Spoorthi Bennur

CREDIT MANEGEMENT WITH REFERENCE TO PRIMARY AGRICULTURE CO-OPARATIVE SOCIETY
CHAPTER-I
INTRODUCTION
P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 1

1.0 INTRODUCTION OF PROJECT

A study of credit management is the title of this project. This Project is mainly
related to various aspects like different type of credit Appraisal, NPA management
recovery management etc. this project work done at primary agriculture society
Ranebennur. The project is undertaken to study the Social profile history of the co-
operative society, Sum other Activities taken by the Society, Both of the society and
financial aspects of the society.
Bank should be operated very efficiently, co-operative societies although a
small part of whole banking system in India, but they are very important not only
from economical point of view but also from a social point of view as it more
concerned about common people welfare and development.
Credit management is a comprehensive process made up of the monitoring of
loan facilities, extension of credit distinguishing with market segment as well as
delineating the returns generated. The policy credit management comprises systems
guidelines and principles that serve as a blue print for employees in the credit
department in awarding loans and steering the total collection of credit facility. The
policy credit management is described as a combination of principles devised to
reduce expenditure connected with loan delivery will taking full advantage of the
games that can be generated from them (MC Naught on 1996).
One critical prerequisite for being able to supervise credit delivery effectively
is the capacity to astutely and competently administer the lines of credit to clients. To
be able to reduce the vulnerabilities associated with uncollectable loans, companies
must exercise a better understanding of economic capacity of clients, history of
customer credit rating and varying repayment arrangements. In order to make an
intrusion into new markets as well as enroll more clients depends on the competence
to rapidly and effortlessly make well-informed credit decisions and set appropriate
lines of credit.
Financial institution is now a day’s playing a pre-dominant role in providing
verity of service to the business form, individuals, society and investors. A financial
institution is an establishment that conducts financial transactions such as

investments, loans and deposits. It may be banks, co-operative, insurance company’s

unit investment trust, non-bank financial institutions which are giving financial
service to the verity group of people or form. Financial service provide by the
financial institutions are excepting deposits, lending loans, issue management, port
folio management , consultancy services, locker facilities etc.
Earlier days it is limited to excepting deposits and landing loans but now a
day’s expended by providing verity of service financial institutions are promotes to
save the many and capital formation. The main function performed by financial
institutions are lending loans or giving financial assistance to the needy people. Loan
can be classified as agriculture loan, BDP loan, vehicle loan, personal loan, Home
loan, Pigmy loan others. The study includes two types of loans i.e. agriculture loan
and pigmy loan.
Credit management is the process of controlling and collecting payment from
customer. This is the function within financial institutions two control credit policies
that will improve revenues and reduce financial risk. Financial institutions generate
income by providing credit. Lending loan give more profitability to the institutions.
Two management of credit flow is necessary in very institutions it contains high risks
because doubtful debts. If credit management adopts effective policies than it will
help to the both of the institutions. The study is defending on proving credit as
agriculture and pigmy loan and also collecting of payments are recoveries. Over all
the study is made on credit flow analyses.

1.1 NEED OF THE STUDY

Lending is the back bone of society activities in that it contributes larger part of
the society’s profits. This is however achievable only with the effective credit
management. That guarantees not only the repayment of the principle amount but also
assured interest on the loans granted by the society.
➢ To discuss the conceptual aspects of loans recovery and over dues.
➢ To analyze the over dues in co-operative society .
➢ To discuss the factor affecting the recovery of loans in co-operative society
➢ To suggest the methods and strategies for the better recovery and NPA
management in co-operative society.
1.2 OBJECTIVE OF THE STUDY

➢ To analyze the credit the flows in the institutions.
➢ To analyze the recovery loans distributed by the financial institutions.
➢ To now the loan landing pattern in primary agriculture society.
➢ To suggest necessary suggestion to improvement of services.
➢ To Study the History growth and development of Ranebennur society.
➢ To study the bank credit policy while lending to customer.

➢ To know the study on non recovered loan by the Society.
➢ To know the study on internal rate of interest of the Society.
➢ To know the study of rates on term deposit.
1.3 SCOPE OF THE STUDY

Scope is the extent of the areas or subject matter that something deals with or
which it is relevant. The study of covers by selecting a unit that is primary agriculture
society. This is located in Ranebennur (district Haveri)

1.4 RESEARCH METHODOLOGY

Methodology is systematic, theoretical analyses of the methods apply to a
failed of a study the study used simple, valuable methods for collection of data the
study is based on data collected from both primary and secondary sources.
➢ Primary Data
The Primary Data is been collected by various through interaction with
manager staff members and employees.
.
➢ Secondary Data
The Secondary Data is been collected from financial account of societies,
annual reports, Books, Journals and Internet resources.
1.5 CHAPTERISATION
The entire project is classified into five chapters which are as follows,
I. INTRODUCTION
1.0 Introduction of project
1.1 Need Of the study
1.2 Objective of the study
1.3 Scope of the Study
1.4 Research Methodology
1.5 Chapter Scheme
1.6 Limitations
II. Conceptual Frame Work

2.0 Introduction
2.1 meaning of credit management
2.2 credit manager
2.3 funds for lending
2.4 credit planning
2.5 credit policy
2.6 credit analysis and credit investigation

2.7 follow –up supervision and control of bank credit

2.8 types of loans
2.9 credit risk
2.10 types of credit risk
2.11 risk management structure
3. COMPANY PROFILE
3.0 History
3.1 Company Profile
3.2 Rules and Regulations for providing loans
3.3 Products Offered by Primary agriculture co-operative society
4. DATA ANALYSIS AND INTRPRETATION OF DATA

4.0 Agriculture Loan At the beginning of the year.
4.1 Agriculture loan Distributed of during the year.
4.2 Agriculture loan Recovered of during the year.
4.3 Agriculture loan Outstanding at the end of the year.
4.4 Pigmy Loan at the beginning of the year.
4.5 Pigmy Loan Distributed of during the year.
4.6 Pigmy Loan Recovered During the Year.
4.7 Pigmy Loan Outstanding At the End of the Year
5. FINDING SUGATION AND CONCLUSION

5.0 Findings
5.1 Suggestions
5.2 Conclusion
5.3 Bibliography

1.6 LIMITATIONS
 The study is based on mainly secondary data.
 Analysis of data is made by taken only two types of loans that are agriculture and
pigmy loan.
 Sufficient time is not available to make detail and creative analysis.
 Accuracy of data provides cannot guarantee which does not give clear idea about
functioning of the society.
 The study covers only five aspects of balance sheet.
 The information taken only of five years.
 Time constraint
 The generated information is not sufficient enough to draw the conclusions.
 The level of usefulness depends upon the kind of industry.
 Only financial aspects are covered, to conclude overall performance, facts
collected are not enough.
 Due to time constraint and within available sources. The study was not
possible to go in detail regarding all the aspects of Credit management as well
as the organization.

CHAPTER-II
CONCEPTUAL FRAME WORK

II.0 INTRODUCTION
Credit is a transaction between two parties in which one (the creditor or

lender) Supplies many, goods, service are securities in return for promised future
payment by the other (the debtors are borrower ) such transactions normally include
the payment in interest to the lender . Credit may be extended by public are private
institutions to finance business activities, agriculture operations consumer
expenditures or government projects. Large sounds of credit are usually extended
through specialized financial institutions.
“Credit allows the customer to by now pay later”. So also credit constitutes the
major business activity of the bank’s lending loans and advances. Of all the functions
of modern banking with are without security is by far the most important functions
advances comprise a very large portion of total bank assets and forms to back bone
every bank structure. The strength of the bank is thus primarily judged by the
soundness of its advances. A wise and prudent policy in regard to advances is
considered an important factor inspiring confidence in the depositors and the
prospective customer of a bank.
Advances not play an important role in gross earnings banks but also promote
the economic development of the country. All type of business activity including
trade, industry agriculture defends on bank finance in one form or other. Bank assists
in creating more avenues of employment and thus helps in raising the standard of
living of the people.
Creditability of bank is one of the most important criteria in establishing the credit
worthiness of a bank. Loans and advances constitute lending loans from major
business activity of a bank and the need to the liquid and easily realizable as be bank
is obligated to reply the depositors as and when they are due from payment. Major
port of the banks income is earned from interest on the advances. So there is a need
for the proper management of loans and advances.

