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Comparative study of interest rates on education loans conducted at pnb

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Comparative study of interest rates on education loans conducted at pnb

Comparative study of interest rates on education loans conducted at pnb

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Comparative study of interest rates on education loans conducted at pnb Comparative study of interest rates on education loans conducted at pnb Document Transcript

  • INTRODUCTION An education loan is a loan taken to help pay for an education, usually at a college or trade school, but may also be used to pay for private schools or prep schools as well. The education loan is available in several different types. These are student loans, parent loans and private loans. Loans are also either guaranteed or unguaranteed. Student and parent loans are most likely to be guaranteed by the government, though many agencies work for the government in this respect. Unguaranteed or unsubsidized loans are usually from private lenders only, and usually can only be obtained if one has a good credit score or significant equity. The student loan is usually the best choice education loan for a student whose parents cannot pay for his or her education. While the student remains in school, interest on this type of education loan in accrues and is paid for by the government. A parent education loan is a good choice for parents who don‟t want their children to end their college career in debt. These can also be guaranteed, meaning that parents don‟t necessarily have to have great credit scores to get a loan. Interest rates tend to be relatively low, but a longer repayment schedule means paying quite a bit of interest. The private education loan almost always requires good credit. Many people use the equity in their house to take out such a loan. Unlike the parent and student education loan, the private education loan is not usually need based. Often when students apply for financial aid, they are told they, or their parents, make too much money to qualify. The federal government does not guarantee the private education loan, and payments usually begin on the loan right away. These loans usually have the highest interest rates, as well. If they are taken as part of refinancing a home, they may be more economical. 1
  • Because students frequently leave college heavily burdened with debt, it is important to consider how much of a loan one really needs. The less debt contracted the better. Before applying for an education loan, evaluate the other types of aid that may be available. There are numerous scholarships that go unclaimed each year because no one applies for them. Research into scholarships that are not need-based can often help defer some college expenses, lessening the amount one needs to borrow. RESEARCH DESIGN a. Statement of the problem: A strong banking sector is important for flourishing economy. The failures of the banking sector may have an adverse impact on other sectors. This Study will help us to understand the education loan about banking services and products. In this background this study tries to analyze the educational loan interest rate towards banking services b. OBJECTIVE The objective is to Analyze the history of Punjab national bank Analyze the educational loans with a view to arrive at the most popular loan schemes offered by the banks under study. Conclude from the analysis the best possible schemes which would keep the bank ahead of completion. 2
  • d. RESEARCH METHODOLOGY PROJECT TITLE: “Comparative Study of Education Loan with Reference to PNB,SYNDICATE BANK and SBM”. To compare education loan schemes & policies of the Punjab National Bank (PNB), Syndicate Bank and State Bank Of Mysore (SBM) METHODOLOGY: In this research I have adopt the Descriptive Research method only for PNB, Syndicate bank and SBM Education loan schemes for just compare the offer document of these three banks. Research Methodology is an important part of every project. Because it help in knowing how to select representative sample from the world or the general population, the right research tools and techniques to complete the research. To satisfy the customer the study of consumer behavior is important because he is the king. The Research Process is based on survey method, so in order to implement the survey we go to Service Provider and the Services user which is the customers. The research involves the following steps :- Define the problem & research objective - The problem and objective is to assess the services offered by various service provider and what the consumer wants. 3
  • Developing the research Plan - The second stage of research methodology is to develop a research plan.The research plan desigined to take decesion on the data soruces, research approaches, research, instruments, sampling plan and contact methods. Research Instrument – The use of an effective research instrument is very important. Because through this instrument we collect data. In this project through observations & personal interviews were conducted. Personal Interview – As we were doing direct selling. we interacted with my customers are asked about there views in selecting a service and what are there wants and expectations from a service provider Sampling Plan - After finalizing the research approch and instruments a sampling must be designed. Sampling Unit –data have been collected from banks Sample size – It has been collected from four banks. Collect the Information :-After completing all the steps, the data are collected from different sources. Primary data: Information is collected through direct interview with employees and other banks. Secondary data: Website. Bank old record books. PNBO‟s compliments Analyze the Information:-After the data is collected they are analyzed to Know the findings. The data is then tabulated to develop frequency distribution. 4
  • Present the findings:-As the last step, the findings are presented that are relevant to the major marketing decisions. e. Scope of study Research scope is only three banks and these three banks are State Bank of Mysore (SBI), Punjab National Bank (PNB),and Syndicate Bank. f. LIMITATIONS: If there are advantages of study then obviously there are limitations of that study also. So, some limitations of this study are: -  Time period for the study is limited as we have got two months for this project, but if we got more time than analysis can be much broad.  Analyses of only three banks are done rather than more banks.  Study is limited to local area of Hassan. 5
  • LITERARY REVIEW OF PNB PNB for students 1.1 Educational loan scheme “Vidya Lakshyapurti” Merger of PNB Sarvottam shiksha It now been decided to merge PNB sarvottom shikshan with PNB vidyalakshyapurthi with immediate effect permitting continuation of exiting accounts under PNB sarvottam shiksha. Further, the provision of sanctioning and disbursement of education loans at the bramches nearer to education institutes‟ i.e., other than those to residence of parents presently available under PNB sarvottam shiksha shall continue under PNB vidyalakshapurthi for specified courses/ institutes. The Reference:- post merger of scheme, they have been receiving references from the field seeking clarifications whether Education Loans could still be sanctioned in terms of the above customization for students who have taken admission during the academic year 2008-09 in the following circumstances:- 1) Admission taken during academic year 2008-09 but request for education loan made subsequently/ after merger of schemes. 2) Admission taken during academic year 2008-09 and made payment of fees from own sources but now seeking re-imbursement of the amount by getting sanctioned fresh education loan. 3) Admission taken during academic year 2008-09, not availed any credit facility during 2008-09 but may request for Education Loan during subsequent years of the courses. 6
