employees) maintained with our branches.(b) Big organisations where number of permanent employees is more than 50: - In

such cases at least 50 employees should draw salary through their respective salaryaccounts (i.e. accounts of individual employees) maintained with our branches.


25/29

Personal Loan to Doctors PLR+1.00%

Education Loan

For IIT/ IIM/ ISB (loan upto 10.00 Lacs)For Other

Loan upto 4.00 LacsFor loan above Rs.4.00 Lac

PLR-1.75%

PLR-0.75%PLR-1.00%

@ Girl students rebate of 1.00%@ Rebate of 1.00% if interest is serviced during moratorium

Housing Loan for Furnishing PLR-1%

Gyan Dipika PLR

Personal Loan to Pensioners PLR+1.00%

Loan against NSC/ KVP

T/L PLR-1.5%

O/D PLR

Gold loan

Loan for Agricultural purpose Rate prescribed by the bank for

agriculture loan. At present as under -1. Up to Rs.50000 .00 - 9.75% (Fixed)

2 Above Rs.50000.00 & up to Rs.2.00Lac - PLR-2%

3 Above Rs.2.00 Lacs & up to Rs.5.00Lac - PLR-0.5%

Loan for other purposes PLR

Short term loan to application money

If interest is serviced on monthly PLR-1.00%

If interest for 6 months is paid upfront & as marginInterest equivalent of 3 months is paid

PLR-1.50%

Reverse mortgage 11.00% (Fixed)(Subject to reset clause of

three years)

Housing Loan

Floating CategoryUp to Rs.20 Lac

Up to 5 years PLR-3.75%

More than 5 Yrs & up to 10 Yrs PLR-3.25%


26/29


More than 15 Yrs to 25 Yrs PLR-2.75%

Floating Category above Rs. 20.00 Lacs but below 50.00 Lacs





Floating Category For loans Rs 50.00 Lacs and above





Fixed CategoryUp to

Rs.20 Lac

Above Rs. 20.00

lacs but below 50.00

Lacs

Rs 50.00 Lacs

and above

Up to 5 years 11.00% 11.50% 12.00%

More than 5 Yrs & up to 10 Yrs 11.50% 12.00% 12.50%

More than 10 Yrs & up to 15 Yrs 11.75% 12.25% 12.75%

More than 15 Yrs to 25 Yrs 12.25% 12.25% 12.75%

ALLBANK COMMERCIAL VEHICLE

FINANCETerm Loans

Upto Rs 2.00 Lacs : PLR

Above Rs 2.00 Lac to Rs 5.00 Lac : PLR +1

%Above Rs 5.00 Lac to Rs 200.00 Lac : PLR

+2%

Working capital : PLR

AllBank IPO/ FPO Finance Scheme PLR-0.50%


27/29

Unaudited Financial Results for the Quarter & Nine Months ended 31st December 2009

(Rs. In lakhs)

PARTICULARSQuarter

Ended

Quarter

Ended

(Reviewed)Nine Months

Ended

Nine Months

Ended

(Reviewed)Year Ended

(Audited)

31.12.2009 31.12.2008 31.12.2009 31.12.2008 31.03.20091. Interest Earned

(a) + (b) + (c) +(d) 210775.52 189804.45 616263.10 544962.25 736472.79

(a) Interest/discount onadvances/bills 159551.76 145118.86 473479.17 404916.66 549438.81

(b) Income oninvestments 50469.57 44230.27 140609.26 138298.66 184935.70

(c)Interest on balances

with Reserve Bank

of India and other

inter bank funds753.73 117.28 2098.51 715.82 1074.15

(d) Others 0.46 338.04 76.16 1031.11 1024.13

2. Other Income 33953.02 40840.47 111386.88 68365.53 114192.43

3 TOTAL INCOME(1)+(2) 244728.54 230644.92 727649.98 613327.78 850665.22

4 Interest Expended 143218.94 129390.46 425475.46 388346.14 520606.13

5 OperatingExpenses (i) + (ii) 36496.68 34648.49 113114.48 96281.23 139943.84

(i) Employees Cost 20935.12 23002.97 70566.12 60176.61 87393.84

(ii) Other operatingexpenses 15561.56 11645.52 42548.36 36104.62 52550.00

6

TotalExpenditure

(4+5)

excludingprovisions and

contigencies

179715.62 164038.95 538589.94 484627.37 660549.97

7

Operating Profit

before Provisionsand contingencies(3-6)