2.1 MEANING OF CREDIT MANEGEMENT
Credit management if the process for controlling and collecting payment from
your customers. A good credit management system will help you reduce the amount
of capital tied up with debtors (people who owe you money) and minimize your
exposure to bad debtors.
The effective management of credit involves choosing it’s best mix and used
respect to loan maturity terms, interest, payment size and frequency. In other words it
shows the inside of knowing when to barrow, how much to barrow, and from where
to barrow. the ability to handle credit is of course influenced by money factors such
as your current and future income and your current and future expenses the prevailing
interest that you will have to pay on barrowed founds the payment terms of your
loans and your financial discipline.
Effective credit management is not simply sound theoretical jargon that can
help you because you heat it ones. Just as with virtually anything else in life, if you
want experience any benefits you will need to apply the techniques to your own
personal circumstances. This will require certain amount of sacrifice and discipline.
For instance you mean find that you’ll have reduce delay are even eliminate sum
purchases that you might ordinarily make because of the limits that a credit
management program has put on your barrowing. Forgoing at least in the shot tern
some desire purchase is the major sacrifice. Fortunately by following a more
discipline approach to your finance in the long run should be able to obtain more of
the things that you really want.
The ability handle debt is primarily function of the income is available to may
payment to creditors. This is the income that’s left after meeting other basic spending
needs such as food clothing shelter taxes, insurance and retirement although there is
likely some flexibility in what you can spend on these items, there’s a definite limit to
the amount that you can reduce them. The greater the amount of current and projected
incomes that remains after your required spending needs are not the larger the debt
payments you should be able to afford without becoming financially overextended.

Being able to handle larger debt payment means that if needed you can safely
barrow more money. Although every individuals or family situations are unique
money financial advisors suggest basic rule-of –thumb to debtor mine your overall
debt position. Compute the percentage of your take-home-pay also noun as your
disposable income that’s required to service your debts (don’t include home mortgage
cost and credit card debt that is regularly paid in full). If the debt payments are 10%
or less of your disposable income, your debts is generally within safe limits. if the
payments are 11% to 20% you are at the maximum advisable. And if over 20% you
are probably over extended and should look to reduce your overall debt. Of course
every situation is different and spending needs defend on verity of factors.
Example: a family with several children is likely to spend more money than an
individual for most basic consumption items. Thus a single person is generally able to
support substantially more debt than a family which earns the same a income. The
point here is to analyze your own financial circumstances and determine what you
need to do to get an keep your credit use and your finance as a whole within healthy
parameters..
2.2 CREDIT MANAGER

Credit manager is a person employed by on organization to manage the credit
department and make decisions concerning credit limits, acceptable levels of risk and
terms of payment to their customers. In companies the role of credit manager is
variable in its scope.
Credit manager are responsible for:

➢ Controlling bad-debts exposure and expenses through the direct management of
credit terms on the company’s ledger.
➢ Maintaining strong cash flows through efficient collection. The efficiency of cash
flow is measured using various methods most common of which is days sales
outstanding (DSO).
➢ Ensuring an adequate allowance for doubtful accounts is kept by the company.
➢ Monitoring the accounts receivable port polio for trends and warning signs.

➢ Enforcing the stop list of supply of goods and services to customers.

➢ Determining credit ceilings.
➢ Setting credit-rating criteria.
➢ Setting and ensuring compliances with a corporate credit policy.
➢ Obtaining security interest where necessary. Common example of this could be
PPSA’s-letters of credit are personal guaranty.
➢ Initiating legal or other recovery actions against customer who are delinquent.
➢ Credit managers tend to fall into one two groups due to the different.
Specialty legal and jurisdiction knowledge required.

1. Commercial credit managers.
2. Consumer credit managers.
Company’s which sell to both markets will require a credit manager familiar
with both aspects of credit management.
2.3 FUNDS FOR LENDING:

If we examine the balance sheet of a bank we would observe that the main
sources of funds available for lending and investment or as follows:
❖ Deposits of all types-fixed, current, savings and requiring.
❖ Undistributed profit.
❖ Paid-up-capital.
❖ General reserves and other resources.
Bank generally provides avenue saving to those who have surplus sounds and the
bulk of such funds are lent out to need customers in form of loans and over drafts.
Thus when a commercial bank is approached for loans special guidelines have to be
followed. He went further say that such banks have it general principles. For example
some banks use the papers criteria and 5C”S of credit lending.
❖ P-Person
❖ A-Amount
❖ P-Purpose
❖ E-Equity
❖ R-Repayment
❖ S-Security.
5C”S are character, capacity, capital collateral and conditions.

2.4 CREDIT PLANING

Credit planning has emerged as a measure instrument for planned allocation of
credit among the various sector and projects that have been considered necessary for
the allocation of scarce resource in accordance with planned priorities.
The basic objective of credit planning is to guide investment and output.

Along lines postulated in the development planning by RBI. The macro level national
credit plan is linked with micro level credit budget of banks.
For the implementations of national level credit plan formulated at the macro
level, it becomes necessary to disaggregate in terms of its various components like
deposits mobilization, credit expansion, priority sector lending so that individual
banks should know how exactly each bank fits into the national credit plan.
In fact credit planning to way process:

❖ Individual banks credit plane should feed process plan formulated at national
level.
❖ Ones the national plan is finalized individual banks should implement in terms of
various components.
Based on their experience and judgment banks formulated their own credit
plan in the prescribed performed. The implementation of the credit plans largely the
responsibility of individual banks for the realistic estimation of available resources for
lending mainly in the form of mobilization of deposits. While preparing the credit
plan and making credit allocation a bank has to consider all the quantitative and
qualitative aspects as summarized below.
➢ The resource available for development has to be gouged expected mobilization of
deposits, the charges on such deposits. Accretion by way of cash reserves,
statutory requirement and net founds availability.
➢ Founds required to meet the statutory obligation deducting liquid assets from the
total estimate demand and time liabilities we can find out the found for lending.

➢ In estimating the total credit founds or allocated for sectored employment and the
balance should be embarked for different segments of barrowers like industry,
trade and commerce.
➢ Each branch of bank will then prepare the annual credit plane for development
credit in each of the villages in its own service area.
➢ The annual credit plane should reflect both the needs and potentialities of the area
on basis of the intimate knowledge gained by the branch manager throw the
survey.
➢ The branch manager will take a note of the lending programmer, PLDB’s while
panelizing their own credit plans.
➢ A list of barrowers is to be obtained to avoid double financing and emphasis has

to be on agriculture and allied activities.
The animal credit plans prepared by the all branches in a black together with
the lending programmers of co operative and primary sector activities proposed to be
financed are to be consolidated into block credit plan.
2.5 CREDIT POLICY

According to the Preamble of RBI Act of 1934, the main function of RBI or to
regulated the issue of bank notes and keeping of service with a wave to secure
monitory stability and generally to operate the currency and credit system of the
country to its advantage. Credit policy can be looked upon as a short term policy
instrument to make connection in the economy as it progresses.
It is customary for the reserve bank to announce the credit policy for the first
half of the financially ear. The credit policy indicates the current economic scenario
wail at the same time indicates the areas where credit policy initiatives are required. It
also specific the various policy measures to be indicated by the reserve bank over the
next six months.

The credit policies measures may include some are all of the following measures
defending upon the prevailing situations:
➢ Reserve banks expectations of deposits growth and to achieve the targeted growth
raid.
➢ Measures to control liquidity in the banking system which may include CRR, SLR
and curtailment of refinance facilities.
➢ Changes in bank deposits and landing interest rate and their effect on saving
deposit of mobilization, priority sector lending, investment and bank profitability.
➢ Measures to promote agriculture growth rural development.
➢ Changes in re-financing and bills re-discounting facilities.