  • The clarification:- The matter has been examined and it is clarified as under:- In terms of RBD advances cir.no. 59/08 dated 20.12,08, no fresh loan to be sanctioned under PNB sarvottam shiksha under the above circumstance (RBD advances cir. 24/08 dated 11.6.08) even for re-imbursement of fees already paid/fees etc. of subsequent year. However, in case the loan has already been sanctioned/ documentation done before issuance of above guidelines, disbursement in the account would continue for the full term of the course. Objective:- Scheme AMIS at providing financial assistance to deserving / meritorious students for pursuing higher education in India and abroad. with an emphasis that every meritorious student though poor, is provided with an opportunity to pursue education with the financial support from the banking system with affordable terms and conditions and no deserving student is denied an opportunity to pursue higher education for want of financial support. Student eligibility i. Should be an Indian national. ii. Secured admission to professional/technical courses in India or abroad through entrance test/ merit bases selection process. 7
  • Courses eligible I. Graduation courses: BA, B.COM., B.SC., Etc II. Post graduation courses: Master & phd; III. Professional courses: Engineering, medical, agriculture, veterinary, Law, Dental, Management, computer Etc. IV. Computer certificate courses of reputed institutes accredited to dept. of electronics or institutes affiliated to university. V. Courses like ICWA, CA,CFA Etc. VI. Courses conducted by IIM , IIT, IISC, XLRI. NIFT Etc. VII. Regular degree/diploma courses like Aeronautical, pilot training, shipping Etc., approved by director general of civil Aviation/shipping, if the courses is pursued in india. In case the course is pursed Abroad, the institute should be recognized by the competent local (abroad) Aviation/ shipping authority. VIII. Courses offered in india by reputed foreign universities. IX. Advance diploma in banking technology offered by PNBIIT, Luknow. X. Evening courses of approved institutes. XI. Other courses leading to diploma/ degree Etc. conducted by colleges/universities approved by UGC/ GOVT./ AICTE/ AIBMS/ ICMR Etc. XII. Courses offered by national institutes and other reputed private institutions(reputation of the institutes to be decided on the basis of A. Placement record B. Campus/availability of required infrastructure, C. Faculty, D. Age of the institute, E. Affiliation of the institute, F. Size of enrolment,etc. XIII) Diploma courses, diploma leading to degree courses abroad and courses offered by recognized universities of repute through distant learning Etc.(to be permitted by circle heads & above). 8
  • Technicalities of admission process :- Branches need not to go into technicalities of the admission process (selection through management quota) and may consider education loan based on admission advice from the college/institution. Studies abroad:- i. Graduation: for job oriented professional/ technical courses offered by reputed universities. ii. Post graduation: MCA,MBA,MS, Etc; iii. Courses conducted by CIMA- London, CPA in USA Etc. Expenses considered for loan:- i. Fee payable to college/school/hostel; ii. Examination / library/laboratory fee; iii. Purchase of books/ equipments/instruments/uniforms; iv. Caution deposit, building fund/ refundable deposit supported by institution bills/ receipts, subject to the condition that the amount does not exceed 10% of the total tuition fees for the entire course. v. Travel expenses/ passage money for studies abroad; vi. Purchase of computer- essential for completion of the course. vii. Insurance premium for studies borrower; viii. Any other expense required to complete the courses – like study tours, project work, thesis, etc 9
  • Quantum Of Finance:- Need based finance subject to repaying capacity of the parents/ students with margin and following ceiling: i. Studies in india- Max. Rs. 10 lacs; ii. Studies abroad- Max.Rs. 20 lacs. However, circle heads and above have full discretion foe sanctioning higher quantum of loan keeping in view the merits of the case. Requirement of additional educational loan for the same courses for which education loan has already been sanctioned, the request be dealt with by taking it as a part of the original project and considered on merits by the competent authority within the vested powers under the scheme. Margin :- i. Upto Rs. 4 lacs - nil; ii. Above Rs .4 lacs – studied in india 5%; iii. Studied abroad 15%. Scholarship/ assistantship to be included in margin. Margin may be brought- in on year-to-year basis as and when disbursements are made on a pro-rata basis. Security:- i. Upto Rs. 4 lacs - co-obligation of parents. No security; ii. Above Rs .4 lacs and upto Rs. 7.5 lacs- - co-obligation of parent together with coll. Security in the form of suitable 3rd party guarantee. The sanctioning authority may, at this discretion, in exceptional cases, waive 3rd party guarantee if satisfied with the net worth/ means of parent/s who would be executing the document as “ joint borrower”. iii. Rs.7.5 lacs and above- co-obligation of parents together with tangible coll. Security of suitable value, along with the assignment of future income of the student for payment of installments. 10
  • Miscellaneous:- i. The loan document should be executed by both the student and the parent/ guardian as joint borrower. ii. The security can be in the form of land/ building/ govt. securities/ public sector bonds/ units of UTI, NSC, KVP, life policy, gold, shares/mutual fund units/debentures, bank deposit in the name of student/ parent/ guardian or any other third party with suitable margin. iii. Wherever the land/building is already mortgaged, the unencumbered portion can be taken as security on second charged basis provided it covers the required loan amount. iv. In case the loan is given for purchase of computer, the computer has to be hypothecated to the bank. Rate of interest:- As per interest rate chart annexed. Simple interest to be charged during the repayment holiday/ moratorium period. Additional Incentives For Girl Students:- A rebate of 0.5% in rate of interest be permitted in the application rates of interest to women beneficiaries for loans up to Rs. 10 lacs for studies in india and Rs. 20 lacs for studies abroad under PNB Vidyalakshapurthi for existing as well as new girl student borrower wef. 8.3.2009, WOMEN‟s DAY. However , it should be ensured that the above rebate is not allowed in cases where such rebate in terms of PNB Mahila Sasaktikaran Abhiyan has been permitted. 11
  • Relaxation to the students of IITS, IIMS, RECS, NITS, ITS, GOVT. Recognized medical colleges, FMS; Delhi, MDI Gurgaon and XLRI Jamshedpu:- In partial modification of instructions contained in RBD Advances Circulars No. 26/2008 dated 18.06.2008 and 30/2009 dated 04.06.2009 it has been decided to extend the following relaxations/ concessions to the students of IITs, IIMs, RECs, NITs, ITs, government recognized medical colleges, FMS Delhi, MDI Gurgaon and XLRI Jamshedpur: i. Rebate of 0.5% in rate of interest: ii. Exemption from taking guarantee for loan upto Rs. 7.50 lac; iii. To reduce turnaround time, these cases to be dealt with outside Hub & Spokes Model ensuring application of PNB Score at branches identified by Circle Heads. (Availability of maker checker access under „PNB Score‟ to the designated branches be ensured through ITD HO and all the cases are strictly handled with its application.) The above relaxation shall be available in respect of fresh sanctions. Further, co- obligation of parent(S) as per the scheme be ensured in all the cases along with compliance of other extant guidelines. The availability of concessions may be utilized to tap the vast potential available in the segment of intellectual group of students of these prominent institutions. Branches are advised to give “-0.50” in “A/c. pref. int. (Dr.)” field while opening the account in CBS. Penal Interest:- Penal interest @ 2% to be charged (subject to provisions of priority sector) ie., upto Rs. 25000/NIL and above Rs. 25000/ as applicable to retail advances presently @ 2% on the outstanding amount. 12
