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Loan Analysis PDF
Loan Analysis PDF
INTRODUCTION
1
INTRODUCTION
For a long period, India was a British colony. Due to prolonged rule of
British Govt. the economy of the country was completely shattered. The Govt.
did not take any attention to the problems of the agriculturist. So they depend in
money lenders for their needs. But money lenders charged high rate of interest for
their loans.
The co- operative movement was originated in India when the British
Govt. initiated steps to liberate Indian peasants from the clenches hands of
the money lenders. Government enacted Deccan Agriculturists Reliefs Act
1879, Land improvements Loans Act of 1883 and the Agriculturists Loan Act
1884. This Act could not make any impact on the grim face of the peasants.
2
So here I am trying to analyze the loans provided by the Koyilandy Co-
operative Agricultural Development Bank Ltd, Balusseri. To know loans are
how effectively utilized.
In this project I have learned out loan analysis of the Koyilandy Co-operative
Agricultural Development Bank Ltd, Balusseri.
Accepting deposit and lending loan are the two fundamental functions of
bank, co operative are not away from basic banking functions. Co operative banks are
focusing priority sectors like agriculture, rural development and offering loans and
advances to the poor and downtrodden people in the society. Quilandy co operative
agricultural bank has been offering various types of loans for the uplift of the above
mentioned society. Here indeed a study is required to asses the performance of
banking operation in general with particularly loan performance is essential, so we
studied loan performance of the bank. Area of study covered various loan schemes,
relationship between debt and equity, deposit and loans.
3
OBJECTIVES OF THE STUDY
To study the performance of loans and advances provided by the Koyilandy Co-
operative Agricultural Development Bank Ltd during the period under study
To analysis the relationship between the loans provided by bank with deposit mobilized by
the bank under the study period
To analyze the relationship between debts with equity, and deposits with loans in the Koyilandy
Co-operative Agricultural Development Bank Ltd.
To make suitable suggestions to the bank for improving their operation efficiency in a
subsequent years.
4
LIMITATIONS OF THE STUDY
The main limitation of my study is time constraint, the time allowed to completing the project is 45 days.
So to select complete data about the bank and its loan schemes is difficult. The bank cannot disclose all its
records which kept confidential, so I got only a limited data for doing my project. Busy schedule of
workers and staffs prevented lengthy discussions. Despites these limitations I tried my maximum to
make a successful project.
5
METHODOLOGY OF THE STUDY
I have drawn the various loan schemes of the bank from the deferent financial
statements of the bank, such as balance sheet, profit and loss account, cash flow
statement etc. Both primary and secondary data are used for the study. Primary data
are collected discussion with secretary, manager and staffs. Secondary data collected
from bank documents and journals. Five years loan amount are taken to analyze the
data. Comparison, ratio and trend analysis are used to analyze different loans. Table,
chart and graph etc. are used to present the analyzed data.
6
CHAPTER II: - PROFILES
7
CO-OPERATIVE BANKS IN INDIA
State Co-operative Bank is the apex bank in the co-operative credit system. It is
an association of central co-operative banks. The first and most important
function of state co-operative bank is to provide appropriate financial facilities
to the member banks. It also controls and co-ordinate banks.
These are the bottom level of the three tier structure, their formed for
providing financial assistance in the rural areas. Individual mainly, farmers are the
members of this bank.
8
CO-OPERATIVE MOVEMENT IN KERALA
The Kerala Co-operative Societies Act 1969 was enacted with a view to providing for
the orderly development of the co-operative movement in the state of Kerala in
accordance with the relevant directive principles of state policy associated in the
construction of India.
