A study on loans & advances and its impact on sbm

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  • 1. TITLE OF THE STUDY PRESENTED BY: Avinash
  • 2. INDUSTRY PROFILEWithout a sound and effective banking system in India it cannot have a healthyeconomy. The banking system of India should not only be hassle free but it should beable to meet new challenges posed by the technology and any other external andinternal factors. For the past three decades Indias banking system has severaloutstanding achievements to its credit. In fact, Indian banking system has reached evento the remote corners of the country. This is one of the main reasons of Indias growthprocess. The governments regular policy for Indian bank since 1969 has paid richdividends with the nationalization of 14 major private banks of India. Not long ago, anaccount holder had to wait for hours at the bank counters for getting a draft or forwithdrawing his own money. STAGES OF BANKING IN INDIAThe first bank in India, though conservative, was established in 1786. From 1786 tilltoday, the journey of Indian Banking System can be segregated into three distinctphases. They are as mentioned below:•Early phase from 1786 to 1969 of Indian Banks•Nationalizations of Indian Banks and up to 1991 prior to Indian banking sectorReforms.•New phase of Indian Banking System with the advent of Indian financial & BankingSector Reforms after 1991.
  • 3. COMPANY PROFILEIn 1913, at the instance of Sir M. Visvesvaraya, the Engineer Statesman, a state aidedBank, under the patronage of His Highness the Maharaja of Mysore, Sri Krishnaraja WodeyarIV, was established. This was "MYSORE BANK LTD". During 1953, "Mysore Bank" wasappointed as an agent of Reserve Bank of India to undertake Government business andtreasury operations, and in March 1960, it became a subsidiary of the State Bank of Indiaunder the State Bank of India (subsidiary Banks) Act 1959. Now our bank is an AssociateBank under State Bank Group. The Bank has grown progressively, right from its inceptionand has declared uninterrupted profits from the beginning. "MYSORE BANK", as it ispopularly known, is constantly committed to serve its customers. Our dedicated service toclientele has brought recognition laurels to "MYSORE BANK". In this competative worldof Banking and Technology we reiterate and resolve to rededicate ourselves for the service ofthe Nation through improved service to our customers.“To give real service, you must add something which cannot be bought or measured withmoney” - Sir M. VisvesvarayyaThe bank has stood up to the challenges of financial sector reforms in this decade.The Bankhas a widespread network of 707 branches(as on 31.03.2011) and 22 extension countersspread all over India which includes 6 Small and Medium Enterprises Branches, 4 IndustrialFinance branches, 3 Corporate Accounts Branches, 6 specialised Personal BankingBranches, 10 Agricultural Development Branches, 3 Government Business branches, 1 AssetRecovery Branch and 8 Service Branches, offering wide range of services to the customers.
  • 4. INTRODUCTIONAny amount borrowed or lent is called loan. If money is borrowed it is debt ofbusiness and if loan is given, it is receivable for the business. Loan is a method oflending under which bank gives credit to a borrower for a fixed period and for aspecific purpose. Loan are promises for future payment, they have to be repaid inperiods beyond a year and are, therefore long term liabilities. In other wards "when abanker makes an advances in a lump sum which cannot be paid wholly or partly andwhich the customer has permission to withdraw subsequently, it is called a loan."Profit is the pivot on which the entire business activity rates. Banking is essentially abusiness dealing with money and credit. Like every other business activity. Bankshare profit oriented. A bank invests its funds in many ways to earn income. The bulkof its income is derived from loans and advances. Banks make loans and advances totraders, businessman and industrialist against the security of some assets or on thebasis of the personal security of the borrower. In either case, the banks run the risk ofdefault in repayment. Therefore, banks have to follow a cautions policy and soundlending principles in the matter of lending. Banks in India have to consider thenational interest along with their own interest while determining the lendingpolicy.Many a time a borrower needs funds for fixed assets or non-respective type ofactivitiesand thus seeks money from the bank that is withdrawn in one lump sum.The loan amount isnormally repaid in installments. Loan may be short-term, medium-term or long-term.