  • Appraisal/ Sanction/Disbursement:- i. In the normal courses, while appraising the loan the future income prospectus of the student will be looked into. However, where required ,the means of parent/ guardian could also be taken into account to evaluate repayment capability ii. The loan to be sanctioned as per delegations of power preferably by the Branch nearest to the place of residence of parents. iii. No application for education loan received should reject without the concurrence of Next Higher Authority. iv. The loan to be disbursed in stages as per the requirement /demand directly to the institutions/ vendors of books /equipments/ instruments to the extent possible. Further, the branches will not pass on education loan application to other banks/branches stating that the applicants doesn‟t fall within the area of operation of their branch, but to process all education loan applications received as long as they were in the same district. However, the relaxations in this respect for indentified institution/ courses shall continue (RBDA 60 DT 20.12.08). Repayment :- Repayment holiday/ moratorium- course period + 1 year or 6 months after getting job, whichever is earlier. The loan to be repaid in 5-7 years after commencement of repayment. If the student is not able to c complete the courses within the scheduled time, extension of time for completion of course may be permitted for a maximum period of 2years. If the student is not able to complete course for reason beyond his control, sanctioning authority may at his repayment holiday period to be added to the principal and repayment in Equated Monthly Installment (EMI) fixed. “Branch Manager empowered to permit extension in moratorium period upto maximum two years as against present provision of maximum one year in deserving cases under reporting to Circle Head”. 13
  • Interest Concession :- 1% Interest concession may be provided for loanees if the interest is serviced during the study period when repayment holiday is specified for interest / repayment under the scheme. The concession is to be allowed at the time of start of repayment period of the loan and the rate of interest / EMI to be fixed accordingly. Insurance:- Life insurance policy on the students availing Educational loan may be taken ( at the option of the student borrower ) from the approved co (presently Kotak Mahindra Old Mutual Life Insurance Co). in terms of guidelines issued in this respect. Follow-up/Tracking:- Banks to contact college / university authorities to send the progress report to the bank at regular intervals in respect of students who have availed loans. In case of studies abroad, bank may obtain the unique identification number (UIN) identity card and note the same in the bank‟s records. Processing charges / Upfront fee:- No Processing charges / Upfront charges may be collected on education loan for studies in India. However, for loans for studies abroad, upfront fee@ 0.50% with a maximum of Rs. 5000/ be recovered which shall be refunded on availment of the loan amount. Documentation charges:- As prescribed from time to time be recovered. (Presently as per LA 101 dt 17.7.08) 14
  • Disposal of application (RBDA/29 dt 01/06/09):- Loan applications have of within a period of 1 week (cases of Branch/Hub level) and within 2 weeks (cases falling under the power of circle Head & above). Capability certificate:- Bank can also issue the capability certificate for students going abroad for higher studies. For this purpose financial and other supporting documents may be obtain from applicant if required.(some of the foreign universities require the students to submit a certificate from their bankers about the sponsors‟ solvency/ financial capabilities, with a view to insure that the sponsors of the students going aboard for higher studier are capable of meeting the expenses till completion of studies). Multiple loans:- In case of receipts of applications for more than one loan for student borrowers form a family, the „family‟ as a unit has to be taken in to account considering the loan and security taken in relation to the total quantum of finance disbursed, subject to margin and repaying capacity of the parents / student. Top up loans:- Top up loans to students pursuing further studies with in the overall eligibility limit, with appropriate re-schedulement of existing loan, subject to taking required security be considered at the level of the circle head, on merits, depending upon the genuineness, accessibility, future repaying capacity of the obligants and recovery of loan. No dues certificate:- No dues certificate need not be insisted upon as a pre-condition for considering education loan. However, a declaration/ an affidavit confirming that no loans are availed from other banks may be obtained. 15
  • Minimum age:- There is no specific restriction with regard to the age of the student to be eligible for education loan. Change of address:- In order to safeguard bank‟s interest, the permanent address of the student borrower be captured besides obtaining his/her present address in the loan application form and the same shall also be got confirmed from the records available at the educational institution concerned. Co-obligator:- “Parents/ guardians of the student borrower and in case of married persons, co- borrower can be spouse or the parents/ parents in law. In case parents are not alive, grandparents are taken as co-obligator taking into account their net worth”. Flexibility In terms:- In order to bring flexibility in terms like eligibility, margin, security norms, circle Head may consider relaxation in the norms on case-to-case basis. Loaning powers:- As per Loaning Power Chart in force from time to time.(currently as per RBD 32/08 annexed at the end of this chapter). Confidential report:- Borrower: No CR to be compiled as the loan application form will indicate the required information, Guarantor(s)/ co- obligants: CR to be compiled on PNB 905/282(C). 16
  • Documentation:- i. In case the student is minor- agreement (PNB 1116) duly stamped to be taken. On attaining majority, confirmation from student be obtained as per PNB 1147; ii. In case the student is major- Agreement(PNB 1117) duly stamped to be taken. iii. Letter of Guarantee (PNB785) duly stamped as an Agreement to be taken where applicable. In case coll. Security is taken in the shape of mortgage of IP, procedure given in Book of Instruction on loans and other guidelines issued from time to time be followed. Disbursement: Education loan is to disbursed in the shape of term loan. The amount of loan to be disbursed in stages as per requirements/demands, directly to the institutions/vendors of the books/equipments/instruments to the extent possible as per terms of sanction( in case of purchase of stationery and books, amount may be disbursed/reimbursed by crediting his/her saving account, on declaration by the applicant and production of bills). Sanctioning and disbursement at a branch other than the said branch/ hub, circle Head of the respective circle can consider the same on the merits of individual case, keeping in view the genuineness, accessibility and aspect of recovery of loan. 17
