LOAN (Topic)

In finance a loan is the lending of money from one individual organization or

entity to another entity. A loan is debt provided by an entity to another entity at
an interest rate, and evidenced by a promissory note which specifies, among
other things, the principal amount of money borrowed, the interest rate the
lender is charging and date of repayment. A loan entails the reallocation of the
subject asset for a period of time, between the lender and the borrower.

In a loan, the borrower initially receives or borrows an amount of money,

called the principal from the lender and is obligated to pay back or repay an
equal amount of money to the lender at a later time.

The loan is generally provided at a cost, referred to as interest on the debt

which provides an incentive for the lender to engage in the loan. In a legal
loan, each of these obligation and restrictions is enforced by contract which
can also place the borrower additional restrictions know as loan covenants.
Although this article focuses on monetary loans, in practice any material
object might be lent.

Acting as a provider of loan is one of the principal tasks for financial

institutions such as banks and credit card companies. For other institutions,
issuing of debt contract such as bonds is a typical source of funding.

I have done my internship at Vendar Service Co-operative Bank from 02th

April to 16th April for a period of 11 days. As per the instructions given by the
state co-operative union every student had to take a particular section of a
society and about it in detail. The section or department which is took for
study from the particular society during the 10 days of my internship period
was loan section, my aim is to study about the working of the society in detail
and studied how loan scheme is being handled or carried down in the society
from its beginning to its end. This internship report contains the details
regarding what I have learned and understood about the society and loan
procedure during my internship period. One of the major functions of the

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Vendar Service Co-operative Bank Ltd. No236 is to give support of the
financial requirements of the members. The bank provides various kinds of
loans as per the byelaw of the bank on the basis of security given by the
members.

➢Purpose of loan

• Education:

To cover tuition fees, hostel charges, books, and other academic expenses.

• Housing:

For constructing, purchasing, renovating, or extending residential buildings.

• Business Development:

To start new ventures, expand operations, or manage business cash flow.

• Medical Emergencies

To meet expenses related to surgery, hospitalization, or long-term treatment.

• Marriage and Celebrations:

To finance weddings, receptions, or other large personal events.

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• Vehicle Purchase:

For buying two-wheelers, cars, or commercial vehicles.

• Agricultural Needs:

For buying seeds, fertilizers, pesticides, livestock, or farm machinery.

• Debt Consolidation:

To pay off multiple existing debts by merging them into a single loan.

• Travel or Personal Needs:

For vacations, pilgrimages, or unplanned expenses.

• Consumer Durable Purchase:

To buy electronic items, furniture, or appliances.

• Home Appliances and Furniture:

To furnish or equip a new or existing home.

• Working Capital:

To meet day-to-day operational expenses of businesses or self-employed

individuals.

• Emergency or Contingency Fund:

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To cover unexpected expenses such as accidents or natural calamities.

• Incensement in Property or Land:

To buy land or invest in real estate for future returns.

• Repairs and Maintenance:

For upkeep of buildings, vehicles, or business tools.

• Educational Travel Abroad:

To finance visa, travel, and settlement costs for overseas studies.

• Legal or Court Expenses:

To manage legal battles, documentation, or settlements.

Membership eligibility

1) Membership: Applicants must be Membership of the cooperative society

2) Eligibility: Evaluate income, credit score, employment history, residency,

and age. Eligibility criteria, such as minimum shareholding.

LOAN APPLICATION

Application form:

The member submits a loan application form, providing required Details, such
as loan amount, purpose, and repayment plan.

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Supporting documents:

The applicant provides supporting documents, including.

 Identification proof
 Address proof
 Income proof
 Business-related documents (if applicable)

Verification and Appraisal

Verification: The society verifies the applicant’s creditworthiness, income, and

other details.

Appraisal: The society appraises the applicant’s credit history, repayment

Capacity.

Loan Sanction

Loan sanction committee: The society’s loan sanction committee reviews the
Application and appraisal report.

