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A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over 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. Typically, the money is paid back in regular installments, or partial repayments; in an annuity, each installment is the same amount.
(A)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 a short period to suit the convenience of the borrower. Thus business may be run efficiently with borrowed funds from banks for financing its working capital requirements. (B) loans and advances are utilized for making payment of current liabilities, wage and salaries of employees, and also the tax liability of business. (C) 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.
Demand loan A Demand Loan is a loan which is repayable on demand by the bank. In other words it is repayable at short-notice. The entire amount of demand loan is disbursed at one time and the borrower has to pay interest on it. The borrower can repay the loan either in lump sum (one time) or as agreed with the bank . For example, if it is so agreed the amount of loan may be repaid in suitable installments. Such loans are normally granted by banks against security. The security may include materials or goods in stock, shares of companies or any other asset. Demand loans are raised normally for working capital purpose like purchase of raw materials, making payment of short-term liabilities.
Medium and long term loans are called term loans. Term loans aregranted for more than a year and payment of such loans is spread over alonger period. Term loan is required for the purpose of starting a newbusiness activity renovation, modernization, expansion of existing units,purchase of their land for setting up a factory, construction, of factorybuilding or purchase of other immovable assets. These loans are generallysecured against the mortgage of land, plant and machinery, building and thelike.
Unsecured Secured Unsecured loans are those loans which are not covered by the Secured loans are those which are security of tangible assets. Such granted against the security of loans are granted to tangible assets, like stock in trade and immovable property. Thus, firms/institutions against the while granting loan against the personal security of the owner, security of some assets, a charge is manager or director. created over the assets of the borrower in favor of the bank. This enables the bank to recover the dues from the customer out of the sale proceeds of the assets in case the borrower fails to repay the loan.
The advances can be classified two categories• Loans, cash credits and overdrafts.• Bills discounted and purchased.
This account is the primary method in which bankslend money against the security of commodities anddebt. It runs like a current account except that themoney that can be withdrawn from this account is notrestricted to the amount deposited in the account.
OverdraftsThe word overdraft means the act ofoverdrawing from a bank account. In otherwords, the account holder withdraws moremoney from a bank account than has beendeposited in it.. Bills discounted and purchasedBank takes the bill drawn by borrower onhis(borrowers) customer and pay himimmediately deducting some amount asdiscount/commission
(I) FILLING UP OF LOAN APPLICATION FORM (II) SUBMISSION OF FORM ALONG WITH DOCUMENTS (III) SANCTIONING OF LOAN (IV) EXECUTING THE AGREEMENT (V) ARRANGEMENT OF SECURITY FOR LOAN
Response No. of response Percentage % Yes 65 65 No 35 35 Total 100 100 Response Yes No
Response No. of response Percentage % House loan 15 15Educational loan 35 35 Personal loan 21 21 Vehicle loan 29 29 Total 100 100 No. of respondent 40 30 20 10 0 No. of respondent
Responses No. of response Percentage %Less than 1 Year 15 15 1 to 3 Year 35 35 3 to 5 Year 21 21More than 5 Year 29 29 Total 100 100 No. of Response Less than 1 Year 1 to 3 year 3 to 5 Year More than 5 year
Banks CANARA Bank Other Pvt. Banks Other Nationalized BanksNo. of respondents 37 24 39 50 40 Canara 30 Other Pvt. Bank 20 10 Nationalised 0 bank No. of respondent
Occupation Businessman Serviceman Self-employed people OthersNo. of respondents 35 38 11 16 40 35 Businessman 30 25 Serviceman 20 15 Self-employed 10 people 5 Others 0 Occupation
Response No. of response Percentage %MONTHLY 25 25QUARTERLY 40 40ANNUALLY 35 35 Total 100 100 No. of Response 40 30 20 10 No. of Response 0
Response No. of response Percentage % Public Sector 65 65 Private Sector 25 25Co-operative Sector 10 10 TOTAL 100 100 No. of Respondent 80 60 40 20 0 No. of Respondent
Due to inflexibility in account opening it is difficult to convince customers. No authentic evidence of customers is found. No special facilities of loans to businessman are given in semi rural or rural area. The bank is not tapping untapped areas. Lack of communication & delivery channels. Lack of social banking. Loans are not provided without security. Loans are not provided at ease lot of paper work & documentation is involved. The time bound period is the major limitation in research projects.
More customer convenience Services for businessmen Service for Self employed & Serviceman’s Rural Banking Social Banking
The cutthroat competition of 21st century demands not just a satisfied but delighted customer as a key to success in a service industry. Strength, Weakness, Opportunities, threat analysis are apply in the bank to do the work more efficiently. Also, improved advertising efforts, embracement of latest technology, more and more awareness about internet banking thus facilitating customers while providing solutions at their convenience and easy reach.