bbm project final (1)
TRANSCRIPT
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INTRODUCTION
1.1 Finance
In modern money using economy”financial is consider to be the life blood of every business. “it is
the foundation of every economy activity and is the pivot around which every business activityrotates money (or) finance has acquired so much importance that the modern economy is descried
as money as effectively ,efficient and smoothly as a money economy.
In business, finance is defined as the provision of money when it is wanted; finance is the
art of rising and spending of money. every business concern required money(or)finance to
commerce its operation to continue its operation to continue its operation and for
expansion 9or)growth, so there must be a continuous flow of money (or)finance in and out
of every business enterprise for its success and survival. Finance is the master key which
provides access to all and merchandising activities.
Financial management is that managerial activity which is concerned with planning and
controlling of the firms financial resources, it is of recent origin as a separate activity of
discipline; it was a branch of economic till 1890 still today, it has no unique body of
knowledge of its own and grows heavily in economics for its theoretical concepts.
DEFINTION OF BUSINESS FINANCE
“Business financial can be broadly defined as the activity concerned with planning, raising,
controlling and administering of funds in the business”.
-Gathman & dougall
“Business financial deals primarily with rising administering and disturbing funds by
privately owned business units operating in non financial field of industry”.
1 Prather and wert
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DEFINITION OF FINANCIAL MANAGEMENT
“Financial managent is the operational activity of a business that is responsible for obtaining
and effectively utilizing the funds necessary for efficient operation”.
1 Joseph and massie
“Financial management is the application of the planning and control functions to the finance
function”.
“Financial management is the area of business management devoted to a judicious use of
capital and careful selection and careful selection to move in the direction of reaching its goal “.
1 j .f Bridler
SOURCES OF FINANCE.
The source of finance through which a company meets its financial requirement is broadly
divided as:-
1. Long term sources
2. Short term sources
The long –term sources are:
1. Shares
2. Debentures
3. Preference shares
4. Leasing
5. Public deposits
The short term sources are
1. Trade credit
2. Bank credit
3. Factoring
4. Bank financing of accounts receivables
1.2 origin of bank
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Authorities on banking are divide in their opinions regarding the origin of the term “bank”
is derived from the Italian world “bank” used as a counter for banking activitities viz.
Money changing and money lending in the market place , as such the word “bank “should
be associated with the Italian word “bank”.
HISTORY OF BANKING
According to ancient European history, the Babylonians were the earliest people to develop
a systematized banking and the priest played the role of financial agent. In 12 the century,
some bank were simply receiving deposit and lending money to the people. The bank of
England started its business in 1694 with a view to finance the government to carry on its
work with France.
What is banking?
A bank is profit seeing business firm, dealing in money and credit,it is a financial institution
dealing in money in the sense that it accepts deposited of money from the public to keep
them in its custody for safely , so also it deals in credit , by making advance out of the funds
received as deposited to needy people it , the thus function as a mobilise in the economy.
A bank is therefore, like a reservoir into which flow the saving ,the idle surplus money of
households and from which loans are given on interest to business and other who need
them for investment (or) productive.
Definition of bank:
“A person (or) corporation who holds itself out to receive from public deposit payable on
demand (or)by cheque”.
-WALTER LEAF
IMPORTANCE OF BANK
Banks plays a significant role in economic development of a country. The importance of
bank in the modern economy cannot be denied.
1) Banks mobilize the small and scattered ideal savings of people and make them available
for productive purpose. This in turn helps in capital formation.
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2) By offering attractive interest on the of the people deposited in bank, they bank, hey
promote the habit of saving among the people.
3) By accepting the saving, bank provides safety and security to the surplus money of the
depositors.
4) Bank provides a convenient and economical means of payment through cheques and
demand drafts.
5) Bank provides convenient and economical means of transfer of funds from one place to
another through bank draft or demand draft, mail transfers and telegraphic transfers.
6) They influence the rate of interest in the money market by the supply of money.
7) They help trade, commerce and agriculture by meeting their financial needs.
8) The bank serve as the best financial intermediaries between he savers and the investors
9) Banks direct the flow of funds into productive channel by concentrating on essential
activities.
TYPES OF BANKS
1. COMMERCIAL BANK
2. INDUSTRIAL BANK
3. AGRICULTURAL BANK
4. EXCHANGE BANK
5. CENTRAL BANK
1) COMMERCIAL BANK
Commercial bank is the oldest banking institutions in the organized sector. They constitute the
predominant segment of him banking system in India. They cater to the needs of trade,
commerce, industries, agriculture, small business, transport and other activities with a wide
network of branches throughout the country. Commercial bank command a major share in the
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total banking operations. They are called commercial banks as they mainly finance commerce.
They are also called deposit bank, as they accept deposits from publicly
2) INDUSTRIAL BANK OR INVESTMENT BANK
Industrial bank are banks, which provide long-term finance to industries. They are also called
investment banks, as they invest heir funds in subscribing o shar4es and debentures of
industrial banks. Instead, special industrial finance corporations have been se up for providing
long – term finance to industries.
3) AGRIULTURAL BANK
Agricultural banks are banks which provide financial to agriculture. These banks areorganized on co-operative basis. They extend loans to the members at a relatively
reasonable rate of interest. Agricultural bank, in India are of two types, such as:-
A) Agricultural co-operative societies.
B) Land mortgage or land development banks.
4) EXCHANCGE BANK S
Exchange banks specialize in financing the foreign trade .they supply the necessary foreign exchange for
the importers and exporters. in many countries, commercial bank themselves undertaken foreign
exchange business.
5) CENTRAL BANKS
Central bank is a special institution, which regulates the entire banking structure and monetary
stability. it regulates the notes issue . It functions in close co-operation with the government . It
maintains internal and external values of currency . In short, central bank is apex bank of thecountry.
