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Summer Internship Report 2012

Study of Credit Appraisal Process In Vasai Janata Sahakari Bank Ltd.

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TABLE OF CONTENT

Sr.

No

Chapter Page No.

1) Executive summary 3 to 6

1. Objective of the project 5

2) Introduction of Banking Sector & Co Operative banking 7 to 16

1. Overview of banking sector 7

2. Indian banking structure 13

3. Co Operative banks in India 14

3) Introduction of Vasai Janata Sahakari bank 17 to 21

1. Organization profile 17

2. Financial review of bank 18

3. Hierchy structure of bank 20

4. Different departments 21

4) Literature review 22 to 23

1. Research Methodology 22

2. Research objective 22

3. Research Methodology and Data collection 22

4. Scope of Research 23

5) Process description of Co Operative bank 24 to 45

1. Basket of products 24

2. Types of deposits 25

3. Types of loans 26



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6) Project profile 46 to 69

Credit Appraisal Mechanism

1. Credit appraisal 46

2. Departments related to Loan Process 46

3. Delegation of Lending Power 51

4. Flow chart of Loan Procedure of Retail Loan 53

5. Retail Loan Process 54

6. Flow Chart of Loan Procedure of Corporate Loan 61

7. Corporate Loan Process 62

7) NPA Management & its classification 70 to 73

1. Guiding principles 70

2. Asset classification 70

3. Provisions 73

4. Action under SARFAESI ACT 73

8) Case study 74

1. Personal Loan 74

2. Housing Loan 74

9) Findings and conclusion 75 to 79

10) Learning Experience 80

11) Appendix 81

12) Bibliography 83



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EXECUTIVE SUMMARY

Once a project opportunity is conceived and it is considered after the preliminary

screening, a detailed feasibility study has to be undertaken covering marketing, technical, and

financial aspects of the project. The study in the form of Loan process mechanism and along

with going through the borrowers information, general information of the proposal, past record

of borrower and details of security mortgaged. Financial records of the borrower audited,

provisional and projected such as Profit and loss account statements, Balance Sheet and Cash

and Fund Flow Statements needed to be considered. The ratios such as current Ratio, Debt

Service Coverage Ratio etc. are also checked. The ultimate decision whether to grant the credit

to borrower for the application or not and how to go about it , is undertaken after this study

which discloses whether the borrower has good past record and information provided are true

and fair.

My project concerns Credit Appraisal process, in which I need to asses if the borrower

should be granted credit, and what should be the recommended loan amount. This all is done

after carefully evaluating the financials and securities provided by the borrower.

Various financial ratios are calculated for the past and future data provided by the

borrower after checking the veracity of the same. The various ratios, which are frequently

calculated include:

Current ratio:

[(Receivables + material and finished good inventory)/ (creditors for goods and

expenses)]

Long term debt-equity ratio

[Long Term Debt/ Net worth]

Interest coverage ratio

[(Profit Before Interest Provision for Tax)]/(Interest payments due for the year]

Fixed assets coverage ratio



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[Fixed Assets/ (Term loan and other long term debt obligations)]

Debt-service coverage ratio

[{(Profit after tax + Interest on term loan + Depreciation} + Other non-cash

charges]/ [Interest on term loan + Principle Repayment]

Profit after tax/sales

Debtors Velocity

[Average Receivables/Credit Sales* No. of days in a year.]

Creditors Velocity

[Average Payables/Credit Purchase* No. of days in a year.]

Stock Velocity

[Average Stocks/Cost of goods Sold* No. of days in a year.]

Two other important criterions are IRR and DSCR

Financial institutions calculate the Internal Rate of Return (IRR). The Internal Rate of

Return refers to the rate of return that the project is expected to generate based on its projected

cash flows accruing over its expected lifespan. Institutions have a threshold IRR that the project

needs to surpass to assess its viability.

DSCR refers to the ability of the project to generate sufficient cash flows to repay the

debt taken to finance the project. This includes the principal along with the interest component.

The above ratios are taken and matched with the standard, though a certain amount of

flexibility is exercised depending on the perception and personal judgment of the appraising

officer. A rating is assigned to the project based on the scores of the different ratios. A cut-off

rating determines financing decision (whether the project would finance or not). Above the

rating, the projects may be categorized into excellent, good and average. Based on this and the

project characteristics, the final terms and conditions of financial assistance are decided upon



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like:

Moratorium

Repayment period

Availability period

Security (like first charge, personal guarantee etc.)

Interest rate

All the expenses like service fee, processing fee, document fee and other expenses like

inspection of site, factory, etc. are charged to the applicant and are a source of income for the

lending institution.

Credit Appraisal:-

Credit appraisal is done to evaluate the credit worthiness of a borrower. The credit

proposal is prepared to indicate the need based requirement and the rationale for its

recommendation. Bank has in place a well-defined framework for approving credit limits of

different segments. Requests for credit facilities from the prospective borrowers shall be on the

prescribed format and the full-fledged proposal should be prepared for submission to the

appropriate sanctioning authority for approval. These proposals analyze various risks associated

with bank lending i.e. business risks, financial risks, management risks, etc. and clarify the

process by which such risks will be managed on an on going basis.

Objective of the study:-

The objective of research is to study the Co-operative Banking in Vasai Janata Sahakari

Bank Ltd. The area of study in Vasai Janata Sahakari Bank Ltd include:-

1. To make an item wise study of the component of Credit Appraisal and Process.

2. The study also involves the study of procedural formalities included in sanctioning the

finance to its clients.

3. This study would involve analyzing the balance sheets of their clients in determining



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their financial needs.

4. To suggest the step to be taken to increase the efficiency in Credit Appraisal.



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INTRODUCTION

1. Overview of Indian Banking Sector

Banking in India originated in the last decades of the 18th century. The first banks were The

General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790;

both are now defunct. The oldest bank in existence in India is the State Bank of India, which

originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of

Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay

and the Bank of Madras, all three of which were established under charters from the British East

India Company. For many years the Presidency banks acted as quasi-central banks, as did their

successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon

India's independence, became the State Bank of India in 1955.

History

Merchants in [Calcutta] established the Union Bank in 1839, but it failed in 1848 as a

consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and

still functioning today, is the oldest Joint Stock bank in India.(Joint Stock Bank: A company

that issues stock and requires shareholders to be held liable for the company's debt) It was not the

first though. That honor belongs to the Bank of Upper India, which was established in 1863, and

which survived until 1913, when it failed, with some of its assets and liabilities being transferred

to the Alliance Bank of Simla.

Foreign banks too started to app, particularly in Calcutta, in the 1860s. The Comptoire

d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862;

branches in Madras and Pondicherry, then a French colony, followed. HSBC established itself in

Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the

British Empire, and so became a banking center.



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The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in

Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in

1895, which has survived to the present and is now one of the largest banks in India.

Around the turn of the 20th Century, the Indian economy was passing through a relative period

of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial

and other infrastructure had improved. Indians had established small banks, most of which

served particular ethnic and religious communities.

The presidency banks dominated banking in India but there were also some exchange banks and

a number of Indian joint stock banks. All these banks operated in different segments of the

economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign

trade. Indian joint stock banks were generally undercapitalized and lacked the experience and

maturity to compete with the presidency and exchange banks. This segmentation let Lord Curzon

to observe, "In respect of banking it seems we are behind the times. We are like some old

fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome

compartments."

The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi

movement. The Swadeshi movement inspired local businessmen and political figures to found

banks of and for the Indian community. A number of banks established then have survived to the

present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank

and Central Bank of India.

The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina

Kannada and Udupi district which were unified earlier and known by the name South Canara (

South Kanara ) district. Four nationalized banks started in this district and also a leading private

sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian

Banking".