  • Concessions for wards of working staff:- The wards of serving staff members, pursuing higher education in professional/technical courses in other than the prominent institutions shall be covered under “PNB Sarvottam Shikshan”, subject to the following terms and conditions:- i. The wards of those employees whose total service in the Bank is ‟12 years &above‟ to be eligible for the facility. ii. The loan to be sanctioned only with co-obligation of the employee concerned. iii. Caution‟ on terminal dues of the employee to be noted. iv. In case terminal dues of our employees(after adjustment of other liabilities) are not sufficient to cover the captioned loan, equitable mortgage of property of suitable value to be obtained, v. In cases where housing loan has already been availed by the employee from PNB, Education loan to be secured by extension of charge on house property. In cases where mortgage is yet to be created, an undertaking from such employee to be obtained that as and when mortgage is created, the same shall be extended for covering the captioned loan. vi. The wards of those employees who are‟ under suspension, are not eligible for the above facility. vii. Existing Education loans towards of staff under „PNB Vidyalakshyapurti‟ may be converted into „PNB Sarvottam Shiksha‟ Scheme at the option of borrowers, subject to fulfillment of above terms& conditions, from the date of execution of supplementary agreement and documents for mortgage, if required. 18
  • The reference and clarification regarding concessions for wards of working staff:- We have been receiving references seeking clarifications on these terms and conditions. The matter has been examined and we have to clarify as under: i. Where collateral security of adequate value is available even after the retirement of an employee, there will not be any restriction on releasing his terminal dues; ii. In a situation where staff member is retiring and wants to continue with the education loan with concessional interest (as per PNB Sarvottam Shiksha), some security in the shape of cash collateral/ IP has to remain. In case the employees is not in a position to offer any IP, liquid securities may be obtained/retained before releasing the terminal dues. iii. As per the scheme there is no restriction on continuation of education loan A/C under PNB Sarvottam Shiksha even after the retirement provided the limits are secured by mortgage/liquid securities in terms of the scheme. iv. On the aspect of coverting PNB Sarvottom Shiksha into PNB Vidyalakshyapurti, it is clarified that the loan is already under PNB Vidyalakshyapurthi enjoying concessional interest applicable in case of PNB Sarvottam Shiksha. However, the benefit may be withdraw in case the staff member after retirement opts for the same or is not able to provide collateral security and his terminal dues released. v. On the aspects of non availability of collateral security in the case where staff member has not availed any housing loan it is clarified that he may be permitted to offer any other collateral security acceptable to the bank. 19
  • Transfer of Account:- In order to facilitate hassle free deposit of repayment dues, and to have proper monitoring, branches will have the discretion/ freedom in intra-zone and intra-zone transfer of existing as well as new loan accounts. to the nearby branch of the place of positing/ residence/ domicile of the student borrower after getting necessary proof insupport thereof. However, this should be duly communicated to the borrower. The following para to be added after para 9&10 respectively of Education loan agreements for minor/major students: “ The borrower agrees that it will be open to bank to transfer his/her loan account to any other branch ( within India). Nearby the place of posting/residence/domicile of the student borrower to facilitate repayment of dues as well as monitoring of the account.” In addition, the following clause to be added in the confirmation letter to be obtained from student on attaining the age of majority:- “ It is open to the bank to transfer the Education Loan account to any of its branches which is near to my place of posting/residence/domicile (within India) and inform me accordingly for my further dealings in account at that branch”. Classification:- Advances allowed under the scheme upto Rs. 10 lac in respect of domestic study and Rs 20.00 lac for study abroad will be classified as priority sector. Domicile clause:- Education may be sanctioned at the branch convenient to the borrower. 20
  • Check list:- Loan application on bank‟s format; Passport size photograph; Proof of address.; Proof of age; Proof of having secured pass marks in last qualifying examination; Letter of admission in professional, technical or vocation courses; Prospectus of the course wherein charges like admission fee, examination fee, hostel charges etc. are mentioned; Detail of asset and liabilities of parents/co-obligants/guarantors; In case loan is to be collaterally secured by mortgage of IP, copy of title deed, valuation certificate and non-encumbrance certificate from approved lawyer of the bank to be obtained at the cost of the borrower; Photo copy of passport &visa, in case of study abroad; Any other document/information, depending upon the case and purpose of the loan. Post sanction supervision:- The bank will reserve the right of giving loan under this scheme to any scholar or continue/discontinue the yearly disbursement to a borrower under the scheme, depending upon whether or not he/she shows good results at the institution he/she has joined for studies and whether or not reports about his/her conduct are satisfactory. Such report will be required to be produced to the incumbents incharge of the lending office before the start of each academic year subsequent to the first year. Loan pass book (PNB 589) be issued to the borrower containing details such as date of sanction of loan, amount of loan sanctioned, subsidy received (if any) rate of interest, amount due under each installment, due date of installment etc. 21
  • Weekly monitoring:- “ Follow up/ tracking banks to contract college/university authorities to send the progress report to the bank at regular intervals in respect of students who have availed loans. In case of studies abroad, bank may obtain the unique identification number (UIN) Identity card and note the same in the bank‟s records.” In the morning meeting dated 19.2.2009, it has been decided that all branches should keep a track of whereabouts of the borrowers and co-borrower of all educational loans. It has also been desired that field functionaries be advised to obtain a report from the educational institutions in this respect every six months. It is, therefore, advised that guidelines on follow up/tracking be followed meticulously. Further, branches should ensure that whereabouts of the student borrowers and co- borrowers are ascertained on half yearly basis even after completion of their studies/placement and a record of the same is maintained in the loan file. Circle heads are advised to keep the above aspects under their constant monitoring. Relaxation to the students securing admission in IITS/IIMS/MDI Gurgon/XLRI Jamshedpur, India school of business Hyderabad(RBD/30 dt 04.06.09):- Attention of incumbents is invited to RBD advances circular No.24/08 dated 11.06.08 permitted various relaxation for the students taking admission in the above institutions during academic year 2008-09. It has now been decided to permit the following relaxation to the students securing admission in all the above institutes during the academic year 2009-2010(for full term of the course): Exemption from making the parent/guardian as co-borrower; Exemption from taking guarantee for loans up to Rs. 7.50 lac. 22