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FUNCTIONS OF COMMERCIAL BANK
Commercial bank perform a variety of crucial functions which are as follows :-
PRIMARY FUNCTIONS
1) Acceptance of deposits
2) Creation of credit
3) Lending of funds
4) Investment of funds on securities
PRIMARY FUNCTIONS:
1) Acceptance of deposits:
Accepting deposits in one of the primary functions of commercial banks. Deposits serve
as the major source of supply of deposits from all types of income earners. They are:
a) Fixed deposits.
b) Savings deposits
c) Current deposits
d) Recurring deposits
2) creation of credit
Commercial banks receive deposit from the public and also lend funds to the needy but also
create money. In the process of lending funds, they lend money more then their cash deposits
which they actually received from the public. This way it creates or money in the market.
3) Lending of funds:
The basic purpose of commercial banking is to do the business of lending. banks earn income in the from
of interest through granting loans and advances . Banks lend funds to public by way of :-
A) Secured advances
B) Unsecured advances
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4) Investment of funds on securities:
Investment of funds on securities is one of the important function of the commercial banks. hey invest a
considerable amount of their funds in government and industrial securities.
Definition of banker:
“ A dealer in debt . his own and there peoples according to this definition the essential function
of a bank s dealing in debt and lending of the needy, this definition makes mention of onely the
main function of a bank, but not its subsidiary services.
-CROWTHER
Definition given by Indian banking regulation act:
Section 5(1) of the Indian regulation act of 1949 defines the term “banking companies” as any
company which transact the business of the banking in Indian.
Section 5(1)9(b)of the same act defines the term “bankig “as” accepting for the purpose f
lending (or) investment of deposits of money from the public, repayable on section 5(1)of the
Indian banking regulation act of 1949 defines the term “banking companies “”as” any company
which transact the business of banking in Indian.
Section 5(1)(b) of the same demand (or) other wise and withdrawal by cheque, draft order(or)
otherwise”.
This act, beasties starting the main banking activities also enumerates , in section 6 the various
subsidiary service such as the collection of cheque draft and bill remittance of funds,
acceptance of safe custody deposits etc ,that are performed by a bank . this act also stipulates
that banking , business should be the main business of the bank, again section 1 of this act
required that every banking company should use as part of its name, the “bank” “bankers”9or)
banking company” .
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1.3 MEANINGS OF LOAN
Loans are financial arrangement, under which the bank to a borrower on a serrate account
grants an advance.
When the loan is sanctioned to a barrower and it is paid to the borrower are once in lump sum
either in cash or transfer to the credit of his current account. The repayment of the loan also is
made in one lump sum or in instalments.
1.4 TYPES OF LOANS:-
Short term loan
Medium term loan
Long term loan
A loan is generally , granted for a short period of one year or less than one year, such a
loan is called short term loan or demand loan.
Loan may also be granted for period of more than one year like , 2 year ,3 year ,4year,7
year etc. Such a loan is called term loan.
The loan is given for a period raining from more than one year usually for three to five
year it is called a medium term loans.
The loan is given for still longer period; it is called a long –term loan.
A loan once repaid in full r part cannot be drawn again by the borrower unless the banker
sanctions a fresh loan. A loan is granted either against collateral securities or against the person
security of the borrower.
The rate of interest is changed on a loan is comparatively lower than changed on an over draft
and a cash credit.
A banker prefers to make an advance in the form of a loan for two reasons. he can collect
interest on the entire amount of the loan sanctioned .
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A loan involves him with very little. Accounting work, as the granted &repayment of the loan
are done in a lump sum.
However the barrower does not prefer this form of advance, as he is required to pay interest on
the full amount of loan sanctioned to him irrespective of the amount actually with drawn by
him.
ADVANCES
Advances are granted on the mere personal security of the borrowers, therefore , in the event
of the default of the borrower, the banker as only personal rights of action against the
borrower these advance are very risk , as they should be given only to highly credit worthy
borrower further they should be given only for short periods.
SECURED ADVANCES
According to sec 5(a0 of the banking regulation act of 1949 a secured advances means loan or
advances made on the security of assets, the market value of which is not, at any time less than
the amount of such advances granting advances against collateral-securities a banker should
bear in mind
The following points .
1. Ready reliability
2. Stability of prices
3. Yield
4. Absence of disability
5. Validity of title
6. Absence of prior charge
7. Cos of supervision
8. Right method of creating charge
9. Documentation
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I. Advancing money against tangible securities is the margin for advance.
1. Degree of sale ability of securities.
2. Fluctuations in prices of securities.
3. Interest and other change.
4. Credit worthiness of borrowers.
5. Reserve bank’s directives.
II. Advancing against stock exchange securities.
III. advances against government securities.
A government security includes securities issued by central and state
government.
1. Bearer bonds
2. Inscribed stocks
3. Government promissory notes
4. Saving deposit certificates
IV. advances against shares of public companies
V. Advances against shares of private companies.
VI. Advances against be dentures of joint stock companies.
VII. Advances against documents of title to goods.
VIII. Advances against plant and machinery.
IX. Advances against real estates, immovable properties or land and buildings.
X. Advances against gold ornaments.
XI. Advances against life insurance policies.
XII. Advances against fixed deposit receipts.
XIII. Advances against supply bills.
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UNSECURED ADVANCES
Wherever the borrower does not have sufficient security to offer and if he has exchange
all securities he can required the banker to accept the surety of the party. The banker has no
collateral or tangible security they may take the forms of:-
a) advances on the mere personal security of the barrower (O.D)
b) Advances against guarantees.
a) advances on the mere personal security:-
In this case advances are granted on the mere personal security of he barrower. In the
event of the default of the borrower and as such there are very risky. Advances should
be given only to highly credit worthy borrowers and they should be given only for shortperiod.
b) advances against guarantees:-
The personal who gives security for the loan raised by the principle debtor is called
guarantee. Section 126 of the Indian contract to perform he promise or discharge the
liability of a third person in case of his default. it means a third person agrees to
discharge the liability of the principle debtor ID he principal debtor fails to clear the
money due to creditor.
TYPES OF ADVANCES
The various types of advances given by the bank are as follows:I. Loans
II. overdraft
III. cash credit
IV. discounting of bills
V. clean loans
VI. letter of credit.
I.