So also individual’s banks must also prepare their own credit policy in
confirmation with the guidelines issued by RBI.
2.6 CREDIT ANALYSIS AND CREDIT INVESTIGATION

Credit analysis is the process of assessing the risk of lending to a business or
individuals. They also called credit risk must be evaluated against the befits the bank
expects to derive from making a loan. Credit risk is primarily related to the quality of
banks loan portfolio and banks delivery mechanism. A banks risk exposure is
determined by its portfolio of it assets, liabilities. And capital. Credit risk is the risk
that the counter party will to perform on an obligation to the bank credit risk
constitutes the critical portfolio which as to managed well by the banks.
Credit risk assessment has both quantitative and qualitative dimensions, the
qualitative dimensions, of risk or generally more difficult to assess. The to basics
steps involved in this process are:
1. Obtaining credit information.
2. Analysis of credit information.

Obtaining Credit Information

The first step in credit analysis is obtaining credit information with forms a basis
to evaluate the credit worthiness of a customer. The sources of information may be:
➢ Internal
➢ External
Internal
Banks usually require there customer to fill various forms and documents
giving details of its financial operations. They are also require to furnish to trade
reference with which banks can have contracts to judge the credit worthiness of the
customer. Another source of credit information is derived from the records of the
banks contemplating on the extension of credit. It is likely that a particular customer
may have enjoy credit facility in the past, in that case the bank would have
information on the behavior of the customer in terms of the historical payment
pattern. But this type of information may not be sufficient and may therefore have to
be supplemented by information from other source.
External
The second source of information is external the availability of information from
this source to assess the credit worthiness of customers defends on the development of
institutional facilities and industry practice. In India the External source of
information is not developed as much as industrially developed countries of the word.
Defending upon the availability of the following sources may be employed:
 Financial statements.
 Bank reference.
 Trade reference.
 Credit Bureau Report.

Analysis of Credit Information

Ones the credit information has been collected from deference sources it
should be analyzed to determine the credit worthiness of the applicant. Although are
not established procedure to analyze the information the form should cover two
aspects:
 Quantitative.
 Qualitative.
Quantitative
The assessment of the quantitative aspect is based on the factual information
available from the financial statements the past record of the form. The first step
involved in this type of assessment is two preparing ageing schedule of the accounts
payable of the applicant as well as calculate average age of the accounts payable. The
exercise will give an inside into the past records of the customer. Another step
involved in analyzing the credit information is through ratio analyses is the liquidity,
profitability and debt capacity of the applicant. This ratios should be compared with
the industry average. More over trend analyses over a period of time would reveal the
financial strength of the customers.
Qualitative
The quantitative assessment should be supplemented by a qualitative
interpretation of the applicant credit worthiness. The subjective judgment covers
aspects relating to the quality management. Here the reference from other suppliers,
bank reference and specialist bureau report would form the basis for the conclusion to
be drawn. In the ultimate analysis the decision whether to grant credit to the applicant
and what amount to extend will depend upon the subjective interpretation of his credit
standing. After obtaining and analyzing the credit information the firm will get an
idea about the type of the customer, whether new or existing the customers business
line’s background and related trade risk and these data should be promptly gathered.

If finally helps to classify the customer into several credit categories:

● Completely reliable customer.
● Highly reliable customer.
● Slightly reliable customer.
● Doubtful customer.
Unnecessary delay in responding to the customer request can prove to be

detrimental and should be informed about the decision taken by the bank whether he
will be granted credit or not.
FOLLOW UP SUPERVISION AND CONTROL OF BANK CREDIT

No doubt credit disbursed are made by banks after careful evaluation and
appraisal of loan proposals to determine their bank ability ‘On the basis of principal of
banks of the lending banker is to follow-up[ and supervise the use of bank credit to
verify first whether the assumptions on which lending decision was taken continue to
hold good both in regard to business operations and environment and second whether
the end use is according to purpose for which it was given.
When money has been lent, the bank can reduce the risk of not getting repaid
by checking up on how the money has been used and what the customer is doing
about repayment. Any diversion of found and deviation by the borrowers from terms
and conditions stipulated by banks has to be noticed and guard against any misuse of
credit facilities. Loans-made successfully should be repaid according to their terms
and conditions.
It has been said that a bank “never” makes a bad loan-a loan goes bad after it
has been made. So it is very necessary to take necessary precaution before accepting
the proposal for credit and at the same time it is all so necessary to supervise and
control after loan is disbursed to the customer.

TYPES OF LOANS
These day’s banks offer various types of banks to loans to loan seekers,
especially those having a good track record of repaying their bills and a stable job get
these loans passed easily. You need to have proof of your identify and income to get
bank loans and certain bank loan types may also require collateral such as a car or
home equity loan. Given below are some of guidelines which will help you to choose
from the best types of bank loans possible for your situation from different bank loans
options available. The first important things is to make sure you know what the
different types of banks loans are there is a difference between secured and unsecured
bank loan types.
These are the kinds of loans which are provided to an individual, rather than to
a group or business. The personal loans are further divided into many different
categories like secured and unsecured loans.
UNSECURED LOANS
These types of bank loans allow a borrower to get a check or cash and pay it
back in fixed installments over a certain fived period of time. In unsecured personal
loans, no specific loan purpose is required. However it is far less common for a bank
to provide an individual’s an unsecured bank loan types. The unsecured personal
loans are liked a credit card. Nothing is placed as a security for the loan. The borrower
simply gives his word to the bank that he will pay the loan back in the terns agreed
upon. In case the loan is not paid back, the bank gets nothing. The rate of interest
unsecured loans is usually quite a bit higher than secured loans, so the bank ensure
they get their money early in case the borrower gets fail to pay back the loan.
SECURED LOANS
The secured loans issue cash or a check to the loan seeker. The loan seeker has
to provide the bank with interest in collateral such as a savings account or a property
in case the loan does not get repaid. These kinds of bank loans are the most common
personal bank loans types which are offered by the banks. These are the types of bank
loan types which have some sort of possession put up as security for the loan. In other
words, if you are not able to pay back your loan according to the set agreement, the

bank has a right to repossess whatever you put up for the loan. Borrowing against the
equity in your home is an example of a secured loan. Your home because the security
for the loan amount, and if you do not pay back your loan on time, the bank could
repossess your home.
AUTO LOANS
In general almost all kinds of banks provide these auto loans for purchasing
new and used vehicles and for repair of older ones. The consumer has to pay back for
it on the basis of monthly installments otherwise the vehicle or the car is repossessed
by the banks.
MORTAGEGE LOANS
These types of bank loans allow the loan recipients to leave in a home will
paying it of over time. Usually down payment of 5% to 20% is required to get the
loan approved and the house is seized in foreclosure if payment is not made.
INVESTMENT BANK LOAN

These Kinds of bank loans are usually taken to make a comparatively bigger
major purchase such as mortgage. These kinds of bank loan need credit check which
is rigorous because of the large amount of money involved. These are also considered
as secured as loans because if you do not pay them back, the offshore bank accounts
can shell of f your investment to earn the money you owe them.
HOME LOAN
Home loan as name suggest is the loan against buying property. Every individual
currently have dreams to have there are sub-categories of home loans which are as
below.
● Home loan for residents
● Loans for repairs and extension
● Land purchase loan
● Top-up loans
● Loan for earnest money deposits
● Reverse mortgage loans
● Loan against property

CAR LOAN or VEHICAL LOAN

This is usually used to meet your financial requirement when one is planning
to have his dream car or bike. It is usually a secured loan where collateral is your
vehicle and in case of default lender may recover it by taking your vehicle. But some
lenders offer unsecured loans your credit score matters more.
LOANS AGAINST INSURANCE POLICES

You can use your insurance investment as either cultural or take loan from
insurer itself it that policy eligible for loan. Usually loans will be available after 3
years of policy period. You will get loan easily on your policy from insurer. But other
method to take a loan is to pledge your policy document with banks and takes loan on
that. LIC will offer you loan on your policy with the interest rate of 10%, which I
think competitive pricing compare to other type of loans.
LOAN AGAINST BANK FD’s

This is one form of loan where your collateral is your bank FD itself. Suppose
you’ve bank FD of around Rs.10,00,000 them you are usually eligible to get loan up
to Rs 8,00,000 but interest will 1-2% higher than your FD rate. Nut still this form of
loan Is also fastest and best way.
2.9 CREDIT RISK