  • 1.2 Life insurance coverage for Education Loan Borrowers Background: To maintain competitive edge in our Education Loan Scheme and also to make our portfolio secured against the exigencies of death of the student borrower during the study or repayment period of education loan, we have finalized a life insurance Scheme with M/s Kotak Mhaindra Old Mutual Life insurance Ltd. (KLI). The salient features of the scheme are as under:- The product: The product is a life insurance cover offered by KLI for all new and existing Education loan borrowers of PNB( primary borrowers only and not co-borrowers). The cover is available on a voluntary basis to all Student Borrowers between the age of 18 and 33 years, to whom education loan has been sanctioned by PNB on payment of single premium. Service network: At the time of sanctioning education loan, a brochure of the product will be handed over to the prospective borrower. If he/she volunteers to enroll for the product, he/she will have to complete and submit an Enrolment form cum Declaration of Good Health (DOGH) for cover upto Rs. 15,00,000(Rupees Fifteen Lac only) and for cover amount above Rs.15,00,000 the candidate will have to submit detailed Medical Questionnaire provided by KLI and will have to undergo medical tests as prescribed by KLI. KIL will nominate a customer Relationship Manager (CRM) as a single point of contact for all matters & in respect of the product capable of servicing PNB in all the major cities. All queries may be routed through the CRM which will be responded in three working days and resolved with in seven working days in most instances expect claim, which shall be processed as per claim processing timeline on receipt of necessary claim documentation. 23
  • Premium Rates: A single premium is payable for the life insurance coverage. Such Single Premium charges depends upon the Borrowers‟ Age and Total Insurance Tenor is summation of period of Education, Moratorium Period and Repayment Period. The applicable Premium Rate table is enclosed as Annexure 1. The bank can finance the entire premium or the same may be by paid by the borrower from own sources. Life Cover Benefits: The Sum Assured in the policy shall be summation of sanctioned loan amount and expected accumulated interested payable on the same as calculated by PNB. The sum Assured shall vary depending upon the prevailing rate of interest and the Tenor of Education Plus period of Moratorium. At the request of the borrower, Amount & period/ Amount or period of Coverage can be reduced. The Sum Assured arrived using the above table remains constant for the full tenor of insurance coverage under all circumstances. In the event of death of the covered borrower, KLI will repay to PNB the borrower‟s outstanding liability on the Education Loan towards PNB or the sum Assured whichever is lower. Any amount in excess of borrower‟s liability towards PNB shall be paid to nominee of the borrower as registered with KLI. 24
  • Procedure: All existing and future student borrowers of Education Loan between 18 year and 33years of age (attained age basis) can opt for Life Insurance coverage by completing an Enrolment Form cum Declaration of Good Health. Borrowers with coverage amount exceeding Rs. 15,00,000 (rupees Fifteen Lac only)will have to undergo underwriting including medical interests. The COST OF SUCH Underwriting and Medical Test shall be borne by KLI. The student Borrower has the option to get the premium payable for the Insurance coverage financed from PNB or pay the same using own funds. Even after debiting the Insurance Premium to the education Loan account (in the case of existing as well as prospective borrowers), it will carry the same rate of interest and same security (Guarantee/ Coll. Security) under which the loan falls before debiting the premium. Underwriting: Coverage above Rs.15 Lac IS Subject to individual underwriting including medical tests. A case may be accepted at Standard Rates, may be Rated-up Or may be declined on the basis of underwriting at the discretion of KLI. Exclusions in the coverage: Any claim arising as a result of a member under this policy committing suicide( whether being sane or insane at such time) within one year of commencement of the insurance cover will be disallowed. Where an assured commits suicide within a year of any increase in the cover. The claim payable will be restricted to the lower of: The insurance cover (under this policy) as on the date of death and; The insurance cover (under this policy) one year prior to the death. Foreclosure : If the loan is foreclosed, the Student borrower has a choice to continue the coverage as per original schedule or surrender the coverage and take a proportionate refund of premium. 25
  • Standard operating procedure: The standard operating procedure giving detailed steps/clarification is available on Bank‟s website of PNB e- Circulars. Integration with CBS system:- The required up gradation of CBS system has been completed for application in fresh cases of education loans with following modification: The amount of sum assured shall be rounded of to next ten thousand rupees. (this process shall be automatically taken care by the CBS system while calculating insurance premia). Introduction of Maker- checker concept. There is no change in other guidelines in the matter 26
  • COMPANY AND INDUSTRY PROFILE 2.1 Bank In the recent past banks have diversified into many related areas such as merchant banking, mutual funds, venture capital, equipment leasing, housing finance, hire purchase, credit card, securities trading, equity participation either on their own or through setting up of special subsidiaries. The key areas in banking operations and development at present are consolidation with moderate and selective expansion in social banking with improvement in financial viability, selective modernization, mechanization and computerization, privatization, better customer service, effective managerial culture, adequate profitability, strong and healthy organization structure and effective system of internal supervision, control. Definition of Bank “A person or corporation who holds itself out to receive from public deposits payable on demand or by cheque.” WALTER LEAF A financial institution that accepts deposits and channels the money into lending activity, “he cashed a check at the bank”, “that bank holds the mortgage on my home”. A fund form deposits or contributions; to be used in transacting business; a joint stock or capital. Authorities and banking are divided in their opinion regarding the origin of the terms “bank”. According to some other the English term “bank” is derived from the Italian word “Banco” and French word “Banque” which means bench used as a counter for banking activities. Their opinion is that the medieval European bankers transacted their banking activities that is money changing and money lending by displaying coins of different denominations, in big on the benches in the market place, as such the word 27
  • “Bank” should be associated with the Italian word “Banco”. According to other the term bank is derived from the German word “Bank” which means a joint stock fund or common fund raised from a large number of member from the public. They argue that early European bankers raised a common funds or heaps of money raised from the public; the term bank should be traced with the German word bank. Banking, in its crude firm is an age old phenomenon it was in existence even in accident times. Revil Poudt, a French writer for instance mention about bank notes, in Babylon in 6000 B.C. In Indian, the reference to money lending business are funds in the Manusmrithi also chaldeon Egyptian, and Phencian, history also record the existence of rudimentary banking in early days. Pro. Marshall in this book , money credit and commerce (1923) written about the activity of money changes in the temple of Olympic and other sacred placed in Greece around 2000 B.C. To quote him, “ private money changes began with the task of reducing many metallic currencies , more or less exactly, to a common unit of value and even to expect money on deposit at interest and to lend it out at higher interest permitting mean while draft to be drawn on them”. Another factor that supports the emergence of bank in the early period was the need for borrowing by the monarchial government form finance companies. In the middle age, in Italy the first bank called the “Bank of Venice” was established in 1157, in this ground when the authorities of the State of Venice were in financial trouble due to war. In England, however the Banks of Lombardy has taken the initiative to that modern banking along with riding activities in London but, commercial banking began there only after 1640, when goldsmith started receiving deposits from the public for custody and issue receipts for the acknowledgment which were used as bear demand notes later on. In England, initially the bank of England was established in 1664 on Italian lines to support government with finance. Modern joint stock commercial banks, however came into the picture which the passage of banking act 1833 in England. In India, however modern banking started when the English agency in Calcutta and Bombay began to serve as bankers to the East Indian Company and the Hindustan Bank was the first banking institution to be established in 1779. Commercial banks are the most important source of financial institutions/ credit in the money market. A bank is a profit seeking business firm, dealing in money and credit, it is a financial institution 28
