“Lending Practices With Special Reference to Karnataka Gramin Bank”

CHAPTER 1

SYNOPSIS

 INTRODUCTION
 LITERATURE REVIEW
 STATEMENT OF THE PROBLEM
 OBJECTIVE OF THE STUDY
 SCOPE OF THE STUDY
 NEED OF THE STUDY
 METHODOLOGY
 SOURCES OF THE STUDY
 LIMITATIONS OF THE STUDY

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INTRODUCTION

Every country has to undergo from the continuous process of development. Banks play a vital
role in this process. The Indian banking system has progressed as a powerful mechanism of
planning for economic growth. Banks channelize savings to investments and consumption.
Through that, the investment requirements of savers are reconciled with the credit needs of
investors and consumers. Out of all principal roles of the banks, lending is the most important
role in which banks provide working capital to commerce and industry. Importance of credit is
not only because of its social obligation to cater the credit needs of different sections of the
community but also because lending is the most profitable activity, as the interest rates realized
on business loans have always been well above those realized on investments. Credit being the
principal source of income for banks and usually represents one of the principal assets of the
banks so its proper management becomes all the more necessary. The extension of credit on
sound basis is therefore very essential to the growth and prosperity of a bank. With the
increasing role of commercial banking in capital formation, employment generation and
production facilitation, the credit operations of commercial banks are expected to be in harmony
with the requirements of the economic system. Till today, banks are the major suppliers of
working capital to the trade and industry and they have privilege of having massive lending
facilities produced by the banks. Hence, the management of bank credit operations is required to
be more creative than the traditional approach followed by it earlier. Lending activities of banks
have surround effect on the economy. For overall development of economy, all the sectors of
economy should be grown and developed equally. Credit management serves the concept of
credit deployment that bank should observe that overall bank credit should be deployed in such a
way that each and every segment of an economy and system of nation get benefited. This is the
one aspect of credit management. On the other hand, if lending activity becomes fail, it adversely
affects the whole economy. In last decade, banks have realized that an increase in retail credit
increased the credit risk also. Success of bank lies on profitability and liquidity and that come 74
majority from successful lending activity. So an examination of some of the important aspects of
credit management of Indian banks would provide an insight into the credit/ lending activity of
commercial bank.

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LITERATURE REVIEW

The bank lending channel of monetary policy and its effect on mortgage lending (May, 2010)
explains the bank lending channel suggest the bank play in special role in the transmission on
monetary policy. In this theory monetary, has an effects on banks’ cost of funds in addition to
the change in the risk free rate, lending to an additional response in bank lending. The supply of
intermediated credit therefore has a unique response to monetary policy. To analyze the bank
lending channel, the study the response of the banks to monetary policy in the context of the
mortgage funds and mortgage lending. We focus on lending in subprime communities, because
it is a form of information intensive lending which affects banks’ choices in funding sources and
their response to changes in funding costs. Our paper helps explain how mortgage loan supply
responds to monetary policy by addressing the role of banks in the transmission of monetary
policy.

The balance-sheet channel developed by Bernanke and Gertler (1989) operates through the
net worth of business firms. Contractionary monetary policies causes a decline in equity rice or a
reduction in cash flow. Therefore, it lowers net worth of business firms because of the increase
of the adverse selection and moral hazard problems, 7 in turn lending to decrease lending to
financial investment and consumption.

Bernanke and Gertler (1988): First establish a theoretical macroeconomic model with the bank
lending channel. They extend the standard IS/LM model by explicitly modeling the credit
marketing independently from money market under the assumption of imperfect substitutability
among all bank assets. By allowing for the coexistence of the auction-market credit (bond) and
the customer-market credit (banks loans), they show that an increases in money supply
influences the output not only through interest rate channel, but also through the credit channel
furthermore, expansionary monetary policy has a more potent effect on output under their model
than under their standards IS/LM model.

All of the above literatures concentrate on the analysis of credit channels under a closed
economy. As financial markets become more internationalized, the conduct of monetary policy
turns more complicated in the open economy.

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Therefore, the recent studies extend the discussion of credit channel into case of an open
economy. Wu (1999), Abrams and Settle (2003) and Chiades and Gambacorta (2004)
analyze the monetary policy transmission mechanisms and finds the condition under which
monetary policy can be aimed at policy targets despite international capital mobility adherence
to a fixed exchanges rates. However, the viewpoints obtained in their studies are doubtful. As a
matter of the fact, under regime of fixed exchange rate, the money supply becomes endogenous
such that monetary policy is still ineffective in influencing output even with an operative credit
channel. It is hard to convince people that the credit channels operate and monetary policy can
have real effects under the regime of fixed exchange rates.

However, under the regime floating exchange rate, there is no room for credit channel to
operate. If the domestic currency depreciates, the credit channel would amplify the expansionary
effect of monetary policy on output. Ram rex (2004) extends Bernanke and Blinder’s model to
the open economy under floating exchange rates and claims the monetary policy is such more
potent with credit channel. Tsai (2005) further investigates the model with imperfect
international capacity mobility and finds that under the case with relative high capital mobility,
expansionary monetary policy may lead to a fall in the exchange rate Via a credit channel and an
appreciation in the currency in turn offsets expansionary monetary effect. Yet Tsai’s model
ignores the effects of international credit flows

STATEMENT OF THE PROBLEM

The lending practices constitutes the largest operating access and source of revenue of the most
commercial banks. The present study is an attempt to revel a detailed information on the lending
practices in the bank, in general and the lending practices in Karnataka Gramin Bank in
particular. The study aims at providing the detailed information regarding customer reviews on
lending practices in RRBs at micro as well as macro level. In the present days the lending
practices of the bank is turned as difficulties to all RRBs because the NPA has continuously
increasing, so the bank have to take so many corrective actions while lending the loans to the
customers. Therefore the analysis have been made on the primary data of customer opinion
towards the lending practices of RRBs with the special reference to Karnataka Gramin Bank,
Shivamogga.

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OBJECTIVE OF THE STUDY

 To know the role and importance of RRBs in lending practices.

 To study the customer services of the bank.
 To examine the varieties of lending schemes provided by the Karnataka Gramin Bank.
 To understand the impact of credit on sample borrowers.
 To identify the problems faced by the Karnataka Gramin Bank in lending practices and
suggest some suggestions to overcome it.

SCOPE OF THE STUDY

Lending practices are much important for the banking sector. Here the study would be restricted
to lending practices with special reference to Karnataka Gramin Bank. The each and every
project study along with its certain objectives also has scope for further studies. Scope of the
study not only consist one or two future business plans but also sometime it gives ideas about
new business which become more profitable for the researcher then the previous one.

METHODOLOGY

The important point for the validation of any research study is based on what type of
methodology is adopted.

SOURCE OF DATA

Data are facts, figures collected together for reference and analysis. The data serve as the bases
for analysis. Without an analysis of actual data no specific inferences can be drawn on the
questions under study. Inferences based on imagination or guess work cannot provide correct
answers to research questions. The relevance, adequacy and reliability of data determine of
quality of findings of a study.

For the purpose of present study data from two sources have been gathered namely Primary data
and Secondary data.

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1. PRIMARY DATA

Primary data are original data collected for the purpose of a particular study. In the present
study primary data have been collected by personal method with the help of questionnaire.

2. SECONDARY DATA

These are the sources containing data, which have already been collected and compiled for other
purpose by other researchers. The secondary sources consist of readily available materials and
already compiled statistical statements and reports whose data may be used by researcher for
his/her studies.

SAMPLE SIZE

The sample size is of 50 respondents consisting of customers in shivamogga city.

LIMITATIONS OF THE STUDY

 The rate of interest may vary according to market environments.

 These figures are according to publish in annual report of Karnataka Gramin Bank.
 The report is according to my perception only and cannot be taken as a final decision.
 This study only relates to one organization, so conclusions drawn may not be finding its utility
in all other banks.

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CHAPTER 2

INDUSTRY PROFILE

 INTRODUCTION
 ORIGIN OF BANK
 HISTORY OF BANKING
 INDIAN BANKING REGULATION ACT 1949
 FUNCTION OF A BANK
 STRUCTURE OF THE INDIAN BANKING INDUSTRY

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INTRODUCTION

Banking system has occupied an important position in the modern era. Banking system plays an
important role in the economic development of the country. RRBs are having loans share in
total banking operations in our nation. Banks today are back bone of modern industry. They are
assistance part of the society.