LOAN
Loan is a financial accommodation under which bank an advance on a separate account called
loan account. Interest is changed on entire amount o loan sanctioned. Loan is given to all type
of persons against the personal securities of the borrower or against the movable and
immovable properties.
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II. OVER DRAFT
An over draft is a financial accommodation under which a current account holder is amount over drawn
by the customer. It is granted against the security of the borrower. It is advantageous to the borrower
because interest is charged only on the amount actually over drawn by him.
III. CASH CREDIT:
A cash credit is a financial accommodation under which an advance is granted on a
separate account called cash credit account up to a specified limit. Interest is changed
on the amount made use f the borrower. it is granted against to security of goods or
person security of one or more person other than borrower . Traders prefer cash credit
to direct to direct loans as they need not pay interest on the entire amount.
IV. DISCOUNTING OF BILLS:
Discounting of bill is a financial arrangement under which a customer holding a bill of
exchange can get loan equivalent to the value of the bill, less discount. The discount
represents interest on the money lent for the unexpired period of the bill. On maturity,
the banker collects the proceeds of the bill from its acceptor.
V. CLEAN LOANS
This is a type of advances where in the banker makes advances to the customer against his
personal security and security of one or more person. That amount is credited to the
customer’s account immediately after sanction sand is repayable in lump sum or in instalments.
The period of loans will be lightly higher compared to cash credit or over drafts.
The interest is changed on the entire amount of loan.
VI. LETTER OF CREDIT (LOC):
This is a sort of loan facility extended extended by a banking institution to his customer . yhis is
given to customers who will be on travel and to business people . a letter f credit is undertaking
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given by an issue banker to pay the specified sum of money to the person or drawee bank
which pays money to the holder of LOC.
a) Traveler facility letter of personal credit letter.
b) Letter for commercial credits (LC).
a) Traveler facility letter:
This is issued to a customer who will be traveling abroad for a specific period. the person who
stays abroad for a given time period will have an arrangement with the issuing bank to get
money where every he may be .the issuing bank to pay a certain agreed amount to the
customer and opens an account and debits it with the specified sum.
b) Commercial letter of credit (LC)
This is also called ‘documentary letter of credit’. this is issued by the undertaking bank to pay to
exporter the value of bill of exchange accompanied by shipping documents which are to be
submitted the bank LC may be revocable or irrevocable or confirmed and the nature of
undertaking depends upon type of LC issued by the bank.
VII. SANCTION OF LOANS & ADVANCES
While sanctioning after security of the loan application the bank may sanction in full the loan
applied for, reduced the loan amount or period of repayment, after the condition with regard
security or reject the loan application. The bank is not bound to inform the applicant the
reasons regarding its decision. However the applicant shall be advised about the rejection while
disposing of the loan application, the decision of the bank in final.
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UTILIZATION AND REPAYMENT OF LOAN
1. A member shall utilize the amount of loan sanctioned for the purpose for which it was
sanctioned. In case the sanctioned amount is utilized for a purpose different from the purpose
for which it was sanctioned, the bank to recall such loans together with interest up to date.
2. It shall be the duty of every borrower to repay promptly the instalment on the loans and
advances as per terms and advances as per terms and conditions prevailing at the time sanction.
3. When the loans and advances are repaid by the borrower, the overdue instalment and interest
towards unsecured loans and advances shall be recovered first and the balance amount shall be
towards secured loans and advances.
VIII. RATE OF INTERST
1. The rate of interest charged on various types of loans and advances shall be fixed by the
bank from time to time.
2. Penal interest shall be charged above the normal interest rate on overdue loans and
such interest shall be treated as income.
3. Interest on loans and advances shall be calculated on daily product basis and charged at
quarterly rests. Interest so calculated on daily product basis and charged at quarter rest.
interest so calculated as a 30 June, over draft accounts on the last day of the quarterly
not with standing any interest in due in a loan a/c such interest shall be recovered first
out of and amount realized.
4. When interest on any loan or part these of is due to the bank a member that amount
shall b revoked by the bank first from any amount that may be paid in to the bank
behalf of the member.
5. For the purpose of calculation interest or penal interest for fractions of a month, actual
number of days shall be taken in to account.
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6. Interest and overdue interest shall be charged to all the loans and advances at the end
of each calendar quarter and capitalized. However UN recovered portion of his interest
shall not be taken to profit and loss account as an income unless it is fully realized.
IX. PRINCIPLES OF LENDING LOAN &ADVANCES
As we have observe, majority of commercial bank funds are employed in the form of loan advances .
Loans bring good money to the bank in the form of profit by changing interest lending activity of a
commercial bank is reciprocal activity in the sense, bank gets and the loans get benefit of money
required for their activities.
All and sundry cannot get loan from banking institution. Before they lend, commercial banks have to
follow certain guidelines or principles. These principles are discussed at length in the first part of this
volume under investment policy. However as a passing reference these principles are explained n brief.
1. LIQUIDITY
Liquidity here we mean the ready convertibility of advances into meet the customer demand
across the counter. This does not mean that they should hold all the deposits they receive in
the from of cas.oly a portion is held to meet the demand and major portion is lend. While
making such loan, the banker should bear in mind hat it is easily convertible into cash without
loss. Hence he should make loans only of short – team nature. The secret of banking consists in
knowing the different between a mortgage and a bill of exchange. this statement clearly
indicates the when a banker lends against mortgage, the bank funds will be linked against a bill
of exchange , the bank funds will be locked up for a long time and liquidity concept is taken not
of and the bank will be locked up for a long time and liquidity loosed ground . Whereas when it
lends against a bill of exchange, the liquidity concept is taken not of and bank will be getting
bank its money is short period.
Even the bank balance sheet is prepared according to the liquidity concept. Cash appear as the
first item in the balance sheet. But the percent of cash held of the total funds is less, as bank
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believes by experience that a major portion can be employed in lending activity. But while
lending, they must keep in mind he point of liquidity i.e. ready convertibility of earning assets
into cash, without loss. The bank, when get rediscounting facility form the RBI, they have to
consider the cost of borrower bank. Considering all these factors, the lending activity of a bank
should be governed by the liquidity principle.