During the First World War (19141918) through the end of the Second World War (1939



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1945), and two years thereafter until the independence of India were challenging for Indian

banking. The years of the First World War were turbulent, and it took its toll with banks simply

collapsing despite the Indian economy gaining indirect boost due to war-related economic

activities. At least 94 banks in India failed between 1913 and 1918 as indicated in the following

table:

Years Number of banks

that failed

Authorised capital

(Rs. Lakhs)

Paid-up Capital

(Rs. Lakhs)

1913 12 274 35

1914 42 710 109

1915 11 56 5

1916 13 231 4

1917 9 76 25

1918 7 209 1

Post-Independence

The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal,

paralyzing banking activities for months. India's independence marked the end of a regime of the

Laissez-faire for the Indian banking. The Government of India initiated measures to play an

active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the

government in 1948 envisaged a mixed economy. This resulted into greater involvement of the

state in different segments of the economy including banking and finance. The major steps to

regulate banking included:

The Reserve Bank of India, India's central banking authority, was established in April

1934, but was nationalized on January 1, 1949 under the terms of the Reserve Bank of

India (Transfer to Public Ownership) Act, 1948 (RBI, 2005b).[1]

In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of

India (RBI) "to regulate, control, and inspect the banks in India".



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The Banking Regulation Act also provided that no new bank or branch of an existing

bank could be opened without a license from the SBI, and no two banks could have

common directors.

Nationalization

Banks Nationalization in India: Newspaper Clipping, Times of India, July 20, 1969

Despite the provisions, control and regulations of Reserve Bank of India, banks in India except

the State Bank of India or SBI, continued to be owned and operated by private persons. By the

1960s, the Indian banking industry had become an important tool to facilitate the development of

the Indian economy. At the same time, it had emerged as a large employer, and a debate had

ensued about the nationalization of the banking industry. Indira Gandhi, then Prime Minister of

India, expressed the intention of the Government of India in the annual conference of the All

India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalization." The

meeting received the paper with enthusiasm.

Thereafter, her move was swift and sudden. The Government of India issued an ordinance

('Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969')) and

nationalised the 14 largest commercial banks with effect from the midnight of July 19, 1969.

These banks contained 85 percent of bank deposits in the country. Jayaprakash Narayan, a

national leader of India, described the step as a "masterstroke of political sagacity." Within two



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weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition

and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969.

A second dose of nationalization of 6 more commercial banks followed in 1980. The stated

reason for the nationalization was to give the government more control of credit delivery. With

the second dose of nationalization, the Government of India controlled around 91% of the

banking business of India. Later on, in the year 1993, the government merged New Bank of India

with Punjab National Bank. It was the only merger between nationalized banks and resulted in

the reduction of the number of nationalized banks from 20 to 19. After this, until the 1990s, the

nationalized banks grew at a pace of around 4%, closer to the average growth rate of the Indian

economy.

Liberalization

In the early 1990s, the then Narasimha Rao government embarked on a policy of liberalization,

licensing a small number of private banks. These came to be known as New Generation tech-

savvy banks, and included Global Trust Bank (the first of such new generation banks to be set

up), which later amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI

Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of

India, revitalized the banking sector in India, which has seen rapid growth with strong

contribution from all the three sectors of banks, namely, government banks, private banks and

foreign banks.

The next stage for the Indian banking has been set up with the proposed relaxation in the norms

for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights

which could exceed the present cap of 10%,at present it has gone up to 74% with some

restrictions.

The new policy shook the Banking sector in India completely. Bankers, till this time, were used

to the 4-6-4 method (Borrow at 4%; Lend at 6%;Go home at 4) of functioning. The new wave

ushered in a modern outlook and tech-savvy methods of working for traditional banks. All this



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led to the retail boom in India. People not just demanded more from their banks but also received

more.

Currently (2010), banking in India is generally fairly mature in terms of supply, product range

and reach-even though reach in rural India still remains a challenge for the private sector and

foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to

have clean, strong and transparent balance sheets relative to other banks in comparable

economies in its region. The Reserve Bank of India is an autonomous body, with minimal

pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage

volatility but without any fixed exchange rate-and this has mostly been true.

With the growth in the Indian economy expected to be strong for quite some time-especially in

its services sector-the demand for banking services, especially retail banking, mortgages and

investment services are expected to be strong. One may also expect M&As, takeovers, and asset

sales.

In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak

Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed

to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any

stake exceeding 5% in the private sector banks would need to be vetted by them.

In recent years critics have charged that the non-government owned banks are too aggressive in

their loan recovery efforts in connection with housing, vehicle and personal loans. There are

press reports that the banks' loan recovery efforts have driven defaulting borrowers to suicide.



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2. Indian Banking Structure



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3. Co Operatives Banks in India

The Co-operative banks has a history of almost 100 years. The Co-operative banks are an

important constituent of the Indian Financial System, judging by the role assigned to them, the

expectations they are supposed to fulfill, their number, and the number of offices they operate.

The co-operative movement originated in the West, but the importance that such banks have

assumed in India is rarely paralleled anywhere else in the world. Their role in rural financing

continues to be important even today, and their business in the urban areas also has increased

phenomenally in recent years mainly due to the sharp increase in the number of primary co-

operative banks.

While the co-operative banks in rural areas mainly finance agricultural based activities including

farming, cattle, milk, hatchery, personal finance etc. along with some small scale industries and

self-employment driven activities, the co-operative banks in urban areas mainly finance various

categories of people for self-employment, industries, small scale units, home finance, consumer

finance, personal finance, etc.

Some of the co-operative banks are quite forward looking and have developed sufficient core

competencies to challenge state and private sector banks.



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Co operative Banks in India are registered under the Co-operative Societies Act. The cooperative

bank is also regulated by the RBI. They are governed by the Banking Regulations Act 1949 and

Banking Laws (Co-operative Societies) Act, 1965.

These banks provide most services such as savings and current accounts, safe deposit lockers,

loan or mortgages to private and business customers. For middle class users, for whom a bank is

where they can save their money, facilities like Internet banking or phone banking is not very

important.

The co-operative banking structure in India is divided into following main 5 categories:

Primary Urban Co-op Banks

Primary Agricultural Credit Societies

District Central Co-op Banks

State Co-operative Banks

Land Development Banks

Co-operative banks function on the basis of 'no-profit no-loss'. Co-operative banks, as a

principle, do not pursue the goal of profit maximization. Therefore, these banks do not focus on

offering more than the basic banking services. So, co-operative banks finance small borrowers in

industrial and trade sectors, besides professional and salary classes.

Cooperative banks in India finance rural areas under:

Farming

Cattle

Milk

Hatchery

Personal finance

Cooperative banks in India finance urban areas under:

Self-employment



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Industries

Small scale units

Home finance

Consumer finance

Personal finance

Some facts about Cooperative banks in India

Some cooperative banks in India are more forward than many of the state and private

sector banks.

According to NAFCUB the total deposits & lendings of Cooperative Banks in India is

much more than Old Private Sector Banks & also the New Private Sector Banks.

This exponential growth of Co operative Banks in India is attributed mainly to their much better

local reach, personal interaction with customers, their ability to catch the nerve of the local

clientele.



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INTRODUCTION OF VASAI JANATA SAHAKARI BANK LTD.

Vasai Janata Sahakari Bank Ltd, Vasai was established on 6th

October 1973 by people

committed to social cause in Vasai.

Few enthusiastic RSS Leaders gathered together with a common goal to make available

the banking facility to the common man. They had an aim that any person in need of genuine

financial difficulty should have a source for raising loan and such person should not be a prey of

traditional moneylenders.

Names of few Pioneers are as follows

1. Shri . Shantaram Dhuri.

2. Shri. D. R. Raje

3. Shri. Y. G. Gaikwad

4. Shri. V. B. Pai

5. Shri. W. T. Samant

The Bank has always kept the goal of helping economically weaker section society and

has carved a place as bank of masses and not only for classes.

1. Organization Profile

Vasai Janata Sahakari Bank Ltd. commenced its business operations in 21st September, 1973

and has completed 39 years of responsible and responsive banking operations. Since

incorporation without any interruption, Bank has been awarded "A" Grade Audit Classification.