Credit risk refers to the risk that a borrower will default on any type of debt by
failing to make required payments. The risk is primarily that of the lender and
includes last principle and interest disruption to cash flows and increase collection
cost. The lass may be complete of partial and can arise in a number of circumstances.
For example:
● A consumer may fail to make a payment due on a mortgage loan credit card, line
of credit, or other loan
● A company is unable to repay the asset-secured fixed or floating charge debt
● A business or consumer does not pay trade invoice when due
● A business does not pay an employs earned wages when due

● A business or government bond issuer does not make a payment on a coupon or

principle payment when due
● An insolvent insurance company does not pay policy obligation
● An insolvent bank want return funds to a depositor
● A government grants bankruptcy protection to an insolvent consumer or business
To reduce the lender’s credit risk, the lender may perform a credit check on the
prospective borrower, may require the borrower to take out of appropriate insurance,
such as mortgage insurance or seek security or guarantees of third parties. In general
higher the risk the higher will be the interest rate that the debtor will be asked to pay
on the debt.
PIGMY COLLECTION
Pigmy deposit scheme is a monitory deposit scheme introduced by syndicate
bank of India. Money can be deposited into an account on daily basis the amount may
be small as Rs 5. It can be called a recurring deposit scheme as the money is deposited
almost daily, from the account holders door step . the scheme was introduced to help
daily wage earners , small traders and farmers to include saving habits and also has
means to fund their bigger capital requirements such as wedding, home buying,
vehicle purchase etc. the scheme is offered by several banks and co-operative
societies in India.
AGRICULTURE LOANS
Cash
Instant cash against shares/Debentures/Bonds/Units!
Purpose
➢ Earn on your investments, And keep them too.
➢ No need to liquidate your investments even during dire necessities.
➢ Instead, you can avail Society Cash loan pledging your investments in shares,
Debentures, Bonds or units.

Eligibility
➢ Individual-Existing customers with satisfactory dealings.
➢ New customers-well-introduced and credit worthy can also avail.
Loan Amount
➢ Maximum loans up to Rs.10 laces if demat account is maintained with DPs of our
Society Rs.5 laces in physical form.
Security
➢ Security of the shares/debentures/blond as per the approved list circulated from
time to time.
➢ Securities can be replaced/substituted during the currency of the loan up to times,
Nominal charges for substitution of securities.
Rate of Interest
Rate of interest defend on current rate of the societies
2.10 TYPES OF CREDIT RISK

Credit risk can be classified as follows:
● Credit default risk

The risk of loss arising from a debtor being unlikely to pay its loan obligations in
full or the debtor is more than 90 days past due on any material credit obligation;
default risk may impact all credit-sensitive transactions, including loans, securities
and derivatives.
● Concentration risk
The risk associated with any single exposure or group of exposures with the
potential to produce large enough losses to threaten a bank's core operations. It may
arise in the form of single name concentration or industry concentration.

● Country risk
The risk of loss arising from a sovereign state freezing foreign currency payments
(transfer/conversion risk) or when it defaults on its obligations (sovereign risk); this
type of risk is prominently associated with the country's macroeconomic performance
and its political stability.
Modern risk management in bank

Risk is the potential for the occurrence of a loss (“potential negative effect on
an asset that may derive from given processes in progress or given future events.”),
but importantly risk attaches to i.e. risk cannot be separated from growth
opportunities. Banks in the process of financial intermediation are confronted with
various kinds of financial and non-financial risks viz., credit, interest rate, liquidity,
foreign exchange rate, equity price, commodity price, legal, regulatory, reputational,
operational, etc. These risks are highly interdependent and events that affect one area
of risk can have ramifications for a range of other risk categories. Thus, top
management of banks should attach considerable importance to improve the ability to
identify measure, monitor and control the overall level of risks undertaken.
Risk Management function

✓ Well defined organizational structure;
✓ Comprehensive risk measurement approach;
✓ Comprehensive risk management policies approved by the Board which should
be consistent with the broader business strategies, capital strength, management
expertise and overall willingness to assume risk;
✓ Guidelines and other parameters used to govern risk taking including detailed
structure of prudential limits;
✓ Robust MIS for reporting, monitoring and controlling risks;
✓ Well laid out processes, effective control and comprehensive risk reporting
framework;
✓ Separate risk management framework independent of operational departments
and with clear delineation of levels of responsibility for management of risk;
✓ Timely assessments

2.11 RISK MANAGEMENT STRUCTURE

The primary responsibility of understanding the risks run by the bank and
ensuring that the risks are appropriately managed should clearly be vested with
the Board of Directors. The Board should set risk limits by assessing the bank’s risk
and risk- bearing capacity. At organizational level, overall risk management should be
assigned to an independent Risk Management Committee or Executive Committee of
the top Executives that reports directly to the Board of Directors. The functions of
Risk Management Committee should essentially be to identify, monitor and measure
the risk profile of the bank. The Committee should also develop policies and
procedures, verify the models that are used for pricing complex products, review the
risk models as development takes place in the markets and also identify new risks.
The Committee should design stress scenarios to measure the impact of unusual
market conditions and monitor variance between the actual volatility of portfolio
value and that predicted by the risk measures. The Committee should also monitor
compliance of various risk parameters by operating Departments.
A prerequisite for establishment of an effective risk management system is the

existence of a robust MIS, consistent in quality. The existing MIS, however, requires
substantial up gradation and strengthening of the data collection machinery to ensure
the integrity and reliability of data. The risk management is a complex function and it
requires specialized skills and expertise. As the domestic market integrates with the
international markets, the banks should have necessary expertise and skill in
managing various types of risks in a scientific manner.
Credit Risk
Credit risk or default risk involves inability or unwillingness of a customer or
counterparty to meet commitments in relation to lending, trading, hedging, settlement
and other financial transactions. The Credit Risk is generally made up of transaction
risk or default risk and portfolio risk. The portfolio risk in turn comprises intrinsic and
concentration risk.
The credit risk of a bank’s portfolio depends on both external and internal factors.

External factors are the state of the economy, wide swings in commodity/equity

prices, foreign exchange rates and interest rates, trade restrictions, economic
sanctions, Government policies, etc.
Internal factors are deficiencies in loan policies/administration, absence of

prudential credit concentration limits, inadequately defined lending limits for Loan
Officers/Credit Committees, deficiencies in appraisal of borrowers’ financial position,
excessive dependence on collaterals and inadequate risk pricing, absence of loan
review mechanism and post sanction surveillance, etc.
Another variant of credit risk is counterparty risk. The counterparty risk

arises from non- performance of the trading partners. The non-performance may arise
from counterparty’s refusal/inability to perform due to adverse price movements or
from external constraints that were not anticipated by the principal. The counterparty
risk is generally viewed as a transient financial risk associated with trading rather than
standard credit risk.

The management of credit risk should receive the top management’s attention
and the process should encompass:

● Measurement of risk through credit rating/scoring;
● Quantifying the risk through estimating expected loan losses i.e. the amount of
loan losses that bank would experience over a chosen time horizon (through
tracking portfolio behavior over 5 or more years) and unexpected loan losses i.e.
the amount by which actual losses exceed the expected loss (through standard
deviation of losses or the difference between expected loan losses and some
selected target credit loss quintile);
● Risk pricing on a scientific basis;
● Controlling the risk through effective Loan Review Mechanism and portfolio
management.


The credit risk management process should be articulated in the bank’s Loan

Policy, duly approved by the Board. Each bank should constitute a high level Credit
Policy Committee, also called Credit Risk Management Committee or Credit Control
Committee etc. to deal with issues relating to credit policy and procedures and to
analyze, manage and control credit risk on a bank wide basis.
The Committee should, inter alia, formulate clear policies on standards for

presentation of credit proposals, financial covenants, rating standards and
benchmarks, delegation of credit approving powers, prudential limits on large credit
exposures, asset concentrations, standards for loan collateral, portfolio management,
loan review mechanism, risk concentrations, risk monitoring and evaluation, pricing
of loans, provisioning, regulatory/legal compliance, etc. The credit risk management
department should also lay down risk assessment systems, monitor quality of loan
portfolio, identify problems and correct deficiencies, develop MIS and undertake loan
review/audit.