2. PROFITABILITY
Profitability means earning profit on the assets acquired. Assets here refer o the bank loan and
advances
Whenever the banks obtained deposits they have to pay interest to deposits’. beside this , the
shareholder of the bank
Should receive some return on their investment. It is the responsibility of the bank that it
should receive some return on their investment. It is the responsibility the bank management
to leave some surplus to declare dividend to shareholders. Hence banks have to meet the
liquidity. Hence the banker should always decide the quantum of funds to be employed in the
earning assets leaving enough amounts to meet the liquidity situation. While employing the
funds the bank should keep in mind the for a and steady returns on the earning assets.
3. SAFETY
Safety is another principle to be borne in mind while employing the funds since earning assets .
if the bank funds are not safely employed , bank cannot survive . whatever be the advances
made by the banker should come bank to the banker within the stipulated time without
resorting to legal action hence, the advances as far as possible should be made only to people
who are for repaying the bank loan honesty . Insurance and dishonest should not be given the
loan. They only the bank funds will be safe
4. DIVERSIFICATION
Another important principle to be followed by the banker is to see that loans and advances are
spread to different categories. This means, advances should not be concentrated in only in
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sector. Every advance is a risky advance and this can be distributed. If advances are made in
different categories to large number of people scattered in a wide area. Hence while lending;
the banker should keep in mind the concept of diversification.
5. OBJECT
The object of advance is also another principle to be borne in mind by the banker while making
advances. If he advances for productive purpose like industry agriculture or trade, the fund will
come back quickly and without any difficulty. Because these organization will get back money
by selling their products and this cash inflow. Thus the object of advance is also a guiding factor
in lending.
6. SECURITY
Another guiding factor in bank advances is security. When the banker advances without
security he will rent his risk of losing the money. If the loan is prompt in repayment then there
will be no worry. But it essential that the banker should have substantial security for his
advance. This thinking is gradually changing. The purpose of advances the security offered is
assuming important. However the traditional thinking still prevails. The banker is not advancingwithout sufficient security. Because he will be managing the public money, and if the
confidence of the public is lost, there will be run-on the bank. Hence the banker will not
advanced, interest their o and other charges. Thus the banker should also bear in mind the
security principle while lending.
7. PUBLIC POLICY
The banker should keeping mind the national policies and programmers while lending. The
government takes up several welfare measures and activities relating to economic growth. The
lending should fall in with these government programmers. This principle is well considered
only after nationalization of commercial bank.
CHARGES ON SECURITY
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A there are different methods of creating charges on securities. The term ‘charge ‘refers to
have a legal hold on immovable properties. The forms of legal hold are:-
1. LIEN
‘Lien’ is a term used to identify the right to retain a property belonging to a debtor till such time
until the debtor discharges the debt to the retainer of property. Lien will be lost when his
possession of the property is lost.
Lien is divided in to two heads such as:-
General lien
Particular lien
2. PLEDGE
The Indian contract act defines the term ‘pledge’ as a bailment of goods as a security for
payment of debt or performance of a promise. the person who pledges the property is called
‘pledger’ or ‘pawner’ and the person in whose name the property is pledged is called ‘pledge’
or ‘Pawnee’.
A valid pledge has following requisites
a) it is a charge on the movable property
b) They should have either oral or written contract between themselves.
c) The physical delivery of the pledged property is essential.
d) The ownership of the goods will be retained with the pledge.
e) The pledge can sell the property by giving reasonable notice to the pledged. In case
pleder fails to repay the debt.
3) HYPOTHECATION:
Hypothecation is a charge against property for an amount of debt where neither ownership not
possession is passed to the creditor. It is a charge against movable property. But the good will
be retained with borrower. The borrower gives only a letter stating that the goods are
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hypothecated to he banker as security for the loan granted. The process of hypothecation take
place by executing a letter by the borrower called ‘letter of hypothecation’.
The features of hypothecation are:-
I. Neither the possession nor the ownership f he property is transferred to the banker.
II. It is an equitable charge created against immovable property.
III. For the banker, hypothecation is safe as pledge.
IV. The contents in the letter of hypothecation decide the right of the banker.
5) MORTGAGE:
The term mortgage is defined “as the transfer of the interest in a specific movable property for
the purpose of securing the payment of money advances “. the person who transfers the
interest of a specific property is called a ‘mortgager’. the person in whose favour the interest of
the property is transferred is called the ‘mortgagee’ .the principle money and interest payment
are called ‘mortgage money’ and he document through which the interest of the property is
transferred is called ‘mortgage deed’.
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Chapter-2
MEANING OF RESEARCH
Research is a scientific and systematic search for pertinent information on a specific concept or
fact.
Research is a organized enquiry designed and carried out to provide information for solving aproblem and it is a careful injury or examination to discover new information or relationships
and to expand to very existing knowledge for the purpose of gaining knowledge. Through each
research study has its own specific purpose, we may think of research objectives as falling into a
number of following broad groupings:
To gain familiarity with a phenomenon or to achieve new insights into it.
To portray accurately the characteristics of a particular individual situation or group.
To determine the frequency with it is associated something Else.
To test a hypothesis of casual relationship between variables.
MEANING OF REARCH DESIN
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Research design is the conceptual structure within which research is conducted . it is an
organized enquiry. it is also referred to as a search of fact. It constitutes the blue print for the
collection , measurement and analysis of data as such the design include an outline of what the
researcher will do from writing the hypothesis and its operational implication to the final
analysis.
2.1 TITLE OF THE STUDY OR RESEARCH:-
A project report on the “Loans and advances at corporation bank, vijayanagar branch,
Bangalore.
2.2 OBJECTIVES OF THE STUDY:-
This study is mainly aimed to cover all details of loans and advances available in corporation
bank, vijayanagar branch, Bangalore, and their advantages and other details such as structure,
type of loans, duration, rules and regulations and the type of deposits etc.