ORIGIN OF THE BANK

There are various opinion regarding the origin of the term ‘Bank’. According to some, it is
derived from the Italian word ‘Banco’, Latin word ‘Bancus’ and French word ‘Basque’ which
means bench, the reason believed this argument is the olden banking business, but according to
others, the word ‘Bank’ which means common fund raised from a large number of public by
clear analysis. The later argument seems to be more realistic and most people have accepted the
German word ‘Bank’ to be the origin of banks.

HISTORY OF BANK

The history of Banking began at about 2000 B C of the ancient world when merchants made
grain loans to formers and traders started carrying goods between cities within the areas of
Assyria and Babylonia. The code of Hammurabi, dating back to about 1772 B C is one of the
oldest deciphered writings of significant length in the world that deals with matters of contract
and set the terms of the transactions. This code also included standardized procedures for
handling loans, interest and guaranties.

INDIAN BANKING REGULATION ACT 1949

The Banking Regulation Act 1947 is a legislation in India that regulates all banking firms in
India. Passed as the Banking Companies Act 1949, it came into force from 16-3-1947 and
changed to Banking Regulation Act 1949 from 1-3-1966. It is applicable in Jammu and Kashmir
from 1956. Initially, the law was applicable only to banking companies. But in 1956 it was
amended to make it applicable to cooperative banks and to introduce other changes.

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FUNCTION OF A BANK

The functions of the bank are classified into two types. They are as under :

 Primary Function
 Secondary Function
 Primary Functions of the bank :

1. Accepting Deposits: Deposits are the amount of money that a customer hands over to the bank.
This is known as making a deposit. The deposits are of a few types namely: Saving Deposit, Fixed
Deposit, Current Deposit, and the Recurrent Deposit. The various deposit schemes are based on the
type of deposit and the frequency of depositing. For example, in a fixed deposit a definite sum is
handed over to the bank for a few years. The interest is only compounded if the deposit term is
complete. Providing these services of the deposit is one of the primary functions of a bank. So what
happens if you need money? Shouldn’t that also be a primary function of the bank? Well, let us see
further.

Saving/ Fixed/ Current Deposit

In a saving deposit, the amount and the rate of interest are low. Withdrawals are also
allowed but only in a limited number. The account is suitable for people who want to save
on salaries and similar sources of income.

Similarly, the fixed deposit is a fixed sum that one gives to the bank for a certain agreed
time. The withdrawals are not allowed before the completion of the time of the fixed
deposit. On the other hand, the current account or deposit, there is no interest paid by the
bank and the customer can withdraw or deposit any number of times.

Now let us see the other secondary function:

2. Granting Loans and Advances: The bank lends people money on a time-interest basis. Each loan
amount is passed by the bank after due consideration and securing the bank’s profit. The bank also

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gives advances to its customers. These are also the primary functions of the banks. The bank
provides the services of an overdraft, cash credits, loans, and discounting of the bill of exchange.

The banks also take part in what we call the secondary functions of the bank.

 Secondary Functions of the bank :

The secondary functions of the Bank are either selling gold coins to the public or selling insurance
products and selling mutual fund products etc. Let us make a more formal study. Following are the
important secondary functions of the Banks:

1. Agency Functions: The bank is an agent for its customers in a way that it invests on behalf of
its customers. Acting as the agent of the customer the bank may transfer funds, the collection
of cheques, periodic payments, portfolio management, periodic collections, and several other
agency functions. All of these functions are the secondary functions of the bank.

2. General Utility Functions: The bank also performs several utility functions. Some of the most
important utility functions of the banks may include the issue of drafts, letter of credits, etc.,
locker facility, underwriting of shares, dealing in foreign exchange, project reports, social
welfare programs, other utility functions. The banks also provide several services like the
safe deposit locker facilities, safe custody facilities, and Demat accounts. The opening of
Demat accounts allows the account holder to trade in the stock exchange or the money
market directly. The customer that holds a Demat account can directly buy or sell shares
from the capital market.

The General Utility Functions are also called as Social development functions. In some areas, the
banks will help you with all the transactions that you will have to do during a course of time. For
example, you will be able to pay your phone, electricity and other utility bills from a center that is
run by the banks. This sums up the functions of the banks.

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STRUCTURE OF INDIAN BANKING INDUSTRY

The organized banking system in India can be classified as given below :

Exhibit 2.1 : Structure of Indian Banking Industry

Reserve Bank of India (RBI) :

Reserve Bank of India is the Central Bank of our country. It was established on 1st April 1935
accordance with the provisions of the Reserve Bank of India Act, 1934. It holds the apex position
in the banking structure. RBI performs various developmental and promotional functions.
It has given wide powers to supervise and control the banking structure. It occupies the pivotal
position in the monetary and banking structure of the country. In many countries central bank is
known by different names.

For example, Federal Reserve Bank of U.S.A, Bank of England in U.K. and Reserve Bank of
India in India. Central bank is known as a banker’s bank. They have the authority to formulate

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and implement monetary and credit policies. It is owned by the government of a country and has
the monopoly power of issuing notes.

SCHEDULED AND NON SCHEDULED BANKS :

The scheduled banks are those which are enshrined in the second schedule of the RBI Act, 1934.
These banks have a paid-up capital and reserves of an aggregate value of not less than Rs. 5
lakhs, they have to satisfy the RBI that their affairs are carried out in the interest of their
depositors.

All commercial banks (Indian and foreign), regional rural banks, and state cooperative banks are
scheduled banks. Non- scheduled banks are those which are not included in the second schedule
of the RBI Act, 1934. At present these are only three such banks in the country.

COMMERCIAL BANKS :

Commercial bank is an institution that accepts deposit, makes business loans and offer related
services to various like accepting deposits and lending loans and advances to general customers
and business man.

These institutions run to make profit. They cater to the financial requirements of industries and
various sectors like agriculture, rural development, etc. it is a profit making institution owned by
government or private of both.

Commercial bank includes public sector banks, SBI merger and consequences, private
sector banks and regional rural banks:

 Public Sector Banks :

Currently there are 11 Nationalized banks in India. The public sector banks are where a
majority stake (i.e. more than 50%) is held by a government. The shares of these banks are
listed on stock exchanges. As per 1st april 2020, there are 12 public sector banks, which are
managed and controlled by the central authority i.e. the Reserve Bank of India.

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 SBI Merger and Consequences :

SBI, which is India’s largest bank merged with five of its associate banks ( State Bank of
Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala
and State Bank of Travancore) and Bharatiya Mahila Bank with itself. This is the first ever
large scale consolidation in the Indian Banking Industry. With the merger, SBI will enter the
league of top 50 global banks with a balance sheet size of Rs 33 trillion, 278000 employees,
420 million customers and more than 24000 branches and 59000 ATMs.

 Private Sector Banks :

Private Sector Banks are banks where greater parts of share or equity are not held by the
government but by private shareholders. There are many Indian and Foreign Private Banks
in India .

For example : HDFC Bank, ICICI Bank, Axis Bank, IDBI Bank, RBL Bank, Federal Bank,
etc. are some major Foreign banks in India.

 Regional Rural Banks :

The government of India set up Regional Rural Banks (RRBs) on October 2, 1975. The banks provide
credit to the weaker sections of the rural areas, particularly the small and marginal farmers,
agricultural laborers, and small entrepreneurs. As of 1st April 2020 there are 43 RRBs in India.
NABARD holds the apex position in the agricultural and rural development.

COOPERATIVE BANKS :

It is an institutions established on the cooperative basis and dealing in the ordinary banking
businesses. Like other banks, the cooperative banks are founded by collecting funds through
shares, accept deposits and grant loans.

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Cooperative Banks include state cooperative banks, urban/central cooperative banks and
primary credit societies :

 State cooperative Banks :

State Cooperative Banks are small financial institutions which are governed by regulation like
Banking Regulations Act, 1949 and Banking Laws Cooperative Societies Act, 1965. At present
there are about 33 State Cooperative Banks of which 19 are Scheduled.