HISTORY
9
IMPORTANT EVENTS IN THE HISTORY OF THE BANK IN THE COUNTRY
1938
Kozhikode Co-op Land Mortgage Bank formed on 15/04/1938 under Madras
Province
1952 Travancore - Cochin Co-op Societies Act came into force [under Act X of 1952]
1956
Kerala Central Co-op Land Mortgage Bank formed [vide bye-law regd. on
04/10/1958]
and started functioning on 25/10/1956
1960 Kerala Co-Op Land Mortgage Banks Act come into force [Act I of 1960]
10
1969 Kerala Co-op Societies Act - 1969 come into force [Act 21 of 1969]
1984 Kerala State Co-op Agricultural Development Banks Act come into force since
30/07/1984 [Act 20 of 1984]
1985 Kerala State Co-op Agri. Dev. Bank Ltd.4017 bye-law 13/85 got registered from
R.C.S Kerala
1986 Kerala State Co-op Agri. Dev. Bank rules - 1986 come into force since 30/04/1986
1990 Kerala State Co-op. Agricultural and Rural Development Bank Act [amended]
1990 come into force [Act 19 of 1990]
2006 Kerala State Coop. Agricultural and Rural Development Bank celebrated the
golden jubilee Year
11
ROLE OF NABARD IN THE DEVELOPMENT OF CO-
OPERATIVE MOVEMENT IN KERALA STATE
The refinance to state co-operative banks and district co-operative bank for short term
(short term agriculture operation) purpose at present is made available by the
NABARD subject to minimum involvement policy. The credits limit statement under
the crop loan system.
NABARD also assists credit co-operative banks through state government by way
of providing financial assistance form the long Term operation Fund (LTO) Patterns
of assistance under the scheme is as shown below.
12
NABARD provides refinance to the Kerala state co-operatives agriculture and rural
development bank by way of subscription to the special development debentures to
the extent of 85% to 95% of each issue of special debentures. The remaining portion
shall be subscribed by the government of India and state government. The rate of
interest of refinance sanctioned by NABARD will be such as may be determined by
NABARD from time to time. NABARD assistance under the programs is limited to
the approved unit cost minus subsidy available from the agency. The repayment of
assistance (principal and interest) in respect of special debentures floated shall be
guaranteed fully and unconditionally by the state government.
13
7
Functions
to mobilize resources for providing long term loans to its affiliated Primary
Co-operative Agricultural and Rural Development Banks, by
floatation of Special Development Debentures, Ordinary Debentures,
Special Rural Housing Debentures, or by way of loans.
To provide loans to its affiliated Primaries, for initial lending, out of
interim finance/cash credit facility arranged and to collect effective
mortgages/gehans, for the floatation of Debentures.
To exercise effective financial control over its affiliated Primary Banks, as a
Central/Apex Bank, subject to the powers vests upon them under the
Banks Act, Rules and bye-laws.
to provide required institutional promotion and self -training support
to its affiliated Primaries, and
to provide direct lending to corporate bodies as approved by State
government, viz. to Kerala State Electricity Board, to Farming Societies etc.
14
Structure of the Bank
Members
48 Affiliated PCARDBS
The KSEB
Board of Directors
Elected members:
Each from a District-14
SC/ST Member 1
Woman Member 1
Ex-Officio Members : Director of Agriculture 1
Registrar of Co-operative Societies 1
The Secretary of Cooperation, GOK 1
The Managing Director, KSCARDB 1
The Chief Gen. Manager, NABARD 1
15
Government Nominees
Executive Committee
Directors (Elected) 5
16
COMPARATIVE STUDY ON THE PERFORMANCE OF CO-OPERATIVE
SECTOR IN KERALA BEFORE AND AFTER INEPENDENCE
As on 1946 As on 1999
1. Total number of co-operatives 1669 11690
2. Total membership 0.02 2.90
3. Share capital 0.32 936.06
4. working capital 0.9 16146.32
5. Loan disbursement 0.11 9899.96
6. Over dues at society level 0.02 264.84
7. percentage of over dues 81.5% 9.5%
8. Over dues at member level 0.17 958.61
9. Percentage of over dues 48.1% 13.5%
10. Sales of consumer 2.25 408.48
Before the formation of state of Kerala co-operatives under the area were
administered by travancore co-operative societies act v of 11 12 (M.E) Cochin co-
operatives societies act XXVI of 11 13 (M.E) and Madras co-operatives act 1932.