Approval: If approved, the committee sanctions the loan amount, interest rate,
and repayment terms.

Loan Agreement

Loan agreement: The society and the borrower execute a loan agreement,
Outlining the terms and conditions.

Security documents: If applicable, the borrower provides security documents,

Such as property deeds or guarantees.

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Disbursement

Disbursement: The society disburses the loan amount to the borrower.

Repayment schedule: The borrower adheres to the repayment schedule,

making timely payments.

Repayment and Monitoring

Repayment: The borrower repays the loan according to the agreed-upon

Schedule. Monitoring: The society monitors the borrower’s repayment
performance and Creditworthiness. In the case of the mortgage of immovable
property, the legal Verification of the title deed and encumbrance is inevitable
to clear the legal title of the borrower. After these processes, the loan
application will be handed over to two members of the Committee for the
purpose of valuation. The valuation is carried out based on local Inquiry, spot
inspection, consideration of sales Statistics of property in the area etc. In the
case of mortgage of landed property a Member can execute a continuing
guarantee bond for a subsequent loan that he May wish to avail of from that
society on the mortgage of the same land for a fixed period.

The prescribed loan application form duly filled up with necessary information
regarding the property and submits the application long with the following
documents they are

• Application form

• Legal opinion

• Possession certificate obtained from village officer

• Sketch of the property

• Receipt of land tax paid

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 • Aadhar Card copy

• Identity Card

• Chellan receipt

• Gehan

• Declaration of the loan applicant

• Encumbrance certificate

• One passport size photo

The interest rate of the loans may vary as per the circular issued by the
registrar of cooperative societies. Vendar service co-operative bank
provides different types loans .The are as follows:

 Agricultural loan
 Non-agricultural loan
 Gold loan
 Deposit loan
 Kudumbasree loan
 Kisan credit card (KCC)
 Muttathamulla

AGRICULTURALLOAN

Agricultural loan provided by bank are financial product designed to meet the
specific need of farmer and agricultural business. The loans are used to
finance various agriculture activities including purchasing land equipment
seeds livestock or for operational expense like irrigation fertilizers and labour
cost. These loan are crucial for supporting the growth and sustainability of the
agricultural sector.

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The agricultural loan maximum a member can borrow is Rs 3 lakhs and the
rate of interest charged us 5%

Types of Agricultural Loans

Crop Loan / Kisan Credit Card (KCC)

 Short-term loan for buying seeds, fertilizers, pesticides, etc.

 Offered under the KCC scheme with revolving credit.

Interest subsidy available for prompt repayment.

2. Term Loan

For long-term investments like tractors, irrigation pumps, or land development.

Tenure: 3–15 years depending on the asset.

3. Farm Mechanization Loan

For purchasing tractors, harvesters, sprayers, etc.

4. Horticulture / Plantation Loan

For developing orchards, plantations (rubber, coconut, tea, etc.).

5. Dairy / Poultry / Fisheries Loan

For livestock rearing, poultry farms, fish ponds, etc.

6. Agricultural Infrastructure Loan

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For building warehouses, cold storage, fencing, drip irrigation, etc.

7. Gold Loan for Agriculture

Offered against pledged gold for seasonal agricultural expenses.

Eligibility

Individual farmers, joint farmers, SHGs, JLGs, tenant farmers, etc.

• Must own or lease agricultural land.

• Valid ID proof, land records, and sometimes a bank account history.

Procedure of Agricultural Loan

To obtain an agricultural loan, a farmer or agribusiness must first determine

the purpose of the Loan, such as for crop production, equipment purchase, or
irrigation. The next step is to choose an Appropriate lender, which could be a
commercial bank, cooperative bank, rural bank, or a Government scheme.
The applicant must then ensure they meet the eligibility criteria, which often
Includes proof of identity, land ownership or lease documents, and sometimes
a credit history. Once eligible, the applicant fills out the loan application form
and submits the necessary Documents. The bank reviews the application,
may conduct a field inspection, and assesses the Borrower’s creditworthiness.
If approved, the loan is sanctioned and a formal agreement is signed. The
loan amount is then disbursed—either directly to the applicant or to vendors in
case Of equipment purchases. The borrower is expected to use the funds
strictly for agricultural Purposes, and repayments are usually scheduled in
alignment with the crop cycle or loan terms.