 Urban or Central Cooperative Banks :

The term Urban Cooperative Banks (UCBs) refers to primary cooperative banks located in urban
and semi-urban areas. These banks, till 1996, were allowed to lend money only for non-
agricultural purposes. This distinction does not hold today. These banks were traditionally
centered around communities, localities work place groups. They essentially lent to small
borrowers and businesses.

 Primary Credit Societies :

Primary Credit Societies or Primary Agricultural Credit Society (PACS) is a basic unit and
smallest cooperative credit institution in India. It works on the grassroots level (gram panchayat
and village level). It virtually function like banks, but whose networth is less than Rs. 1lakh;
who are not members of the payment system and to whom deposit insurance is not extended.

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CHAPTER 3

COMPANY PROFILE

 INTRODUCTION
 HISTORY
 ORGANISATIONAL STRUCTURE
 SIGNIFICANCE OF LOGO
 MOTTO
 BOARD OF DIRECTORS
 EXECUTIVES OF THE BANK
 REGIONAL MANAGER OF KARNATAKA GRAMIN BANK,
REGIONAL OFFICE , SHIVAMOGGA

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INTRODUCTION

Karnataka Gramin Bank is located in Bellary, Karnataka, India and is a part of the Banks and
Credit Unions Industry. Karnataka Gramin Bank has 3,836 total employees across all of its
locations. There are 100 companies in the Karnataka Gramin Bank Corporate Family.

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HISTORY

Regional Rural banks (RRBs) in India were established by Government of India, under
provisions of RRBs Act 1976, enacted by the Indian Parliament.

With a view to develop the rural economy by catering the basic banking needs for the purpose of
development of Agriculture, Trade, Commerce, Industry and other productive activities in the
rural areas, credit and other facilities, particularly to the small and marginal farmers, Agricultural
Labourers, Artisans and small entrepreneurs and for matters connected therewith and individuals
thereto.

RRBs have now become an Integral part of the Indian banking System. Like other public sector
Banks RRBs are established by Govt. of. India and are scheduled & notified by Reserve Bank of
India.

RRBs are jointly owned by Government of India(GOI), Sponsor Bank and the concerned State
Government and with share proportion 50%,35% & 15% respectively.

Govt.of.India with a view to improve the operational viability and efficiency of RRBs, initiated
the process of Structural Consolidation by amalgamating RRBS. The amalgamated RRBs were
expected to provide better customer service with improved infrastructure, expanding area of
operation with combined network, Improved technology with innovative IT, improvement of
combined workforce, strategic marketing efforts. etc.

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Karnataka Gramin Bank with its Head office at Ballari under the sponsorship of Canara Bank
came to existence on 01.04.2019 as per the gazette Notification of Government of India No.852
dated 22.02.2019 with amalgamation of 2RRBs i.e Pragathi Krishna Gramin Bank (Sponsored
by Canara Bank with Head Office at Ballari) &Kaveri Grameena Bank (Sponsored by State
Bank of India with Head Office at Mysuru).

ORGANISATIONAL STRUCTURE

Exhibit 3.1 : Organizarional Structure of Karnataka Gramin Bank

 HEAD OFFICE :

Head Office is the main administrative center for a company or organization. Karnataka
Gramin Bank with its Head Office is located at Ballari under the sponsorship of Canara
Bank. The present Chairman of Karnataka Gramin Bank is Sri. Sreenath Joshi H.

 REGIONAL OFFICE :

Regional Office is an office where business for a particular geographic area is handled. This
office typically reports back to a home office/head office. There are around 18 Regional
Offices located under Karnataka Gramin Bank.

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 BRANCH OFFICE :

A Branch Office is an outlet of a company or, more generally, an organization that – unlike a
subsidiary – does not constitute a separate legal entity, while being physically separated from
that organization’s main office. There are around 1,142 branches located under Karnataka
Gramin Bank.

SIGNIFICANCE OF LOGO

Exhibit 3.2 : Significance of LOGO of Karnataka Gramin Bank

 Leaves represent agriculture and signifies prosperity.

 Diverging leaves signify our expanding base and growing support to agriculture and
clean environment.
 The circle formed signifies the wholeness and inclusive growth.
 Blue color represents trust, loyalty, integrity and responsibility.
 Yellow color represents optimism, success, confidence, youthfulness and fresh energy.

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MOTTO

“Vishwasada Pratheeka” :Symbol for the Faith/Trust.

BOARD OF DIRECTORS

Table No. 3.1

SI.NO Name Designation

Chairman, Karnataka Gramin Bank,Deputy
1 Sri. Sreenath Joshi H
General Manager-Canara Bank
2 Smt. S. Suchitra Asst. General Manager
3 Sri. Venkatesh R.S. Asst. General Manager
4 Smt. Ramakumari. M Deputy General Manager
5 Shri. B UdayBhaskar Deputy General Manager
6 Sri. L ChandreshekarNayaka, IAS Deputy Secretary
7 Sri. K. Nitish, IAS CEO, ZP

EXECUTIVES OF THE BANK

Table No. 3.2

SI.NO Name Designation

1 Sri. Sreenath H Joshi Chairman
2 Sri. S J F Ravindranath General Manager
3 Sri. B G Manjunath General Manager
4 Sri. M C Anji Reddy General Manager
5 Sri. G Pradeep Varma General Manager
6 Sri M N Girish General Manager
7 Sri N Ravi Kumar General Manager
8 Sri B C Ravichanda General Manager

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REGIONAL MANAGER OF KARNATAKA GRAMIN BANK, REGIONAL OFFICE,

SHIVAMOGGA

Nagaraj K G

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CHAPTER 4

CONCEPTUAL FRAME WORK

 INTRODUCTION

 MEANING OF LOANS AND ADVANCES

 UTILITY OF LOANS AND ADVANCES

 BORROWING RATE AND LENDING RATE

 LENDING MONEY BY BANK

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INTRODUCTION

All banks provide funds or finance or loans or credits or advances, whatever term is used, to the
individuals as well as business entities known as borrowers to fulfill gaps in their financial
requirements for different purposes. The borrower has to repay such loans in installments within
a certain period as specified by the lending bank. Banks recovers a certain charge i.e. interest and
other charges from the borrowers in consideration of providing funds and related services/
facilities to them. Thus, banks earn interest as well as non interest income from lending. Income
from advances constitutes a huge portion of banks‘ total income. Therefore, it is inevitable for
banks to minutely observe that loans are adequately secured, timely repayment of loan and
interest thereon is ensured as well as deployment of fund is made to productive avenues because
default in any of these areas may harm flow of income, and thereby profitability, liquidity and
overall worth of a bank.

MEANING OF LOANS AND ADVANCES

The term loan refers to a type of credit vehicle in which a sum of money is lent to another party
in exchange for future repayment of the value or principal amount. In many cases, the lender also
adds interest and/or finance charges to the principal value which the borrower must repay in
addition to the principal balance. Loans may be for a specific, one-time amount, or they may be
available as an open-ended line of credit up to a specified limit. Loans come in many different
forms including secured, unsecured, commercial, and personal loans.

KEY TAKE AWAYS :

 A loan is when money is given to another party in exchange for repayment of the loan
principal amount plus interest.
 Loan terms are agreed to by each party before any money is advanced.
 A loan may be secured by collateral such as a mortgage or it may be unsecured such as a
credit card.
 Revolving loans or lines can be spent, repaid, and spent again, while term loans are fixed-
rate, fixed-payment loans.
 ‘Advance’ is ‘credit facility’ granted by banks for short term.

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UTILITY OF LOANS AND ADVANCES

Loans and advances granted by commercial banks are highly beneficial to individuals, firms,
companies, and industrial concerns. The growth and diversification of business activities are
effected to a large extent through bank financing. Loans and advances granted by banks
helps in meeting short term and long term financial needs of business enterprises. We can
discuss the role played by banks in the business world by way of loans and advances as
below :
 Loans and advances can be arranged from banks in keeping with the flexibility in
business operations. Traders may borrow money for day to day financial needs availing
of the facility of cash credit, bank overdraft and discounting of bills. The amount raised
as loan may be repaid within short period to suit the convenience of the borrowed funds
from banks for financing its working capital requirements.
 Loans and advances are utilized for making of current liabilities, wage and salaries of
employees, and also the tax liability of business .
 Loans and advances from banks are found to be ‘ economical’ for traders and
businessmen, because banks charge a reasonable rate of interest on such loans /
advances. For loans from money lenders, the rate of interest charged is very high. The
interest charged by commercial banks is regulated by the RBI.
 Banks generally do not interface with the use, management and control of the borrowed
money. But it takes care to ensure that the money lent is used only for business
purposes.
 Bank loans and advances are found to be convenient as far as its repayments is
concerned. This facilities planning for future and timely repayment of loans. Otherwise
business activities would have come to a halt.
 Loans and advances by banks generally carry element of secrecy with it. Banks are
duty-bound to maintain secrecy of their transanctions with the customers. This enhances
people’s faith in banking system.