After the integration of Travancore and Cochin, Travancore Cochin co-operatives
societies Act 1951 came into force with effect from 15.5.1969 in order to uniform law
on o-operation applicable throughout the state. Consequent on the introduction of
Kerala o-operatives societies act 1969, societies with unlimited liability ceased to
exist and societies with limited liability came into existence. Thereafter government
of Kerala passed the Kerala co-operatives (amendment) act 1999 which came into
force with effect from 1.1.2000. Providing membership to local institution, deposit
guarantee scheme in primary Agriculture Credit Societies, Consortium Lending
scheme, co-operative development and welfare fund, independent election
commission, separate audit wing and Vigilance wing, and co-operative Examination
Board are the new provisions in the amendment Act.
17
PERFORMANCE OF CO-OPERATIVE CREDIT STRUCTURE IN KERALA
Kerala can claim to an elaborate and efficient rural credit system administered
through primary co-operatives, central co-operative bank and Apex o-operative bank.
The co-operative credit structure in Kerala comprises of two parts viz. (i) short and
medium term credit structure in (ii) long term credit structure. The short and medium
credit requirements are met by a three tier system consisting of state co-operative
bank and 1013 Employees credit co-operatives are meeting the Non agriculture credit
requirement of their members.
The primary agriculture credit societies in the state which were once upon a time
were Nanaya Vinimaya Sahakaran in course of time transformed themselves into the
present agriculture credit societies which can cater al the credit needs of the rural
mass and capable of socio economic activities, got entrenched in drivers sectors of the
economy and touched the lives of all sections of the people at large. Apart from credit
activities, self help group scheme, kissan credit card scheme and cooperative neethi
medical stores scheme are implemented through primary agriculture credit societies.
Further a tea factory with a project cost of Rs. 21000 lakhs is run by the Malanad
Service cooperative bank with the assistance of ICDP Idukki.
18
During the period off emergency when stringent action were taken against
indigenous money lenders, there arose a social problem, the petty tradesmen and
village artisans who were depending on theses money lenders could not get credit
facility from anywhere. These credit gaps, which imposed a social problem. The
petty tradesman and village artisan who were depending on theses money lenders
could not get credit facility from anywhere. This credit gap which imposed a social
problem was effectively tackled by the co-operative in Kerala. All the credit societies
joined together to tap the internal resources from the state itself be initiating a special
deposit mobilization campaign which commence in the year 1976 as a novel idea to
stabilize the cooperative sector. The entire mechanism supported the scheme and it
was a grand success. The deposit mobilization campaign is organized every year with
a view to increase resources position of Primary Agriculture credit societies. The
performance of theses societies was spectacular in as much of the programs having
achieved 329% of the target fixed or the mobilization of deposit.
Long term credit consists of Primary Agriculture and development banks federated
into an Apex Body viz. Kerala co-operative agriculture and rural development bank.
Various developmental purposes covered by the banks lending activity include minor
irrigation farm mechanization, land development cultivation of plantation or
horticulture crops and diversified activities like daring fish culture, poultry farming
biogas, goat rearing, sericulture etc. The primary agriculture development banks area
having 8:24 laths members and share capital of Rs. 75.40 crores. The working capital
of the banks is Rs. 1004.62 crores and percentage of overdue sat member level is six
only.
19
THE KOYILANDY CO-OPERATIVE AGRICULTURAL
AND RURAL DEVELOPMENT BANK LTD.
BALUSSERY
20
land development and minor irrigation under the ordinary lending programs.
Then the bank has launched scheme loans under Agricultural Rural
Development Schemes (ARDS) and Special Agricultural Development Unit
(SADU) during the year 1977-1978 and 1978-1979. After passing Kerala State
co-operative Agricultural Development Act in 1984 the name of the bank was
changed into Koyilandy Co-operative Agricultural Development Bank entered
into the field of non-farm, rural housing and other allied activities.