The faith and trust of the customer has made a bank to leave a benchmark for itself with high

quality of services and serving the community at large. Since 39 years of bank incorporation the

only motto of bank is serve the customers from economically weaker, lower, middle and upper

income classes, Small Businessman, Professionals, Small & Medium Enterprises and Corporate

who can secure their financial dreams under one roof.



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Bank has been showing Average Growth of 20%, in Business during last 3 years and the net

N.P.A. of the Bank is 0% over the three consecutive years. Bank's total Business from the level

of Rs.1536 Crores in 2006-2007, has grown to Rs.2723 Crores as on March 31, 2011.

Bank is having 10 Branches in Thane District and 1 in Mumbai i.e. at Vasai Gaon, Navghar

(Vasai East), Virar (East & West), Nalasopara (East & West), Boisar, Dahanu and Dahisar

having its operations in semi urban & rural areas. Bank has completed 38 years of its purposeful

existence and has always been in forefront for development of economically backward class

population.

Bank has more than One lakh depositors in number, and Bank already started Core Banking

solution. Bank has been awarded 'A' Class by the Statutory Auditors over the years and Grade -

'I' by Reserve Bank of India.

Presently the Bank is having eight branches and deposit of Bank at present is Rs.26133 Cr as of,

March 31st 2011. Over the years, the bank has consistently shown robust growth not only in size

of Deposits and Advances but has also maintained profitability.

2. Financial review of Bank

The position as on March 31, 2011 is as follows:

Particular Amount

Reserves 1679 cr.

Deposit 26153 cr.

Loans 12982 cr.

Total Income 2723 cr.

Profit 482 cr.

Dividend 15%



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Facilities to the customers like:

Core Banking Solutions

Demand Draft facility. Teller facility at Virar, Vasai & Nallasopara Branch, 12 x 7 days

banking at our Virar, Navghar Branch (Except Bank Holiday)

Seven days banking at Virar, Vasai, Navghar & Dhaisar.

I. Core Banking Solution

With an initiative to give the modern banking facility to its customer, the bank has successfully

implemented the Core Banking Solution; the customer is no more the customer of a Branch, but

the Bank's Customer. CBS is a step towards enhancing customer convenience through anywhere

and Anytime Banking

1. Any Branch Banking - Banking from any Branch of the Bank irrespective of the Branch

where the customer is having account.

2. Balance Enquiry - customer can make enquiries about the balance; debit or credit entries

in his/her account.

3. Cash Withdrawal the customer can withdraw cash upto the stipulated limit from any

branch irrespective of his/her account in the branch.

4. Cheque / Cash Deposits - To deposit cash / cheques into account of some other person

who has account with any of the branch of the bank.

5. Statement & Passbook printing

6. Cheque Status enquiry

7. Fund Transfer the customer can make the fund transfer instantly from one account to

another account in the Bank (his / her own or third party)

8. EMI of Loan & RD installments can be paid

9. Personalized Cheque Book facilities



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3. Hierchy structure of bank

Chairman

Vice-Chairman

Board of Director's

General Manager

D. General Manager

Senior Manager/ Executives

Branch Manager

Administrative Staff

Branch Manager


Branch Manager


Branch Manager




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4. Different Departments in Vasai Janata Sahakari Bank

VASAI JANATA SAHAKARI

BANK DEPARTMENT

LOAN & ADVANCE

DEPT

ACCOUNT DEPT

RECOVERY & LEGAL

DEPT

CLEARING DEPT

TREASURY DEPT

INDUSTRY FINANCE

DEPT



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LITRATURE REVIEW

1. RESEARCH METHODOLOGY

Research Statement

Study of Loan Process Mechanism in Vasai Janata Sahakari Bank Ltd.

2. Research Objective

I. To understand Loan process Mechanism in Vasai Janata Sahakari Bank Ltd.

II. To analysis and conclude the data collected by primary data and secondary data.

3. Research Methodology & Primary Data Collection

Data collected specifically for the study of Loan Appraisal & Renewal from Vasai Janata

Sahakari Bank Ltd.

Since the research carried out for this project is descriptive in nature, the various

documents and official files would require for understanding the methodology used by the banks.

The data collection is done by personal interview or direct observations. At the same time,

related articles, newspapers, magazines, in-house journals, Credit Policy of banks, etc were

referred. The information on the project under consideration is obtained by the bank employees

and officials. Also I went through various files and the official correspondence of the bank for

better understanding the topic under the study. The methodology also include finding out the

financial ratio, understanding the credit rating and assessment of Credit Appraisal and renewal of

the companies.

Secondary Data:-

This data is collected from banks internal documents which make on monthly basis.

Secondary data is scrutinized on the basis of suitability, reliability, adequacy and

accuracy.



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Suitability:

It has been ensured that the data available is suitable for the purpose of inquiry on hand.

Reliability:

The data is reliable because it is collected from the banks internal sources.

4. Scope of Research

The research concluded on Nallasopara branch. And the Scope of research within bank

and Nallasopara branch.



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PROCESS DESCPRITION OF CO OPERATIVE BANK

1. Basket of Products

VJSB various products

Deposit Product

Saving a/c

Current a/c

Recurring Deposit

Fix Deposit

Loan Product

Janata Industrial Loan Scheme

Loans to professional

Janata Samruddhi Scheme

Group Loan Scheme

Vidya Vardhini(Educational

Loan Scheme)

Personal Loan

Mortgage Loan



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2. Types of Deposit

Bank has various Deposits schemes with attractive rate of interest.

Period/Type of

Deposits Rate of Interest w.e.f 15.06.2012

% p.a

General

% p.a

Sr.Citizen

A. Savings Bank Deposits 4.00 4.00

B. Term Deposits

15 Days to 45 Days 4.50 6.00

91 Days to 180 Days 5.50 6.00

181 Days to 364 Days 6.00 6.50

For 1 Year 9.50* 10.00

1 year upto3 years 8.50^ 9.00

Above 3 years 10.25 10.75

500 Days 9.00 9.50

Notes -

1. *Effective Interest Rate 9.84%

2. ^Effective Interest Rate 11.98%

3. Sahakar Utkarsha Thev

Rate of Interest 10% for 555 days

For Senior Citizen & Reg. Society 10.25%



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3. Types of Loans

Various Loans available In Vasai Janata Sahakari Bank

Janata Industrial Loan Scheme

Loans to professional

Janata Samruddhi Scheme

Group Loan Scheme

Vidya Vardhini(Educational Loan Scheme)

Personal Loan

Mortgage Loan

Niwara Loan

House Repair/ Improvement Loan

Gruhalakshmi Loan

Computer Loan

Vehicle Loan

Gold Loan

Term Loan



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I. Janata Industrial Loan Scheme:-

This loan scheme formulated special scheme for small and medium scale industries enterprises

(SME Sector) As a helping hand to the dynamic entrepreneurs in this sector.

Features:

Purchasing industrial gala/unit.

Acquisition of plant & machinery.

Expansion / Modification & technological up gradation.

Complete package of project finance including working capital finance.

Interest rate 12% p.a. This most competitive rate in the banking sector.

The Limit of this Loan is Rs. 2,00,000 & Margin is 25%. The rate of interest is 12%. There

are at least two Granter required for this Loan. The repayment period is 60 Months &

membership is A. The E.M.I is Rs. 2,225 on Rs.1,00,000.



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II. Loans to professional:-

For any type of the business requirements of the professional like Doctors (MBBS, BAMS,

BHMS, BDS),Pathologists, Physiotherapists , Charted Accountants, Architects, Engineers, and

interior Designers. Special rate of interest rate @ 11% offered.

The loan will get on the basis of Term Loan under any scheme. The rate of interest rate is 11% &

Repayment period is 84% Months. The membership is A.