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NON-AGRICULTURALLOAN
AGRICULTURALLOAN

Non-agricultural
agricultural loan refers to loan provided for purposes other than
agriculture can encompasses a wide range of need including personal range
of financing need including personal loan for individual business loan fo
for
enterprises in various industry and this play y a significant role in stimulating
economic growth and meeting the financial need of individuals and business
outside of the agricultural sector. Non
Non-agricultural
agricultural loan divided into CSOL (co-
(co
operative societies
es own land) forthe period of Rs 10 lakhs and the rate of
interest is 12.5

GOLDLOAN

A gold loan is a type of secured loan where borrower pledged their gold
jewelry coin or bars as collateral to obtain fund. The loan amount is a
percentage of the market va
value.
lue. Gold loan are usually short and can be used
for various purposes such as personal expenses business needs or
emergencies.

The borrower fails to repay the loan, the lender has the right to sell the
pledged gold to various outstanding amounts and the gold loan based on the
75% market value of loan the maximum amount the borrower can take

Eligibility:

Person should be at least 18 years old.

Any person who owns gold | gold ornaments | gold coins that needs to be
mortgaged With the bank.

Person should have a regular income (optional).

Persons who are having Savings or Current account with the bank
(optional).

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DocumentRequired

• Duly filled up and signed gold loan application form

• Passport size photographs

• Proof of identity- Passport, Voter ID card, Driving license, PAN card,

Aadhaar Card, Government department ID card

Security

Gold or gold ornaments or gold coins etc. And since these can easily get
liquidated In case of any default, banks offer these loans easily and at lower
rates.

Tenure

It is a short term loan, and has a flexible tenure ranging from a minimum of 3
Month period 12 month period depending on the lender. You can take your
gold back From the bank after you repay the loan completely.

Repayment

Bank permits repayment through EMIs or a bullet repayment at the end of

Loan term. In case of bullet payment at the end, borrowers need to pay
principal amount And interest on time.

The purity of gold which is required a collateral for gold loan should be 18-22
carat or above. No value of precious gems studded in the gold jewelry is
taken into account. If unable to repay the gold loan on time then there are
high chances of Losing pledged gold/gold jewelry

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Defaultinpayment

In case of non – payment of the mortgaged items after giving notice of

Maturity of the loan , the bank cover the right to issue a one month notice ,
issue a new Advertisement , auction and sell the proceeds, accounting for the
loan . If the proceeds of The auction are not enough to repay the loan, the Co-
operative Society can take action to

FIXED DEPOSIT LOAN

A Fixed Deposit Loan, also known as a Loan against FD, is a type of secured
loan provided by Banks and financial institutions where the borrower uses
their Fixed Deposit as collateral. This Loan is ideal for individuals who need
immediate funds but want to retain the benefits of their FD, such as continued
interest earnings. Typically, the loan amount sanctioned is a percentage of
The FD value—usually between 75% to 90%. Since the loan is backed by a
deposit, the interest Rate charged is relatively low, generally 1% to 2% higher
than the FD rate. The loan can be Availed as a lump sum or an overdraft
facility, offering flexibility in usage. The repayment tenure Usually does not
exceed the maturity period of the FD. No credit score check is usually
required, Making it accessible even to those with limited credit history. If the
borrower defaults, the bank Has the right to liquidate the FD to recover the
outstanding amount.

