retail lending schemes at canara bank

PREFACE

This project report pertains to the making of a project SUMMER TRAINING OF M.B.A curriculum.

The purpose of this project is to make the student have through knowledge of the topics given to them. I learned a lot from the hard work I put in to collect information regarding the same, which would be of great use in my near future as a professional.

Justification can not be done to whatever I have learnt within a few days but I have still tried my best to cover as much as possible about “Retail lending schemes of CANARA BANK” in this report.

Being students of Masters in Business Administration, we need to be aware of the organization internal environment. Summer training helps us to understand these concepts related to the organization.

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ACKNOWLEDGEMENT

The successful completion of this project marks the beginning of a learning experience of converting ideas and concepts into real life practical system. This project along with the knowledge enhancement has provided various useful professional life experiences. It would be worthwhile here to mention the contribution made by people around me leading to successful completion of this project.

I would like to thank, with sincere gratitude, my project guide Mr. RAVINDER KUMAR BHAT , Chief Manager of CANARA BANK Head office Chandigarh for his able guidance and understanding which was a great source of inspiration and motivation for me. I would also like to thank the employees of CANARA BANK HEAD OFFICE Chandigarh who provided me with the necessary information and help that was very important for the successful completion of the project.

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DECLARATION

I, HARJOT SINGH, student of MBA (BANKING & INSURANCE) here by declare that project entitled “RETAIL LENDING SCHEMES” submitted in the partial fulfilment of the degree for Master of Business Administration to “UNIVERSITY INSTITUTE OF APPLIED MANAGEMENT & SCIENCES, PANJAB UNIVERSITY CHANDIGARH” is of my own accurate work.

I further declare that all the facts and figures furnished in the project report

are the outcome of my own intensive research and findings.

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CONTENTS

S. No Topic Page no.

1 INTRODUCTION 1

2 BANK PROFILE 2

3 REVIEW OF LITERATURE 10

4 OBJECTIVES OF THE STUDY 11

5 COMPARISON OF CANARA BANK WITH HDFC BANK & ICICI BANK

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6 RETAIL LENDING SCHEMES 15

7 GLOBAL SCENARIO 46

8 INDIAN SCENARIIO 47

9 ISSUES AND CHALLENGES 48

10 SUGGESTIONS AND RECOMENDATIONS

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11 BIBLIOGRAPHY 52

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INTRODUCTION

The banking sector has been undergoing a complex, but comprehensive phase of restructuring since 1991, with a view to make it sound, efficient and at the same time forging its links firmly with the real sector for promotion of savings, investment and growth. Although a complete turnaround in banking sector performance is not expected till the completion of reforms, signs of improvement are visible in some indicators under the CAMEL framework. Under this bank is required to enhance capital adequacy, strengthen asset quality, improve management, increase earnings and reduce sensitivity to various financial risks. The almost simultaneous nature of these developments makes it difficult to disentangle the positive impact of reforms measures. Keeping this in mind, signs of improvements and deteriorations are discussed for the three groups of scheduled banks in the following sections.

The whole banking scenario has changed in the very recent past has changed in the very recent past on the recommendations of Narasimham committee. Further BASELL II Norms were introduced to internationally standardize processes and make the banking industry more adaptive to the sensitive market risks. The fact that banks work under the most volatile conditions and the banking industry as such in the booming phase makes it an interesting subject of study. Amongst these reforms and restructuring the CAMELS Framework has its own contribution to the way modern baking is looked up on now. The attempt here is to see how various ratios have been used and interpreted to reveal a banks performance and how this particular model encompasses a wide range of parameters making it a widely used and accepted model in today’s scenario.

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BANKS PROFILE

Widely known for customer centricity, Canara Bank was founded by Shri Ammembal Subba Rao Pai, a great visionary and philanthropist, in July 1906, at Mangalore, then a small port town in Karnataka. The Bank has gone through the various phases of its growth trajectory over hundred years of its existence. Growth of Canara Bank was phenomenal, especially after nationalization in the year 1969, attaining the status of a national level player in terms of geographical reach and clientele segments. Eighties was characterized by business diversification for the Bank. In June 2006, the Bank completed a century of operation in the Indian banking industry. The eventful journey of the Bank has been characterized by several memorable milestones. Today, Canara Bank occupies a premier position in the comity of Indian banks. With an unbroken record of profits since its inception, Canara Bank has several firsts to its credit. These include:

Launching of Inter-City ATM Network

Obtaining ISO Certification for a Branch

Articulation of ‘Good Banking’ – Bank’s Citizen Charter

Commissioning of Exclusive Mahila Banking Branch

Launching of Exclusive Subsidiary for IT Consultancy

Issuing credit card for farmers

Providing Agricultural Consultancy Services

Over the years, the Bank has been scaling up its market position to emerge as a major 'Financial Conglomerate' with as many as nine subsidiaries/sponsored institutions/joint ventures in India and abroad. As at March 2012, the Bank has further expanded its domestic presence, with 3595 branches spread across all geographical segments. Keeping customer convenience at the forefront, the Bank provides a wide array of alternative delivery channels that include 2858 ATMs, covering 1139 centres. Several IT initiatives have been undertaken during the year, which include Funds Transfer through Interbank Mobile Payment Services (IMPS) in ATMs, ASBA facility to net banking users, E-filing of tax returns and facility for viewing details of tax deducted at source, Terminal at 223 branches for customers to use net banking, SMS/e-mail alerts

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for all transactions done through ATM, net banking, POS, mobile banking, online payments irrespective of amounts, online loan applications and tracking facility, generation of automatic pass sheets through e-mail and automatic renewal of term deposits.

1) History

Founded as 'Canara Bank Hindu Permanent Fund' in 1906, by late Shri Ammembal Subba Rao Pai, a philanthropist, this small seed blossomed into a limited company as 'Canara Bank Ltd.' in 1910 and became Canara Bank in 1969 after nationalization.

Founding Principles

1. To remove Superstition and ignorance.2. To spread education among all to sub-serve the first principle.3. To inculcate the habit of thrift and savings.4. To transform the financial institution not only as the financial heart of

the community but the social heart as well.5. To assist the needy.6. To work with sense of service and dedication.7. To develop a concern for fellow human being and sensitivity to the

surroundings with a view to make changes/remove hardships and sufferings.

Vision

To emerge as a ‘Best Practices Bank’ by pursuing global benchmarks in profitability, operational efficiency, asset quality, risk management and expanding the global reach.

Mission

To provide quality banking services with enhanced customer orientation, higher value creation for stakeholders and to continue as a responsive corporate social citizen by effectively blending commercial pursuits with social banking.

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Awards and Achievements during 2011-12

Under the implementation of Rajbhasha, the Bank received Indira Gandhi Rajbhasha Puraskar Yojna-2009-10 - Encouragement Prize.

NABARD’s Best Performance Award, 2010-11, for SHG Credit Linkage and Best Performing Farmers’ Club Award of NABARD, 2010-11, in Karnataka.