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III. Janata Samrudhi Scheme:-

Special loan scheme of personal loan up to Rs. 200000 for the confirmed employees of the

Sthanik Sanstha, Hospitals, Educational Institution . The employer to give undertaking deduct the

monthly installment from salary.

Rate of interest: 13% (o.5% rebate for absolute punctuality in repayment of EMI)

Period : 60 months



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IV. Group Loan Scheme:-

Special scheme of personal loan upto Rs. 2.00 Lacs, for the permanent employees of the

company. The Employer to give undertaking to deduct the monthly installment from salary.

Rate of interest : 12.5%

Period : 60 months.

This Loan basically given to group of people. It is Consists of 15- 20 members. The limit for this

Loan is Rs. 100000. The Margin is Nil & Rate of interest is 12.5%. The repayment period is 60

months. The Monthly E.M.I is Rs. 2,200 on Rs.100000. There should at least one Granter &

Membership should be B.



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V. Vidya Vardhini : Educational Loan Scheme :-

Vidyavardhini Educational Loan Scheme for the students. This specially designed scheme aims

at providing financial assistance to meritorious students to enable them to pursue higher studies in

India or abroad.

Amount of loan: Education In India Rs. 5 lacs

Foreign Education Rs. 10 lacs

Period: 7 years (including moratorium)

The repayment will start form six month after completion of the course / education or

after getting job whichever is earlier. Only the interest payment should be made in the

moratorium period.

Security equivalent to the amount of bank finance, by way of mortgage of the property,

or any security acceptable to the bank.

Insurance policy of s tudent, equivalent to the amount of bank finance, to be assigned in

favour of the bank.

The membership required is A. The EMI will be Rs.100000 for Education loan in

India. For education loan in Aboard EMI will be depend on moratorium.



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VI. Personal Loan :-

The Loan purpose is to get loan for personal use. The maximum Limit is up to Rs.200000. The

interest rate on this loan is 15%. The repayment period is 36 Months. The EMI is Rs.3,470. If

person is paying loan regularly than person gets the rebate of 2% & His EMI reduce to Rs.2380.

There should at least two granter are required for this Loan & membership should be A.



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VII. Mortgage loan :-

The limit for this Loan is 100 lacs & Margin is 40%. The rate of interest is 13% & repayment is

60 months. The E.M.I is Rs. 2,275 on Rs.100000. There should ne at least two granter are

required for this Loan & Membership Is A.



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VIII. Niwara Loan (Home Loan):-

This loan is also called as Housing Loan. Its divided into two parts. First part is amount up to Rs.

500000 & Second Part is divided in to Rs 500000 2500000. The margin for this loan is 10%.

The Margin for this Loan 10%. The Interest Rate for this type of loan is 11% & 12% respectively.

The repayment time in 180 Months. The E.M.I is Rs.1140- Rs. 100000 on loan up to Rs. 500000

& Rs. 1200 Rs. 100000 for Loan up to Rs. 500000- Rs 2500000. There should be at least 2

Granters are required for this loan & Membership is A.



35

IX. Gold Loan:-

The Gold loan limit is Rs.200000. The margin is 25% & the rate of interest rate is 11.50%.

The repayment time 12 months. The monthly will be Rs. 8865 on Rs. 100000 & if person is

giving 10 gram of gold to bank than bank is giving them Rs. 12000 & the repayment will be

bullet repayment. No guarantor is required for this type of loan.



36

X. Cash Credit Loan:-

It is divided in to two parts. First part is stock & second is Debtor. For Stock margin is 30%. At

least two grunter required for that & Membership is A. For debtors it should be below 90 days.

& margin is 40%.



37

XI. Deposit Loan:-

This Loan may give for purpose of document like F.D & The Interest Rate is F.D Rate + 2%

There are No Granter Required for this Loan.



38

XII. Computer Loan:-

This Loan facility provides these who want to buy Computer. The limit for this type of Loan is

Rs.30000. The Margin is 25% & The interest Rate is 11.50%. The Repayment period is 36

month. The E.M.I is Rs. 990 for 30000. There should be at least one granter is required for this

type of loan. The Membership is B.



39

XIII. Vehicle Loan:-

The limit for this of Loan is Rs. 1500000. It is divided in to three parts. First part is for Personal

use & Margin for this loan is 15%. The Interest rate for this type of loan is 11.50%. The

repayment time is 60 Months & Membership should be A. The Monthly EMI is Rs.2200 on Rs.

100000. The Second part is loan for Business purpose but amount is up to Rs. 100000 & margin

for this type of loan is 15%. The interest rate is 11.50% & repayment time is 36 month E.M.I is

Rs.3,300 on Rs. 100000. There should be at least one granter is required for this both cases. The

third part is for above Rs.100000 & Margin is 15%. The rate of interest is 13% & repayment

period is 60 months. There should at least two granter are required for this type of loan & EMI is

Rs. 2,275 on Rs.100000. Membership is A.



40

XIV. House Repair/Improvement Loan:-

This loan mainly given for the Improvement/Repair purpose. The person can get loan up to Rs.

200000. The margin for this type loan is 30%. The interest rate is 12.50%. The repayment time is

60 Months & The monthly E.M.I should be A. There should be at least two granter required.



41

XV. Gruhalakshmi Loan:-

The limit for this type of loan is Rs. 300000. The margin for this type loan is 30%. The interest

rate on this type Loan is 11.50%. The Repayment time is 48 Months. There should be at least two

granter are required for this Loan & Membership should be A. The Monthly EMI is Rs. 2610

on Rs. 100000.



42

XVI. Term Loan:-

The limit for this Loan is above Rs.5000000. The first part is Rs. 2 lac Rs. 10 lac &

Margin is 25%. The rate of interest is 12.50% & repayment period is 60 months. The

membership is A & The EMI will be Rs. 2250 on Rs.1 lac. Second part is divided in to

Rs. 10 lac Rs. 50 lac. Margin is 25% & rate of interest is 13%. The Repayment time is

60 Months & Membership is required A. The EMI is Rs. 2275 on Rs. 1 lac. Third part

is divided in to Rs. 50 lac & Above & Margin is 25%. The rate of interest is 13.50% &

Repayment time is 60 months & membership is A. At least two granter required for all.

Special Features of Loan:

Attractive rate of interest

Convenient repayment schedule

Minimum processing charges

Early sanction

Rebate on rate of interest on regular repayment of loan



43

Concession in rate of interest for registered small scale industries

No project report required up to limit of Rs. 10 lacs

Timely enhancement on working capital limits and hassle free renewals

Fast decision

Flexibility on collateral security

Ever supportive for all your financial requirements

Customer friendly approach

No hidden cost

Flexibility on margins

Minimum paper work

Background- Various Schemes on Various Loans

Sr.

No.

Loan Name Amount(In

lacs)

Margin

(%)

Interest

(%)

Months granter Membe

rship

E.M.I

1 Niwara Rs. 5.00 Lacs 10 11 180 2 A Rs. 1140 Rs.

10000

Rs. 5.00 Lacs

to 25 Lacs

10 12 180 2 A Rs. 1,200 Rs.

100000

2 House Repair Rs. 2 Lacs 30 12.5 60 2 A Rs. 2,250 Rs.

100000

3 Personal Rs. 1 Lacs Nil 15 36 2 A Rs. 3,470 Rs.

100000

Janata Samrudhi

Scheme

N.A 13 60

4 Gruhalaxsmi Rs. 3 Lacs 20 11.5 48 2 A Rs. 2,610 Rs.

100000

5 Computer Rs. 30000 25 11.5 36 1 B Rs. 990

Rs.30000

6 Vehicle Rs. 15 Lacs



44

Personal 15 11.5 60 1 A Rs. 2,200 Rs.

1,00,000

Loan up to 1

lacs

15 11.5 36 Rs. 3,300 Rs.

1,00,000

Business use 15 13 60 2 A Rs. 2,275 Rs.