  • dealing in money in the sense that it accepts from the public to keep them in its custody for safety. So also it deals with credit that it creates credit by making advance out of the funds received as deposit to the needy people, thus function as a mobilizes of saving in the economy. STRUCTURE OF INDIAN BANKING SYSTEM Reserve Bank of India Scheduled banks Non-scheduled banks State co- Commercial Central co- Commercial operative Banks operative Banks Banks Banks & primary credit societies Indian Banks Foreign Banks Public sector Banks Private sector Banks State Bank of India Other nationalized Regional rural and its subsidiaries Banks Banks 29
  • 2.2 GROWTH OF BANK Merchant Bankers issued „Hundis‟ to remit funds in India such Merchant bankers were known as Seth‟s. The next stage in the growth of banking was the Goldsmith he started charging something for taking care of the money and bullion. The next stage in the growth of banking is the money lenders, the goldsmith found that on an average the withdrawal of coins were much less than the deposits with him. So he started advancing the coins on loan by charging interest as a safeguard he kept some money in the reserve thus the goldsmith –money lenders became a banker who started performing the 2 functions of modern banking that of accepting deposit and advancing loan. Meaning of Banking Transacting business with a bank; depositing or withdrawing funds or requesting a loan etc. or Engaging in the business of banking, maintaining saving and checking accounts and issuing loans and credit. Functions of Banking: The most important functions of banking may be classified follows. To assemble capital and make it effectively. To receive deposits and make collections. To check out and transfer funds. To discount or lend. To exercise fiduciary or trust powers. To issue circulating notes. 30
  • Primary Function of Banking 1) Safeguarding Bank keeps our money safe. And takes decision wisely about making loans and investment because these are supervised by government for safety and stability of money.  Keeps record of transition.  Identify the culprit and take legal action when theft / fraud / loan defaulter takes place  Transfers our money safety to other accounts and branches in cash and electronically.  Central bank is the government banks that manage, regulate and protect both the money supply and banks themselves. 2) Transferring and exchanging money Bank provide us the facility to make payment to some one get payment from someone using check, draft and electronically. This makes our life easy because we need not to carry money every time with us. And this money transferring or exchanging is done by the bank for us. Customer can have multiple cities to transfer money form one account to another account. 3) Lending Banks takes decision wisely about making loans and investment. Banks give loan only to those who qualify to get according to banks parameters. In this way risk of loosing money by the bank gets minimized. 31
  • 2.3 Nationalization of Financial Institutions RBI is the leader of the financial system but it was established as private Institutions in 1935. It was nationalized in 1948. It was followed by nationalization of the imperial bank of India in 1950 by renaming as the state bank of India. In the same year 245 life insurance companies were brought under government control by merging all of them into a single corporation called “life insurance Corporation of India”. Another significant development in our financial system was the nationalization of 14 major commercial banks in 1969 again 6 banks were nationalization in 1980. Thus, the important financial institutions were brought under public control. Nationalization of 14 major commercial banks in 1969 According to the ordinance, those banks which had deposits of more than Rs.50 crores were taken over by the government. The foreign banks and India banks with less than Rs 50 crores of deposits were excluded from the purview of nationalization. The major 14 banks which were nationalized are 1) Central Bank of India 2) Bank of India. 3) Punjab national bank, 4) Bank of Baroda 5) United Commercial Bank 6) Canara Bank 7) United Bank of India. 8) Dena Bank. 9) Syndicate Bank. 10) Union Bank of India. 11) Allahabad Bank. 12) Indian Bank. 13) Bank of Maharashtra 14) India Overseas Bank. 32
  • Nationalization of six more Banks in 1980 The government of India nationalized six more commercial banks on April 5, 1980. These banks are 1) Vijaya Bank. 2) Corporation Bank. 3) Andhra Bank 4) New Bank of India 5) Oriental Bank of Commerce 6) Punjab and Sind Bank. The reasons given for the nationalization of these banks are as follows; 1) The deposits of each of these banks were more than Rs. 50crores. 2) Their nationalization was felt necessary for effective implementation of the 20-point programme. 3) Their nationalization would help in raising the share of advances to priority sectors from 33.3 percent to 40 percent over the period of next 5 years. 4) The government would able to ensure that a large percentage of deposits would be better utilized to fulfill the socio-economic objectives. 5) There was a greater need for more effective control of the government over the credit policy implemented by the banking system .the deposits in each of these six banks exceeded Rs 200crores. 33
  • 2.4 Commercial bank Is a type of financial intermediary and a type of bank. Commercial banking is also known as business banking. It is a bank that provide checking accounts, saving account and money market account and that accepts time deposits. Commercial bank to refer to a bank or a division of a bank primarily dealing with deposits and loans from corporation or large business. Role of commercial banks Commercial banks engages in the following activities  Processing of payments by way of telegraphic, transfer, internet banking.  Issuing bank drafts and bank cheques.  Accepting money on term deposits.  Lending money by overdraft, installment loan or other means.  Providing documentary and stand by letter of credit guarantees, performance bonds.  Safe keeping of documents and other items in safe deposits box. Scheduled banks: Scheduled banks are the big banks which have a paid- up capital and reserve of Rs. 5 lakh and above. Their names appear on the special list called schedule kept by the reserve bank of India. On June 30, 2000 the total number of schedule banks in India was 299. They have a large number of branches spread in all the parts of the country. The total number of the branches of both scheduled and non scheduled banks rose from 4,151 in 1995 to over 65.930 by the end of the June 2001. Non scheduled banks The non scheduled banks are the small banks whose paid- up capital and reserve are less than Rs. 5 lakh .they financial local trade and small industries. They have very few branches. The number of non schedule banks as on June 30, 2000 was only 3. 34