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BORROWING RATE AND LENDING RATE

People make their funds available to the banks by depositing their ‘savings’ in various types
of accounts. In others words, bank funds mainly consists of deposits from the public, through
banks may also borrow money from other institutions and Reserve Bank of India. Banks thus
mobilizes funds through its deposits. On public deposits the banks pay interest at and the rate
of interest varies according to the type of deposit. The borrowing rate refers to the rate of
interest paid by a bank on its deposits. The rates which the banks allow depend upon the
nature of deposits account and period for which the deposit is made with the bank. No interest
is generally paid on current account deposits. The rate is relatively lower on savings account
deposits. Higher rates ranging from 6% to 12% per annum are paid on fixed deposit accounts
according to the period of deposit. Banks also borrow from their institutions as well as from
the Reserve Bank of India. When the Reserve Bank of India lends money to commercial
banks, The rate of interest it charges for lending is known as ‘Bank – Rate’.
The rate at which commercial banks make funds available to people is known as ‘Lending
– rate’. The lending rates also vary according to the purpose in view. For example if the loans
is sanctioned for the purpose of activities for the development of backward areas, the rate of
interest is relatively lower as against loans and advances of loan the rate of interest is higher
as compared to larger amounts. Again lending rates for consumer durables, e.g. Loans for
purchase of two-wheelers, cars, refrigerators, etc., are relatively higher than for commercial
borrowings.
However, the Reserve bank of India from time to time announces charges in the interest-
rate structure to regulate the lending of funds by banks. Different rates of interest are
prescribed for various categories of advances, such as advances to agriculture, small scale
industries, road transport, etc. Graded rates of interest are prescribed for backward areas.
Lower rate is normally charged from agencies selling food-grains at fixed through
government, approved outlets. Lastly , lower rate of interest is charged for loans granted to
persons belonging to ‘weaker sections of the society’.

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LENDING MONEY BY BANK

The commercial banks lend money in four different ways :

 Direct loans
 Cash credit
 Overdraft and
 Discounting of bills

They are briefly dicussed below :

DIRECT LOANS :

A direct loan is a type of loan in which an institution lends directly to a borrower.

Direct lenders include nonbank institutions, such as the government, as well as banks. Wells
Fargo, Washington Mutual, and Bank of America are examples of banks that provide direct
loans. Smaller banks may offer them as well, but are more likely to go through third-party
lenders with greater resources.

 The term “direct loan” is most commonly used in reference to student loans and home
purchases. However, it can be used to refer to any type of direct loan, including direct
payday loans.
 Direct payday loans are payday loans that are offered directly by the lender. They contrast
with loans provided through third-party brokers who act as go-betweens—they connect
people who want to borrower money to lenders willing to loan to them. Potential
borrowers provide their financial information to the broker who then passes it on to
lenders interested in fulfilling their loan request.

CASH CREDIT

A Cash Credit (CC) is a short-term source of financing for a company. In other words, a cash
credit is a short-term loan extended to a company by a bank. It enables a company to withdraw
money from a bank account without keeping a credit balance. The account is limited to only
borrowing up to the borrowing limit. Also, interest is charged on the amount borrowed and not
the borrowing limit. To learn more, check out CFI’s Credit Analyst Certification program.

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OVER DRAFT

An overdraft is an extension of credit from a lending institution that is granted when an account
reaches zero. The overdraft allows the account holder to continue withdrawing money even when
the account has no funds in it or has insufficient funds to cover the amount of the withdrawal.

Basically, an overdraft means that the bank allows customers to borrow a set amount of money.

KEY TAKE AWAYS :

 Overdraft protection is a loan provided by some banks to customers when their account
reaches zero.
 The overdraft allows the customer to continue paying bills even when there is insufficient
money in the customer's account(s).
 An overdraft is like any other loan, the customer pays interest on the loan and, in the case
of overdrafts, will typically have a one-time insufficient funds fee.

As with any loan, the borrower pays interest on the outstanding balance of an overdraft loan.
Often, the interest on the loan is lower than the interest on credit cards, making the overdraft
a better short-term option in an emergency. In many cases, there are additional fees for using
overdraft protection that reduce the amount available to cover your checks, such as
insufficient funds fees per check or withdrawal.

BILL DISCOUNTING

It is a dicount/fee which a bank takes from a seller to release funds before the credit period
ends. This bills is then presented to sellers to releaes funds before the credit period ends.
This bills is then presented to seller’s customer and fill amount is collected. Bill discounting
is mostly applicable in scenaios when a buyer buys goods from the seller and the payment is
to be mase through letter of credit. Etc.

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LONG TERM LOAN AND SHORT TERM LOAN

LONG TERM LOAN :

A form of debt that is paid off over an extended time frame that exceeds one year in duration.
Obtaining a long term loan provides a business with working capital that it can use to
purchase assets, inventory or equipment which can then be used to create additional income
for the business.

SHORT TERM LOAN :

A short term loan is a type of loan that is obtained to support a temporary personal or
business capital. As it is a type of credit, it involves a borrowed capital amount and interest
that needs to be paid by a given due date, which is usually within a year from getting
the loan.

Example : a short-term loan might be a $4,000 loan with a five-month repayment term. With
a loan, you receive a lump sum of cash, and then you repay that loan with interest. With
many loans, you can make extra payments to pay it off sooner.

NATURE AND SECURITIES OF LOAN

To ensure the safety of funds lend, the first and most important factor considered by a bank is
the capacity of borrower to repay the amount of loan. The bank is the capacity of borrowers to
repay the amount of loan. The bank therefore, relies primarily on the character, capacity and
financial soundness of the borrower. But the bank can hardly afford to take any risk in this
regard and hence it is also has the security of tangible assets owned by the borrower. In case
the borrower fails to repay the loans, the bank can recover amount by attaching the assets.
It can sell the assets offered as security and realize the amount. Thus from the view point
of security of loans, we can divide the loans into two categories (a) secured and (b) unsecured.
Unsecured loans are those loans which are not covered by the security of tangible assets.
Such loans are granted to firms/institutions against the personal security of owner, manager or
director. On the other hand, Secured loans are those which are granted against the security of

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tangible assets , like stock in trade and immovable property. Thus, while granting loan against
the security of some assets, a change is created over the assets of the borrower in favor of the
bank. This enables the bank a to recover the dues from the customer out of the sale proceeds
of the assets in case the borrower fails to repay the loan.
There are various types of securities which may be offered against loans granted, but all of
those are not acceptable to the banks. The types of securities generally accepted by the bank
are the following:
 Tangible assets such as plant and machinery, motor-van, etc.
 Documents of title to goods , like railway receipt (R/R), Bills of exchange, etc, Financial
securities (shares and debentures)
 Life-Insurance policy
 Real estates (Land, building, etc.)
 Fixed deposits receipt (FDR)
 Gold ornaments, jewellers etc.

PROCEDURE OF GRANTING CASH CREDIT, OVERDRAFT AND BILL

DISCOUNTING

Banks provide financial assistance to its customers in the form of loans, advances, cash credit,
and overdraft and through the discounting of bills. The procedure and applying for sanction of
loans and advances differs from bank to bank. However, the steps which are generally to be
taken all cases are as follow:

1. Filling up loan application form:

Each bank has separate loan application forms for different categories of borrowers. When
you want to borrow money from a bank, you will have to fill up a loan application form
available with the bank free of cost.

The loan application form contains different columns to be filled in by the application. It
includes all information required about the borrower, purpose of loan, nature of facility (cash-
credit, overdraft etc ) required, period of repayment, nature of security offered, and the

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financial status of the borrower. A running business limit be required to furnish additional
information in respect:

Assets and liability:

Profit and loss for the last 3 years

The names and addresses of three persons (which may include borrowers, suppliers,
customers and bankers) for reference purpose.