1.
To mobilize or borrow funds.2. To prepare and finance projects to improve the economic conditions of the member
particularly those belonging to weaker sections of the society.
3. To find out the percentage of non – performing assets.
4. To find out he effectiveness of various lending schemes.
5. To extend financial and technical assistance to the unemployed to start their wn
industry or profession .
6. To encourage member to promote trade and industry and to do such other things as are
incidental and conductive to the promotion and advancement of their objects of the
business of the society.
7. To study the lending policies of corporation bank.
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8. To analyze whether the lending schemes have been implemented by the bank as per the
guidelines of the RBI.
2.3 research methods:-
The banks can give the loans advances o the customers the various metode are as
follows.
1. Liquidity
2. Demand loan method
3. Recurring deposit method
4. Fixed loan method
5. S.B account method
6. insurances service
7. equipment purchase loan
8. hire purchase
2.4 TOOLS OF COLLECTING DATA
Data sources-both primary and secondary data were used.
PRIMARY DATA:-
For the study the data was collected by means of detailed interview schedules and
questionnaires use for banking employees.
SECONDARY DATA:
The use of existing information on the topic under study was collected from the sources such as
magazines, publications, circulars, annual report etc. And websites.
2.5 NEED FOR STUDY:
Bangalore is the fast growing city7 it is developing in a rapid speed with economic
liberalization, which has huge marketing transactions, industrial activities, financial
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transactions, banking, and money market transactions. So it is very important have a
field study about loans & advances in detail.
2.6 STATEMENT OF PROBLM:-
in the present competitive world to securing a huge funds for a business is a complicated
matter, so it is necessary to study about loans and advances for obtaining loans we should
consider so many matter such as rate of interest, duration, securities, rules and regulation of
hypothecation, different types of loans in different type of bank and in other financial institution
. Now a days, this has become more and more complicated because of lack of awareness about
the above matter.
Though each research study has its own specific purpose, we may think of research
objectives as falling into number of following broad grouping.
RELATES TO THE BANKER
I. The borrower cannot repay the amount banker consider the debt amount, in this case
the banker as to bear the problem.
II. In the golden method the gold rate is immediately down, that time the banker also fall
the proems
RELAES TO THE CUSTOMER
He bank should take legal steps to recover the balance due from a borrower and his sureties. If
they fail to pay i according to the terms of the loan agreement the bank will initiate legal steps
to recover the dues with in 6 months from the date of loan becoming over due.
2.7 INTEREST ON DEPOSITS :-
These include interest paid on all type of deposits from bank other institutions.
2.8 SCOPE OF THE STUDY:-
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The study on lending polices of cooperation bank was conducted to study the various schemes ,
procedure, rules and regulations and their policy
Guidelines followed while loans to the customers.
The area of the study includes entire corporation bank.
The data pertaining to the study is taken from annual reports of past three year [2006-07, 2007-
08, 2008-09] and from internet.
2.9 METHODOLOGY :
The study was started with a discussion with a branch manager at corroboration bank,
vijayanagar branch, Bangalore.
The information was collected from annual report of the bank, few text books and
references books and personal visits were made to bank o collect necessary
information.
2.10 LIMITATIONS OF THE STUDY:-
Study on loan & advances lacks detailed study of each entity due to limited data
available.
Due to time constraint study is restricted to loans and advances of a bank only.
non – availability of the required data in some cases like personal loans , gold loans ,
vehicle loans , etc become hardly to the study.
Data collected are deemed to be true.
The study was done only for two months.
RELATES TO THE BANK:
1. The customer shoes the irrelevant documents and improper information.
2. RELATES TO THE CUSTOMER.
a. The banker to lien their property.
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b. The banker changes high rate of interest like compound interest.
2.11 PLAN FOR ANALYSIS
The data collected from the information provided by the manager, internal guide and staff
member of the corporation bank branches was prepared, tabulated and analyzed. The
tabulated information is presented in the form of table and graphs by using simple percentage
under different heading. The analyzed information has been explained under each heading.
CHAPTER-4
4.1 OBJECTIVE OF ANALYSIS
To mobilize or borrow funds.
To lend money to its member to porches on hire purchase of hypothecation of
machineries equipment and motor vehincial as defined in the motor vehicles act.
To create funds for the promotion of corporation education.
To create or to support or to pay in the instalment of funds of net profit for the welfare
of the member and their dependents subject to the rules on named by the board.
To do banking business.
To prepare finance project to improve the economic condition of the member
particularly belonging to weaker sections of the society subject to the limits prescribed
by the board.
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to create funds for promotion of education of member children subject to the limits
prescribed by the board.
To discount member short term bills or business bill in accordance with the rules framed
by board.
To possess, acquire, alter or construct site or building.
To issue to accept, to sell or purchase notes, drafts warrants, Share certificates and
other negotiable instrument on behalf of its customers.
To give financial and technical assistance to small scale industry, transport operators
and self employed professional to promote their business.
To extent financial and technical assistance to the unemployed to start their own
industry or profession.
To establish death relief fund of the benefit of member and extend relief to the family of
the decreased members.
To encourages member to promote trade and industry and to do such other things as
are incidental and conductive to the promotion and advancement of there objects and
of the business of the surely.
4.2 ANALYSIS OF METHODOLOGY
Liquidity
In this method the banker charge simple interest before 90 days after 90 days or 3 months they
will charge compound interest, valuation changes in 3 rs. On 1000 and service changes is 10 rs.
And insurances charge is 5 rs.
Demand loan method
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In this method the loan holders are paid immediately or instalment and the banker compound
interest also the customer did not paid the amount with in 24 months the bank can lien their
property it the loan holders can not repay the amount granters should pay their amount.
Recurring deposit method
The minimum amount 50 rs. To deposit RD account in a bank. The 80% of loan given to the
customer on their depositing amount 9 to 13% interest given to the customer on their
depositing amount and 2% extra interest should be charged as their loan.
Fixed loan method
The 80% of the loan will give to he customer on their original property.