65012.92 66605.97 189060.04 128700.41 190115.25

8Provisions ( other

than tax)

and contingencies24628.40 10297.81 47977.26 57172.99 82538.21

9 Exceptional Items 0.00 0.00 0.00 0.00 0.00

10Profit (+)/ Loss (-)

from Ordinary

Activities before tax

(7-8-9)40384.52 56308.16 141082.78 71527.42 107577.04

11 Tax Expenses 5847.73 19361.22 42900.76 21076.12 30717.23

12Net Profit(+) / Loss

(-) from

Ordinary Activitiesafter tax (10-11)

34536.79 36946.94 98182.02 50451.30 76859.81

13 Extraordinary Items(net of tax expenses) 0.00 0.00 0.00 0.00 0.00

14Net Profit (+) / Loss

(-) for the period (12-

13)34536.79 36946.94 98182.02 50451.30 76859.81

15Paid-up equity share

capital

(Face Value@ Rs.

10 per Share)44670.00 44670.00 44670.00 44670.00 44670.00


28/29

16

Reserves excluding

revaluation reserves

(as per balance sheet

of previous

accounting year)

453187.88 389604.97 453187.88 389604.97 453187.88

17 Analytical Ratios

(i)

Percentage of shares

held byGovernment of India 55.23 55.23 55.23 55.23 55.23

(ii) Capital AdequacyRatio (%) 15.00 12.20 15.00 12.20 13.11

(iii)

Earning per share

(Rs.)*

a. Basic and diluted

EPS beforeextraordinary

items( Net of Tax

expense) for the

period,

for the year to date

and for the previous

year

7.73 8.27 21.98 11.29 17.21

b. Basic and dilutedEPS after

extraordinary items

for the period

to date and for the

previous year

7.73 8.27 21.98 11.29 17.21

(iv)

NPA Ratios

a)

(i) Gross NPA116050.00 101601.00 116050.00 101601.00 107824.47

(ii) Net NPA 22752.00 42920.00 22752.00 42920.00 41911.25

(b)

(i) % of Gross NPA 1.77 1.93 1.77 1.93 1.81

(ii) % Net NPA 0.35 0.82 0.35 0.82 0.72

(c) Return on Assets 1.31 1.78 1.29 0.81 0.90

18 Public Shareholding-- Number of shares 200000000 200000000 200000000 200000000 200000000

--Percentage of share

holding 44.77 44.77 44.77 44.77 44.77

19Promoters and

promoter group

Shareholding

246700000 246700000 246700000 246700000 246700000

a) Pledged/Encumbered

- Number of Shares NIL NIL NIL NIL NIL

-Percentage of

share

(as a % of the total

shareholding

of promoter and

promoter group)

NIL NIL NIL NIL NIL

-Percentage of

share


share

capital of the Bank)

NIL NIL NIL NIL NIL

b) Non-encumbered

- No of Shares 246700000 246700000 246700000 246700000 246700000

-Percentage of

share100 100 100 100 100


29/29


shareholding

of promoter and

promoter group)

-Percentage of

share


share

capital of the Bank)

55.23 55.23 55.23 55.23 55.23

Items of other operating Expenses Exceeded 10% of total expenditure excluding interest Expenditure

Rent, Taxes &

Lighting 4482.31 3361.99** 11976.64 9223.08** 13592.85**

* Not Annualised

** Not exceeding 10% of total expenditure excluding Interest Expenditure

Documents

29825301 Functions of Commercial Banks