Credit Risk Management encompasses management techniques, which help the
banks in mitigating the adverse impacts of credit risk:

● Carefully formulated scheme of delegation of powers i.e. Credit Approving
Authority
● Prudential limits, single/group borrower limits, should be laid down,
maximum exposure limits to industry, sector
● Comprehensive risk scoring / rating system
● Risk-return pricing and Risk Adjusted Return on Capital (RAROC)
framework for pricing of loans
● Periodic monitoring/ evaluation of the loan portfolio
● Loan Review Mechanism for large value accounts, formulate Loan Review
Policy and it should be reviewed annually by the Board
● The proposals for investments banking should also be subjected to the same
degree of credit risk analysis, as any loan proposals
● Adequate framework for managing their exposure in off-balance sheet
products like forex forward contracts, swaps, options, etc.
● Framework for Inter-bank Exposure and Country Risk

Market Risk
With progressive deregulation, market risk arising from adverse changes in
market variables, such as interest rate, foreign exchange rate, equity price and
commodity price has become relatively more important. Even a small change in
market variables causes substantial changes in income and economic value of banks.
Market risk takes the form of:

a. Liquidity Risk
b. Interest Rate Risk
c. Foreign Exchange Rate (Forex) Risk
d. Commodity Price Risk and
e. Equity Price Risk

The Boards should clearly articulate market risk management policies,
procedures, prudential risk limits, review mechanisms and reporting and auditing
systems. The policies should address the bank’s exposure on a consolidated basis and
clearly articulate the risk measurement systems that capture all material sources of
market risk and assess the effects on the bank. The operating prudential limits and the
accountability of the line management should also be clearly defined.

The Asset-Liability Management Committee (ALCO) should function as the
top operational unit for managing the balance sheet within the performance/risk
parameters laid down by the Board. The banks should also set up an
independent Middle Office to track the magnitude of market risk on a real time basis.
The Middle Office should comprise of experts in market risk management,
economists, statisticians and general bankers and may be functionally placed directly
under the ALCO. The Middle Office should also be separated from Treasury
Department and should not be involved in the day to day management of Treasury.
The Middle Office should apprise the top management / ALCO / Treasury about
adherence to prudential / risk parameters and also aggregate the total market risk
exposures assumed by the bank at any point of time.


Liquidity Risk
Liquidity is the ability to efficiently accommodate deposit and other liability
decreases, as well as, fund loan portfolio growth and the possible funding of off-
balance sheet claims. A bank has adequate liquidity when sufficient funds can be
raised, either by increasing liabilities or converting assets, promptly and at a
reasonable cost. It encompasses the potential sale of liquid assets and borrowings
from money, capital and forex markets. Thus, liquidity should be considered as a
defense mechanism from losses on fire sale of assets.

The liquidity risk in banks manifest in different dimensions:
Funding Risk - need to replace net outflows due to unanticipated withdrawal/non-

renewal of deposits (wholesale and retail)

Time Risk- need to compensate for non-receipt of expected inflows of funds, i.e.
performing assets turning into non-performing assets; and

Call Risk - due to crystallization of contingent liabilities and unable to undertake
profitable business opportunities when desirable.
The first step towards liquidity management is to put in place an effective

liquidity management policy, which, inter alia, should spell out the funding strategies,
liquidity planning under alternative scenarios, prudential limits, liquidity reporting /
reviewing, etc.

Liquidity measurement is quite a difficult task and can be measured through
stock or cash flow approaches. Apart from this banks adopt key ratios, which are
followed across the banking system
In addition to this Banks should prepare Contingency Funding Plans to

measure their ability to withstand bank-specific or market crisis scenario.


Interest Rate Risk (IRR)

Interest Rate Risk (IRR) refers to potential impact on NII or NIM or Market
Value of Equity (MVE), caused by unexpected changes in market interest rates. The
management of Interest Rate Risk should be one of the critical components of market
risk management in banks. The regulatory restrictions in the past had greatly reduced
many of the risks in the banking system. Deregulation of interest rates has, however,
exposed them to the adverse impacts of interest rate risk. The Net Interest Income
(NII) or Net Interest Margin (NIM) of banks is dependent on the movements of
interest rates. Any mismatches in the cash flows (fixed assets or liabilities) or
reprising dates (floating assets or liabilities), expose banks’ NII or NIM to variations.
The earning of assets and the cost of liabilities are now closely related to market
interest rate volatility. Interest Rate Risk can take different forms:
1. Gap or Mismatch Risk
2. Basis Risk
3. Embedded Option Risk
4. Yield Curve Risk
5. Price Risk
6. Reinvestment Risk
7. Net Interest Position Risk

Foreign Exchange (Forex) Risk
Forex risk is the risk that a bank may suffer losses as a result of adverse
exchange rate movements during a period in which it has an open position, either spot
or forward, or a combination of the two, in an individual foreign currency. The risk
inherent in running open foreign exchange positions have been heightened in recent
years by the pronounced volatility in forex rates, thereby adding a new dimension to
the risk profile of banks’ balance sheets. The banks are also exposed to interest rate
risk, which arises from the maturity mismatching of foreign currency positions.

Even in cases where spot and forward positions in individual currencies are
balanced, the maturity pattern of forward transactions may produce mismatches. As a
result, banks may suffer losses as a result of changes in premia/discounts of the
currencies concerned.


In the Forex business, banks also face the risk of default of the counterparties
or settlement risk. While such type of risk crystallization does not cause principal
loss, banks may have to undertake fresh transactions in the cash/spot market for
replacing the failed transactions. Thus, banks may incur replacement cost, which
depends upon the currency rate movements. Banks also face another risk called time-
zone risk or Herstatt risk which arises out of time-lags in settlement of one currency
in one centre and the settlement of another currency in another time- zone. The Forex
transactions with counterparties from another country also trigger sovereign or
country risk

Forex risks can be managed by:
a. Setting appropriate limits – open positions and gap limits.
b. Establishing clear and well-defined division of responsibility between front,
middle and back offices.
Operational Risk
Managing operational risk is becoming an important feature of sound risk
management practices in modern financial markets in the wake of phenomenal
increase in the volume of transactions, high degree of structural changes and complex
support systems. The most important type of operational risk involves breakdowns in
internal controls and corporate governance. Such breakdowns can lead to financial
loss through error, fraud, or failure to perform in a timely manner or cause the interest
of the bank to be compromised.

Generally, operational risk is defined as any risk, which is not categorized as
market or credit risk, or the risk of loss arising from various types of human or
technical error. It is also synonymous with settlement or payments risk and business
interruption, administrative and legal risks. Operational risk has some form of link
between credit and market risks. An operational problem with a business transaction
could trigger a credit or market risk.

Indian banks have so far not evolved any scientific methods for quantifying
operational risk. In the absence any sophisticated models, banks could evolve simple

benchmark based on an aggregate measure of business activity such as gross revenue,

fee income, operating costs, managed assets or total assets adjusted for off-balance
sheet exposures or a combination of these variables.

Internal controls and the internal audit are used as the primary means to
mitigate operational risk. Banks could also explore setting up operational risk limits,
based on the measures of operational risk. The contingent processing capabilities
could also be used as a means to limit the adverse impacts of operational risk.
Insurance is also an important mitigator of some forms of operational risk.

Risk education for familiarizing the complex operations at all levels of staff
can also reduce operational risk.

Banks should have well defined policies on operational risk management. The
policies and procedures should be based on common elements across business lines or
risks. The policy should address product review process, involving business, risk
management and internal control functions.

One of the major tools for managing operational risk is the well-
established internal control system, which includes segregation of duties, clear
management reporting lines and adequate operating procedures. Most of the
operational risk events are associated with weak links in internal control systems or
laxity in complying with the existing internal control procedures.

The self-assessment could be used to evaluate operational risk along with
internal/external audit reports/ratings or RBI inspection findings. Banks should
endeavour for detection of operational problem spots rather than their being pointed
out by supervisors/internal or external auditors.

Credit Monitoring in Banks: The Borrower Factor:

Proper monitoring of credit in banks has assumed greater significance in the
effective management of lending. The success of credit monitoring largely depends on
two aspects namely the co-operation of the borrower clients in furnishing the required
data and statements to the banks on time and the capacity and knowledge of the credit
monitoring authorities to take timely decisions and corrective steps to keep the
borrowable accounts in good health. Had there been proper and effective cordite
monitoring, many of the incidents of accounts becoming NPA (Non Performing
Assets), especially in the SME sector, and the growing volume of unproductive assets
could have been minimized.