2. Submission of form along with relevant documents:

The bank application form duly filled in should be submitted to the bank along with the
relevant documents.

3. Sanctioning of loan
The bank scrutinizes the documents submitted and determines the credit worthiness of the
applicant. If it is found to be feasible, the loan is sanctioned if the loan is for Rs 5000 or
less, normally the Branch manager himself can take the decision and sanction the loan. In
case the amount of loan is more than Rs 5000, The application is considered at regional,
zonal or head office level, depending on the amount of loan.
4. Executing the agreement:
When the loan is sanctioned by the bank and the borrower is informed about it, he will
have to execute an agreement with the bank regarding terms and condition for the amount
of loan raised.
5. Arrangement of security for loan
The borrower will now range for securities against the loan. These securities may be
immovable properties, shares, debenture, fixed deposit receipts, and other documents, like
Kisan vikas patra, National savings certificate, as per agreement.
When the borrower completes at the formalities, he is allowed to get the amount of
loan/advance/over draft as sanctioned by the bank , In case of ‘discounting of bills’, the
bank credits the amount of bill to the customers account before the realization of the bill
and thus, makes available the fund. In case, the bill is dishonored on due date, the amount

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due on the bill together with interest and other charges are payable by the party whose bill
is discounted.

STATUTORY AND OTHER RESTRICTION ON LOANS AND ADVANCES

(1) Not withstanding anything to the contrary contained in section 77 of the Companies Act,
1956 (1 of 1956), no banking company shall-

(a) grant any loans or advances on the security of its own shares, or

(b) enter into any commitment for granting any loan or advance to or on behalf of-

(i) any of its Directors,

(ii) any firm in which any of its Directors is interested as Partner, Manager,
Employee or Guarantor, or

(iii) any company (not being a subsidiary of the banking company or a company
registered under section 25 of the Companies Act, 1956 (1 of 1956), or a
government company, of which 15[or the subsidiary or the holding company of
which] any of the Directors of the banking company is a Director, Managing
Agent, Manager, Employee or Guarantor or in which he holds substantial interest,
or

(iv) any individual in respect of whom any of its Directors is a partner or

guarantor.

(2) Where any loan or advance granted by a banking company is such that a commitment for
granting it could not have been made if clause (b) of sub-section (1) had been in force on the date
on which the loan or advance was made or is granted by a banking company after the
commencement of section 5 of the Banking Laws (Amendment) Act, 1968 (58 of 1968), but in
pursuance of a commitment entered into before such commencement, steps shall be taken to
recover the amounts due to the banking company on account of the loan or advance together with
interest, if any, due thereon within the period stipulated at the time of the grant of the loan or

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advance, or where no such period has been stipulated, before the expiry of one year from the
commencement of the said section 5:

PROVIDED that the Reserve Bank may, in any case, on an application in writing made to it by
the banking company in this behalf, extend the period for the recovery of the loan or advance
until such date; not being a date beyond the period of three years from the commencement of the
said section 5, and subject to such terms and conditions, as the Reserve Bank may deem fit:

PROVIDED FURTHER that this sub-section shall not apply if and when the Director
concerned vacates the office of the Director of the banking company, whether by death,
retirement, resignation or otherwise.

(3) No loan or advance, referred to in sub-section (2), or any part thereof shall be remitted
without the previous approval of the Reserve Bank, and any remission without such approval
shall be void and of on effect.

(4) Where any loan or advance referred to in sub-section (2), payable by any person, has not
been repaid to the banking company within the period specified in that sub-section, then, such
person shall, if he is a Director of such banking company on the date of the expiry of the said
period, be deemed to have vacated his office as such on the said date.

Explanation : In this section-

(a) "loan or advance" shall not include any transaction which the Reserve Bank may, having
regard to the nature of the transaction, the period within which, and the manner and
circumstances in which, any amount due on account of the transaction is likely to be realized, the
interest of the depositors and other relevant considerations, specify by general or special order as
not being a loan or advance for the purpose of this section;

(b) "Director" includes a member of any board or committee in India constituted by a banking
company for the purpose of managing, or for the purpose of advising it in regard to the
management of, all or any of its affairs.

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(5) If any question arises whether any transaction is a loan or advance for the purposes of this
section, it shall be referred to the Reserve Bank, whose decision thereon shall be final.

ADVANTAGES OF GETTING LOANS :

 Low Interest Rates: Generally, bank loans have the cheapest interest rates. The rates you
pay will be cheaper than other types of high interest loans, such as venture capital.
As Bizfluent says, bank loans offer significantly lower interest rates than you will find
with credit cards or overdraft.

 Flexibility: When you receive a bank loan, the bank will not provide a set of rules
dictating how you spend the money. While venture capitalists and angel investors will
restrict what you can do with the money, bank loans can provide you the flexibility to
spend the money where you see fit. Whether you need capital to purchase new
equipment, enter a new market, or carry out a new marketing plan, you can use the
money from a bank loan.

 Maintain Control: You don’t have to give up equity to get a loan from a bank. Venture
capitalists and angel investors typically require you to give them equity or some say in
your company. However, this is only true if you make your payments to the bank on
time.

DISASVANTAGES OF GETTING LOANS :

 Requires Profitability: While venture capitalists and angel investors usually take risks to
invest in companies that haven’t yet proved profitable, banks will take no such risk. To
be eligible, your company must be consistently profitable, which disqualifies the majority
of startups.

 Complicated: Obtaining a bank loan is extremely time consuming. You will be required
to fill out excessive paperwork, and the terms of interest will be quite complicated. The
process will not be quick either, often, it takes several months to qualify and obtain

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capital from a bank. Compared to other financing options, bank loans serve as one of the
most difficult to obtain.

 Collateral: Regardless of your profitability or how good your credit score happens to be,
banks will need some form of collateral. Banks need to protect themselves in the case that
you can’t make your payments.

THE ROLE OF REGIONAL RURAL BANKS

The RRBs were established “with a view to developing the rural economy by providing, for the
purpose of development of agriculture, trade, commerce, industry and other productive activities
in the rural areas, credit and other facilities, particularly to small and marginal farmers,
agricultural laborers’, artisans and small entrepreneurs, and for matters connected therewith and
incidental thereto” . The institution of Regional Rural Banks (RRBs) was created to meet the
excess demand for institutional credit in the rural areas, particularly among the economically and
socially marginalized sections. In order to provide access to low–cost banking facilities to the
poor, the Narasimham Working Group (1975) proposed the establishment of a new set of banks,
as institutions which "combine the local feel and the familiarity with rural problems which the
cooperatives possess and the degree of business organization, ability to mobilize deposits, access
to central money markets and modernized outlook which the commercial banks have". The
multi–agency approach to rural credit was also to sub serve the needs of the input–intensive
agricultural strategy (Green Revolution) which had initially focused on `betting on the strong’
but by the midseventies was ready to spread more widely through the Indian countryside. In
addition, the potential and the need for diversification of economic activities in the rural areas
had begun to be recognized, and this was a sector where the RRBs could play a meaningful role.
In this paper we are going to discuss on the role of regional rural banks and their responsibilities
towards rural development.

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CHAPTER 5

ANALYSIS OF DATA AND INTERPRETATION

 INTRODUCTION
 TABLE
 CHARTS
 INTERPRETATION

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INTRODUCTION

In the last chapter Indian Banking systems and company profile of SBI and conceptual frame
work of lending practices have been provided. This chapter is concerned with the analysis and
interpretation of data through primary source, tools like questionnaire, graphs, tables and
simple statistical tools have been used for analyzing the data. The following are the details of
the analysis and interpretation.

Data analysis and interpretation is the process of assigning meaning to the collected
information and determining the conclusion significance and implications of the findings.

Analysis involves estimating the values of unknown parameters of the population and testing
of hypotheses for drawing inference.

Data interpretation refers to the implementation of processes through which data is received for
the purpose of arriving at any informed conclusion.