ORGANISATION PROFILE
21
ORGANIZATION STRUCTURE
GENERAL BODY
BOARD OF DIRECTORS
PRESIDENT
SECRETARY
ASSISTANT SECRETARY
MANAGER
SENIOR SUPERVISOR
JUNIOR SUPERVISOR
SENIOR CLERK
JUNIOR CLERK
SUB STAFF
22
ORGANISATION SET UP
GENERAL BODY
With the one month after the completion of the co-operation year. This
meeting is called annual general body.
At the request of the president or members of the board.
On the request made by members not less than 1/5 of total number of
members.
To liquidate the time bared board of Directors and elect new director
board in every 5 years.
BOARD OF DIRECTORS
Board of directors has been responsibility of the proper working of the bank.
Board of director has the right to co-ordinate and controls the affairs of the
bank. The board consists of nine member elected from among in a board is 5
years. Members of the board have the right of resign. Out of nine members of the
board one is reserved for scheduled caste and one for women. The board has a
president. a vice president and a treasurer elected from them.
23
PRESIDENT
SECRETARY
STAFF
MEMBERSHIP
SHARE CAPITAL
There are mainly three types of shares issued by the bank namely 'A' class
'B' class and 'C' class. Among this B' class shares are nontransferable and non-
refundable and the value shall be transferred to reserve fund on the clearness of
the relative loans. 'B' class shareholders are not entitled to vote class
shares shall be available for subscription only to the State Government.
24
Funds:
The bank will ordinarily obtain fund from the following sources:
1. Share capital
Borrowings:
It shall be competent to the committee to borrow funds from the state co-
operative Agricultural Development Bank such document as may be necessary in
this behalf.
The total borrowing of the bank shall not exceed 50 times of the paid up
share capital plus reserve fund.
Annual statement
The board shall prepare annually in such form as may be prescribed by the Registrar.
3. A balance sheet
25
Objective of KCARDB are-
26
DETAILS OF LOANS
The bank provides loans to the members for the productive purpose for getting the
loans. The person who applied for the loans from the bank are in prescribed form
mentioning the name and address of the borrower, Membership number, loan amount,
required etc. When getting the application the bank certifies the entire documents
which are attached with the application. When the properties are mortgaged with the
bank and ends an official for verification of the land and value of the market proves
of the land sanctioned. When this procedure is over, the bank passes the application in
the board meeting.
RECOVERY OF LOANS
The attachment can undertake by the ban after the publishing the news in the
details have wide publication in the area after the expiry f the notice period the
bank give chance to the borrower on repayment of loan. By way of attachment and
sale the bank can realize the loan with interest. If there is any balanced amount that
should give to the borrower by the bank.
27
LOAN SCHEMES
A major portion of the resources of the bank is employed for granting loans and
advances. The bank provides different types of loans to the members for there
needs that the short medium and long term loans.
Loan schemes
Ordinary
Scheme loans
Housing loan
Cash credit
Gold loan
28
CHAPTER III
REVIEW OF LITERATURE
29
REVIEW OF LITERATURE
Various studies conducted and numerous suggestions were given to bring
effectiveness in the working and operations of financial institutions especially the
banks. Narsimham Committee (1991) emphasized on capital adequacy and liquidity,
Padamanabhan Committee (1995) suggested CAMEL rating (in the form of ratios) to
evaluate financial and operational efficiency, Tarapore Committee (1997) talked
about Non-performing assets and asset quality, Kannan Committee (1998) opined
about working capital and lending methods, Basel committee (1998 and revised in
2001) recommended capital adequacy norms and risk management measures. Kapoor
Committee (1998) recommended for credit delivery system and credit guarantee and
Verma Committee (1999) recommended seven parameters (ratios) to judge financial
performance and several other committees constituted by Reserve Bank of India to
bring reforms in the banking sector by emphasizing on the improvement in the
financial health of the banks.
Experts suggested various tools and techniques for effective analysis and
interpretation of the financial and operational aspects of the financial institutions
specifically banks. These have focus on the analysis of financial viability and credit
worthiness of money lending institutions with a view to predict corporate failures and
incipient incidence of bankruptcy among these institutions.