The Bank was conferred 5 Awards by the Public Relations Council of India (PRCI), in the following categories

Silver Award for Corporate Advertisement - Single Language

Bronze Award for Annual Report

Bronze Award for Corporate Brochure on CSR activities

Bronze Award for Corporate Single Advertisement - English

Bronze Award for Shreyas In-house Magazine - English

Received during 2011-12

Canara Bank was awarded coveted skoch award for financial inclusion on 5.01.2012 at New Delhi. The award was handed over by Dr C Rangarajan, Chairman Prime Ministers. Economic Advisory Council to Smt Archana Bhargava Executive Director Canara Bank in a glittering function held at New Delhi. The other dignitaries present on the occasion were Dr D Damodaran Former Chairman SEBI, Dr Govinda Rao, Mr Yogesh Aggarwal Chairman PFRDA. A certificate of merit was handed over to S S Bhat General Manager Financial Inclusion Wing for Canara Banks role in providing Access to Banking and Financial Services. Citation reads as "Canara Bank has a hand in every arena when it comes to promoting financial inclusion through skilling and self employment. During last one year it has shown significant improvement in its financial inclusion efforts. " Canara Bank deems it a great honour and would redouble its efforts for the cause of financially excluded

The Bank was conferred with National Award - 2011 for excellence in the field of Khadi and Village Industries - Best Bank, South Zone for PMEGP.

Corporate Social Responsibility Award-2011 to CANARA BANK

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Receive during 2010-11

Awards/Accolades

Canara Utsav & SLBC Kerala-Declaration of total banking coverage

Canara Bank bags Indira Gandhi Rajbhasha shield 2009-10

The Bank has been conferred with the Second Best Bank Award under National Awards for Excellence in lending to Micro Enterprises for the year 2009-10, by the Ministry of MSME and Outstanding Performer at National level for implementation of Interest Subsidy Eligibility Scheme (ISEC) of KVIC in the country for 2009-10.

The Bank was conferred 4 awards by the Public Relations Council of India (PRCI), in the following categories

Silver Award for Corporate Film ( TV Commercial ) – English

Bronze Award for House Journal/Magazine – Languages

Bronze Award for Table Calendar

Bronze Award for Corporate Advertisement – Single - English

SPECIFIC ACHIEVEMENTS PERTAINING TO RECOVERY WING ARE AS FOLLOWS:

1. CASH RECOVERY OF Rs.750 CRORE ACHIEVED DURING JUNE 2011 QUARTER WHICH IS ALL TIME HIGH FOR ANY PARTICULAR QUARTER.

2. ON LINE AUCTION OF SECURED ASSETS INTRODUCED AND IMPLEMENTED UNDER SARFAESI.

ACHIEVEMENT OF INSPECTION WING:

Total No. of Branches / Units risk rated : 3378

No. of LOW Risk branches: 2009

% of LOW Risk branches : 59.47 %

No. of HIGH Risk branches : 1

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Audit / Inspection conducted as per the audit plan and there is no backlog.

The concurrent audit of 494 branches cover 79 % of advances and 53 % of deposits of the Bank.

Priority Sector Performance

A. Priority Sector Advances : Performance as at March 2011

B. Highlights of Priority Sector Performance in last 3 years.

o Bank has achieved hat-trick by crossing all mandated, SoI and Internal Targets in Priority Credit.

o Bank has doubled the growth under Agriculture in 2009-10 compared to 2008-09.

o The Agriculture disbursement in FY 07-08 was Rs.11443 crore while in it in FY 10-11 Rs. 22374Crores, which is almost doubled in a period of 3 years.

o Education loan stood at Rs.3503 crore, compared to O/s level of Rs.1737 crore for Mar 08 more than doubled in 3 years.

o Weaker Sections, SC/ST and Minority advances also more than doubled in 3 years.

Strengths

Country-wide presence Overseas presence with profitable overseas operation Strong capital base High proportion of long Term liabilities A well diversified asset portfolio A large and diversified client base Fully computerised branches at major centres

KEY HIGHLIGHTS

Canara Bank has informed the Exchange regarding the standalone Results for the quarter ended on 30-JUN-2012 as follows: Interest earned of Rs. 847286 lacs for the quarter ending on 30-JUN-2012 against Rs. 718075 lacs for the quarter ending on 30-JUN-2011. Interest expended of Rs. 662932 lacs for the quarter ending on 30-JUN-2012 against Rs. 538767 lacs for the quarter ending on 30-JUN-2011. Net Profit / (Loss) of Rs. 77524 lacs for the quarter ending

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on 30-JUN-2012 against Rs. 72585 lacs for the quarter ending on 30-JUN-2011.

MEANING OF RETAIL CREDIT

A financing method which provides loan services to retail consumers for goods and services. Retail credit facilities lend funds to consumers wishing to purchase high ticket items but are short on capital. Thus, retail credit facilities may enable a greater number of consumers access to a retailer’s goods.

In other words, retail credit facilities can take the form of point of sale finance options in retail outlets.

Retail credit facilities give the option of consuming now or consuming in the future . higher interest rates may be acceptable to some consumers, depending on the consumers unique consumption utilities. The risk of default is a factor that determines the interest rate that retail credit facilities charge.

Credit history

The credit counselling centres advise based on the credit history of the customer. In India, CIBIL has built up a fairly large volume of database, although large scale cleansing of data has been an issue for CIBIL. The efforts to built a robust credit history need to be continued.

The role of credit counselling in development of a healthy financial market has been proved to be significant in the developed and emerging economies. The counselling assumes added importance in emerging economies where the customers are not very financially knowledgeable and experience asymmetry in financial information on the innovative products and services offered. The role of credit counselling in retail segment is hugely important where these asymmetries are largely present. An early attempt to address the challenges and issues would go a long way in establishing a healthy credit counselling process and ensuring a sound and robust financial appropriate sharing of customer information by credit counselling centres and CIBIL would also go a long way in building a reliable credit history.

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Way forward

The role of credit counselling in development of a healthy financial market has been proved to be significant in the developed and emerging economies. The counselling assumes added importance in emerging economies where the customers are not very financially knowledgeable and experience asymmetry in financial information on the innovative products and services offered. The role of credit counselling in retail segment is hugely important where these asymmetries are largely present. An early attempt to address the challenges and issues would go a long way in establishing a healthy credit counselling process and ensuring a sound and robust financial market.

Role of retail credit

Credit information bureaus are agencies that collect, process, and maintain credit record of borrowers and make them available to lending institutions in its network. This information is distributed for a fee to lenders, who use it to decide whether to approve a given credit application, how much credit to offer to a specific borrower, and on what terms.

Credit information bureaus are known as credit reporting, intelligence or reference agencies; and also as credit registries.

Credit reports help both the lenders and prospective borrowers. While lenders use it to reduce default rates and application processing time, borrowers use it to secure expenditious credit sanctions and better loan rates by keeping their payment history in good shape.

Credit reports perform the secondary function of limiting will full default by increasing the cost of default for a borrower.

In developed countries where credit bureau mechanism is well entrenched, individuals have to worry about having a good credit history, because for them it not only impacts the cost and access to credit across the financial system, but also the access to other services like rental accommodation.