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Table No. 5.1

Table showing the gender of respondents

Gender Number of Respondents Percentage

Male 28 56%

Female 22 44%

Total 50 100%

Source : Survey Data

Chart No. 5.1

56%

100% Male
Female
44% Total

Interpretation :

The above table and chart shows that, among total number of 50 respondents, 28 are male
respondents and 22 are female respondents. It is also clear that the majority of the respondents
are male.

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Table No. 5.2

Table showing the age of the respondents

Age Group Number of Respondents Percentage

20-30 05 10%
30-40 25 50%
40-50 13 26%
50 and above 7 14%

Total 50 100%
Source : Survey Data

Chart No. 5.2

120

100
100

80

60 No.of Respondents
50 50
Percentage
40
25 26

20 13 14
10
5 7

0
Age 20-30 Age30-40 Age 40-50 Age 50> Total

Interpretation :

The above table and chart shows that, out of 50 respondents, 10% of respondent’s age group is
between 20-30, 50% of respondent’s age group is between 30-40 years, 26% of respondent’s age
group is between 40-50 years and 14% of respondent’s age group is 50 and above.

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Table No. 5.3

Table showing the qualification of the respondents

Particulars Number of Respondents Percentage

SSLC 2 4%
PUC 12 24%
Graduate 30 60%
Higher Education 6 12%
Total 50 100%
Source : Survey Data

Chart No. 5.3

120

100
100

80

60
60
50 No.of Respondents
Percentage
40
30
24
20 12 12
4 6
2
0
SSLC PUC Graduate Higher Total
Education

Interpretation :

From the above table it is clear that among 50 respondents, 4% of the respondents belongs to
SSLC education, 24% of the respondents belong to PUC education, 60% of the respondents
belong to graduates and 6% of the respondents belong to the higher education.

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Table No. 5.4

Table showing the occupation of the respondents

Occupation Number of Respondents Percentage

Government 18 36%
Private 15 30%
Business 15 30%
Other 02 4%
Total 50 100%
Source : Survey Data

Chart No. 5.4

120
100
100

80

60 50 No.of Respondents

36 Percentages
40 30 30
18 15 15
20
2 4
0
Government Private Buisness Other Total

Interpretation :

The results shows that the majority of respondents comes under other working category i.e. 36%
of the respondents are working under government sector, 30% of the respondents are working
under private sector, 30% of the respondents are having their own business and 4% respondents
are working in other sectors.

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Table No. 5.5

Table showing the respondent’s monthly income

Monthly Income Number of Respondents Percentage

Less than 10,000 3 6%
10,000-15,000 6 12%
15,000-20,000 12 24%
20,000 and above 29 58%
Total 50 100%
Source : Survey Data

Chart No. 5.5

120

100
100

80

58
60
50
No.of Respondents
40 Percentage
29
24
20 12 12
3 6 6
0
Monthly Monthly Monthly Monthly Total
income< income income income
10000 10000-15000 15000-20000 20000 >

Interpretation :

The table and chart shows that, among 50 respondents, 3 respondent’s monthly income is less
than 10,000, 6 respondent’s monthly income is between 10,000-15,000, 12 respondent’s monthly
income is between 15,000-20,000 and 29 respondent’s monthly income is 20,000 and above.

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Table No. 5.6

Table showing the type of account maintained by the respondents

Particulars Number of Respondents Percentage

Savings Bank Account 17 34%
F D Account 20 40%
Current Account 12 24%
Others 01 2%
Total 50 100%
Source : Survey Data

Chart No. 5.6

120

100
100

80

60
50 No.of Respondents
40 Percentage
40 34
24
17 20
20 12
1 2
0
Savings F D Account Current Others Total
Account account

Interpretation :

From the above table and chart it is clear that, out of 100% of respondents, 34% of respondents
are maintaining savings bank account, 36% of respondents are maintaining F D account, 24% of
respondents are maintaining current account and 6% of respondents are maintaining other
account.

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Table No. 5.7

Table showing the results of from how many years the respondents are customer of
Karnataka Gramin Bank

Particulars Number of Respondents Percentage

Below 5 years 13 26%
5-10 years 15 30%
10-15 years 17 34%
15 years and above 5 10%
Total 50 100%
Source : Survey Data

Chart No. 5.7

120

100
100

80

60 No.of Respondents
50
Percentage
40 34
30
26

20 15 17
13
10
5
0
< 5 years 5-10 Years 10-15 Years > 15 Years Total

Interpretation :

The above table and chart shows that among 50 respondents, 13 respondents are customer of
Karnataka Gramin Bank since below 5 years, 15 respondents are customer of Karnataka Gramin
Bank since 5-10 years, 17 respondents are customer of Karnataka Gramin Bank since 10-15
years and 5 respondents are customer of Karnataka Gramin Bank since 15 years and above.

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Table No. 5.8

Table showing the results of loans and advances borrowed from the customers

Particulars Number of Respondents Percentage

Yes 50 100%

No 0 0

Total 50 100%
Source : Survey Data

Chat No. 5.8

50 50
Yes
No
Total

Interpretation :

From the above table and chart it is clear that, all the 50 respondents have borrowed the loans
and advances from the Karnataka Gramin Bank.

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Table No. 5.9

Table Showing the results of types of loans borrowed by the respondents

Particulars Number of Respondents Percentage

Short term loan 15 30%
Medium term loan 20 40%
Long term loan 15 30%
Total 50 100%
Source : Survey Data

Chart No. 5.9

120

100
100

80

60
50 Number of Respondents
40 Percentage
40
30 30
20
20 15 15

0
Short term loan Medium term Long term loan Total
loan

Interpretation :

The above table and chart shows that, among 50 respondents, 15 respondents have borrowed
short term loan, 20 respondents have borrowed medium term loan and 15 respondents have
borrowed long term loans.

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Table No. 5.10

Table showing the results of amount borrowed by the respondents

Particulars Numbers of Respondents Percentage

Below Rs 25,000 5 10%
Rs 25,000- Rs 50,000 13 26%
Rs 50,000- Rs 1,00,000 16 32%
Above Rs 1,00,000 16 32%
Total 50 100%
Source : Survey Data

Chart No. 5.10

120

100
100

80

60
50 Numbers of Respondents
Percentage
40 32 32
26

20 13 16 16
10
5
0
Below Rs Rs 25,000- Rs 50,000- Above Rs Total
25,000 Rs 50,000 Rs 1,00,000 1,00,000

Interpretation :

From the above table and chart, it is clear that out of 50 respondents, 5 respondents have
borrowed amount below Rs. 25,000, 13 respondents have borrowed amount of Rs. 25,000- Rs.
50,000, 16 respondents have borrowed amount of Rs. 50,000- Rs. 1,00,000 and above Rs.
1,00,000.

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Table No. 5.11

Table showing the results of amount borrowed

borrowed by the respondents is sufficient

Particulars Number of Respondents Percentage

Yes 46 92%

No 4 8%

Total 50 100%

Source : Survey Data

Chart No. 5.11

Percentage

92%
100%
Yes
No
Total

8%

Interpretation :

From the above table and chart, it is clear that out of 50 respondents, the amount borrowed by the
bank is sufficient to 46 respondents and the amount borrowed by the bank is insufficient to 4
respondents.

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Table No. 5.12

Table showing the results for what purpose the respondents borrowed the loan

Particulars Number of Respondents Percentage

Agriculture 12 24%
Housing 10 20%
Education 8 16%
Business 10 20%
Others 10 20%
Total 50 100%
Source : Survey Data

Chart No. 5.12

120

100
100

80

60
50
Number of Respondents
40 Percentage
24
20 20 20
20 16
12 10 10 10
8

Interpretation :

The above table and chart shows that, out of 50 respondents, 12 respondents have borrowed the
loan for agriculture purpose, 10 respondents have borrowed the loan for housing purpose, 8
respondents have borrowed the loan for education purpose, 10 respondents have borrowed the
loan for business purpose and 10 respondents have borrowed loan for other purpose.
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Table No. 5.13

Table showing the time taken by the respondents to pay the last interest of the principle
amount

Particulars Number of Respondents Percentage

Less than 90 days 10 20%
Less than or equal to 12
19 38%
months
More than 12 months 21 42%
2 years and above 0 0
Total 50 100%
Source : Survey Data

Chart No. 5.13

120
100
100

80

60 50
38 42 Number of Respondents
40
21 Percentage
20 19
20 10
0 0
0
Less than 90 Less than or More than 2 years and Total
days equal to 12 12 months above
months

Interpretation :

From the above table and chart, it is clear that among 50 respondents, 10 respondents pay the last
interest of principle amount in less than 90 days, 10 respondents pay the last interest of principle
amount in less than or equal to 12 months, 21 respondents pay the last interest of principle
amount in more than 12 months and 0 respondents in 2 years and above.