The borrower clients, who are enjoying various bank facilities by way of
working capital and term loans, are required to submit the following statements to the
bank.
(i) Monthly stock statement.
(ii) Monthly select operational data.
(iii) QIS forms I, II and III for bigger borrowers.
(iv) Half yearly and yearly balance sheet and profit and loss account.
(v) Monthly statements of sales and purchases with outstanding creditors and debtors.

The following books of accounts are also necessarily to be made available
every month for verification by bank officials at the time of periodical inspection.
(i) Sales and purchase registers supported by respective invoices.

(ii) Stock registers giving details of stock holdings and movement of stock.

If the borrowers enjoy non fund based limits like guarantee, Letter of credit,
etc then further information regarding the progress of activities for which such
facilities are made available, are to be furnished. The list of controlling statements to
be given to the bank is exhaustive and submission of the same on time is not an easy
task for the borrower particularly for the borrowers coming under SME category. This
is mainly because the borrowers’ books of accounts are not kept updated. If they
adopt a programmer of daily tallying of the accounts, then it will be not only easier

for term to submit their statements on time but also it will enable them to take
appropriate and corrective steps to prevent any untoward situations in business to
happen. The penalty for the non submission of these controlling statements by the
borrowers is that the bank will charge an extra penal interest of 2% over and above
the normal interest being charged by them. This will cut into the profitability of the
borrower. It is sheer apathy and indifferent and callous attitude and lack of purpose on
the part of the borrowers that come in the way of furnishing the details on time to the
bank.

By chance, even if the details are available, the preparation of such statements
takes more time because of lack of knowledge to prepare such statements. The
common complaint put forth by the borrowers is non availability of suitable hands to
maintain accounts and to prepare such statements. That is only an unacceptable
excuse because various statutory requirements are also to be fulfilled and filed by the
business enterprises to various government departments which they neither cannot
skip nor avoid submission.

Yet another lacuna found is the delay to submit half yearly and yearly balance
sheet and profit and loss account even after reasonable delay which hampers the
critical study and analysis and evaluation of performance of the borrower. The bank
allots a credit rating for each borrowable account based on which the interest rate is
fixed. Hence timely submission of controlling documents will enable the borrower to
earn a good credit rating depending upon the performance and financial position of
the borrower enterprise. But the pertinent question that is very often raised is whether
the borrower submits a balance sheet which truly reflects the factual and actual
financial position or a balanced sheet which they feel the bank wants to accept
favorably. There have been instances where different balance sheets have been
prepared to suit the requirement of the purpose.

A very common feature found in the business transactions in India is the cash
dealings which normally do not reflect in the financial statements of the business
enterprise. This gives raise to distortion in the financial position which does not give
the true picture of total business. This distortion also affects the assessment of
financial needs of the business enterprise. The aberration is found more in the balance

sheet of SMEs, trading business, transport service, construction activities,

professionals and self employed. It is advisable to stop such unhealthy practices.
Borrowers, it is found, do not give much importance to timely submission of
controlling statements to the bank because they do not understand the importance of
such statements.

The borrowers should realize that the various statements are required to
safeguard their interests and it will facilitate them to seek any help from the bank at
the time of need. If the conduct of the account is satisfactory and dealings good with
total compliance of all terms and conditions of sanction of facilities, the borrower will
be able to fight with the bank for their legitimate rights to get much needed timely
help and assistance from the bank. It must be remembered by every borrower that no
bank would want their good clients to go out of their fold. Financial discipline is very
essential for any borrower for the healthy conduct of their business and to keep up the
good relationship.

One of the fundamental mistakes that the borrower client normally commits is that
their relationship starts with the individual relations that they initiate with the first
manager who entertains their credit needs. They forget the fact that though the
individual healthy relationship is very essential, the maintenance of relationship with
the bank as a whole is more required in the overall context because the individual
relationship depends on the perception and perspectives of the succeeding managers
who are liable to be transferred after their tenure in the branch is over. The
performance and conduct of the account is perceived more and taken note of than the
individual relationship.

The statements and data sought by the banks if submitted purposefully and
promptly will enable the banks to have a critical analysis and purposeful evaluation of
performance of the borrower clients to monitor their activities based on which timely
remedial measures and counseling can be initiated to prevent impeding financial
crisis if any. Hence the borrower should consider the timely and prompt submission of
all statements and financial papers to the bank as their duty and part of business deal
and understand the importance of presenting them on time to the bank to maintain
banking discipline.

Now, how does the bank tackle the problem of delay? They do it by (i) by
writing letters to the borrowers stressing the importance of submission of data and
statements. (ii) Charging penal interest on their borrowable accounts for the period of
delay. (iii) By lowering their credit rating and (iv) by suspension of their credit
facilities till the papers are submitted. Even after persuading the borrowers to submit
the required data and statements, if the bank fails to get any positive response from
the borrower client, then they can use their deadly weapon of invoking the
SARFAESI ACT by which the bank can take possession of the secured assets of the
business enterprise without the intervention of the court. Even though the last resort is
an extreme step, the bank’s Endeavour must be to inculcate the necessary discipline
among the borrower clients by educating them properly even though it is time
consuming. But then it is enduring and everlasting.

CHAPTER - III
COMPANY PROFILE

3.0 HISTORY
The primary agriculture co-operative society Ranebennur was been
established in the year 1997 i. e ( 24-03-1997) with 8 members which begin its
banking operations with just an initial investment of Rs 1,50,000. At present
primary agriculture co-operative society is a famous society in the haveri district
as it caters the needs of farmers, business men, and individuals by lending the loan
and provides attractive saving schemes for the general public.
He started giving loans like agriculture loan, pigmy loans, B D P loans,
personal loans, & day by day his business started earning more profits for him & it
has grown big & he expanded his office by recruiting more employees.
The co-operative movement becomes the largest socio-economic movement in
the word. It has contributed significantly to the alleviation of poverty, creation of
productive employment and the enhancement of social integration. The co-operative
movements in the India have taken deep roots in various sectors it has also been
making a significant contribution to words economic and social development of the
people.

3.1 COMPANY PROFILE
Name of the Firm : Primary Agriculture Co-Operative Society

Address : Near Main Road, Ranebennur
Tq:Hangal Dist:Haveri
Pin Code 581120
Reg No : DRZ 23686119697
Establishment : 24-03-1997
Nature of Activity : Loan Services
Name of Auditor : Mr. N.S.Bharigadad
Name of Manager : Mr. Jagadeesh Dodmani
Number of Workers : 8
Working Hours : 9.00 am to 1.00 pm

4.00 pm to 7.00 pm
Working Days : Monday to Saturday
Name of Loans : Agriculture Loans

Pigmy Loans
BDP Loans
Current Loans
Personal Loans
Interest Rate for Loans : Agriculture Loans-0%
All Loans-18%

3.2 RULES AND REGULATIONS FOR PROVIDING LOANS

The primary agriculture co-operative society mainly engaged in lending
services through agriculture and pigmy loan. B.D.P loan, current loan are included in
vehicle s
VEHICLE LOAN
Under this, company will provide the maximum 75% of the value of the
vehicle as a loan, remaining 25% is the down payment which has to pay by the
customer. Interest for the loan is 15%. If customer not paid the EMI continuously for
3 months or90 days then company will seize that vehicle & company will give them
some days or months to the EMI.
If customer fails to repay the due amount in the given period then the company
will auction his vehicle & recovers loan amount.
PIGMY LOAN
Under this society will provide the 40% of the value of pigmy loan. If
customer not paid the interest amount continuously for 3 months or 90 days then
society will send a notice and company will give them some days or months to pay
the due amount. If customer fails to repay the due amount in the given period then the
society will auction his assets or middle men of recovers his loan amount
3.3 PRODUCTS OFFERED BY PRIMARY AGRICULTURE CO-

OPERATIVE SOCIETY
The financial institutions mobilize the savings from different avenues like
deposits, issuing securities, mutual funds etc. The primary agriculture co-operative
society offer mainly three types of products to mobilize the savings. It takes fixed
deposits, collection of pigmy and cash certificates.