Table showing net profit
Year Amount [in crores] %change
2005-06 444.46 40.2
2006-07 536.14 44/73
2007-08 734.9 36/94
2008-09 892.77 21.52
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Analysis:
analysis the above table the net profit of “corporation bank” rs.444.46 crores in the year of
2005-06 , rs 536.14 crores in the year 2006-07, rs 734.99 crores in the year 2007-08 rs.892.77 in
the year of 2008-09.
Inference:-
The net profit to its general customer or farmer by corporation bank indicates that banks
financial power in last year has increased the following data represent fact &figures.
444.6
536.14
734.99
892.77
0
100200
300
400
500
600
700
800
900
1000
2005-06 2006-07 2007-08 2008-09
NET PROFIT
NET PROFIT
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Table showing net profit
Year Amount [in crores] %change
2005-06 32877 28.24
2006-07 423456 29.44
2007-08 55424 30.85
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2008-09 73984 33.48
Analysis:
Analysis the above table that the deposits of “corporation bank” rs.32877 crores in the year of
2005-06, rs 42356 crores in the year 2006-07, rs 55424 crores in the year 2007-08 rs.73984 in
the year of 2008-09.
Inference:-
Deposits formed by the largest simple source of funds of the bank the deposits of the bank was
increased rs. 32877 crores in the year of 2005-06, to rs 42356 crores in the year of 2006-07 , to rs 5542
crores in the year of 2007-08, rs 73984 crores in the year of 2008-09 increasing the year to year.
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4.3 inferences:-
1. limitation
0
10000
20000
30000
40000
50000
60000
70000
80000
2005-06 2006-07 2007-08 2008-09
32877
42356
55424
73984
DEPOSITS
DEPOSITS
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If the customer shows the irrelevant documents and improper information.
If the customer are irregular.
If the banker did not encourage the member o promote trade industry.
If the banker did not give the employed opportunity to the unemployed people.
If did not accept purchase promissory notes, drafts, warrants.
If the bank did not prepare financial projects to improve the economic condition.
If the bank did not create funds for promotion of corporation bank.
2. problems
If the customer cannot repay the amount.
If the market value of gold comes down.
If the banker charge interest that means compound interest.
If the banker should take the legal action.
Table showing total advances
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Year Amount [in crores] %change
2005-06 23962 20.79
2006-07 29950 24.98
2007-08 39186 30.83
2008-09 48512 23.79
Analysis:
analysis the above table the advances of “corporation bank” rs.23962 crores in the year of
2005-06 , rs 29950 crores in the year 2006-07, rs 39186 crores in the year 2007-08 rs.48512 in
the year of 2008-09.
Inference:-
The advances to its general customer or farmer or farmer by corporation bank indicate that banks
financial power in last four year has increased the following data represent fact & figures.
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GRAPH SHOWING TOTAL ADVANCES
Table showing NET NPT% to total advances
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
2005-06 2006-07 2007-08 2008-09
TOTAL ADVANCES
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Year Amount [in crores] %change
2006-07 141.93 0.47
2007-08 126.92 0.32
2008-09 139.30 0.29
Analysis:
analysis the above table the net NPA of “corporation bank” rs.141.93 crores in the year 2006-
07, rs 126.92 crores in the year 2007-08 rs.139.30 in the year of 2008-09.
Inference:-
The above reveals that the net nap to total advances varies based on the changes in the
amount and also decreases the percentage changes.
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115
120
125
130
135
140
145
2006-07 2007-08 2008-09
141.93
126.92
139.3
NET NAP%
NET NAP%
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Table showing GROSS NET NPT% to total advances
Year Amount [in crores] %change
2006-07 624.57 2.05
2007-08 581.41 1.47
2008-09 559.21 1.14
Analysis:
analysis the above table the GROSS net NPA of “corporation bank” rs.624.57crores in the year
2006-07, rs 581.41 crores in the year 2007-08 rs.559.21 in the year of 2008-09.
Inference:-
The above graph reveals that the gross nap to total advances provided by corporation bank
decreased year to year .their financial power in last three years as decreased the following
data represent facts & figures.
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Graph showing GROSS NET NPT% to total advances
35%
33%
32%
gross NAP%
2006-07
2007-08
2008-09
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Table showing DIVIDEND (%)
Year Amount [in crores]
2005-06 70
2006-07 90
2007-08 105
2008-09 125
Analysis:
The above table shows that the dividend is paid by the bank are varies from one year to
another year it is the simple sources of funds
Inference:-
The dividend to its general customers or farmer by corporation bank indicates that the bank
financial power in last four years has increased the following data represent facts and figures.
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Graph showing DIVIDEND
0
20
40
60
80
100
120
140
2005-06 2006-07 2007-08 2008-09
7090
105
125DIVIDEND
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CHAPTER-5
5.1 CONCLUSION:
The corporation banks playing a significant role in the financial system of the country. They
mobilize saving from the lower and middle income groups and lend to the relatively lower
incomes and vulnerable sections of the so city. The urban corporation banking movement has
shown greater vibrancy since 1993 when reserve bank of India adopted a liberated policy in
licensing of new primary corporation banks. During the last six year, 530 new corporation banks
have come up making a total of 1,936 banks the total branches net works has grown to 5,934
offices.
Banking regulation in India always been a key element in influencing the role of banks, it seeks
to protest the depositors interest and at the same foster an efficient , competitive banking
system .this is particular evident in to day’s environment when corporation banks are seeking
to offer broader range of services . the growing incident of non –performing assets and related
banks problems are forcing bankers and banks regulators to increase their emphasis on the
sound operation of individual banks the over all stability of the banking system.
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Banking laws and regulation have been extended too many aspects of banking, including how
new banks an organized, what products can offered and how banks can open new branches .