1. Dutta and Basak (2008) in their study analysed that Co-operative banks
should improve their recovery performance, adopt new system of
computerized monitoring of loans, implement proper prudential norms and
organize regular workshops to sustain in the competitive banking
environment.
30
3. Machiko Nissanke and Ernest Aryeetey in their study Financial
Integration and Development explained about the loan administration and
risk reduction by formal lenders (i.e. banks), Credit Analysis Standards,
Increase Project equity requirements, Loan screening of banks and assessing
creditworthiness during screening. Banks consider return on project as an
important indicator for appraising the projects.
5. Eleanor Charles (1995) in his study Appraising the Role of the Appraiser
analysed about the centralized function of the appraiser to grant the loan and
virtually every loan applicant will have to rely on an appraisal to set a value
on the property against which the loan is to be made.
31
the world of business have been provided to facilitate a better understanding
of the vast and significant changes in the financial market.
From the foregoing review of earlier studies hardly to find that there was no study
under the titled Loan Analysis of Koyilandy Co-operative Agriculture Bank. So we
decided to conduct a study under the title of Loan analysis Koyilandy Co-operative
Agriculture Bank.
32
CHAPTER IV
ANALYSIS AND INTERPRETATION
Analysis of loan schemes
Trend analysis
33
Table 4.1: Comparative analysis of various loans provided by the Koyilandy
co-operative Agricultural and Rural Development Bank Ltd. Balussery
Years
34
INTERPRETATION
Ordinary Loans
With regard to ordinary loans, from the table it is clear that the loan disbursed shows
an increasing trend with percentage increasing from 2.23% to 81.01%.
Housing Loans
With regards to housing loan, from the table it is clear that the loan disbursed shows
an increasing trend with percentage increasing from 38.005% to 441.65%.
35
Gold Loan
With regard to gold loan from the table is the clear that loan disbursed shows an
increasing trend up to the year 2013 from 39.1% to 157.96% . Then in the year 2014
it decreasing to 88.97%.
Cash Credit
With regard to cash credit, from the table it is clear that the loan disbursed shows an
increasing trend with percentage increasing 2.16% to 2262.68%.
36
Analysis of loans
Ordinary loans
37
14000000
12000000
10000000
8000000
6000000
4000000
2000000
0
2011 2012 2013 2014 2015
38
HOUSING LOAN
39
800000000
700000000
600000000
500000000
400000000
300000000
200000000
100000000
0
2011 2012 2013 2014 2015
40
Non farm sector(NFS)
INTERPRETTATION: When we looking to the NFS loans it were very high in the
year 2011. Then it decreased in next year. And it increased in the year 2013. But after
the 2012 it starts to fall. In 2011 the amount was 38567243 then it is decreased to
4853639 in the year 2015.
41
45000000
40000000
35000000
30000000
25000000
20000000
15000000
10000000
5000000
0
2011 2012 2013 2014 2015
42
Rural Housing Scheme (RHS)
INTERPRETTATION: Rural housing loan is the one of the important loan scheme
in which the table and graph shows a decreasing trend. It is not keeping a stable
position so we can say rural housing loans are coming down. In 2011 the amount was
8104979 it decreased to 1042548 in 2015.
43
9000000
8000000
7000000
6000000
5000000
4000000
3000000
2000000
1000000
0
2011 2012 2013 2014 2015
44
Kisan credit card loan
INTERPRETTATION: Kisan credit card loan also showing a down trend, the
requirement of this loan is decreased over the years. Farmers are not reaching to this
loan. In 2011 it was 3841102 then keeping falling every year at last 2015 it reached
465961.
45
4500000
4000000
3500000
3000000
2500000
2000000
1500000
1000000
500000
0
2011 2012 2013 2014 2015
46
SWORAJ CERDIT CARD
47
800000
700000
600000
500000
400000
300000
200000
100000
0
2011 2012 2013 2014 2015
48
Gold loan
INTERPRETTATION: Gold loan is the one of the most important loan scheme
provided by the bank. From the above chart we can see in the years 2011 to 2014 it
was high demand in loans. In 2015 the amount of loan decreased to 9697970.