Common Uses

• Medical expenses

• Business cash needs

• Short-term working capital

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•

• Avoiding breaking FD before maturity

Procedure of Fixed Deposit Loan

The procedure for obtaining a Fixed Deposit Loan begins by approaching the
bank or financial institution where your FD is held. You must submit a loan
application, indicating the desired loan Amount and type—either a lump sum

loan or an overdraft facility. The bank will verify the Details of your FD,
including its tenure, value, and whether it is lien-free. Since the FD serves as

Collateral, there is usually no need for additional documentation or a credit

check. The loan

Amount sanctioned is typically a percentage of the FD’s value, often ranging

from 75% to 90%. Once approved, a lien is marked on the FD, which restricts
premature withdrawal until the loan Is fully repaid. After signing the loan
agreement, the sanctioned amount is disbursed directly to Your account. The
loan tenure is generally aligned with the FD’s maturity date, and interest is
charged at a rate slightly higher than the FD interest rate. Repayment terms
vary depending on whether it is a term of loan or overdraft.

KISSAN CREDIT CARD LOANS (KCCL)

Provide timely credit to farmers through simplified procedure facilitating loans

when needed. It aims to meet their cultivation expenses, contingency
expenses And expenses related to ancillary activities. Under this scheme, the
bank issued loan to farmers on the basis of their Holdings for a period of 3
years. The bank provides up to Rs.300000/- on the basis of Area of
agricultural land as loan. The loan facilitates adequate and timely support to

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the Farmers for their cultivation needs including purchase of inputs in a
flexible and cost Effective manner. The rate of interest is 7%.

Those who repay correctly will get 3%Interest rate subsidy from the
government. The bank charges interest on each Withdrawal amount under the
Kissan Credit Card.

Purpose

Cultivation/crop production expenses of short duration crops.

Annual maintenance of long duration crop/ plantation crops/post-harvest

crops/
expenses.

Working capital requirements of allied activities lik

likee dairy, poultry,
piggery, etc. Annual maintenance/repair cost of farm
machinery/equipment.
Maintenance/repair cost of fencing, soil and water conservation structures.

Post-harvest
harvest expenses.

Consumption needs of farmers

Eligibility

All farmers – individuals/joint borrowers who are owner cultivators.

SHGs or Joint Liability Groups (JLG) of farmers including tenant farmers,

share Croppers etc
etc.

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PROCEDURE FOR KCC LOAN

Visit the Cooperative Society: Go to the nearest cooperative bank or society

and Inquire about the KCC scheme.

• Application Form: Obtain the KCC application form from the society.

• Document Submission: Fill out the application form and attach the
required Documents, which may include:

❖Application Form

❖Two passport-size photographs

❖Proof of land hold

HOUSING LOAN

A housing loan, also known as a home loan, is a type of financing provided by

banks or financial Institutions to help individuals purchase, construct,
renovate, or expand a residential property.

The borrower receives a lump sum amount that is repaid in monthly

installments (EMIs) over a fixed tenure, typically ranging from 10 to 30 years.
Housing loans usually come with either a Fixed or floating interest rate and
the property being financed generally serves as collateral. Applicants must
meet certain eligibility criteria, including stable income, good credit score, and
Documentation such as ID proof, address proof, income statements, property
documents, and Employment details. Based on the applicant’s financial
profile, the lender determines the loan Amount, interest rate, and repayment
terms. In many countries, governments offer tax benefits on Home loan

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interest and principal repayment, making it an attractive option for home
buyers.

Types of Housing Loans

• Home Purchase Loan

For buying a new or resale house/apartment.

• Home Construction Loan

For building a new house on your own land.

• Home extension Loan

For expanding your current house (adding a room, floor, etc.).

• Plot + Construction Loan

For buying a plot and constructing a house on it.

• Home Loan Balance Transfer

To transfer an existing home loan to another lender for a lower interest

rate.