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Table No. 5.14

Table showing the opinion of respondents regarding the ROI charged by the bank

Particulars Number of Respondents Percentage

Very high 2 4%
High 16 32%
Reasonable 30 60%
Low 2 4%
Total 50 100%
Source : Survey Data

Chart No.14

120

100
100

80

60
60 Number of Respondents
50
Percentage
40 32 30

20 16

2 4 2 4
0
Very high High Reasonable Low Total

Interpretation :

The above table and chart shows that, 2 respondent’s opinion is that the interest rate charged by
the bank is very high, 16 respondent’s opinion is that the interest rate charged by the bank is
high, 30 respondent’s opinion is the interest rate charged by the bank is reasonable and 2
respondent’s opinion is that the interest rate charged by the bank is low.

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Table No. 5.15

Table showing the percentage at which the respondents borrowed the loan

Particulars Number of Respondents Percentage

5% - 6% 8 16%
7% - 8% 36 72%
9% - 10% 4 8%
10% and above 2 4%
Total 50 100%
Source : Survey Data

Chart No 5.15
120

100
100

80 72

60
50 Number of Respondents

36 Percentage
40

20 16
8 8
4 2 4
0
5% - 6% 7% - 8% 9% - 10% 10% and Total
above
o

Interpretation :

From the above table and chart, it is clear that , out of 50 respondents, 8 respondents borrowed
loan with 5% - 6% ROI , 36 respondents borrowed the loan with 7% - 8% ROI, 4 respondents
borrowed the loan with 9% - 10% ROI and 2 respondents borrowed the loan above 10% ROI.

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Table No. 5.16

Table showing the result of respondents satisfied with the ROI charged by Karnataka
Gramin Bank

Particulars Number of Respondents Percentage

Highly Satisfied 5 10%
Satisfied 30 60%
Somewhat satisfied 13 26%
Unsatisfied 2 4%

Total 50 100%
Source : Survey Data

Chart No. 5.16

120
100
100

80
60
60 50 Number of Respondents
40 30 Percentage
26
20 10 13
5 2 4
0
Highly Satisfied Somewhat Unsatisfied Total
Satisfied satisfied

Interpretation :

From the above table and chart, it is clear that, out of 50 respondents, 5 respondents are highly
satisfied with the ROI charged by the bank, 30 respondents are satisfied with ROI charged by the
bank, 13 respondents are some what satisfied with the ROI charged by the bank and 2
respondents are unsatisfied with the ROI charged by the bank.

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Table No. 5.17

Table showing the opinion of the respondents on the time given by the bank for the
repayment of loan

Particulars Number of Respondents Percentage

Excellent 2 4%
Very good 9 18%
Good 14 28%
Average 25 50%
Total 50 100%
Source : Survey Data

Chart No. 5.17

120

100
100

80

60 Number of Respondents
50 50
Percentage
40
28
25
18
20 14
9
2 4
0
Excellent Very good Good Average Total

Interpretation :

The above table and chart shows that, out of 50 respondents, 2 respondents feel excellent about
the time given by the bank for the repayment of the loan, 9 respondents feel very good, 14
respondents feel good and 25 respondents feel average.

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Table No. 5.18

Table showing the results of the problem faced by the respondents from the bankers for
repaying the loan

Particulars Number of Respondents Percentage

Yes 9 18%

No 41 82%

Total 50 100%

Source : Survey Data

Chart No. 5.18

18%

100%
Yes
82% No
Total

Interpretation :

From the above table and chart, it is clear that the 9 respondents have faced problem by the
bankers while repaying the loan and 41 respondents have not faced any problems regarding the
repayment of loan.

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Table No. 5.19

Table showing the opinion of the respondents satisfied regarding staff service

Particulars Number of Respondents Percentage

Yes 45 90%

No 5 10%

Total 50 100%

Source : Survey Data

Chart No. 5.19

90%
100%
Yes
No
Total

10%

Interpretation :

From the above table and chart, it is clear that, out of 50 respondents, 45 respondents are
satisfied with the staff service and 5 respondents are unsatisfied.

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Table No. 5.20

Table showing the results of respondents maintaining account in other banks rat
rather than
Karnataka Gramin Bank

Particulars Number of Respondents Percentage

Yes 44 88%

No 6 12%

Total 50 100%
Source : Survey Data

Chart No. 5.20

88%
100%
Yes
No
Total

12%

Interpretation :

The above table and chart shows that out of 50 respondents, 44 respondents are maintaining the
accounts in other banks rather than Karnataka Gramin Bank and 6 respondents are not
maintaining any such accounts.

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Table No. 5.21

Table showing the comparison of services provided by Karnataka Gramin Bank with other
banks

Particulars Number of Respondents Percentage

Excellent 10 20%
Good 20 40%
Satisfactory 13 26%
Unsatisfactory 2 4%
Total 50 100%
Source : Survey Data

Chart No. 5.21

120
100
100

80

60 50
Number of Respondents
40
26 Percentage
20
20 10 13
2
0

Interpretation :

The above table and chart states that out of 50 respondents, 9 respondent’s opinion is excellent
with the service of the Karnataka Gramin Bank when compared with other bank’s services, 18
respondent’s opinion is good, 21 respondent’s opinion is satisfactory and 2 respondent’s opinion
is unsatisfactory.

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Table No. 5.22

Table showing the opinion of respondents about document formalities of Karnataka

Gramin Bank when compared with other banks

Particulars Number of Respondents Percentage

Satisfied 43 86%

Unsatisfied 7 14%

Total 50 100%

Source : Survey Data

Chart No. 5.22

86%
100%
Satisfied
Unsatisfied
Total

14%

Interpretation :

From the above table and chat, out of 50 respondents, 43 respondents are satisfied with the
document formalities of Karnataka Gramin Bank when compared with other banks and 7
respondents are unsatisfied.

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Table No. 5.23

Table showing the opinion of respondents about financial procedure of the bank

Particulars Number of Respondents Percentage

Comfortable 48 96%

Uncomfortable 2 4%

Total 50 100%

Source : Survey Data

Chart No. 5.23

100% 96%
Comfortable
Uncomfortable
Total

4%

Interpretation :

The above table and chart states that out of 50 respondents, 48 respondents are comfortable with
the financial procedure of the bank and 2 respondents are uncomfortable.

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Table No. 5.24

Table showing the result of the factors that make respondents unhappy at the Karnataka
Gramin Bank

Particulars Number of Respondents Percentage

Sanctioning of loan 12 24%
Interest rate 12 24%
Document verification 15 30%
Installment 11 22%
Total 50 100%
Source : Survey Data

Chart No. 5.24

120

100
100

80

60
50 Number of Respondents
Percentage
40
30
24 24 22
20 12 12 15
11

0
Sanctioning Interest rate Document Installment Total
of loan verification

Interpretation :

The above table and chart shows that, out of 50 respondents, 12 respondents are unhappy with
loan sanctioning, 12 respondents are unhappy with interest rate charged by the bank, 15
respondents are unhappy with the document verification and 11 respondents are unhappy with
installment.
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Table No. 5.25

Table showing the result of respondents expecting any changs in loan scheme of Karnataka
Gramin Bank

Particulars Number of Respondents Percentage

Yes 15 30%

No 35 70%

Total 50 100%

Source : Survey Data

Chart No. 5.25

30%

100%
Yes

70% No
Total

Interpretation :

The above table and chart shows that out of 50 respondents, 15 respondents are expecting
changes in loan scheme of Karnataka Gramin Bank and 35 respondents are not expecting any
changes.

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CHAPTER 6
FINDINGS, SUGGESTIONS AND CONCLUSION

FINDINGS :

 Majority of the respondents are male.