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RETAIL BANKING

It includes exposures to individuals or small businesses. Retail banking activities are identified based on four criteria of orientation, granularity, product criterion and low value of individual exposures. In essence, these qualifiers imply that retail exposures should be to individuals or small businesses (whose annual turnover is limited to Rs. 0.50 billion) and could take any form of credit like cash credit, overdrafts etc. Retail banking exposures to one entity is limited to the extent of 0.2% of the total retail portfolio of the bank or the absolute limit of Rs. 50 million. Retail banking products on the liability side includes all types of deposit accounts and mortgages and loans (personal, housing, educational etc) on the assets side of banks. It also includes other ancillary products and services like credit cards, demat accounts etc.

The retail portfolio of banks accounted for around 21.3% of the total loans and advances of SCBs as at end-March 2009. The major component of the retail portfolio of banks is housing loans, followed by auto loans. Retail banking segment is a well diversified business segment. Most banks have a significant portion of their business contributed by retail banking activities. The largest players in retail banking in India are ICICI Bank, SBI, PNB, BOI, HDFC and Canara Bank.

Among the large banks, ICICI bank is a major player in the retail banking space which has had definitive strategies in place to boost its retail portfolio. It has a strong focus on movement towards cheaper channels of distribution, which is vital for the transaction intensive retail business. SBI’s retail business is also fast growing and a strategic business unit for the bank. Among the smaller banks, many have a visible presence especially in the auto loans business. Among these banks the reliance on their respective retail portfolio is high, as many of these banks have advance portfolios that are concentrated in certain usages, such as auto or consumer durables. Foreign banks have had a somewhat restricted retail portfolio till recently. However, they are fast expanding in this business segment. The retail banking industry is likely to see a high competition scenario in the near future.

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REVIEW OF LITERATURE

Retail banking in India has fast emerged as one of the major drivers of the overall banking industry and has witnessed enormous growth in the recent past. The Retail Banking Report encompasses extensive study & analysis of this rapidly growing sector. It primarily covers analysis of the present status, current trends, major issues & challenges in the growth of the retail banking sector. This report helps in Banks, financial institutions, MNC Banks, academicians, consultants and researchers to have a better understanding of the booming opportunities in retail banking in India. To keep in pace with the ever changing customer needs and preferences, banking sector is undergoing a rapid revolution in the recent past. New financial products are being innovated day by day. The bankers being aware of the fact that the plain vanilla products cannot satisfy the demanding customers. Several creamy layers have developed . One such nourishing layer is the introduction of retail banking services. Retail banking segment is continuously undergoing innovations, product re-engineering, adjustments and alignments. A remarkable shift in the Indian economy from the manufacturing sector to a budding service sector (Banking) can be witnessed in recent years. The banking scenario in India is at the crossroads and is continuously evolving, but the progress has been remarkable over the past decade. With the retail banking sector expected to grow at a rate of 30%, players are focusing more and more on the retail and are walking up to the potential of this sector of banking. In future the retail banking industry in India is likely to reach a value of $300 billion by 2010.

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http://www.gdevelopment.info/global-challenges-in-banking.html

OBJECTIVE OF THE STUDY

To learn about the CANARA BANK. To know about the RETAIL CREDIT OF CANARA BANK. To learn about the “GUIDELINES OF LOAN SCHEMES OF

CANARA BANK.” To compare various private banks with CANARA bank regarding

loan schemes. To know about the various challenges/ difficulties faced by

CANARA BANK. To know about how to overcome these difficulties. To learn that how CANARA BANK can be made a better bank.

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RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the problem. It may be understood as a science of studying how research is done scientifically.In it we study the various steps that are generally adopted by a researcher in studying his research problem along with the logic behind him.The scope of research methodology is wider than that research method.

Meaning of Research Research is defined as “a scientific & systematic search for particular information on a specific topic.” Research is an art of scientific investigation. It is a systematic effort to gain new knowledge. It is careful inquiry especially through search for new facts in any branch of knowledge. The search for knowledge through objective and systematic method of finding solution to a problem is a research.In this study we will evaluate the performance of the CANARA BANK through the various loan scheme.

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COMPARISON OF CANARA BANK WITH HDFC & ICICI BANK

ATTRIBUTES CANARA BANK

HDFC BANK ICICI BANK

ELGIBILITY 21-65 YRS 21-60 YRS 21-60 YRS

Personal loans Commercial Vehicle loan, Educational loan, Four wheeler loan, Housing loan, Loan against Gold, Two Wheeler Loan

Educational Loan, Four Wheeler Loan, Housing loan, Personal loan, Two wheeler loan

Commercial Vehicle Loan, Educational Loan, Four Wheeler Loan, Housing Loan, Loan Against Deposit, Loan against gold, Personal Loan, Two Wheeler Loan

Features The bank offers housing loans under a scheme called ‘housing loan’ singly or jointly as husband-wife/parent-son/parent-daughter. The loan can be availed for purchase of new independent hose/ ready to built flat; construction loan as well as purchase of old house/flat. The loan is also available for extension/ repair/renovation of existing house. Takeover of loans from other banks can also be availed.

The HDFC housing offers loans for purchase of old as well as new property, repair and renewal as well as for buying plots. The HDFC offers loans to NRI and Indian customers at fixed and floating rates.

ICICI Bank offer loans up to 90% of the ex-showroom price of the car for new car. The minimum loan amount for taking a new car loan is Rs. 1,00,000/-. The maximum loan amount depend upon the price of the car, model variant, profile of the customer, etc.

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Business loans Business Loans, Loan Against Deposit, Trade Finance

Business Loans, Professional Loan, Trade Finance

Business Loans, Professional Loan, Trade Finance

Co-application allowed

Father, Mother, Brother, Sister, Son, Daughter, Spouse



Processing fees 0.5% of loan amount or minimum Rs. 1000

0.50% to 1% of loan amount, maximum Rs. 10000

Upto Rs. 2.5 lakh: Rs. 2500, above Rs. 2.5 lakh- Rs.5 lakh: Rs. 3100, above Rs. 5 lakh- 10 lakh;Rs 4000, above Rs. 10 lakh: Rs. 5000

Prepayment Charges

If paid from own source- Nil, else if the loan is prepaid within 3 years- 2% on principal amount prepaid, after that no charges

If paid from own source-Nil, in other cases- 2% on amount prepaid.

5% on principal amount prepaid.

Down- payment:10%

Max Tenure 20 20 4

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CANARA BANK’S ATRACTIVE LOAN SCHEMES

Being a commercial Bank, giving loans and advances is among our primary activities. Apart from participation in meeting both term loan and working capital requirements of agriculture sector, trade and service sector, large/medium and small scale industry sector, infrastructure sector etc. Including taking care of their export/import and non-fund based needs like letter of credit, bank guarantee, etc. There is large range of loan products specially designed to suit personal needs. Some of the loan schemes are as follows:

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Housing Loan

Purpose:

For construction / purchase / repairs / additions / renovations of residential house / flat including the purchase of land and construction thereon. For taking over of the Housing Loan liability with other recognized Housing Finance Companies, Housing Boards, Co-operative Banks, Co-operative Societies and Commercial Banks at our prevailing low rate of interest.

Eligibility:

Salaried individuals, individuals engaged in business / professionals and self-employed persons. NRIs are also eligible to avail loans without specific permission of RBI. Persons above the age of 55 years are also eligible subject to certain stipulations of RBI.