PROCEDURE FOR HOUSING LOAN

The procedure for obtaining a housing loan begins with identifying the
purpose— whether it’s for Buying, constructing, or renovating a house—and
researching lenders such as banks, housing Finance companies, or NBFCs.
The applicant must check eligibility based on age, income, Employment
stability, credit score, and repayment capacity. Once eligible, the next step is

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to Submit a duly filled application form along with required documents such as
identity and address Proof, income statements (salary slips or IT
ITRs), bank
statements, property documents, and
Photographs. The lender then evaluates the application, verifies documents,
and conducts a credit Appraisal, which may include a personal discussion or
site visit. After this, a loan sanction letter Is issued stating the approved
amount, interest rate, tenure, and EMI. Once the applicant agrees To the
terms, the loan agreement is signed, and the property documents are
submitted as Collateral. Finally, after legal and technical verification of the
property, the loan amount is Disbursed either in full or in stages depending on
the construction status, and repayment begins As per the EMI schedule.

DEPOSIT LOANS (DL)

Deposit Loans are the loans given based on deposits like Fixed Deposits,
Recurring Deposits etc. By the members of the bank. Loan against FD (Fixed

Deposit) is A type of secured loan where customers can pledge their fixed
deposits as security and Get a loan and return. The amount of loan depends
on the FD deposit amount. The Maximum limit of the loan is up to 80% of the
deposit amount. The duration of the Loan is limited to the maturity date of the
deposit. The rate of interest will be 2% in Addition to the rate of interest of the
deposit. The security given by the member is the Fixed Deposit Receipt.

There is no committee resolution is needed for sanctioning These type of

secured loans.

Benefits

Lower interest rates compared to other types of loan like personal loans.

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 No processing fees charged.

Can be repaid as a lump sum or in ed deposits holders, be it

Document

Application form

FD receipt

Eligibility of borrower

Loan against fixed deposits is extended to all the fixed deposits holders, be
it Individual holders or those with joint accounts.

FD in the name of a minor does not qualify for this facility.

SELF HELP GROUP (SHG)

Kudumbashree SHGs, which are effective in the wards of the bank, have
opened accounts In our bank. Loans are also sanctioned on the basis of the
banks assessment
ssment of th
the activities of the group.
Kudumbashree groups are currently being paid up Rs. 5 lakh at 9% interest
duration is 3 years.

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MUTHATHE MULLA

This scheme involves the disbursement of loan and affordable rate of interest
to rural Households. This project has been formulated by Kerala government
aim to liberate women from the micro finance company daily collection from
this loan is for 1 year with interest 12% from Kudumbashree unit.

PROCEDURE OF MUTTATHE MULLA SCHEME

The Muttathemulla project is helping wage earners, small traders and poor
families from the lower strata of society to get out of the difficulties of
interest-bearing loans. The Cooperative Department provides loans to
Kudumbashree groups. Kudumbashree can provide loans to groups and
Kudumbashree members through the Muttathemulla scheme. The scheme is
implemented .Through one to three Kudumbashree units in each ward that
are functional and trustworthy. The great thing about the scheme is that it
allows you to give small loans at low interest rates right from your doorstep.
The loan has to be repaid in a maximum of 52 weeks. They will also visit
Homes every week to collect the repayment amount. Kudumbashree units will
keep these loan Records responsibly.

OVERDUEPOSITION

When the loan issued stands unpaid even after due date, it becomes Overdue
When the overdue increases, the financial strength of the society falls down.

The table shows overdue position of the bank for 3 years.

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 YEAR AMOUNT

2021-2022 38459992

2022-2023 35364557

2023-2024 3828078

LOANRECOVERYPROCEDURE

The main responsibility of the bank is the timely recovery of loans and Due
made by the member and it is the responsibility of managing committee and
board Of directors to ensure the Repayment has been made by the members.
The bank follows Strict guideline
guideliness prescribed by the Cooperative principles
recovery policies. A loan or Advance become an NPA if the interest due
charged during any quarter is not serviced Fully within 90 days from the end
of the quarter. Recovery proceedings in default loan accounts are carried out
by different arrears.

The first step is by sending notice to the defaulter and their surety informing
the Necessity and urgency in clearing the due and makes aware of the legal
proceedings That follow.

Then the staffs visit the loan account holders personal

personality
ity in the premises
premi to
inform about
bout the dues and pending and clear off the arrears.