1,00,000

7. Group Rs. 1 Lacs Nil 12.5 60 1 B Rs. 2,200

Rs.1,00,000

8. Mortgage Rs.100 Lacs 50 13 60 2 A Rs. 2,275 Rs.

1,00,000

9. Vidya Vardhini

(Educational

Loan)

Within India Rs. 5 lacs 25 25 84 2 A Rs. 1,660 Rs.

1,00,000

Abroad Rs. 10 Lacs 25 25 84 2 A Depend On

Moratorium

10. Gold Rs. 2 Lacs 25 11.5 12 N.A B Rs. 8,865 Rs.

1,00,000

11. Document Above 3 year 25 Up to

maturity

N.A B NSC, KVP,

LIC Surrender

Value

Below 3 Year 50 11.5 Date of

documen

t

N.A B NSC, KVP,

LIC Surrender

Value

12. ECS- Personal Rs. 1 Lacs 25 12 36 2 A Rs. 3,325 Rs.

100000

13. Travel

In India Rs. 1 Lacs 20 12.5 24

Abroad Rs. 2 Lacs 20 24 2 A Rs. 4,735 Rs.

1,00,000



45

14. Janata

Industrial Loan

Scheme

Rs. 2 Lacs 25 12 60 2 A Rs. 2,225 Rs.

1,00,000

15. Term Loan Rs. 2 to Rs. 10

Lacs

25 60 2 A Rs. 2,225 Rs.

1,00,000

Rs. 10 to Rs.

50 Lacs

25 60 2 A Rs. 2,275 Rs.

1,00,000

Rs.50 Lacs &

Above

25 13.5 60 2 A

16. Cash Credit Stock 30 2 A

Debtor (below

90 days)

40 2 A

17. Builder &

Developers

25 15 2 A

18. Deposit Principal 10 FD Rate

+2

Up to

maturity

of FDR

N.A N.A

19. Loans to

professional

Term Loan

under any

scheme

11 84 A

20. Janata

Industrial Loan

Scheme



46

CREDIT APPRIASAL MECHANISM

1. Credit Appraisal:-

Credit appraisal is done to evaluate the credit worthiness of a borrower. The credit

proposal is prepared to indicate the need based requirement and the rationale for its

recommendation. Bank has in place a well-defined framework for approving credit limits of

different segments. Requests for credit facilities from the prospective borrowers shall be on the

prescribed format and the full-fledged proposal should be prepared for submission to the

appropriate sanctioning authority for approval. These proposals analyze various risks associated

with bank lending i.e. business risks, financial risks, management risks, etc. and clarify the

process by which such risks will be managed on an ongoing basis.

2. Departments related to Loan Process:

A) Branch :

An applicant comes with loan application at banks respective branches. All credit

proposals will be accepted by Vasai Janata Sahakari Bank respective branches.

Applicants required documents are taken into branches according to loan amount it

goes to respective authorities. After taking all required documents scrutiny is

prepared by branch. Then it depends on the proposal bank decide to give it loan or

not. And in this if any loan more than Rs.5 lacs this loan proposal send to head office.

B) Head Office:

Branch office scrutiny is sent to head office as per requirements. The main role of

head office is to check whether credit policies are properly followed or not. Head

Office includes CIBIL Dept, Legal Dept, Recovery Dept and Mortgage Dept.

CIBIL (CREDIT INFORMATION BUREAU LTD) Dept:

India's first credit information bureau- is a repository of information,

which contains the credit history of commercial and consumer borrowers.

CIBIL's equity was held by State Bank of India, Housing Development Finance



47

Corporation Limited, Dun & Bradstreet Information Services India Private

Limited and Trans Union International Inc. The shareholding pattern was in the

proportion of 40:40:10:10 respectively.

CIBIL is a composite Credit Bureau, which caters to both commercial and

consumer segments. The Consumer Credit Bureau covers credit availed by

individuals while the Commercial Credit Bureau covers credit availed by non-

individuals such as partnership firms, proprietary concerns, private and public

limited companies, etc. Banks, Financial Institutions, State Financial

Corporations, Non-Banking Financial Companies, Housing Finance Companies

and Credit Card Companies are Members of CIBIL.

A Credit Information Report (CIR) is a factual record of a borrower's credit

payment history compiled from information received from different credit

grantors. Its purpose is to help credit grantors make informed lending decisions -

quickly and objectively.

Encryption is technique used to mask proprietary information in order to prevent

it from being accessed by unauthorized individuals. Only authorized individuals

who have been provided with the appropriate decoding software can unscramble

the information. Thus, encrypted information that our Members provide us with is

extremely secure.

For every credit proposal applicants, his companies /organizations CIBIL

report is taken. Also CIBIL report of all sureties is taken in Vasai Janata Sahakari

Bank LTD. We can also get ranking of applicant through this report. 600/900 is

considering as good score. To get ranking of applicant extra fees is charged.

Limitations: CIBIL report can show records of only those banks which

are member of CIBIL. If applicant took loan from other banks which are not

CIBIL member then bank is unable to know that information.

I. Legal Dept :

This department checks mortgagability of securities. Its legal



48

aspects, also they check legal deeds .If any loan goes into default then all

legal terms are taken care by this dept. Central Law Dept makes

agreements between the applicant and the bank.

II. Recovery Dept :

Loans which are default i.e. which are not paid in stipulated time,

those loans come under recovery dept. They send notice to applicant and

accordingly follow all legal procedures against the defaulter. This dept. file

a case against the defaulter in the court and recover a recovery certificate

which is known as award.

Award is kind of legal certificate in which applicants complete

details are mentioned including his loan amount, interest rate, EMI and

securities provided by the applicant. Also the pending amount that may be

principle amount + interest is mentioned.

III. Mortgage Dept. :

Mortgage dept takes care about all details of mortgaged properties

.This dept also verifies that whether given property is already mortgage to

other bank or not. For immovable properties mortgage is done. For

movable properties hypothecation is done. Property is mortgage especially

when loan is taken against that same property. e.g. In housing loan ,the

house is mortgage on which the loan is taken .

Mortgage is of various types i.e. Simple Mortgage, English

Mortgage, Mortgage by deposit of title deed, Mortgage by conditional

sale, Anamolus Mortgage and Usufructory Mortgage.

Vasai Janata Sahakari Bank accepts only simple registered and equitable

mortgage. Mortgage Dept verifies property or place and values the

property according to the market rate through which the stamp duty and

registration fee is calculated.

In major and metropolitan cities if the property have to be

mortgage then equitable mortgage is done and rest other properties besides

the major cities Simple register mortgage is done. In equitable mortgage



49

registration is not required. Only the agreement paper is required between

the applicant and the bank.

If the movable property is kept as a security then the hypothecation

of the same property is done. E.g. In vehicle loan, the vehicle is

hypothecated in the name of bank from which the loan is taken for the

same vehicle.

In Term loan and cash credit loan hypothecation of stock and book

debts is made as security. The value of stock and book debts is calculated

on the basis of the financial statement submitted in the documentation of

the loan procedure.

IV. IFD (Industrial Finance dept):

IFD at head office is looking after by Senior Manager and

managers. Their duty in brief respect of technical scrutiny and monitoring

manufacturing proposes. For loans purchase of machineries above

Rs.15Lakh IFD will verify the genuineness of quotations, competitive

rates and available better alternate machineries at cheaper rate as well as

of better qualities.

In respect of determination of working capital they will study the

production /processing cycle of the industrial unit and decide the working

capital limit based on credit purchases, credit allowed on sales, minimum

inventory levels, raw materials, work in progress and finish goods. IFD

shall always update themselves in respect of various types of suppliers of

machineries / equipments, price list through market contacts and internet.

Corporate loans like working capital loan, loan taken for purchase

of new machinery, etc technical scrutiny is created on the basis of product

manufactured in the industry, organized or unorganized sector, sufficient

infrastructure, potentiality of product, demand in market, competition for

the same product, profit margin.