We finance upto:

4 years of gross salary to salaried individuals. 4 years' gross annual income to individuals engaged in business or to

self-employed persons. For NRIs up to 2 years' gross income and selectively up to 3 years'

gross income. Selectively loan upto 5 years' gross salary/ income also permitted

Rs.7.5 lacs for repairs / renovations / additions to the existing house / flat. Selectively upto Rs.15 lacs in Metro Centres.

What is your contribution?

Loans upto Rs.20 lacs

Loans above Rs.20 lacs

New house / flat (including those for purchase of site &construction of house thereon)

20% 20%

Old house/flat 25% 25%Margin - 25 % for both new and old houses in respect of housing loans for acquiring second house / flat i.e., where the applicant is already owning a house/flat with or without loan.

Rate of Interest

Please visit interest rate page for current rates.

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Security:

Mortgage of House / Flat

Repayment:

In convenient equated monthly instalments upto 25 years or borrow attaining age of 70 years whichever is earlier (subject to conditions).

Processing Charges:

Nominal processing fee of 0.50% (Min Rs.500/- and Max. Rs.10,000/-) is charged. (Waived during Retail Loan Festival period valid till 15.01.2012).

Prepayment :

In case of take over of liability by other banks / HFIs, no prepayment penalties in respect of Housing Loans carrying floating rate of interest.

Documents / Formalities:

Stipulated Loan Application with 2 passport size photos of applicant / guarantor

Sale Deed Agreement for Sale Copy of the approved plan for the proposed construction / extension /

addition Detailed cost estimate / valuation report from Bank's Panel Chartered

Engineer / Architect Allotment letter of Co-operative Housing Society / Apartment Owners'

Association / Housing Board / NOC from the Society / Association / Builders / Housing Board

Legal Scrutiny Report, EC for the past 13 years, Property Tax paid receipt, Khata and permission for mortgage, wherever necessary

Salary Certificate and Form No.16 (in case of salaried persons) IT Returns filed for the past two years (in case of non-salaried persons) A brief note on the nature of business, year of establishment, type of

organization, etc., (in case of self-employed)

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Balance Sheet and P&L Account for the past three years (in case of self-employed)

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House Improvement Loan

Purpose:

For acquiring / construct / renovate house / flat

Can be availed along with a Housing Loan from Canara Bank OR Separately in cases where Housing Loan is obtained from other Banks /

Financial Institutions OR Without any Housing Loans

This loan can also be availed where a Housing Loan is already obtained from us and the liability is subsisting.

Eligibility:

Owners of House / flat who are salaried individuals / individuals engaged in business / professionals / self-employed. NRIs are also eligible.

Salaried individuals should have a minimum monthly net take home salary of 25% of their gross salary or Rs. 2000/- after meeting the loan instalments for the proposed loan.

Professionals and other non-salaried persons should have a minimum annual income of Rs. 50000/- to be evidenced by Income Tax assessment order / return.

Loan Quantum & Margin:

When availed along with Housing Loan from our Bank, amount upto one year's gross salary / income over and above the normal eligible amount for housing finance.

In other cases, one year's gross income / salary will be reckoned to determine the loan quantum under this Scheme.

Subject to above, normally, the maximum loan quantum shall be Rs.2 lacs. Higher quantum considered selectively.

If availed as a part of the housing finance from our Bank, then, the margin stipulated is 15%. In other cases, the margin is 20%.

Rate of Interest: Please visit interest rate page for current rates

Security:

Hypothecation of assets created out of this loan.

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Mortgage of house / flat (if housing loan is availed from us) Suitable co-obligation / personal guarantee. Waiver considered selectively.

Repayment:

In convenient equated monthly instalments upto 60 months.

Processing Charges:

The processing charges payable is 0.5% of the loan amount subject to a minimum of Rs. 500/- and maximum of Rs. 10000/- (subject to change from time to time)

(Waived during the Festival Period valid till 15.01.2012)

Disbursements :

Amount will be normally disbursed only after acquiring ready built house / flat or completion of construction of house / flat or completion of repairs / renovations, etc., where the loan is availed along with housing finance. In case this loan is sanctioned independent of a housing loan then, the loan can also be disbursed against proforma invoice, etc.


Stipulated Loan application with 2 passport size photographs Latest Salary Certificate and Form No.16 ITAO / IT Returns (for professionals and non-salaried persons) Proforma Invoices, cost estimates

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Canara Cash (Shares)

Purpose:

Earn on your investments. And keep them too. No need to liquidate your investments even during dire necessities. Instead, you can avail Canara Cash loan pledging your investments in Shares,

Debentures, Bonds or Units.

ELIGIBILITY:

Individuals - Existing customers with satisfactory dealings. New customers - well-introduced and credit worthy can also avail.

How much will you get :

Shares and Debentures - upto 50 % of market value PSU Bonds upto 70% of Market Value Units of UTI and CBMF - 50% of NAV or market value whichever is less.

Loan Amount

Maximum loans upto Rs.20 lacs if demat account is maintained with DPs of our bank or Rs. 10 lacs in physical form.

Security:

Security of the shares / debentures / bonds as per the approved list circulated from time to time.

Securities can be replaced / substituted during the currency of the loan upto 10 times. Nominal charges for substitution of securities.

Rate of Interest: Please visit interest rate page for current rates.

Repayment:

Upto 60 months. EMI also acceptable. Selectively OD limit is also considered.

Margin:

Uniform margin of 50% shall be applicable on all advances against pledge of

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approved shares/financing for subscribing to IPO/CDB/LCDB/issue of guarantees for capital market operations including loans/advances against pledge of shares to staff.

Processing Charges:

0.1% of the loan amount subject to a minimum of Rs.100/- and maximum of Rs.250/-.

In case of OD, charges as above are to be collected for every renewal / enhancement.

Documents / Formalities :

Stipulated Loan Application with 2 passport sized photographs Guarantee / co-obligation where applicable Statement of holding of scrips issued by DP Latest salary certificate / income proof like ITAO / IT Return Financial Statements for the last 2 years (in case of non-salaried individuals)

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Canara Mobile (Vehicle)

FOUR WHEELER:

Purpose:

For buying new or used four wheeler

ELIGIBILITY:

Salaried persons, professionals and business people, with qualifying income and required repayment capacity. Reputed firms and corporates are also eligible.

HUF not eligible

Your Dream Car. Your contribution and ours...

For buying a brand new car, bring just 10% of the cost. Canara Bank will provide you loan upto 90% of the on road price. There is no ceiling on maximum loan amount!

For new vehicles, loan may be granted upto 90% of the total value inclusive of invoice value, life tax, registration charges, insurance premium and other accessories.

USED CARS

We also finance used cars (not older than 5 years) at the same low interest rates. We finance 75% of the agreed price or 75% of the value of the car, as assessed by an automobile engineer or Rs.6 lakh whichever is lower.

Repayment to suit your pocket:

In convenient Equated Monthly Instalments upto 72 months. In zero percent finance offers, the terms are normally upto one year only. So, step into any of our branches and drive away your dream car.

Processing Charges:

0.1% on the loan amount with a minimum of Rs.250/- and maximum of Rs.500/-.

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TWO WHEELERS

Purpose:

For purchase of brand new two wheelers

Eligibility :

Individuals including professional and salaried class.