  • 2.5 COMPANY PROFILE OF PUNJAB NATIONAL BANK: Established in 1895 in Lahore, Punjab National Bank is one of the oldest banks in India having a virtual presence in every important center of the country. The bank has over 35 million customers through 4540 offices including 421 extension counters, out of which 2/3 of its branches in rural and semi rural areas-the largest among nationalized banks, which makes it enjoy one of the highest penetration rate of banking activities in the country. Punjab National Bank caters to a wide variety of audience through spectrum of services including corporate and personal banking, industrial finance, agricultural finance and international finance. Sitting on a vast banking resources and significant presence in almost every lending sphere, the bank has a capital adequacy ratio (CAR), well above the Basel-2 regulatory requirement, at 12.96% as on June 2008, despite being exposed to numerous market and credit risk elements. Constantly strengthening the capital adequacy ratio through internal accruals and a regular increase in Tier 1 capital has put the bank on a very comfortable and formidable position. Punjab National Bank has a net interest margin (NIM) higher than the industry average due to a mix of improving yields and low cost funding base and has one of the healthiest low cost current account saving account (CASA) ratio of 41.31%. It also enjoys the highest rating by all four domestic rating agencies and one of the few banks to boast a rating on its perpetual debt issue. The bank has ambitious plans of major technological up-gradation to establish capability of having 100,000 terminals under the Core Banking Solutions (CBS) with a greater thrust on increasing international footprints. The bank has successfully migrated to the Basel 2 accord in February this year. 35
  • Outlook: Punjab National Bank has always stood with the time even in the most dire of circumstances. The bank is facing stiff challenges from its private sector counterparts. According to the RBI data, the banking business composition breakup between private sector banks and nationalized banks stood at 4% and 60% respectively, but the equation has taken a paradigm shift in favour of private sector banks owing to phased liberalization of the BFSI sector, the composition stood at 21% as against nationalized banks share with reduced 49% in 2007. In a macro-prudential analysis of the Indian economy, it seems as the Indian banking industry has come a long way and entered in its ever challenging growth phase in a very prominent time as more than 49% of population financially excluded offers immense opportunity to the bank. Pursuing its financial inclusion, Punjab National Bank has opened more than 7.86 lakh No frills Accounts and intends to cover 30,000 villages, 75 million people by 2010 through Biometric Technology apart from comprehensive scheme launched for covering finance and insurance (health and life) for rickshaw pullers, project for empowering women weavers, vegetables vendors, etc. The core focus of the bank will be on retaining and further improving low cost deposits, lending to agriculture and small and medium enterprises and repositioning of subsidiaries and joint ventures. At the time of global financial turmoil, where the banks all over the world are creeping under tremendous pressure, Punjab National Bank has managed to insulate itself away from fatal transactions and has strictly adhered to the RBI guidelines. 36
  • 2.6 Industry scenario History of PUNJAB NATIONAL BANK  1895: PNB commenced its operations in Lahore. PNB has the distinction of being the first Indian bank to have been started solely with Indian capital that has survived to the present. (The first entirely Indian bank, the Oudh Commercial Bank, was established in 1881 in Faizabad, but failed in 1958.) PNB's founders included several leaders of the Swadeshi movement such as Dyal Singh Majithia and Lala HarKishen Lal, Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C. Jessawala, Shri Prabhu Dayal, Bakshi Jaishi Ram, and Lala Dholan Dass. Lala Lajpat Rai was actively associated with the management of the Bank in its early years.  1904: PNB established branches in Karachi and Peshawar.  1940: PNB absorbed Bhagwan Dass Bank, a scheduled bank located in Delhi circle.  1947: Partition of India and Pakistan at Independence. PNB lost its premises in Lahore, but continued to operate in Pakistan.  1951: PNB acquired the 39 branches of Bharat Bank (est. 1942); Bharat Bank became Bharat Nidhi Ltd.  1961: PNB acquired Universal Bank of India.  1963: The Government of Burma nationalized PNB's branch in Rangoon (Yangon).  September 1965: After the Indo-Pak war the government of Pakistan seized all the offices in Pakistan of Indian banks, including PNB's headoffice, which may have moved to Karachi. PNB also had one or more branches in East Pakistan (Bangladesh).  1960s: PNB amalgamated Indo Commercial Bank (est. 1933) in a rescue.  1969: The Government of India (GOI) nationalized PNB and 13 other major commercial banks, on July 19, 1969. 37
  •  1976 or 1978: PNB opened a branch in London.  1986 The Reserve Bank of India required PNB to transfer its London branch to State Bank of India after the branch was involved in a fraud scandal.  1986: PNB acquired Hindustan Commercial Bank (est. 1943) in a rescue. The acquisition added Hindustan's 142 branches to PNB's network.  1993: PNB acquired New Bank of India, which the GOI had nationalized in 1980.  1998: PNB set up a representative office in Almaty, Kazakhstan.  2003: PNB took over Nedungadi Bank, the oldest private sector bank in Kerala. At the time of the merger with PNB, Nedungadi Bank's shares had zero value, with the result that its shareholders received no payment for their shares.  PNB also opened a representative office in London.  2004: PNB established a branch in Kabul, Afghanistan.  PNB also opened a representative office in Shanghai.  PNB established an alliance with Everest Bank in Nepal that permits migrants to transfer funds easily between India and Everest Bank's 12 branches in Nepal.  2005: PNB opened a representative office in Dubai.  2007: PNB established PNBIL - Punjab National Bank (International) - in the UK, with two offices, one in London, and one in South Hall. Since then it has opened a third branch in Leicester, and is planning a fourth in Birmingham.  2008: PNB opened a branch in Hong Kong.  2009: PNB opened a representative office in Oslo, Norway, and a second branch in Hong Kong, this in Kowloon.  2010: PNB received permission to upgrade its representative office in the Dubai International Financial Centre to a branch. 38
  • 2.7 VISION To evolve and position the bank as a world class, progressive, cost effective and customer friendly institution providing comprehensive financial and related services. Integrating frontiers of technology and serving various segments of society especially weaker section. Committed to excellence in serving the public and also excelling in corporate values 2.8 Mission To provide excellent professional services and improve its position as a leader in financial and related services. Build and maintain a team of motivated workforce with high work ethos. Use latest technology aimed at customer satisfaction and act as an effective catalyst for socio economic development. 2.9 VALUES AND ETHICS Bonding and Integrity Confidentiality and fair dealing Compliance with rules and regulations Ethical conduct 39
  • 2.10 PRODUCT AND SERVICE: Savings Fund Account – Total Freedom Salary Account, PNB Prudent Sweep, PNB Vidyarthi SF Account, PNB Mitra SF Account Current Account – PNB Vaibhav, PNB Gaurav, PNB Smart Roamer Fixed Deposit Schemes – Spectrum Fixed Deposit Scheme, Anupam Account, Mahabachat Schemes, Multi Benefit Deposit Scheme Credit Schemes – Flexible Housing Loan, Car Finanace, Personal Loan, Credit Cards Social Banking – Mahila Udyam Nidhi Scheme, Krishi Card, PNB Farmers Welfare Trust Corporate Banking – Gold Card scheme for exporters, EXIM finance Business Sector – PNB Karigar credit card, PNB Kushal Udhami, PNB Pragati Udhami, PNB Vikas Udhami. NRI’S & TOURISTS : Currency exchange services are being provided by our 68 Exchange Bureau‟s spread throughout the country. 40