  • 5. STATEMENT OF THE PROBLEM:The Title of the project is “A study on Loans and advances & Its Impact on StateBank of Mysore. There is a wide fluctuation between different sectors. Whileissuing loans to different sector, should analyze the external factor which isaffecting to the particular sector. Bank should think about increase the Net Incomeand reduce the NPA level of the Bank, while issuing loans. Major portion of theIncome is derived from the loans and advances of the Bank.In this context, study is related to the contribution to Total income from thedifferent sector by analyzing the co-relation between loans and advances issued todifferent sector and the Total income of the Bank. This analytical study of loansand advances to different sector which helps know the risk and return from varioussector.OBJECTIVES OF THE STUDYThe main aim of the present study is to accomplish the following objectives:•To Analysis the sources of income by considering Loans and Advances.•To study the relationship between loans and advances to its total current assets.•To study the Procedure of issuing loans and advances of the bank.•To study the Impact of loans and advances on Net profit
  • 6. SCOPE OF THE STUDY•The information used from the annual report of Sate Bank of Mysore of the year 2010-11, 2009-10, 2008-09 and 2007-08 for preparing the this project report.•For the purpose of comparison, I used the statistical tools like standard Deviation and Co-efficient of correlation. METHODOLOGYResearch designThis study is based on Descriptive research design.Data collection methodSecondary dataThe data published or unpublished which have already been collected and processed bysome agency or person and take over from there and used by any other agency for theirstatistical work.This report is prepared through secondary sources such as text books, journals, and annualreports of the Apex Bank.Tools used to analysis the data:Trend ratio
  • 7. ANALYSIS AND INTERPRETATIONLOANS AND ADVANCES TO INTEREST EARNED Amount in crores Particular 2010-11 2009-10 2008-09 2008-09 2006-07 Interest Earned 4,079.08 3,558.92 3,247.28 2,494.40 1,776.49 Loans and Advance 34,029.81 29,535.86 25,616.05 21,027.14 16,465.54 Sources annual report 2006 to 2011 Loans &advance to interestThe graph shows the comparison between loans earned& advances to the interest earned by the bank inpast five years (2007 to 2011). Here it shows 35,000.00that there is an increasing in loans & advances 30,000.00 Amount in croresover the years, in the current year it issued Rs. 25,000.0034,029Cr from 29535.86Cr. So the bank has 20,000.00 15,000.00given loans & advance to help its customer to 10,000.00meet their obligation and also there is an 5,000.00increase in interest earned from loans given to 0.00the customer by making proper collection 2010- 2009 2008 2008 2006 11 -10 -09 -09 -07efforts. In the current year (2010-11) the Interest Earned 4,079.0 3,558.9 3,247.2 2,494.4 1,776.4interest earned amount is increased by 15% Loans and Advance 34,029. 29,535. 25,616. 21,027. 16,465.compare last year(2009-10).
  • 8. LOANS AND ADVANCES TO TOTAL CURRENT ASSETS : Amount in crores Particular 2010-11 2009-10 2008-09 2007-08 2006-07 Total Current Assets 49,897.23 44,009.74 39,136.72 32,336.00 25,893.68 Loans and Advance 34,029.81 29,535.86 25,616.05 21,027.14 16,465.54Source : annual report 2007-2011 Loans& advances to Total current assetsFrom the graph it shows the comparison 60,000.00between total current assets and Loans &Advances from 2007 to 2011. Here it shows 50,000.00 Amount in croresthat due to increase in loans & advances given 40,000.00to the customer over the years simultaneously 30,000.00total current assets also been increased. In the 20,000.00present year total current asset has beenincreased by 14% compare to the last year. 10,000.00The loan has increased due to moderate 0.00 2010- 2009- 2008- 2007- 2006-interest rates compare to other banks. 11 10 09 08 07 Total Current Assets 49,897.2 44,009.7 39,136.7 32,336.0 25,893.6 Loans and Advance 34,029.8 29,535.8 25,616.0 21,027.1 16,465.5
  • 9. LOANS AND ADVANCES TO TOTAL ASSETS : Amount in crores 2010-11 2009-10 2008-09 2007-08 2006-07 Particular Total Assets 52,127.07 45,454.12 40,510.90 33,069.70 26,842.65 Loans and Advance 34,029.81 29,535.86 25,616.05 21,027.14 16,465.54Source: annual report 2007-2011 Loans&advances to Total assetFrom the above tables it shows the 60,000.00relationship between total asset & loans & 50,000.00advances from 2007 to 2011. Here in the Amount in crores 40,000.00bank total assets have been increased over 30,000.00the years due to increase in loans &advances given to the customer at the 20,000.00moderate interest rates. In the current year 10,000.00the total assets has increased by 15% and 0.00 2010- 2009- 2008- 2007- 2006-also the bank has been invested some of 11 10 09 08 07 Total Assets 52,127.0 45,454.1 40,510.9 33,069.7 26,842.6their funds to the fixed asset. Loans and Advance 34,029.8 29,535.8 25,616.0 21,027.1 16,465.5