Quantum of Loan

70% of the total value inclusive of invoice value, life tax, registration charges, Insurance premium and other accessories or 15 months of net salary / 50% of the annual net income in the immediate previous year whichever is less.

Rate of Interest

Please visit interest rate page for the current rates.

Repayment :-

In convenient EMIs of 48 months. Selectively 60 months also considered.

Documents/Formalities:

Stipulated Loan application with 2 passport size photos. Latest salary certificate and Form No.16 / Income – proof like ITAO/ IT

Return, Financial statements as the case may be. Proforma Invoice or valuation report (as the case may be) Guarantee / co-obligation. Waiver considered selectively. RTO Forms

Processing Charges:

0.1% of the loan amount subject to minimum of Rs.100/- and maximum of Rs.250/-.

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Canara Budget (For Employed/Business)

A simple Personal Loan Scheme exclusively for the benefit of employees of Corporate’s, PSUs, Government Departments, Institutions, etc., and also Non salaried class like ; professional/self employed, businessmen.

Purpose:

To meet genuine personal needs other than speculative purpose.

Eligibility:

Confirmed employees of reputed PSUs and Joint Stock Companies Confirmed Central / State Government officials Lecturers / Asst. Professors / Professors of Colleges / Research Institutions and

Universities. Non Salaried:- Business/self employed who are in the business / profession for

minimum period of 3 year and who are having satisfactory dealings with the branch for at least 1 year.

Employees salary account / business account has to be maintained with our branch

For salaried: Minimum average net take home salary (NTH) for the last three months, of the borrower after meeting the EMI should not be less than 40%.

For non-salaried: The gross annual income of the applicant should not be less than Rs. 5 lakh during the last 3 years.

Quantum :

Salaried: - Six months' gross salary or Rs.1 lakh whichever is less. For Non salaried :- 50% of average gross annual income of the applicant for

last 3 years subject to maximum of Rs.1 lakh Higher quantum also considered selectively.

Rate of Interest:

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Please visit interest rate page for current rates

Repayment:

Salaried : In convenient Equated Monthly Instalments upto 48 months. Non-salaried : In convenient Equated Monthly Instalments upto 36 months.

Security

Salaried : Normally, Co-obligation is required equal to loan amount. Non-Salaried : Suitable co-obligation good for the loan amount is required.

Processing Charges:

0.5% of the loan amount subject to a minimum of Rs.100/- and maximum of Rs.500/-.

Documents / Formalities

Stipulated Loan Application with 2 copies of passport size photographs Latest Salary Certificate and Form No.16 / ITR/ITAO for last 3 years. Co-obligation Pronote / Pronote Covering Letter

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Canara Site Loan

Purpose:

A Loan Scheme to individuals for purchase of Housing sites from State Development/Town Planning Development authorities, Central and State Governments local authorities either exclusively or in partnership with private sector entities, or from any other body constituted by the Government for distribution of sites provided such layouts are duly approved by the concerned statutory authority. Housing loan can be availed whenever required for construction of house of the sites purchased.

Eligibility:

Customer of the Bank with satisfactory dealings. New customers properly introduced & creditworthy.

Age of applicant should not be more than 55 years. NRIs also eligible.

Quantum :

Three years gross annual salary/income with a maximum of Rs.15 lakhs for properties situated at six metros of Mumbai, Delhi, Kolkata, Chennai, Bangalore, Hyderabad and Secunderabad and Rs.10 lakhs for properties situated at other centres.

Margin :

20% on the project

Rate of Interest: Please visit interest rate page for the current rates.

Repayment Period:

5 years

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Security

Mortgage of the housing site proposed to be purchased. No Co obligation/personal guarantee will be insisted.

Processing Charges:

As applicable to Housing Finance. Please visit our interest rate page for the current charges.


Application with 2 passport size photographs Layout/site plan issued by the development authorities. Latest 6 months Salary Certificate/Form No.16 for salaried class and latest ITAO for Businessmen/professionals. Legal Scrutiny Report form Bank’s panel Advocate Allotment letter other any other evidencing purchase/allotment of sites issued

by the development authorities. An undertaking should be obtained from the borrower for construction of the

house within the stipulated time (as stipulated by the development authorities while allotting or giving possession of sites.)

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Loan of Senior Citizen

Purpose:

To meet the cost of medical expenses and other genuine needs

Eligibility:

Pensioners of Central / State Governments / PSUs / Corporate Pensioners / Pensioners of Banks provided they all draw pension through our branches.

Quantum :

10 month's pension amount or Rs. 2,00,000/- whichever is less, subject to Net Take Home of 40% after deducting the proposed EMI.

Rate of Interest:

Please visit interest rate page for current rates.

Repayment :

Up to 36 months in EMIs.

Security :

Co-obligation of spouse / suitable person

Processing Charges:

Processing charges are waived in respect of the loans under this scheme

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Stipulated Loan Application with 2 copies of passport size photographs Latest Salary Certificates and Form No. 16 / ITR/ITAO for last 3 years Co-obligation (unless waived) Delivery letter to DPN

Teachers loan

Purpose:

To meet any genuine personal needs.

Eligibility:

All confirmed teaching / non-teaching staff working in a school / college - drawing salary through our branches, with an undertaking letter from the school / college not to shift the salary account without NOC from the branch.

Net take home after meeting the proposed EMI should be minimum 30% of the gross salary

Quantum :

10 months' gross salary or Rs. 2,00,000/- whichever is less.

Rate of Interest: Please visit interest rate page for the current rates

Processing Charges:

1% of the loan amount with a minimum of Rs.50/- .

Repayment :

Upto 48 months.

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Security :

Suitable co-obligation

Documents/Formalities to be completed:

Stipulated Loan Application with 2 passport size photographs

Latest Salary Certificate and Form No.16

Co-obligation where applicable

Pronote/Pronote Covering Letter

Loan Products

If you need funds for purposes like medical

35

expenses or any other contingencies, Swarna Loan Scheme is ideal for you.

Hassle-free, quick loan, co-obligation and no guarantee required.

Reasonable rate of interest

Purpose:

To meet medical expenses and other unforeseen commitments / contingencies and investment / domestic purposes.

Repayment:

The entire loan is to be repaid in 24 Equated Monthly Instalments ( EMI )

Bullet payment (of Principal) subject to repayment of monthly interest and when debited.

Eligibility:

Credit-worthy SB Account holders with satisfactory dealings or new customers properly introduced and credit-worthy.

Quantum :

Maximum Rs.10,00,000/-.

Rate of Interest:

Please visit our interest rate page for current rates.

Documents & formalities to be submitted:

Application for Swarna Loan Certificate by the Jewel Appraiser (Bank

will arrange) Salary Certificate and Form No.16 /

income proof

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Security: Finance against

Specially minted gold coins sold by any Bank

Gold Ornaments

Processing Charges:

1% of the loan amount, with a minimum of Rs. 50/- subject to a maximum of Rs. 500/- per loan

37

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Purpose:

To provide loans to owners of the property to meet their business needs and / or genuine personal needs, against rents receivable.

Eligibility:

Existing customers with satisfactory dealings.

New customers -well introduced and creditworthy

The property should have been leased / rented out to PSUs / Central / State / Govt. undertakings, reputed corporates, financial institutions, insurance companies, MNCs and banks including Canara Bank branch / office / quarters.