The staff members are divided into three Groups for this purpose based on
the area And location.

If still there is no response from the members to the above

above-mentioned
recovery Measures,
sures, they are subjected to legal proceedings.

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 One of the legal recovery measures is by filing arbitration case before
cooperation Department.

In loan under salary recovery agreement, bank will fol

follow recovery by

sending notice tothe

othe salary disburs
disbursing
ing officer of the concerned the salary

section.

General Loan Recovery Procedure

1.Reminder Notices

• The bank sends SMS, emails, or letters reminding the borrower of missed
EMI payments.

• Usually starts within a few days of non

non-payment.

2. Follow-up
up by Recovery Team

• If payment is not made within 30

30–60
60 days, the bank’s recovery team follows
up through Phone calls or visits.

• Borrower is given a chance to repay or restructure the loan.

3. Issuance of Demand Notice

• A formal legal notice (called a Demand Notice under Section 13(2) of the
SARFAESI Act for secured loans) is issued if default exceeds 90 days.

• Borrower is given a period (usually 60 days) to clear dues.

4. Loan Classification as NPA

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• If no payment is made within 90 days of default, the loan is marked as Non-
Performing Asset (NPA).

• Further legal recovery begins.

LegalRecoverySteps

For Secured Loans (like home/vehicle loans):

1. SARFAESI Act Action

• Applicable for banks and NBFCs.

• After 60-day notice, the bank can:

• Take possession of the property

• Sell the asset to recover dues

• Appoint a receiver

2. Auction of Collateral

• Property, vehicle, or pledged asset is auctioned publicly.

• Sale proceeds are adjusted against the outstanding loan.

For Unsecured Loans (like personal/business loans):

1. Civil Lawsuit

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 • Bank may file a civil recovery suit in a Debt Recovery Tribunal (DRT) or
civil Court, depending on the loan amount.

2. Arbitration (if contract clause exists)

• Arbitration can be used as an alternative method to resolve disputes.

3. Loan Recovery Agents

• Banks may appoint licensed recovery agents to follow up.

• Must follow RBI’s code of conduct—no harassment allowed.

RBI Guidelines on Loan Recovery

• Banks must follow ethical practices.

• No abusive language or physical threats allowed.

• Borrower must be informed clearly before recovery visits.

• Recovery agents must carry proper ID and authorization.

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Options for Borrowers Before Legal Action

• One-Time Settlement (OTS): Settle for a reduced amount.

• Loan Restructuring: Change EMI schedule or extend tenure.

• Moratorium Request: Temporary pause in repayments.

• Grievance Redressal: File complaint with bank or RBI ombudsman.

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CONCLUSION

I have completed my Internship at Vendar Service Cooperative Bank Ltd no

236 on The topic “Different types of loans and its procedures” provided by the
society. The internship Helped to get practical knowledge of working of a
society. The data collected from the past three Years show that the bank is
running in loss now but compared to previous year data I can understand that
the bank took various measures to reduce the overdue they had within a short
Span time of time the bank will come back to its profitable stage. The
cooperative societies Working in an area helps in the development of the
area. The Vendar Service Cooperative Bank Ltd no 236 work for the
development of the people residing in the area of Operation of the society.
The primary function of the cooperative society is to provide services to
People who are in needs. The facilities provided to members by the society
are accepting Deposits and lending money, providing democratic participation,
safe locker facility etc. The Bank was able to provide credit facilities to the
people when needed. The bank also acts as an Agent for providing pension to
the people. They provide awareness to the people about the Facilities
provided by the bank. The cooperative societies are growing with the help of
the Government. The government is trying to bring awareness about the
cooperative movement to the People, so they can utilize in a better way.
Nowadays the cooperative banks play a major role in the development of the
society. The cooperative banks can do many more things to the public

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REFERENCE

✓ Bye law of the society

✓ Annual General Body Report

✓ Minute Book

✓ Audit Certificate & Audit Memorandum

✓ Loan/chitty/deposit Registrar.

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