49
14000000
12000000
10000000
8000000
6000000
4000000
2000000
0
2011 2012 2013 2014 2015
50
CASH CREDIT
INTERPRETTATION: While analyzing the cash credit loan provided by the bank,
it shows an increasing trend over the five years. In the year 2011 the cash credit was
around 1262442 rupees. Then in the 2015 the housing loan granted is reached to
29809881 rupees.
51
35000000
30000000
25000000
20000000
15000000
10000000
5000000
0
2011 2012 2013 2014 2015
52
Housing loan to staff
53
1400000
1200000
1000000
800000
600000
400000
200000
0
2011 2012 2013 2014 2015
54
Vehicle loan to staff
55
1000000
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
2011 2012 2013 2014 2015
56
Loan to deposit ratio
Loans
Deposits
Table 4.12: table showing loan to deposit ratio
INTERPRETTATION: It is clear from the above table , there are moderately high
ratios. So bank having enough liquidity to cover any unforeseen fund requirements.
The ratio is not too low, so the bank can be earn as much as they could
57
1.045
1.04
1.035
1.03
1.025
1.02
1.015
1.01
1.005
2011 2012 2013 2014 2015
58
Debt equity ratio
The Debt Equity Ratio measures the relationship between outside borrowings and
owned funds of any enterprise. It signifies the concerns ability to repay the debts out
of its net worth and helpful to identify the long term solvency of the concern. The
higher ratio is an indicator of the greater claim of creditors than the owners, which is
not a desirable one.
The equation for Debt Equity Ratio is:
Debt Equity Ratio = Total Debts/ Total Equity (equity + reserve fund)
Table 4.13: Table showing debt and equity ratio
59
1.45
1.4
1.35
1.3
1.25
1.2
1.15
1.1
2011 2012 2013 2014 2015
60
CHAPTER V
Findings
Suggestions
Conclusion
61
FINDINGS
1. The bank is providing more than 10 schemes of loans to the members and
public.
2. Total loan provided by the bank shows an increasing trend. This shows
an efficiency of the bank provides more medium term loans as
compared to short and to long term loan.
5. Some loans like RHS, KCC, and ILS are in a down trend.
6. Demand for the sworaj credit card loan is better it has a growing trend.
7. Bank not providing much more importance to vehicle loans and housing
loans to the staff.
8. When we comparing the loan schemes ordinary loans and gold loans are in
a same proportion, others are not in a same proportion.
9. When we analyzing the trend of the loans SCC, gold loan, cash credit are
showing a better future trend this loans are currently performing well. But
in the case of other loan schemes the future trend showing a decreasing
tendency.
10. The deposit-loan ratio shows the bank having better liquidity to meet the
loans.
11. The debt equity ratio of the bank is very good because it almost besides of the
ideal ratio.
62
SUGGESTIONS
1. It is necessary that every care should be taken to see that the amount is recovered
regularly.
2. As the deposits are main sources of the fund for doing business of the bank, the
bank should collect more deposit for the better working of the bank by
introducing attractive schemes.
3. The bank should manage their loans effectively.
4. Avoid unnecessary lending schemes, staff loans are unnecessary schemes
because it should not come under the agricultural and priority sector so avoid
that.
5. From the above analysis we can understand some schemes are not productive
like ILS loan schemes to kisan credit card etc so bank should take effective
steps to improve the loan schemes.
6. Try to include some more effective schemes for farmers like seed schemes,
harvest related schemes, labour assisted schemes etc.
7. Focus on customers oriented banking and improve personal service for them.
8. In the Kerala the influence of Gulf money at maximum even in rural areas.
There for lender to increase the business of Co-operative bank, permit them to
start non-resident investment account.
9. To get more attraction for the loans and deposits banks should introduce some
attractive advertisements.
10. The bank should be more professional in its approach for attracting new
customers.
63
CONCLUSION
64
BIBLIOGRAPHY
WEBSITS
En.wikipedia.org
www.banknetindia.com
www.keralalandbank.org
65