FIXED DEPOSIT
When most people think about fixed deposits, the first thing that comes to the
mind is approaching a bank to open a fixed deposit. However, that is not the only
place where you can open fixed deposits. Many finance houses also offer investors the
facility to open fixed deposits that offer interest rates that can be higher than what
most banks offer.
A fixed deposit (FD) is a financial instrument provided by banks which

provides investors with a higher rate of interest than a regular savings account, until
the given maturity date. It may or may not require the creation of a separate account.
Customers can avail loans against FDs up to 80 to 90 percent of the value of deposits.
The rate of interest on the loan could be 1 to 2 percent over the rate offered on the
deposit
A fixed deposit may be issued by any of the following entities:

● Scheduled banks operating in India including public sector banks, private banks
and foreign bank branches operating in India
● Deposit taking NBFC’s permitted by the RBI to accept deposits
● Housing Finance Companies regulated by the National Housing Bank
● Public Sector Companies and Undertaking
● Private Sector Companies
● Cooperative banks
Fixed Deposit is that it offers guaranteed return so as an investor you do not have
those sleepless nights where you keep thinking whether my investments are safe or
not and what will be my return. In other word investors who want to have peace of
mind prefers fixed deposit as compared to investment in stock market or commodity
market.
Fixed deposits are very flexible in nature because one can have fixed deposit
with maturity for 1 month or 1 year or 10 year and also one can make fixed deposit
with any amount unlike real estate where one needs to invest heavily.

PIGMY COLLECTION
Pigmy Deposit Scheme is a monetary deposit scheme introduced
by Syndicate Bank, India. Money can be deposited into an account on daily basis. The
amount may be as small as Rupees five. It can be called a recurring deposit scheme,
as the money is deposited almost daily. The unique characteristic of this scheme is
that a bank agent collects the money daily, from the account holder's doorstep. This
scheme was introduced by Syndicate Bank headquartered at Manipal, Udupi district
of India. The scheme was introduced to help daily wage earners, small traders and
farmers to inculcate saving habits and also as a means to fund their bigger capital
requirements, such as a wedding, home buying, vehicle purchase etc. The scheme is
now offered by several other banks in India.
Little drops of water make the mighty ocean –we believe in this dictum for our
Daily Deposit (Pigmy) scheme. This deposit scheme is suitable for the needs of one
and all, viz. businessmen, professionals, wage earners, teachers, salaried personnel,
traders, housewives, etc. Under this scheme, you can save money with us regularly as
per your convenience. You need not visit the Bank for doing so either. Our authorized
Agent collects your savings at your doorstep at regular intervals. Subsequently, your
money silently grows over a period into a lump sum for meeting your future
commitments like daughter's marriage, children's education, family functions,
household and personal purchases, payment of insurance premium, yearly taxes, etc.
CASH CERTIFICATE
Cash certificates are a type of deposit that is purchased for a certain amount.
The account holder purchases the cash certificate for a certain amount, but needs to
make payments toward this amount only as long as the term of the certificate lasts.
Typically, the account holder builds up to the full amount of the certificate, earning
interest as the money is transferred to the account, like a reverse loan. Account
holders make payments once every quarter. Cash certificates can last years, and
holders can even borrow money against them if necessary.

SAVING BANK ACCOUNT:

Savings Bank Accounts provides the scope for saving of money at attractive
terms even with small amounts with a convenience of withdrawing at your pleasure.
This account can be opened by an individual, jointly with another individual, by a
guardian on behalf of the Minor, Trusts, Associations and Societies.
CUMULATIVE DEPOSITS:
This scheme ideally suits monthly savings may be in small accounts but
resulting in big accumulation of funds over the period of time. An individual, by a
guardian on behalf of the Minor, can open this account Trusts, Associations, Societies
and companies for a maximum period of ten years.
CURRENT ACCOUNTS:
The Current Accounts are opened to meet needs of the business community
involving large transactions of business nature. An individual, a firm, Partnership
Associations, Trusts, Societies and Companies, can open this Account. This account
can be opened by an individual, jointly with another individual, by a guardian on
behalf of the Minor, Trusts, Associations and Societies

CHAPTER - IV
DATA ANALYSIS AND INTERPRETATION

4.0 AGRICULTURE LOAN AT THE BEGINNING OF THE YEAR

YEAR LOAN AT BEGINNING OF THE YEAR
2014-15 2,53,82,218
2015-16 3,63,84,270
2016-17 3,09,35,574
2017-18 3,87,49,589
2018-19 3,82,58,934
Source: Annual reports from 2014-15 to 2018-19.
40000000
35000000
30000000
25000000
20000000 Series1
15000000
10000000
5000000
0
2014-15 2015-16 2016-17 2017-18 2018-19
Table 4.0 shows the Agriculture loan at the beginning of the year. In the year
2014-15 the Agriculture loan was around 2.5 cores and it increased to 3.6 cores in
2015-16. In 2016-2017 it declined to 3, 09, and 35,574. Then again it increased to 3,
87, and 49,589. This indicated that outstanding of agriculture loan in previous years
has increasing trend.

4.1 AGRICULTURE LOAN DISTRIBUTED DURING THE YEAR

YEAR LOAN DISTRIBUTED DURING THE YEAR
2014-15 2,75,55,530
2015-16 2,86,56,545
2016-17 8,63,10,457
2017-18 9,63,52,801
2018-19 8,57,67,532
Source: Annual reports from 2011-12 to 2015-16
100000000
90000000
80000000
70000000
60000000
50000000
40000000
30000000
20000000
10000000
0
2014-15 2015-16 2016-17 2017-18 2018-19
Series1
Table 4.1 shows the Agriculture loan distributed during the year. In the year
2014-15 Agriculture loan distributed was 2, 75, 55,530 and it has been increased to 9,
63, 52,801 which indicated that lending of Agriculture loan by the primary co-
operative society has upward trend. The major portion of funds lend as Agriculture
loan.

4.2 AGRICULTURE LOAN RECOVERED DURING THE YEAR

YEAR LOAN RECOVERED DURING THE YEAR
2014-15 1,65,53,478
2015-16 3,41,05,241
2016-17 7,67,10,992
2017-18 9,68,49,456
2018-19 8,24,23,744
100000000
90000000
80000000
70000000
60000000
Axis Title 50000000
40000000
30000000
20000000
10000000
0
2014-15 2015-16 2016-17 2017-18 2018-19
Table 4.2 shows the loan amount collected from the borrower which is a very
important activity in a financial institution. Major of Agriculture loan recovered in the
year 2017-18 which was 9, 68, and 49,456. This indicated that suitable policies are
adopted for prompt recovery of the loan.

4.3 AGRICULTURE LOAN OUTSTANDING AT THE END OF THE YEAR

YEAR LOAN OUTSTANDING AT THE END
2014-15 3,63,84,270
2015-16 3,09,35,574
2016-17 3,87,49,589
2017-18 3,82,58,934
2018-19 4,16,02,722
45000000
40000000
35000000
30000000
25000000
Series1
20000000
15000000
10000000
5000000
0
2014-15 2015-16 2016-17 2017-18 2018-19
Table 4.3 shows the Agriculture loan which was not recovered during the year.
In the year 2014-15 outstanding of Agriculture loan was 3, 63, 84,270 and it increased
to 4, 16, and 02,722 in the year 2018-19. This is because of increasing trend in
Agriculture loan distribution but also it is necessary to recover the outstanding amount
for growth of the society.

4.4 PIGMY LOAN AT THE BEGINNING OF THE YEAR
YEAR LOAN AT BEGINNING OF THE YEAR
2014-15 32,77,150
2015-16 35,56,770
2016-17 56,57,871
2017-18 83,64,505
2018-19 1,01,47,091
12000000
10000000
8000000
6000000 Series1
4000000
2000000
0
2014-15 2015-16 2016-17 2017-18 2018-19
Table 4.4 shows the opening balance of pigmy loan. Balance of pigmy loan
indicated upward trend. It was 32, 77,150 in the year 2011-12 and 1, 01, 47,091 in
2015-16 which shows that lending of pigmy loan increasing year to year.