Because of the extensiveness of banking regulation , familiarity with the banking regulation act
is essential more so in the present day contest of technological innovation in the field of
banking, increased computerization and improve financial payment system , all of which have
potential of brining banking closer to its customers. It is, therefore, necessary to have a through
knowledge and familiarity with objective of corporation bank regulations.
corporation societies have been established n several sectors like credit, banking ,processing
,housing, warehousing, transport and many other spheres related with agriculture and
industries , these corporations are being engaged as effective tools for ensuring equal
distribution of state wealth among all sections of the society by providing them with govt. loans
subsidies and grants .even common people also have participated in the business of these
societies by investing their hard earned money.
in order to protect the interest of public funds and to ensure that the administrative authorities
use this fund, in the best interest of the organization, govt. it engaging corporation audit as a
main weapon .to put it in a nut shell he department is functioning not only as friend,
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philosopher and guide to these institution but also as a watchdog of public funds as well the
corporation movement it’s status of corporation societies.
CONCLUSION OF THE STUDY
Loans and advances have gone progress to working result of this branch. This branch has
generated an income by providing finance to the development activities of entire Bangalore
city.
This branch loans and advances have also increasing year by year and this shows the financial
progress of the bank . However there is a great scope for improvement of facilities in the
existing row. Through over night gradually the emphasis of sectional progress has been shifting
from secondary to tertiary sector in the larger economic scenario.
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Accordingly this branch also needs to shift the emphasis of its credit policy towards sector other
than agriculture and small scale of production. This branch also needs to adopt technological
innovation in the field of banking and also the computerization and improve financial payment
system, all of which brings customer loser to the bank.
This branch also needs to provide extension of the credit facility towards capital investment,
transport and communication.
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1 Finance projects
To prepare financial projects to improve the condition
of the member particular those belonging to weaker
section of the society.
2 Money lending
To lend money to its member to purchase on hire
purchase or hypothecation of machineries equipment
and motor vehicles.
3 Negotiable instruments
To issue, to accept to self or purchase promissory
notes, drafts, warrants, share certificates and other
instrument on behalf of its customer.
4 Create funs
To create funds for the promotion co-operative
education and to create or to support or to paid in the
instalment of funds of went profit for the welfare of
members and their departments subject to the roles
famed by the bank and to create funds for the
promotion education of member children subject to
limit prescribed by the bank.
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5 DISCOUNT
To discount member short term bill or business bill in
accordance with rules framed by bank.
6 COLLECT FUNDS Collect funds securities on behalf of its member.
7 Mobilize
The customer are must borrow or mobilize grants.
8 Extend
Extend financial & technical assistance to the
unemployed to start their own industry or profession.
9 Establish
Establish death relief funds for the benefit of member
and extend relief to the family of the deceased
members.
10 ENCOURAGE
Encourage member to promote trade and industry and to
do such other things as are incident and conductive to the
promotion and advances of there objects and of the
business.
To give financial and technical assistance to small scale
industries transport operators and self employed
professional to promote their business.
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Chapter-6
6.1 SUGGESTIONS:-
Since the bank has set of principle which are greatly influences by the government. in the
appreciable of loans and flows there strictly only a few suggestion can be made by me
which are listed below
Except when the loan proposal if for a small and the manager is authorized to advances
the amount the appreciable of a loan proposal takes considerably.
Even when the loan proposal is for small amount and manger authorized to make
advance. The manager cannot act immediately until and unless he/she is very certain that
the barrower is a genuine party. Hence a reliable credit countries so that a quick study of
the borrower is genuine or a fraud.
The changer in the credit policies passed by the government and the RBI should be less
frequent and flexible. So that the account do not fluctuate violent and the borrowed too
or not eventually borrower beaten.
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A strict and rigid recovery produce should be followed in order to the borrowers who are
habited in non payment of loans.
The bank itself must set up a machinery which studies all the borrows and their activities
and precise, the borrower who are irregular in paying the entire borrower and their
activities and précised.
The bank should themselves hold a system by which detained credit report on customer
can be communicated to each other. So that multiple lending by different banks.
The government must also assist the bank in the recovery of loans by setting up legal
bodies which ill given quick and fair solutions to the problem of non payment in case of
legal resorted to the borrower.
Another suggestion is the bank should attract more deposit from public and give
attractive interest rates on deposit to the public.
Once of the important suggestions is that is the bank should provide some of the gift to
the customers or borrower for their prompt repayment of loans and advances, by this the
customers or the borrowers will be motivated and they try to return the amount as early
as possible.
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OTHER RECOMMENDATIONS:-
The banking to do daily activities to mobilize or to borrow funds.
The banks must compulsory prepare the financial projects to improve the economic
condition of the member particular those belonging to weaker section of the society
The banks are wished to lend money to its member to purchase on hire purchase or
hypothecation of machineries equipment and motor vehicles are defending it the motor
vehicles act.
The banker must create funds for the promotion of co-operative education.
The banker must create funds or support or to paid in the instalment of funds of net
profit for the welfare of member and their departments’ subjects to the roles framed by
the board.
The banker must to issue to accept to self or purchase promissory note, draft, warrants,
share certificate and other negotiable instrument on behalf of its customers.
The banker is must passes, acquire, alter, or construct site or building.
The bankers must create funds for promotion of education member, children subject to
the limits prescribed by the board.
The banker with to collect funds securities on behalf of its members.
The banker must be encouraging the member to promote trade and industry and to do
such other things as are incidental and conductive to the promotion and advancement
of these object and of the business of the society.
The banker must establish death relief funds from the benefit of members and extend
relief to the family of the deceased member and also extend financial and technical
assistances or profession
The banker must give the financial and technical assistance to small scale industries
transport operation and self employed professionals to promote their business.