Quantum :

Upto 75% of the net monthly rent receivables for the unexpired lease period of lease, net of TDS and advance rent collected.

Rate of Interest: Please visit interest rate page for current rates.

Security :

Equitable Mortgage of the leased property, value of which should be at least 100% of the loan amount. In exceptional cases, mortgage of alternative property also accepted provided the value of the property is 150 % of the loan amount.

Assignment of lease

Canara Mortgage

.Eligibility:

Customers having satisfactory

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dealings with our bank New customers well introduced and

credit worthy with satisfactory banker's / market reports on them.

Quantum :

Upto 50% on the value of the property offered as security as per the valuation report of the bank's panel-valuer.

Rate of Interest: Please visit interest rate page for the current rates

Repayment :

Upto 60 months by way of EMI

Security:

Equitable Mortgage of property acceptable to the Bank having clear marketable title.

Guarantee:

Personal Guarantee from person / s of adequate net worth acceptable to the Bank. Waiver considered selectively.

Processing Charges:

0.5% of loan amount


Stipulated Loan Application with passport size photographs - 2 copies each

Copy of lease deed Income proof of the applicant and

guarantor Income Tax Assessment Order / IT

Returns

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Title deeds of the property / EC, latest tax paid receipt / Legal Scrutiny Report

Approved plan of building Certificate of balance if finance is

availed against property from any other source

Annual Financial Statements for the past 2 years

Canara Guide

OBJECTIVE

Loan scheme to finance individuals possessing a valid certificate to practice as a Tax

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Return Preparer (TRP) as per the scheme formulated by the Ministry of Finance, Government of India for preparation of income tax returns.

PURPOSE

Purchase of computer, Printer and other peripherals/accessories i.e., necessary software, furniture, mobile telephone, tax books, technical literature etc.

ELIGIBILITY

Individual customers of the bank with satisfactory dealings possessing a valid TRP Certificate. For new customers, the account should be properly introduced to the Bank and should satisfy other eligibility norms.

LOAN QUANTUM

Need based finance with a maximum of Rs.60000/-. (Rupees Sixty thousand only).

MARGIN

A minimum margin of 15% on project cost

REPAYMENT

Entire loan together with interest shall be repaid within 60 months in step up EMIs, with 3 months repayment holiday.

SECURITY

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Hypothecation of the assets created out of the loan & Suitable Co-obligation.

XIII. PROCESSING CHARGES

A lumpsum amount of Rs.500/- (Rupees Five hundred only)

XIV. INSURANCE:

The assets created to be insured.

Doctors Choice

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45

Purpose:

Purchase of equipment Setting up of Clinic, X-ray lab,

Nursing Home, etc. Expansion / renovation /

modernisation of exiting premises Purchase of vehicles, ambulance,

computers and other essential equipments

Meet working capital needs

ELIGIBILITY:

All qualified registered medical practitioners

A well established practice / experience of minimum 3 years

LOAN AMOUNT:

Maximum of Rs.10 lacs (Sub-ceiling of Rs.2 lacs for Working Capital)

Term Loan (TL): Need Based Working Capital (WC): o 25% of previous years’ turnover oro 25% of the expected turnover of

current year oro 2 times the Annual Net Income oro The ceiling amount mentioned above,

whichever is less

Margin

L B

L N

R 1

Canara Jeevan

REVERSE MORTGAGE LOAN (RML) SCHEME FOR SENIOR CITIZENS

In the present scenario, for most senior citizens and those nearing retirement the biggest fear is the need for money to live comfortably after retirement. Reverse mortgage loan scheme helps them to convert their dwelling house property into liquid cash flows to meet their living expenses.

With this objective of meeting the financial needs of the Senior Citizens, a new loan scheme is introduced, namely “CANARA JEEVAN” - Reverse Mortgage Loan Scheme For

46

Senior Citizens.

Objective:

To meet the financial needs of Senior Citizens owning self occupied residential property.

Purpose of the loan:

For supplementing pension/other income

Maintenance of family, Medical, emergency expenditure

Repayment of an existing loan taken for the residential property to be mortgaged

Up gradation, renovation and extension of residential property

For uses associated with home improvement, maintenance/insurance of residential property

Meeting any other genuine need

Eligibility

Owners of residential house/flat, who are residents of India, above 60 years of age,

Property self acquired and self occupied as permanent primary residence and property free from encumbrance

Residual life of property should be at least 20 year

Incase of flats the age of the flat should not be more than 10 year.

Couples will be eligible as joint borrowers and in such cases, at least one of them should be above 60 years of age and the spouse/joint borrower should be more than 55 years of age.

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In case of jointly owned properties the joint owner who is aged above 60 years shall be the first borrower.

Commercial property not eligible under the scheme.

No loans against ancestral property.

Determination of Eligible Amount of Loan:

Depending upon the age of the borrower and the assessed value of the property. flats/house.

Incase of independent house Minimum loan quantum Rs.5.00 lacs and maximum Rs.50.00 lacs. (*)

Incase of flats Minimum loan quantum Rs.5.00 lacs and maximum Rs.25.00 lacs. (*)

(*) Loan amount including interest till maturity.

Nature of Payment:

Nature of payment to be decided in advance as part of the RML covenants, as under:

Periodic payments (monthly/quarterly)

Option once exercised for monthly or quarterly payments shall remain unchanged throughout the tenor of the loan and interchangeability cannot be permitted.

One time Lump-sum payment, not more than 20 % of the eligible loan amount.

In case of periodic disbursement, the payments shall be made during the loan period of 15

48

years or till the death of the last surviving spouse, whichever is earlier.

Period of Loan: Maximum 15 years.

Rate of Interest: Please visit our interest rate page for current rates.

Security:

The loan shall be secured by way of mortgage of residential property, by way of Registered Mortgage or equitable mortgage with memorandum of deposit of title deeds in favour of the bank.

Repayment of the loan:

The loan shall become due and payable only when the last surviving borrower dies or would like to sell the house, or permanently moves out of the house.

Processing charges:

0.25 % of the loan amount with a maximum of Rs. 5000/-

Term Loan – 5-7 years in monthly instalments / EMI

Working Capital

a) OD Limit valid for one yearb) Loan – repayable in 60-84 months in instalments / EMI

Interest Subsidy Educational Loans

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CANARA BANK, Nodal Bank to administer subsidy to scheduled banks.

One of the major concerns of the Government of India is to ensure that nobody is denied professional education because he or she is poor. Indian Banks' Association (IBA) has formulated a comprehensive model educational loan scheme for adoption by all Banks. In order to support students from Economically Weaker Sections of the Society, Department of Education, Ministry of Human Resourse Development , Governemnt of India has launched this interest subsidy scheme.

Eligibility:

1. Only for Educational Loans availed from Scheduled Banks for pursuing any of the approved courses after Class XII in Technical and Professional streams from recognized institutes in India under the Educational Loan Scheme of IBA.2. Students belonging to Economically Weaker Sections with annual gross parental/family income from all sources with an upper limit of Rs.4.50 lacs. Certificate to this effect issued by authorized officers of State Government is to be submitted.3. Full interest subsidy is available for the period of moratorium i.e Course Period plus 1 year or 6 months after getting the job, whichever is earlier.4. Scheme is applicable for the loan amount availed from April 01, 2009 to March31, 2010(Academic Year 2009-10)5. For Loans sanctioned earlier to 1.04.2009, only amounts disbursed during the above period are eligible.