4.5 PIGMY LOAN DISTRIBUTED DURING THE YEAR

YEAR LOAN DISTRIBUTED DURING THE YEAR
85,50,650
2014-15
91,12,276
2015-16
98,06,820
2016-17
2,15,70,694
2017-18
1,37,91,534
2018-19
25000000
20000000
15000000
Series1
10000000
5000000
0
2014-15 2015-16 2016-17 2017-18 2018-19
Table 4.5 shows the distribution of Pigmy loan in respective years. Lending of
Pigmy loan has been increased every year except previous year. In the year 2017-18
the loan distributed was 2, 15, and 70,694 which is the highest among these five
years. As compare to Agriculture loan, distribution of Pigmy loan was less.

4.6 PIGMY LOAN RECOVERED DURING THE YEAR

YEAR LOAN RECOVERED DURING THE YEAR
82,71,030
2014-15
70,11,175
2015-16
71,00,186
2016-17
1,97,88,108
2017-18
1,51,22,983
2018-19
20000000
18000000
16000000
14000000
12000000
10000000 Series1
8000000
6000000
4000000
2000000
0
2014-15 2015-16 2016-17 2017-18 2018-19
Table 4.6 represents the recovery of Pigmy loan during the year. The loan
recovered in 2014-15 and 2015-16 was 1, 97, 88,108 and 1, 51,22,1983 respectively.
Distribution and recovery of the pigmy loan in the year 2016-17 was more. This
indicated that Primary co-operative society performing a effective role in recovery of
the loans.

4.7 PIGMY LOAN OUTSTANDING AT THE END OF THE YEAR

YEAR LOAN OUTSTANDING AT THE END
35,56,770
2014-15
56,57,871
2015-16
83,64,505
2016-17
1,01,47,091
2017-18
88,15,642
2018-19
12000000
10000000
8000000
6000000 Series1
4000000
2000000
0
2014-15 2015-16 2016-17 2017-18 2018-19
Table 4.7 shows the pigmy loan which was not recovered during the year. In the year
2014-15 it was 35, 56,770 and 1, 01, 47,091 in 2017-2018. As distribution and
recovery of pigmy loan was more in the year 2014-15, outstanding also more. In the
year 2018-19 it was decreased to 88, 15,642.

CHAPTER - V
FINDINGS, SUGGESTIONS
AND CONCLUSION

5.0 FINDINGS
➢ Agriculture loan end of year 2014-15 was 25382218 which are increased to
38258934.
➢ Agriculture loan distributed is showing increasing trend that is from 27555530
to 85767532.
➢ Agriculture loan recovered shows strong credit policy because loan recovered
in 2014-15 was 16553478 which were increased 82423744.
➢ Pigmy loan distributed has increased from 2014-15 8550650 to 2018-19
13791534.
➢ Pigmy loan recovered was significant and prompt payment was done by
borrowers.
➢ Primary agriculture co-operative society is the old and famous co-operative
society which caters the needs of farmers, businessmen and the large number
of savers.
➢ The Primary agriculture co-operative society has given the credit in various
segments agriculture loan, pigmy loan, B.D.P loan and vehicles loan.
➢ The Primary agriculture co-operative society also made a good recovery of the
loan from the borrowers during the respective years.
➢ The Primary agriculture co-operative society has the attractive financial
products to offer the large number of customers to mobilize the savings and
use it for lending purpose.
➢ The rate of interest on term deposits is very attractive.
➢ The Primary agriculture co-operative society is having its own premises to
carry on its operations.
➢ There is no separate credit management department in to Primary agriculture
co-operative society manage the credit risk, instead which is been taken care
by the manager.

5.1 SUGGESTIONS
➢ The primary agriculture co-operative society should plan to introduce new

schemes for attracting new customers and satisfying the present ones.
➢ The corporation can start Education loan schemes.
➢ The primary agriculture co-operative society can expand its branches in new
areas and there by expand its services to customers.
➢ The primary agriculture co-operative society can increase its manpower
strength for marketing its products on large scale to meet the market
competencies.
➢ The primary agriculture co-operative society has giving more priority only to
the agriculture loan, so it has wide opportunity to lend loans in other form of
loans.
➢ The primary agriculture co-operative society must have a separate department
to manage the credit risk.
➢ The primary agriculture co-operative society has to have some basic principles
for lending the loans.

5.2 CONCLUSION
The main function of the banks is to accept the deposits and lend it to those
who are in need of it. But there should be a proper balance between the inflow and
outflow of funds. The primary agriculture co-operative society is playing a vital role
in Haveri district Ranebennur by catering the need of the general public especially
those disadvantaged group who are not getting the financial services.
The primary agriculture co-operative society has been lending its majority
loan in the form of agriculture loan, there has been a significant growth in lending
through agriculture and even it has a proper credit management system for the is
recovery of the loan.
This bank is been preferred by the local customers for investing the money in
small fixed deposits where in the bank has offered a attractive interest rate, the same
money borrowed from the public is been channelized for lending the loans. To
conclude I can say that role of Co-operative banks is playing a vital to bridge the gap
of the commercial banks who cannot offer the financial services to the disadvantaged
group of people who cannot afford the financial services.

BIBLIOGRAPHY

BIBLIOGRAPHY:
● Agarwal, H.C., Banking Law and Practice, Swan Publications, Agra-4, 2006.
● Singh and Singh, Financial Analysis for Credit Management in Banks,
Himalaya, Bombay.
● Chatterjee A.K., Management Techniques of Bank Lending, Himalaya,
Bombay.
● Maheshwari S.N., Management Accounting for Bankers, S. Chand and Sons,
New Delhi.
● Beckman, Theodore N. (1992): Credits and Collection Management and
Theory, Me Grew Hill, New Delhi.
● Mithani and Gordeon, Banking Theory and Practice, Himalaya, Bombay.
● Desai, Vasant: Principles of Bank Management, Himalaya Publishing House,
Delhi.
● Subha Rao, P.: Principles and Practice of Bank Management, Himalaya
Publishing House,

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CREDIT MANEGEMENT WITH REFERENCE TO PRIMARY AGRICULTURE CO-OPARATIVE SOCIETY

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 1

1.0 INTRODUCTION OF PROJECT

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 2

investments, loans and deposits. It may be banks, co-operative, insurance company’s

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 3

1.1 NEED OF THE STUDY

1.2 OBJECTIVE OF THE STUDY

➢ To study the bank credit policy while lending to customer.

1.3 SCOPE OF THE STUDY

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 4

1.4 RESEARCH METHODOLOGY

II. Conceptual Frame Work

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 5

2.7 follow –up supervision and control of bank credit

4. DATA ANALYSIS AND INTRPRETATION OF DATA

5. FINDING SUGATION AND CONCLUSION

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 6

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 7

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 8

Credit is a transaction between two parties in which one (the creditor or

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 9

2.1 MEANING OF CREDIT MANEGEMENT

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 10

2.2 CREDIT MANAGER

Credit manager are responsible for:

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 11

➢ Enforcing the stop list of supply of goods and services to customers.

Specialty legal and jurisdiction knowledge required.

2.3 FUNDS FOR LENDING:

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 12

2.4 CREDIT PLANING

The basic objective of credit planning is to guide investment and output.

In fact credit planning to way process:

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 13

➢ A list of barrowers is to be obtained to avoid double financing and emphasis has

2.5 CREDIT POLICY

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 14

➢ Measures to promote agriculture growth rural development.

➢ Changes in re-financing and bills re-discounting facilities.

2.6 CREDIT ANALYSIS AND CREDIT INVESTIGATION

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 15

Obtaining Credit Information

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 16

Analysis of Credit Information

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 17

If finally helps to classify the customer into several credit categories:

Unnecessary delay in responding to the customer request can prove to be

FOLLOW UP SUPERVISION AND CONTROL OF BANK CREDIT

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 18

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 19

INVESTMENT BANK LOAN

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 20

CAR LOAN or VEHICAL LOAN

LOANS AGAINST INSURANCE POLICES

LOAN AGAINST BANK FD’s

2.9 CREDIT RISK

P.G. DEPT. OF STUDIES IN COMMERCE, GFGC, RANEBENNUR-581115 Page 21