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CHAPTER -7
Corporation bank
Balances sheet as on 31-march -2007
SCHEDULE Column1
particulars no 31-3-2007
Capital and liability
Capital and liability 1 143,43,78
resave and surplus 2 3661,30,48
deposits 3 42226,59,78
borrowings 4 3021,00,72
other liabilities and provisions 5 3577,66,39
TOTAL 52630,01,10
ASSETS
cash and balances with reserve
bank
India 6 2983,91,29
balances with banks an money at
cell
and 7 3735,22,30
short notice
investments 8 14320,66,98advance 9 29949,65,01
fixed assets 10 281,40,57
other assets 11 1357,56,77
good will on consolidation 1,58,18
TOTAL 52630,01,10
CONTIGENT LIABILITIES 12 23105,98,94
bills for collection 3022,12,98
significant accounting policies 17
notes on accounts 18
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Profit and loss account for the year ended
31st
march -2008
SCHEDULE Column1
particulars no 31-03-2008
1. INCOME 13 4516,55,48
interest earned 14 699,77,85
other income 5216,33,33
TOTAL
2. expenditure
interest expended 15 3073,23,57
operating expenses 16 891,95,51
provision and contingencies 516,15,49TOTAL 4481,34,57
3. PROFIT
net profit for the year 734,98,76
Total
` 734,98,76
4.APPROPRIATION
transfer to statutory reserve 200,00,00
transfer to staff welfare reserve 15,00,00
transfer from /to investment reserve 9,87,49
transfer to capital reserve 39,72,74
special reserves 25,00,00
transfer to general resave 269,17,66
interim dividend paid 64,54,82
proposed dividend 86,06,40
tax on interim dividend paid 10,96,40
tax on dividend proposed 14,62,66
total 734,98,76
51.24
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Corporation bank
Balances sheet as on 31-march -2007
SCHEDULE Column1
particulars no 31-3-2007
Capital and liability
Capital and liability 1 143,43,78
resave and surplus 2 4085,07,46
deposits 3 55425,42,22
borrowings 4 2137,06,43
other liabilities and provisions 5 4807,14,24
TOTAL 66567,68,14
ASSETS
cash and balances with reserve
bank
India 6 7103,53,20
balances with banks an money at
cell
and 7 999,61,60
short notice
investments 8 17325,08,78advance 9 391885,57,41
fixed assets 10 1712,11,99
other assets 11 1712,11,99
good will on consolidation 6659,68,14
TOTAL
CONTIGENT LIABILITIES 12 27432,46,60
bills for collection 3731,80,03
significant accounting policies 17
notes on accounts 18
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Profit and loss account for the year ended
31st
march -2008 SCHEDULE
particulars no 31-03-2008
1. INCOME 13 6067,35,15
interest earned 14 11707,21,47
other income 7174,56,26
TOTAL
2. expenditure
interest expended 15 4376,37,48
operating expenses 16 1001,57,66
provision and contingencies 903,84,50
TOTAL 6281,79,64
3. PROFIT
net profit for the year 892,76,98
Total
` 892,76,98
4.APPROPRIATION
transfer to statutory reserve 224,00,00
transfer to staff welfare reserve 15,00,00
transfer from /to investment reserve
transfer to capital reserve 379,58,50
special reserves 64,00,00
transfer to general resave 41,26
interim dividend paid 64,54,82
proposed dividend 114,75,20
tax on interim dividend paid 10,96,99
tax on dividend proposed 19,50,21
total 892,76,98
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BALANCES SHEET AS ON 31 MARCH 2009
SCHEDULE Column1
particulars no 31-3-2007
Capital and liability
Capital and liability 1 143,43,78
resave and surplus 2 4753,07,22
deposits 3 73983,91,10
borrowings 4 2072,39,64
other liabilities and provisions 5 5952,99,28
TOTAL 86906,81,02
ASSETS
cash and balances with reservebank
India 6 75590,06,43
balances with banks an money at
cell
and 7 4949,09,49
short notice
investments 8 24937,76,65
advance 9 48512,16,06
fixed assets 10 298,92,07
other assets 11 2617,26,32
good will on consolidation 86906,81,02
TOTAL
CONTIGENT LIABILITIES 12 42230,96,65
bills for collection 3270,91,93
significant accounting policies 17
notes on accounts 18
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AUDITORS REPORT
We have audited the attached balance sheet of corporation bank as on 31 st march 2009
and the profit and loss account annexed thereto for the year ended on that date, in which
are incorporated the returns of 20 branches, audited by us, 832 branches audited by other
auditore, 293 un-audited branches and 34 administrative offices, the return of which are
certified by the branch managers. The branches audited by us and the branches audited by
other auditors have been selected by the bank of India. The un-audited branches account
for 0.53 percent of advances, 2.61 per cent of deposits, 0.27 percent of interest income and
0.45 percent of interest expense. We have also audited the cash flow statement as started
in notes forming part of accounts for the year ended on that date. These financial
statement are the responsibility us to express a potion o these financial statement based on
our audit.
We have conducted our audit in accordance with auditing standards generally accepted in
India. Those standards require that we plan and perform that audit to obtain reasonable
assurance about whether the financial statements are free of material misstatements. An
audit includes examining, on a test basis, evidences supporting the amounts and disclosures
in the financial statements; an audit also includes assessing the accounting principles as well
as evaluating the overall presentation of financial statement. We believe that our audit
provides a reasonable basic for our opinion.
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The balance sheet and the profit and loss account have been drawn up in form “a” and “b”
respectively of the third schedule to the banking regulation act, 1949.
Subject to the limitation of the audit. indicated in paragraph I above , and the limitation of
disclosures contained in the banking companies act,1980 and subject to notes no .10
regarding inter branch transaction ,11(b) and 11(c) regarding balancing of books and 12
regarding claims for agricultural debt waiver under verification and scheme for agricultural
debt relief under implementation , of schedule -18 , where adjustment are pending , the
consequential effect where of on the accounts could not be ascertained;
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BIBLILOGRAPHY
1. REFERENCE
BANKING THEORY AND ORACTICE - B.S.Raman
Theory and practice of banking - Reddy and Appanaiah
Financial management - P.V.Kulkarni
Financial management - S.C.Kuchal
Business research method - Appanaiah, Reddy Ramanath
2. WEB SITES I.D. AND ADDRESS
A) http://corp.k
B) www.corp bank.com
3. MAGZINES
1. KSHEMA
YEARS:-2005
2006
2007
2008
4. ANNUAL REPORT ON CORPORATION BANK