Industries comes under IFD are Printing and Dyeing, Engineering



50

Units, Chemical Manufacturing Units, Textile Mills, Pharmaceutical

Companies, Construction Equipments, etc.

Core activity of IFD: IFD has their own data to analyze and

scrutinizes the manufacturing units .They are well known with production

cycle of the industry .For service and trading activity there is no

interference of technical dept. the branch and DGM scrutiny is used for

such activity. Firstly in IFD Dept project is introduce by applicant which

includes acquiring land, construction of a site , purchase of machinery or

an industrial unit ,etc. then the verification of the quotation and the project

progress is checked . Cost of machinery is verified with the supplier and

with other substitute companies machineries .In case of acquiring land and

construction corporate finance dept is introduce to verify the details. In

case of purchase of machinery and industrial unit scrutiny is done on the

basis of technical viability which is served by IFD. In case of production

unit working capital calculation is done by IFD for which they need to

have complete knowledge of production side of the company.



51

3. Delegation of Lending Power

Sr.

No

Type Of Loan BM Senior

Manager

DGM GM Board of

Directors

1 Loan against Gold ornaments 2.00 2.00 2.00 2.00 Full Power

2 Loan/Overdraft against Banks own

Fixed Deposit

10.00 15.00 20.00 25.00 Full Power

3 Loan/OD against other approved paper

security viz. LIC, NSC, KVP

2.00 15.00 15.00 15.00 Full Power

4 Personal Loan Unsecured and ECS loans 2.00 2.00 2.00 2.00 Full Power

5 Personal loans secured by salary

Deduction under sec 49 and janata

Samrudhi Loan Scheme.

2.00 2.00 2.00 2.00 Full Power

6 Niwara Loan secured by mortgage of

flat/house being purchases out of Bank

finance.

5.00 10.00 10.00 15.00 Full Power

7 Mortgage Loan and Overdraft (Vasai

Vyapar scheme) against real estate.

5.00 10.00 10.00 15.00 Full Power

8 Vehicle Loan: 2 Wheelers & 4 Wheelers

secured by Hypothecation of vehicle

purchased out of Bank finance.

5.00 10.00 10.00 15.00 Full Power

9 Term loan to acquired asset i.e fixed

asset for construction of factory premises

and P & M Furniture & Fixture.

Nil 10.00 10.00 15.00 Full Power

10 Cash credit against Hypothecation of

stock & Book debts with 100% collateral

security and Cash Credit Renewal.

5.00 10.00 10.00 15.00 Full Power

11 Temporary over limit in CC a/c upto

10% of sanction cc limit or maximum as

given in this table whichever is lower.

2.00 10.00 10.00 15.00 Full Power



52

12 Temporary over-limit in OD against

property upto 10% of sanction OD limit

or Maximum as given in the table.

Whichever is lower

2.00 10.00 10.00 15.00 Full Power

13 Temporary over-limit in OD against F. D

a/c upto 5% of sanction OD limit or

maximum as given in this table.

Whichever is lower

2.00 10.00 10.00 15.00 Full Power

14 Non- funded facilities viz. Bank

Guarantee, L.C etc. fully secured

Nil 10.00 10.00 15.00 Full Power

15 Education Loan 10.00 10.00 10.00 Full Power

16 Staff loan Sanction power with General Manger only

staff Housing loan up to Rs. 8 lacs or less

and all other types Staff loans.

Full Power

Reference: - Letter issued to the Branches of Vasai Janata Sahakari Bank LTD. By Head Office



53

4. Flow Chart of Loan Procedure of Retail Loan

Visit to applicants

home, workplace

CIBIL Report of

applicant

Sanction Loan

Amount

Check

Eligibility

Documents

Taken

Yes

No

Reject Make

Member

Preparation of

security

documents

Mortgage Done

Release Credit

Facility

No

Recovery

Dept Loan

Repay

Yes

Loan completely

repaid

Loan Applied



54

5. Retail Loan Process

1) Loan Applied: Applicant comes to banks branch with credit proposal .According to

the type of loan, bank asked for documents.

2) Receipt of documents (Balance sheet, KYC paper, Different Govt registration

no, MOA, AOA, and properties of document

3) Visit to applicants home, workplace: Banks employees gives visit to applicants

home and workplace so that his /her relatives come to know about loan application.

Also bank can get his past record from his colleagues, relatives.

4) CIBIL Report: Bank takes out CIBIL report of applicant, his sureties so that bank

can know about the applicants past loans and whether he is able to pay those loans

regularly or not. If CIBIL report shows that the applicant is unable to repay his past

loans or he has many other loans then bank can reject his application. Through CIBIL

report bank can know applicants loan amounts but bank is unable to view other

banks names from which those loans are taken .To get that information bank have to

give application to CIBIL .

5) Decision on giving Membership: According to credit policies loan can be given to

only members of bank. To give loan first applicant has to become member of the

bank. Applicant can be permanent member or temporary member. Bank checks his

past records and then decide whether to make him member or not.

6) Documents Taken: After making member bank asks for required documents to

member i.e. His residential proofs, his income proof, legal documents if required.

Also bank makes agreement with applicant if required.

7) Eligibility Status: According to the banks credit policies every applicant should

have minimum amount as a take home salary for his basic livelihood. According to

Vasai Janata Sahakari banks credit policy salaried applicant should have minimum

Rs.4500 /-and maximum Rs.20, 000/- as take home salary.

i. e.g.- If applicant has applied for a loan of Rs.2,00,000 as a personal



55

loan ,ROI- 15% ,EMI-60, Salary of the applicant Gross Salary

Rs.10463 per month. Net Salary Rs.8, 800 per month

1. Now we need to find the eligibility amount of the applicant i.e.

according to its salary how much loan bank can sanction.

ii. Net Salary Rs.8, 800

iii. Min. Take home (-) Rs.4500

i. Rs.4300

iv. According to the policy 60 EMI and 15% ROI

v. Loan amount EMI

vi. 1, 00,000 2,353

vii. 1,82,745 4,300

b. In the above calculation Rs.4,300 is the balance amount after the minimum

take home salary is removed i.e. Rs.4,500. So Rs.4,300 can be fully utilized as

the EMI for the loan .The eligibility amount of the applicant whose net salary

is Rs. 8,800 is Rs.1,82,745. So according to the loan application the applicant

is not eligible for the loan amount of the Rs.2, 00,000.

i. From the eligibility amount loan is given according to margins which

are mentioned in credit policies.

8) Sanctioning Loan: In this acceptance, scrutiny, recommendation is come under

sanctioning process.

A. Acceptance:-

I. All credit proposals will be accepted by respective Branches/Credit Cell.

However, the proposals for In-Principle Acceptance as determined from time to

time will be accepted at Regional Offices but after acceptance In-Principle of such

proposals by the Board, they will be once again scrutinized by the Branch and

sent to Head Office through respective Regional Offices.

II. The all credit proposal Regional Offices for scrutiny and recommendations. In

case of enhancement/additional facilities above Rs.100.00 Lakh will be accepted



56

and scrutinized by head office. However, the DGM/AGM should involve the

respective Branch Managers/In-charges for account information, visit and other

preliminary data collection and make them accountable for the same. The

proposals should be scrutinized by the Regional Offices and with the

recommendation of the DGM the proposals shall be sent to Head Office for

sanction.

III. Credit Proposals except Housing Loans, beyond the powers of Regional Offices

shall be sent to Head Office duly scrutinized and recommended by the Branch

office. Housing Loans, beyond the powers of Offices shall be sent directly to

Head Office, duly scrutinized and recommended by the Branch/Credit Cell.

IV. All other proposals shall be accepted, scrutinized and recommended by the

Branches/Credit Cells and the proposals beyond the delegation of the

Branches/Credit Cells shall be forwarded to the Head office.

V. In exceptional cases the proposals may be accepted at Head Office directly.

VI. Acceptance and Scrutiny should be done as per the laid down norms and

instructions issued by Head Office from time to time.