 Majority of the respondents are from the age between 30-40 years.
 Majority of the respondents are graduates.
 Majority of the respondents are working unger Government sector.
 More number of respondent’s monthly income is Rs 20,000 and above.
 Majority of the respondents are maintaining FD account in Karnataka Gramin Bank
 Majority of respondents are customer of Karnataka Gramin Bank from 10-15 years.
 Majority of the respondents borrowed loans and advances from Karnataka Gramin Bank.
 Majority of the respondents are holding medium term loans.
 Majority of the respondents borrowed amount of Rs 50,000- Rs 1,00,000 and above Rs
1,00,000.
 More number of respondents are satisfied with the amount borrowed.
 Majority of the respondents borrowed loan for agriculture purpose.
 Majority of the respondents take more then twelve months of time to pay the last interest
of the principle.
 More number of respondents feel that the ROI charged by the bank is reasonable.
 Majority of the respondents borrowed amount at 7% - 8% of interest.
 Most of rhe respondents are satisfied with ROI charged by the bank.
 More number of respondent’s opinion on the time given for the repayment of the loan is
average.
 Majority of the respondents face no problem from bankers for repaying the loan.
 Most of the respondents are satisfied with the staff service of the bank.
 Most of the respondents are maintaining accounts in other banks rather then Karnataka
Gramin Bank.
 Most of the respondent’s opinion is good with the service of the Karnataka Gramin Bank
when compared with other banks.

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 Most of the respondents are satisfied with the document formalities of Karnataka Gramin
Bank.
 Majority of the respondents are comfortable with the financial procedure of the bank.
 Most of the respondents are unhappy with the document verification of the bank
 Most of the respondents are not expecting any changes with the loan scheme of the
Karnataka Gramin Bank.

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SUGGESTIONS :

 RRBs should simplify and standardise their loan applications and document
formalities with a view to reduce the number of required documents as also to make
the lifre of the documents longer.
 The RRBs should ensure that the borrower is a genuine person and that the loan given
to him would be used for production purpose.
 The staff of RRBs should be trained for the art of effective needling for prompt
recovery of loans. They should be provided training of behavioural sciences. The
satff should be customer friendly and conversant with the local environment.
 The RRBs should have their own recovery system with adequate trained staff and
organise recovery camps involving the government officials, local leaders, and branch
staff.
 New RRBs should be opened in rural and urban area.
 RRBs should provide Rural consultancy services, phased credit programmes, create
better avenues for employment, etc.

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CONCLUSION :

The study concludes that, according to objectives through the study as we know the population is
continuously increasing and more people will not have employment opportunities due to this, the
interested people will come for the loan to start the business, if an account holder wants they
need to have the loan the bank will help customers to have huge amount for less rate of interest.
If the customer’s performance/transaction are good the bank will provide advance, overdraft etc.

The bank was established for mainly rural sector service, still is not on that line to its goal. It is
lacking at various elements, particularly at branch levels, which reveals the edge of other public
and private bank, the lines at which the bank is lacking behind. People are still unaware of the
services provided by the Karnataka Gramin Bank due to lack of advertisement. There is a need to
analyze and pick up early warning signals. A change is needed today in Karnataka Gramin Bank
which is built on confidence in human capital- the most important of all resources- in
commitment, creativity and innovation brought about by proactive management, membership
and employees. The ability to capture knowledge and wisdom gives cooperative banks their
competitive advantage.

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ANNEXURE

 QUESTIONNAIRE
 BIBILOGRAPHY

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QUESTIONAIRE:

Respected Sir / Madam,

I am Pallavi student of Final year M.com in Edurite College of Management Studies, Shivamogga as
a part of my academic study I have undergone a project on “A study on Customer Perception towards
Lending Practices in Regional Rural Bank with special reference to Karnataka Gramin Bank ,
Regional Rural Office Shivamogga”. I request you to fill the following question and do the needful.
The information provided by you will be used strictly for academic purposes.

Thanking you,

Yours sincerely,

Pallavi

Name :

Address :

1. Gender:

i ) Male [ ]

ii ) Female [ ]

2. Age:

i) 20 to 30 [ ]
ii) 30 to 40 [ ]
iii) 40 to 50 [ ]
iv) 50 and Above [ ]

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3. Qualification :

i) SSLC [ ]

ii) PUC [ ]

iii) Graduate [ ]

iv) Higher education [ ]

4. Occupation:

i) Government [ ]

ii) Private [ ]

iii) Business [ ]

iv) Others [ ]

5. Monthly Income:

i) Less than 10,000 [ ]

ii) 10,000 to 15,000 [ ]

iii) 15,000 to 20,000 [ ]

iv) 20,000 and above [ ]

6. Which type of Account Do you maintain?

i) Savings Bank Account [ ]

ii) Fixed Deposit Account [ ]

iii) Current Account [ ]

iv) Others [ ]

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7. From how many years you have been a customer of Karnataka Gramin Bank?

i) Below 5 years [ ]

ii) 5 to 10 years [ ]

iii) 10 to 15 years [ ]

iv) 15 years and above [ ]

8. Have you ever taken any loans and advances from Karnataka Gramin Bank?

i) Yes [ ]

ii) No [ ]

9. If yes, which type of loan you have taken ?

i) Short term loan [ ]

ii) Medium term loan [ ]

iii) Long term loan [ ]

10. How much amount did you borrow?

i) Below Rs.25,000/- [ ]

ii) Rs.25,000 to 50,000/- [ ]

iii) Rs.50,000 to 1,00,000/- [ ]

iv) Above Rs.1,00,000/- [ ]

11. Is the amount borrowed sufficient?

i) Yes [ ]

ii) No [ ]

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11. For what purpose have you borrowed the loan?

i) Agriculture [ ]

ii) Housing [ ]

iii) Education [ ]

iv) Business [ ]

v) Others [ ]

12. When do you pay the last interest of the principle amount?

i) Less then 90 days [ ]

ii) Less then or equal to 12 months [ ]

iii) More then 12 months [ ]

iv) 2 years and above [ ]

13. How do you consider the rate of interest charged by the Karnataka Gramin
Bank?

i) Very high [ ]

ii) High [ ]

iii) Reasonable [ ]

iv) low [ ]

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14. At what percent you have borrowed the loan?

i) 5% to 6% [ ]

ii) 7% to 8% [ ]

iii) 9% to 10% [ ]

iv) above 10% [ ]

15. Are you satisfied with the rate of interest charged by Karnataka Gramin Bank?

i) Highly Satisfied [ ]

ii) Satisfied [ ]

iii) Some What Satisfied [ ]

iv) Unsatisfied [ ]

16. How do you feel about the time given for the repayment of the loan?

i) Excellent [ ]

ii) Very Good [ ]

iii) Good [ ]

iv) Average [ ]

17. Do you face any problems from the bankers for repaying the loan?

i) Yes [ ]

ii) No [ ]

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18. Are you satisfied with the staff service?

i) Yes [ ]

ii) No [ ]

19. Do you maintain any account in other banks rather than Karnataka Gramin Bank ?

i) Yes [ ]

ii) No [ ]

20. If yes, how do you compare the services of Karnataka Gramin Bank with
others?

i) Excellent [ ]

ii) Good [ ]

iii) Satisfactory [ ]

iv) Unsatisfactory [ ]

21. What is your opinion about the document formalities of Karnataka Gramin Bank when
compared with other banks?

i) Satisfied [ ]

ii) Unsatisfied [ ]

22. How do you feel about Finance procedure?

i) Comfortable [ ]

ii) Uncomfortable [ ]

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23. Of which factor do you feel unhappy/ unsatisfied at Karnataka Gramin Bank?

i) Sanctioning of loan [ ]

ii) Interest rate [ ]

iii) Document verification [ ]

iv) Installment [ ]

24. Are you expecting any changes in loan scheme of Karnataka Gramin Bank?

i) Yes [ ]

ii) No [ ]

25. Any suggestions to Bank for providing better service to customers?

Thank you for the time you have spent for the interview. Your suggestions will enable service
provides to improve and enhance their services to suit their customers’ requirements.

Date:

Place:

Signature

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BIBOLOGRAPHY:

Books:

 Chandrashekar.k “History of Indian banking” .

 Philip kotler “ Bank Finance and rural Development”.

Journals:

 Journals of research in commerce and management.

Websites:

 www.karnatakagraminbank.com
 www.ibef.com
 www.indiainfoline.com.

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