  • 10. LOANS AND ADVANCES TO TOTAL LIABILITIES : Amount in crores 2010-11 2009-10 2008-09 2007-08 2006-07 Particular Total Liabilities 52,127.07 45,454.12 40,510.90 33,069.70 26,842.65 Loans and Advance 34,029.81 29,535.86 25,616.05 21,027.14 16,465.54 Source : annual report 2007-2011From the above table shows that comparison Loans & advances with Totalof total liabilities with Loans & advances liabilitiesfrom 2007 to 2011. Here the total liabilities 60,000.00 Amount in croresof the company have increased due to raise 50,000.00 40,000.00in share capital, reserves, deposits, & 30,000.00borrowed funds and hence the loans & 20,000.00advances issued to the customers has also 10,000.00increased over the years. In the current year 0.00the total liabilities of the company has 2010- 2009- 2008- 2007- 2006- 11 10 09 08 07increased by 15% compare to the last year Total Liabilities 52,127.0 45,454.1 40,510.9 33,069.7 26,842.6 Loans and Advance 34,029.8 29,535.8 25,616.0 21,027.1 16,465.5
  • 11. FINDINGS:¥There is an increasing in loans & advances over the years, in the current year it issuedRs. 34,029Cr from 29535.86Cr. So the bank has given loans & advance to help itscustomer to meet their obligation and also there is an increase in interest earned fromloans given to the customer by making proper collection efforts.¥In the current year (2010-11) the bank shows that interest earned amount from thecustomers is increased by 15% compare last year (2009-10).¥ Increase in turnover of the business in the bank because the bank provides newschemes or services to the customer. Hence in the current year the turnover of thebusiness has raised by13% (3984.64 to 4534.26) compare to last year.¥In the current year amount invested by the bank on fixed asset has decreased by 2%compare to last year.¥Increase in loans & advances given to the customer over the years simultaneously totalcurrent assets also been increased. In the present year total current asset has beenincreased by 14% compare to the last year. The loan has increased due to moderateinterest rates compare to other banks.¥The total assets have been increased over the years due to increase in loans & advancesgiven to the customer at the moderate interest rates. In the current year the total assetshas increased by 15% and also the bank has been invested some of their funds to thefixed asset.
  • 12. SUGGESTIONS:The Auto loan product of the bank should be more highlighted with promotionalactivities as there are many competitors for Auto loan in the market.Bank should make provision for free accident insurance cover for the auto loanproduct to attract the customers for loan.Since most of the customers of Auto Loan go for purchasing of new vehicles duringFestivals, are attracted towards the special offers in loan schemes, special offers shouldbe announced during Special occasion Like New Year, Festivals etc as such offersattract customers.The bank should adopt the new technology that makes the customer easy transfer offund through electronically and SMS facilities to mobiles for every transaction that thecustomers transfers money.
  • 13. CONCLUSIONOverall banking in India is considered as fairly mature in terms of supply, product rangeand reach even – though reach in rural India still remains a challenge for the publicsector, private sector and foreign banks. Even in terms of quality of assets and capitaladequacy, Indian banks are considered to have clean, strong and transparent balancesheets as compared to other banks in comparable economies in its region With the growth in Indian Economy expected to be quite some time especially in itsservices sector, the demand for banking services especially retail banking, mortgages andInvestment services are expected to be strong.SBM Bank has been a competent player in the market with quality service and attractiveInterest rate, its service is not only limited to Metropolitan cities but its striving hard toreach and cater the needs of the urban and rural customers and has been a good performerin the Retail loan Industry.As the Banking sector is booming, all the banks are facing stiff competition amongthemselves; to face the competition and survive in the market SBM should adoptInnovative Techniques to face the competition. The main concern of SBM Bank shouldbe quality service and customer satisfaction, to gain a major share in the market bankshould go for aggressive promotional activities and attract customers by chargingcompetitive interest rate.
  • 14. THANK YOU