Eligible students have to contact our branches where they have availed/availing loans for further details.

EDUCATION LOAN

Loans for Students

Purpose:Payment of course fees.Purchase of books, equipments, instruments, uniform, payment of hostel fees, examination fees, study tours, passage expenses (for studies abroad)

Eligible Courses :

Studies in India:Graduation, Post-graduation including technical /

50

professional courses with employment potential conducted by colleges / Universities approved by UGC / Govt./AICTE/Department of Electronics / IMC, autonomous institutions like IIT,IIM etc.

Studies abroad:

Job oriented, technical / professional courses- (graduation / post graduation

Quantum of Finance:

Need based finance For studies in India : Max. Rs.10.00 lacs For studies abroad : Max. Rs.20.00 lacs

MarginUpto to Rs.4.00 lacs – NilAbove Rs.4.00 lacs – for studies in India – 5%studies abroad : 15%

Security:

Loan is given jointly to the student and parent /guardianAssignment of future income of the student Upto Rs.4.00 lacs- No securityAbove Rs.4.00 lacs upto Rs. 7.50 lacs –Satisfactory third party guarantee(Note: If the proposed borrower prefers to offer collateral security of tangible assets (moveable or immoveable) instead of bringing collateral securities in the form of third party guarantee, the same may be accepted, at his request, provided the securities with stipulated margin covers 100% of the loan amount).Above Rs. 7.50 lakhs: Collateral security equal to 100% of the loan amount.

Repayment

Commences two years after completion of the course or six months after getting employment, whichever is earlier.Loan with interest is repayable in equated monthly instalments within 5 to 7 years. Credit DeliveryLoan can be availed from the branch nearest to the place of permanent residence of the parent / guardian.

Loan for Solar Water Heating Systems

PurposeTo purchase brand new solar water heater systems with necessary accessories

Eligibility Individuals, Institutions, Associations, Small Business establishments, Industrial establishments, Hospitals, Hotels, Hatcheries, SMEs etc..

Salaried individuals should have minimum monthly net

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take home salary of 25% of their gross salary OR Rs. 2000/- (after meeting the loan instalment) whichever is more. Professionals and other non-salaried class should have a minimum net yearly income of Rs. 50000/-.

Rate of Interest linked to Base rate

Base Rate of the Bank w.e.f 01.05.2012 – 10.50%

1 RETAIL LENDING SCHEMES ROI p.a.

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1.1 CANARA MOBILE BR+3.00%

1.2 CANARA PENSION BR+3.25%

1.3 HOME IMP. LOAN BR+4.00%

1.4 SWARNA LOAN BR+3.25%

1.5 CANARA TRADE BR+3.50%

1.6 TRADERS’ LOAN-Upto Rs.2.00 lacs

Above Rs.2.00 lacs

BR+4.00%

BR+5.25%

1.7 CANARA JEEVAN BR+1.25%

1.8 CANARA BUDGET, TEACHERS LOAN, CANARA SITE, CANARA CASH

BR+6.00%

1.9 CANARA SOLAR/Loans to purchase solar water heaters 12.50%

(fixed)

1.10 ALL OTHER PERSONAL LOANS BR+5.00%

1.11 HOUSING LOANS ROI p.a.*

Amount ≤ 5 years > 5 years ≤10 years

> 10 years ≤ 30 years

1.11.1 ≤ Rs.30 lacs BR BR+0.25%

BR+0.50%

1.11.2 > Rs.30 lacs ≤ Rs 75 lacs BR+0.25 BR+0.25 BR+0.50

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% % %

1.11.3 > Rs 75 lacs BR+0.50%

BR+0.50%

BR+0.50%

*additional interest of 0.25% p.a for loan for acquisition of second house/flat not applicable in respect of loans sanctioned on or after 02.04.2012.

2 EDUCATION LOANS ROI p.a.#

2.1

2.1.1

2.1.2

2.1.3

Priority Category:

-Upto Rs 4.00 Lacs

- Loans above Rs.4.00 lacs upto Rs.7.50 lacs

- Loans above Rs.7.50 lacs upto Rs.20.00 lacs

BR+3.00%

BR+4.00%

BR+2.00%

2.2 Non Priority Category BR+6.00%

# Concession of 1% will be extended to Girl students.

GLOBAL SCENARIO

Retail lending across the globe has been a showcase of innovation in the commercial banking sector. Countries like China and India have emerged as potential markets with huge investment opportunities. The higher growth of retail lending in emerging economies is attributable to fast growth of personal wealth, favorable demographic profile, rapid development in information technology, the conducive macro –

54

economic environment, financial market reforms, and several micro – level supply side factors. The retail banking strategies of banks are undergoing major transformation, as banks adopt a mix of strategies like organic growth, acquisitions and alliances. This has resulted in paradigm shift in the marketing strategies of the banks. Public Sector Banks players are adopting aggressive strategies, leveraging their branch network and their customer vase to earn a larger share of the retail pie. Banks are also going in for innovative strategies like cross selling and packaged selling of retail products. At the same time, new foreign players are also entering this high growth sector. The boom in retail banking has helped in increasing the competition from upcoming sectors like mutual funds. The banking scenario in India is at the crossroads and is continuously evolving, but progress has been remarkable over the past decade. With the exponential growth of touch points and sophistication, the frontline sales force is assuming the role of a relationship personal is continuously under the microscopic observation of the customer. At a time when channel innovation has become the order of the day to encourage effective banking habits among customers, a vital component of the supply chain namely, customer interface is totally missing. With the advent of liberalization the banking industry hadmade a head start towards the best banking practices at each interaction point of the supply chain. However the Indian landscape is not a replica of the west and is in fact unique.

INDIAN SCENARIO

Retail banking in India has fast emerged as one of the major drivers of the overall banking industry and has witnessed enormous growth in the recent past. The Retail Banking Report encompasses extensive study & analysis of this rapidly growing sector. It primarily covers analysis of the present status, current trends, major issues & challenges in the

55

growth of the retail banking sector. This report helps in Banks, financial institutions, MNC Banks, academicians, consultants and researchers to have a better understanding of the booming opportunities in retail banking in India.

The retail banking strategies of banks are undergoing major transformation, as banks adopt a mix of strategies like organic growth, acquisitions and alliances. This has resulted in a paradigm shift in the marketing strategies of the banks. Public Sector Banks players are adopting aggressive strategies, leveraging their rural branch network and their customer vase to earn a larger share of the retail pie. Banks are also going in for innovative strategies like cross selling, packaged selling of retail products and technology based banking. At the same time, new foreign players are also entering this high growth sector

ISSUES AND CHALLENGES

Though Canara Bank is trying to grow organically at 23% this year to reach a business-mix of Rs. 4,00,000 crore by opening 200 new branches as well as 10 overseas braches, Chairman & Managing Director AC Mahajan had recently opined that mergers and acquisitions are the only way to grow. This hints at the pressures the bank is facing in competing with players one rung above

56

them like State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India, and Union Bank of India.