VII. The Specialized Credit Cells will follow the procedure as laid down in Office

Orders No. 206 dated 10.11.2005 and No. 218 dated 18.9.2006 respectively.

They will send proposals beyond the delegated power of DGM and upto the

delegated authority of the Managing Director, directly to Head Office.

VIII. The Regional Offices will send the proposals beyond the delegated power of

DGM & upto the delegated power of the GM/MD, directly to Head Office for

sanction and proposals beyond the delegated power of the GM/MD.

IX. The Branches shall not sanction Security loans against income proof by

Affidavit and there is no established business. However, if earlier loan

sanctioned on the basis of Affidavit is repaid/ repaying regularly, new loan/top up

loan can be sanctioned.



57

X. In case of applications for loans from Class-IV Employees of Municipal

Corporation of Mumbai, Navi Mumbai, Thane, Bhiwandi, Dombivali, Kalyan,

Pune & other Municipal Corporations etc. can be considered if their full salaries

are received/ credited regularly through ECS in their accounts for more than six

months. They should give 2 good salary earners as sureties.

XI. Branches shall invariably obtain Credit Report from Credit Information Bureau of

India Ltd, (CIBIL) or from other Credit Information Agencies, of all applicants

i.e. Individual as well as Commercial Borrowers and its Partners, Directors,

Trustees as per Circular OC No. 433 dated 8.4.2008 and 456 dated 8.10.2008.

Branches shall also check the www.cibil.com for the List of Defaulters whenever

new and takeover credit proposals are received.

XII. In-Principle Loan Approval Letters: For Surety Loans:-

'In-principle' Loan Approval letters can be issued to our customers whose salary

is being remitted to our Bank through ECS. The approved amount will be based

on the salary amount received in the Branch. The Branch In-charge may issue In-

principle approval letter.

For Housing Loans & Education Loans to students:-

Branch In-charge or in his absence the next official will interview the applicant,

apprise him of all requirements and get Housing/Education Loan Preliminary

Application filled. He will obtain the latest income proof of the applicant and co-

applicant, wherever applicable. On the basis of latest income proof of

Applicant and Co-applicant, the Branch In-charge will on the same day issue

Preliminary Approval of Housing/Education Loan amount upto Rs. 25.00

Lakh/Rs.10.00 Lakh respectively, in the appropriate formats. In case the Branch

In-charge or in his absence, the next official is not satisfied about the proposal, he

will forward it to the next higher authority for perusal/rejection along with their

specific remarks as to why the proposal could not be sanctioned at his end.



58

B. Scrutiny:

Scrutiny is very important part in sanctioning loan. Branch Office make

scrutinizes on credit proposal along with managers remarks. For some proposal

only branches makes scrutiny. Branch Office scrutiny is sent to head offices and

head office remarks also get added into it. In the scrutiny whole proposal of the

applicant, its securities, Financial analysis of applicant is written . Also managers

& GMs remarks get added. Applicants strength and weaknesses also written

down and at the end the whole proposal is goes in front of board meeting if

required. Their remarks also get added.

In Branch office financial analysis of applicant is done. His current ratio, quick

ratio is calculated and compared with the policies requirements. Ratios are

different according to sensitive area, general areas. Ranking also done in Branch

offices if required.

C. Recommendations:-

(i) Recommendations by Branch In-charge and other Sr. Officials upto

Managing Director has to be specific. Recommendations for sanction or

rejection shall be supported by justification.

(ii) For the Loans to be sanctioned by Branch In-charges, specific

recommendation by the In-charge of Loan Dept., such as Asst.

Accountant/Accountant/ Second Manager & whoever is actively involved in

the Scrutiny, of the Branch is a must.

(iii) Unless the Borrower/applicant agrees to mortgage the property and is in

possession of documents, Title Deeds, Branch Office shall not recommend

credit limits subject to mortgage of such properties. Recommendations shall

strictly on the basis of offered prime and collateral securities only. They

should not impose conditions which are not explicitly offered by the

Applicants, like additional securities of property/FDRs etc.

(iv) The Branch Office should ensure that in respect of each property, the



59

original Share Certificate and /or Sale Deeds duly registered & are held by

the Mortgagor.

(v) Similarly, the stipulation of new RD account or FDR as collateral security

should not be mentioned in the recommendation without consulting the

applicant and he agreeing for the same. Branches Office should obtain

consent letter from the applicant.

(vi) Generally the recommendations of Branch In-charge, AGM of ROs and

DGM of Regional Office should not vary substantially as both are

following the same credit appraisal norms as set out in the Credit Policy

and various guidelines/instructions of the Bank. In case of mistake

on the part of the Branch, RO/ZO should point out these mistakes in

writing and advise these concerned Branch/In-charges suitably for the

first instance. In case of repetition of mistakes in determining PBF and

in preparation of the scrutiny notes, the Branch In-charge should be

issued a Warning Memo. Similarly, Personnel Dept. should also be

advised to initiate action against the concerned Branch in-

charge/Scrutinizing Official, for concealment, wrong reporting of

information, etc. as may be observed by the R.O./Z.O./H.O. However,

the Branch In-charges and Regional Office may differ in their

recommendations by noting the reasons.

After recommendations appraisal get sanction accordingly. Sanctioning of loans and

advanceds proposals after 23 days at branch level will be viewed sd violation of delegation

authority attracting disciplinary action against the in- charge of the Branch.

8. Preparation of Security Documentation: The Appropriate Sanction Letter should be

prepared and sent by the disbursement authorities containing all the Terms and Conditions of

sanction. The Borrower and the sureties should give a letter accepting unconditionally all the

terms and conditions of sanction and it should be kept along with other documents. The copy of

sanction letter should be sent to all sureties.



60

All documents should be executed as per the manual of Documentation/ guidelines issued

by higher authorities. It should be ensured that proper documentations are executed with right

amount of stamp duty as per H.O. guidelines issued from time to time .It should also be ensured

that Borrower fulfills all terms and conditions stipulated by the Board/Sanctioning Authorities.

9. Preparation of Mortgage Deed: Mortgage agreement is prepared according to application.

For immovable properties mortgage is done and for movable properties hypothecation is

done. Mortgage Dept takes care of all terms and conditions and legal formalities.

10. Release credit Facility: If all documents, term and conditions are fulfill then credit facilities

are released.

11. Repayment Of Loan: If the loan is not repaid regularly or if the applicant fails to repay the

interest & the principal amount then the case of the credit proposal becomes default. Then

this default case goes to the recovery dept.

Where all necessary legal actions are taken against the defaulter.



61

6. Flow Chart of Loan Procedure of Corporate Loan

Visit to applicants

home, workplace

CIBIL Report of

applicant

Make

Member Reject

No

Yes

Documents

Taken

Check

Eligibility

Sanction Loan

Amount

Prepare security

documents

Mortgage Done,

IFD report taken

Release Credit

Facility

Loan

Repay

Loan completely

repaid

Recovery

Dept

Yes

No

Loan Applied



62

7. Corporate Loan Process

1) Loan Applied: Applicant comes to banks branch with credit proposal. According to

loan type bank asked for documents. In the corporate loan applicants interview is

taken by banks respective authorities.

2) Visit to applicants home, workplace: Banks employees gives visit to applicants

home and workplace so that his /her relatives come to know about loan application.

Also bank can get his past record from his colleagues, relatives.

3) CIBIL Report: Bank takes out CIBIL report of applicant, his sureties so that bank

can know about applicants past loans and whether he is able to pay those loans

regularly or not. If CIBIL report shows that applicant is unable to repay his past loans

or he has many other loans then bank can reject his application. Through CIBIL

report bank can know applicants loan amounts but bank unable to see banks names

through which those loans are taken .To get that information bank have to give

application to CIBIL .

4) Decision on giving Membership: According to credit policies loan can be given to

only members of bank. To give loan first applicant have to become member of the

bank. Applicant can be permanent member or temporary member. Bank checks his

past records and then decide whether to make him member or not.