Canara Bank is one of the four public sector banks (PSBs) that has a significant exposure to the troubled national carrier Air India. The airline has sought more time from Canara Bank to repay its existing loans.

A medium-sized public sector bank (PSB), Canara Bank has completed selecting 1800 new employees, which might add strain in a recessionary environment, especially since there is still no performance-based pay structure in place. Canara Bank needs to put such a structure in place as nearly 20% of its 45,000 workforce will retire within three years.

Canara Bank’s Net Interest Margin (NIM) is still below the comfortable 3%, unlike many of its peers. The bank faces an uphill task in improving NIM.

Canara Bank has recently put on hold a plan for selling its Non Performing Assets (NPAs) as there were no takers from the Asset Reconstruction Companies (ARCs). But it might cause Canara Bank some strain, with the worsening loan-to-value (LTV) ratios, especially in commercial properties.

Bombay Stock Exchange (BSE) has recently halted trading in derivatives of Canara Bank. The public sector bank apparently couldn’t meet the guidelines set forth by BSE. Canara Bank is the only bank to have this trading facility stopped. Moody’s Investors Service has placed Canara Bank’s rating on watch for a possible downgrade.

The South based PSU lender is re-strategizing. From a focus on wholesale segments like infrastructure and short-term corporate loans, it is taking a momentous shift to higher-yield sectors like retail, agriculture, MSME etc. In fact, much of its sluggish performance in Q4 was due to this plan already finding traction. After disturbed by accounts like Air India and SEBs, the top management under Chairman S Raman has consciously decided to chase quality rather than quantity. CanBank has also corrected weaknesses in its CASA strategy to better its NIMs going forward. The mid-sized public sector lender’s Q4 bottomline is 7.77% lower on a year-on-year basis, and 5.31% on a quarter-on-quarter basis. Not a very adverse development, compared to a couple of peers whose bottomline slipped into red in this quarter. But the core question is, is it only a case of net profit dipping? Well, on most other metrics, Canara has shown stable growth. Core income is up by nearly 29% YoY, and nearly 6% sequentially, which shows that the bank’s core topline hasn’t slowed down at all even in this difficult period for credit growth. Other Income has remained stable on a quarter-on-quarter basis. The bank could also well contain expansion in non-interest expenses, with it remaining almost flat

57

at 1.34%. Despite interest expenses swelling, CanBank could also post a 3.4% increase in Net Interest Income on a YoY basis. On the asset quality front too, there were improvements, with Gross NPAs moderating from 1.81% to 1.73% sequentially, while Net NPAs bettered slightly by falling from 1.49% to 1.46% on a YoY basis. On a sequential basis, there was a small up-tick in NNPAs. S Raman, Chairman & Managing Director of Canara Bank has made it clear that the bank could have had better performance in the quarter, if not for some conscious decisions it took in formulating a new battle-plan for FY’13. The first decision was to go slow on wholesale or large-ticket loans. Canara Bank especially had high exposures to two kinds of such loans - infrastructure loans and short-term corporate loans. The figures for the whole year, made available with Q4 numbers, show that the bank could reduce short-term corporate loans by over Rs. 10,000 crore. The strategy seems very sound as in lieu of large volume of business, these loans are not only of lower yield, but also of relatively higher risk. Under CMD Raman, Canara has also completed the detailed process of acquiring a handle or consolidating its position on all its assets, and this has enabled him to confidently state that, going forward, only some restructuring would be the only major task before the bank as far as asset quality is concerned. But a closer look at this restructuring requirements, reveals that much of it has to do with its exposure to State Electricity Boards (SEBs). But then, apart from the temporary pressure it exerts on the finances, such government company loan assets held by a government bank is not really thought of as serious NPAs in most countries due to the very low chance of default. Even in this quarter, nearly a third of its restructuring in this quarter of around Rs. 4500 crore was towards its Air India account, which has received much attention and support from government ensuring that slippages are a remote possibility. Apart from a Rs. 5000 crore restructuring for SEBs, what will remain is less than Rs. 1000 crore of such requirement in a few assorted accounts, which shows that Canara Bank is indeed in a better shape than many comparable PSU banks on the asset quality front. Provisions were already lower in the quarter by 16.8%, falling to Rs. 662 crore from Rs. 796 crore in the corresponding year-ago period. The battle plan that Chairman Raman has crafted together with his top management starts with an aggressive campaign for bettering their CASA profile. In fact, it has already started yielding results, with Savings Bank accounts showing a growth of nearly 11%. Now the bank is focusing more on bettering its Current Accounts where there is significant room for improvement, as due to some technological challenges in their IT infrastructure, the bank was forced to go slow on this front. But that has been fixed now, and Current Accounts will receive high focus from now on. Bettering CASA profile will benefit Canara much, as during Q4, what hurt it most was a YoY hit on Net Interest Margin (NIM) due to rise in deposit costs outpacing rise in yield on advances.

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SUGESTIONS AND RECOMMENDATIONS

Interest rate, possessing fees, tenure, security and margin money all these are very important an all kinds of retail loans. So banks should revise all above keeping in view all other banks. Bank should appoint some marketing executives for this purpose who can give information of market and other banks. These marketing executives gives report head office directly for timely processing so that the market can be fully captured as early as possible.

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Limit of loan amount of all retail loans should keep increasing keeping in view the private sector banks and other nationalised bank.

One of the major strength of UCO bank is timely possessing of loan application. So it must keep on processing the loan application with in the time line to get a competitive edge over other banks.

The bank must ensure a systematic follow up of the loans sanctioned in order to reduce non-performing assets. A special officer should be appointed for the recovery of loans.

The bank must take step to strengthen its phone banking services so that minor queries of loan applicants can be resolved telephonically and it can help the bank in building a loyal customer base.

In order to mobilize fresh retail business, the bank should adopt an aggressive market strategy. This can be done by launching retail loan festival campaign offering various concessions during the campaign period.

Memorandum of understanding should be signed with a number of contractors and builders so that bank can finance the housing loan of all those who are investing in that particular project.

Tie ups can also be entered into with car manufacturing companies for increasing the auto loan section.

The bank with assistance of insurance companies can provide life insurance cover to education loan and home loan customer under special packages.

References/Bibliography

Mckinsey & Company------ “India Banking 2010 - Towards a High-performing Sector”

Ben McClure------Working Capital Works Investopedia From http://www.investopedia.com/articles/fundamental/03/061803.asp

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Richard Loth------The Working Capital Position Investopedia From http://www.investopedia.com/articles/basics/06/workingcapital.asp

Naila Iqbal Paradigms of Working Capital Management From http://ezinearticles.com/?Paradigms-of-Working-Capital-Management&id=1251489

Jagdish Kapoor -------Risk Management in Financial Institutions. From http://www.coolavenues.com/know/fin/jagdish_capoor_a.php3

Principles for the Management of Credit Risk, from http://www.bis.org/publ/bcbsc125.pdf

M.Y.Khan & P.K.Jain------ Financial Management, Seventh Edition

CANARA BANK Journals

(For internal circulation only)

Credit Management & Risk Policy for the year 2012-13 Book of Instructions on Loans Loans & Advances Circulars RBI Circulars and Guideline CANARA BANK retail loan product diary.

Ready reckoner of the bank

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