5) Documents Taken: After making member bank ask for required documents to

member .His residential proofs, his income proof, legal documents if required. Also

bank makes agreement with applicant if required. Balance sheet of 3 years is

required.

i. For CC and Term loans businesss financial data is required. For

business loans past 3 years, current years, next 3 years (projected)

financial data is required.

6) Eligibility Status: For eligibility of term loan and CC facilities eligibility is

calculated according to margins given in the credit policies. Also their average DSCR



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is calculated. For thrust areas DSCR should be 1.5 or above but not less than 1.25 in

each year.

i. For take over loan ranking is done according to policies. File should be

AAA ranked. It has been decide to do credit rating exercise in

respect of all the borrowers enjoying only cash credit limit above

Rs.10Lakh or only loan limit above Rs.25Lakh or if they enjoy both

CC and TL.

ii. Also sureties financial statements are verified so that if the applicant is

failed to repay the loan then surety can pay the balance amount.

e.g. Term loan purchase of machinery .

If the cost of the machinery is Rs.48.36Lakhs then the applicant can apply for 75% of

the cost of machinery i.e. Rs.48.36 * 75% = Rs. 36.27Lakhs so the 25% of the

machinery have to be paid by the applicant on its own source .The 75% cost of the

machinery is Rs.36.27Lakhs so the bank round of the amount to the nearest value and

the loan amount comes to Rs.36.5Lakhs .So the eligibility of the applicant for the

loan is Rs.36.5Lakhs.

7) Sanctioning Loan: In this acceptance, scrutiny, recommendation is come under

sanctioning process.

A. Acceptance:-

XIII. All credit proposals will be accepted by respective Branches/Credit Cell.

However, the proposals for In-Principle Acceptance as determined from time to

time will be accepted at Regional Office but after acceptance In-Principle of such

proposals by the Board, they will be once again scrutinized by the Branch and

sent to Head Office through respective Regional Offices.

XIV. The credit proposals above Rs.5.00 Lakh will be send to Head Office by Regional

Office for scrutiny and recommendations. In case of enhancement/additional

facilities above Rs.100.00 Lakh will be accepted and scrutinized by the Regional

Offices. However, the DGM/AGM should involve the respective Branch



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Managers/In-charges for account information, visit and other preliminary data

collection and make them accountable for the same. The proposals should be

scrutinized by the Regional Office and with the recommendation of the DGM the

proposals shall be sent to Head Office for sanction.

XV. Credit Proposals except Housing Loans, beyond the powers of Regional Office

shall be sent to Head Office duly scrutinized and recommended by the Branch

office.

XVI. All other proposals shall be accepted, scrutinized and recommended by the

Branches/Credit Cells and the proposals beyond the delegation of the

Branches/Credit Cells shall be forwarded to the Head office.

XVII. At present No In-principal approval required for Priority Sector accounts for

limits upto Rs. 5.00 Crore. In Principal Approval for such proposals is required

for new Priority Sector proposals above Rs. 5.00 Crore. In case of Non-Priority

Sector proposals In-Principal acceptance is required for proposals of above Rs.

2.00 Crore.

XVIII. In exceptional cases the proposals may be accepted at Head Office directly.

XIX. Acceptance and Scrutiny should be done as per the laid down norms and

instructions issued by Head Office from time to time.

XX. The Specialized Credit Cells will follow the procedure as laid down in Office

Orders No. 206 dated 10.11.2005 and No. 218 dated 18.9.2006 respectively.

They will send proposals beyond the delegated power of DGM and upto the

delegated authority of the Managing Director, directly to Head Office.

XXI. The Regional Offices will send the proposals beyond the delegated power of

DGM & upto the delegated power of the GM/MD, directly to Head Office for

sanction and proposals beyond the delegated power of the GM/MD, shall be

routed through respective Head Office.

XXII. The Branches shall not sanction Surety loans against income proof by Affidavit



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and there is no established business. However, if earlier loan sanctioned on the

basis of Affidavit is repaid/ repaying regularly, new loan/top up loan can be

sanctioned.

XXIII. In case of applications for loans from Class-IV Employees of Municipal

Corporation of Mumbai, Navi Mumbai, Thane, Bhiwandi, Dombivali, Kalyan,

Pune & other Municipal Corporations etc. can be considered if their full salaries

are received/ credited regularly through ECS in their accounts for more than six

months. They should give 2 good salary earners as sureties.

XXIV. Branches shall invariably obtain Credit Report from Credit Information Bureau of

India Ltd, (CIBIL) or from other Credit Information Agencies, of all applicants

i.e. Individual as well as Commercial Borrowers and its Partners, Directors,

Trustees as per Circular OC No. 433 dated 8.4.2008 and 456 dated 8.10.2008.

Branches shall also check the www.cibil.com for the List of Defaulters whenever

new and takeover credit proposals are received.

XXV. In-Principle Loan Approval Letters: For Surety Loans:-

'In-principle' Loan Approval letters can be issued to our customers whose salary

is being remitted to our Bank through ECS. The approved amount will be based

on the salary amount received in the Branch. The Branch In-charge may issue In-

principle approval letter.

For Housing Loans & Education Loans to students:-

Branch In-charge or in his absence the next official will interview the applicant,

apprise him of all requirements and get Housing/Education Loan Preliminary

Application filled. He will obtain the latest income proof of the applicant and co-

applicant, wherever applicable. On the basis of latest income proof of

Applicant and Co-applicant, the Branch In-charge will on the same day issue

Preliminary Approval of Housing/Education Loan amount upto Rs. 25.00

Lakh/Rs.10.00 Lakh respectively, in the appropriate formats. In case the Branch

In-charge or in his absence, the next official is not satisfied about the proposal, he



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will forward it to the next higher authority for perusal/rejection along with their

specific remarks as to why the proposal could not be sanctioned at his end.

B. Scrutiny:

Scrutiny is very important part in sanctioning the loan proposal. Regional

Branches make scrutinizes on credit proposal along with managers remarks. For

some proposal only branches makes scrutiny. Scrutinized proposal is sent to head

offices and head office remark also gets added into it. In the scrutiny whole

proposal of the applicant, its securities, financial analysis of applicant is written.

Also managers, GMs remarks get added. Applicants strength and weaknesses

also written down and at the end the whole proposal is goes in front of board

meeting if required. Their remarks also get added.

In Regional office financial analysis of applicant is done. His current ratio,

quick ratio is calculated and compared with the policies requirements. Ratios

are different according to sensitive area, general areas. Ranking is also done in

regional offices if required.

In the corporate loan mortgage dept, IFDs comments also get added. For

business loans past 3 years, current years, next 3 years (projected) financial data is

required. That datas analysis is done by Branch office and their remark is added.

For new projects projected financial data plays vital role while sanctioning.

C. Recommendations:-

(i) Recommendations by Branch In-charge and other Sr. Officials upto

Managing Director has to be specific. Recommendations for sanction or

rejection shall be supported by justification.

(ii) For the Loans to be sanctioned by Branch In-charges, specific

recommendation by the In-charge of Loan Dept., such as Asst.

Accountant/Accountant/ Second Manager & whoever is actively involved in

the Scrutiny, of the Branch is a must.



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(iii) Unless the Borrower/applicant agrees to mortgage the property and is in

possession of documents, Title Deeds, Branch Office shall not recommend

credit limits subject to mortgage of such properties. Recommendations shall

strictly on the basis of offered prime and collateral securities only. They

should not impose conditions which are not explicitly offered by the

Applicants, like additional securities of property/FDRs etc.

(iv) The Branch Office should ensure that in respect of each property, the

original Share Certificate and /or Sale Deeds duly registered & are held by

the Mortgagor.

(v) Similarly, the stipulation of new RD account or FDR as collateral security

should not be mentioned in the recommendation without consulting the

applicant and he agreeing for the same. Branches Office should ob