  • ONLINE TAX PAYMENT: PNB provides the facility of online payment of service tax, excise duty, , custom duty & all charges. CASH MANAGEMENT SERVICE (CMS) PNB’s CMS facilitates management of receivables and payments in technology driven environment, ensuring availability of funds at reduced cost, helping reconciliation at multi location accounts MUTUAL FUNDS besides providing customized MIS. & INSURANCE The bank has tied-up with Principal Financial Group for providing Mutual Funds and Insurance services & also tied up for distribution & marketing of UTI Mutual Funds. FOREIGN EXCHANGE: PNB has 150 branches authorized for handling foreign exchange business and these branches have been provided with SWIFT connectivity to ensure faster realisation of funds. LOCKERS : Now, customer can relax with assurance of having your locker at thePNB branch nearest to their home. CUSTOMER CARE FACILITY: All the banking queries and problems are just a call away!PNB presents 24 hr. customer care facility. 41
  • GOLD COIN: PNB gives opportunity to dazzle the well wishers, patrons, partners and acquaintances with the mystical charisma of PNB‟s 999.9 fineness pure 24-carat gold coins and to convey the true value of treasured relationship. Enjoy guarantee of purity & weight of Electronic Clearing Service (ECS) hallmarked gold coins. & Electronic Funds Transfer (EFT) Avail ECS for quick movement of funds in a paperless mode & EFT to ensure an expeditious transfer of fund by using electronic media. 42
  • 2.11 Awards and achievements Awards & Achievements of Punjab National Bank in Recent Times at the IDRBT Banking Technology awards for the "Best IT Team of the Year Award" year 2005-06. SKOTCH Challenger Award for Change Management for the year 2005-06 Best IT User in Banking & Financial by NASSCOM in partnership with Economic Times Services Industry - 2004 for Excellence in Corporate Governance - 2005 by Golden Peacock Award Institute of Directors FICCI's Rural Development Award for Excellence in Rural Development - 2005 Skotch Challenger Award for for becoming a pioneer in Public Banks - 2005 Exemplary use of Technology Golden Peacock National Training - by Institute of Directors 2004 & 2005 National Award for Excellence in SSI Ranked 2nd for 4 consecutive years - 2002, 2003, Lending 2004 & 2005 43
  • Banking Technology Awards 2004 Runner up in 'Best IT Team of the Jointly Adjudged by IBA, Finacle & TFCI Year Award 2005' Money Outlook Award - 2004 Runner up in 'Best Bank (public Sector) of the year Award' -2005 for excellence in export perforamnce for 3 consecutive years 2001, 2002 & 2003 Niryat Bandhu Gold Trophy by Federation of Indian Exporters Organization (FIEO) by the leading Financial Daily The Economic 21st Amongst Top 500 Companies Times, June 2005 9th amongst India's Top 50 Most A.C Nielson Survey, The Economic Times Dec Trusted Service Brands 2004 3rd Rank amongst Banking Sector in India The Bankers' Almanac, January 2006 323rd Rank in the World 368 amongst Top 1000 Global Banks The Banker, London July 2005 Skoch Challenger Award for Winner for becoming a pioneer in public banks by Exemplary Use of Technolgy Skoch consultancy services pvt ltd, Gurgaon 2005 FICCI's Rural Development Award Award for excellence in rural development 2005 44
  • Amity Business School, Noida has conferred the Award to PNB, after an in-depth research to Amity Global Corporate Excellence analyse the strengths and core competencies of the Award Global 500 companies and banks which have already made an indelible most admired impression on the Indian economy. 2008 & 2007 & 2005 IBA, Finacle & TFCI jointly adjudged PNB as Banking Technology Awards runner up in "Best IT Team of the year Award" 2005 Best IT Implementation 2007 PC Quest Users‟ Choice Award & 2005 Symantec Visionary Award Information Security Impact 2005 Money Outlok adjudged PNB as runner up in Money Outlook Award "Best Bank (Public Sector) of the year Award" 2005 IBA, Finacle & TFCI runner up Award for Banking Technology Awards Outstanding Achiever of the Year (Individual). 2005 Golden Peacock Innovative 2010 (for BCP implementation) Product/Service Award Golden Peacock Award for Excellence Winner in the „Large Joint Entry‟.2009 & in Corporate Governance 2007 & 2005 Skoch Challenger Award for Change For upliftment of Weaker sections of society 2006 Management IDRBT Banking Technology Awards Best IT Team of the Year Award 2006 45
  • National Award For Excellence in First Prize by By Ministry of Small Scale lending to Tiny sector Industries.2006 Skoch Challenger Award for capacity Skoch Consultancy Services Pvt Ltd 2007 building for FTC initiative Computer Associates Excellence Excellence in EMS Roll Out. 2007 Award For Best IT Implementation by IDG Media Pvt. CIO 100 Award Ltd.2007, 2008 & 2009 National Award for Excellence in For Lending to Micro enterprises 2007 Lending to Micro Enterprises Award for the use of Technology for Institute for Development and Research in Financial Inclusion. Banking Technology (IDRBT), Hyderabad. 2008 Dun & Bradstreet Award for “Priority Sector Lending including Financial Dun & Bradstreet 2009 Inclusion”. Khadi & Village Industry Commission, Ministry National Award for Excellence in of Micro, Small & Medium Enterprises, Govt. of Lending for Institutional Finance in India Propagating KVI Programmes in (Interest Subsidy Eligibility Certificate Scheme) NORTH ZONE 2009 National Award for Excellence in Khadi & Village IndustryCommission, Ministry of Lending for Institutional Finance in Micro, Small & Medium Enterprises, Govt. of Propagating KVI Programmes in India CENTRAL ZONE (Interest Subsidy Eligibility Certificate Scheme) 46
  • Khadi & Village IndustryCommission, Ministry National Award for Excellence in of Micro, Small & Medium Enterprises, Govt. of Lending for Institutional Finance in India Propagating KVI Programmes in NATIONAL LEVEL (Interest Subsidy Eligibility Certificate Scheme) 2009 Khadi & Village IndustryCommission, Ministry National Award for Excellence in of Micro, Small & Medium Enterprises, Govt. of Lending for Institutional Finance for India Propagating KVI Programmes in NORTH ZONE (Prime Minister Employment Generation Programme) 2009 Khadi & Village IndustryCommission, Ministry National Award for Excellence in of Micro, Small & Medium Enterprises, Govt. of Lending for Institutional Finance for India Propagating KVI Programmes in CENTRAL ZONE (Prime Minister Employment Generation Programme) 2009 India Pride Award by dainik Bhaskar Excellence in PSU 2009 and Daily News analysis Indira Gandhi Rajbhasha Shield Promoting Hindi 2009 Emerson Uptime Champion Awards 2009 “Best InfoSphere Warehouse 2009 (for implementation of Enterprise Wide Solution” Award by IBM Data Warehouse) 47
  • 2.12 SWOT ANALYSIS: STRENGTHS: Wide network. Large number of customers. Fast adaptability to technology. Brand recognition. Excellent training. Providing better services. Building long term customer relationships WEAKNESS: Casual behavior. Product is very good but it is mainly suitable for the higher income group and is not suitable for the middle income group. OPPORTUNITIES: Fast growing Indian economy. High growth in banking sector. Liberal markets. Micro financing. Ample scope for financing flats and apartments for the salaried class in the higher income group. 48
  • THREATS: Large number of market players. Most of the higher salary population go for private banks for education and other loans because of flexibility in lending terms and norms . 49
  • SYNDICATE BANK Established in the year 1925, Syndicate Bank had its first office in the coastal region of Karnataka, Udupi. It was then named as 'Canara Industrial & Banking Syndicate Ltd'. The bank was initiated by a trio - Sri Upendra Ananth Pai, a businessman, Sri Vaman Kudva, an engineer and Dr.T M A Pai, a physician, with a capital of Rs. 8000. During that time, the crisis in the handloom industry crippled the local weavers completely. The main aim of Syndicate Bank was to provide financial assistance to them, by mobilizing Small savings from the country. Three years later, in 1928, the bank came up with Pigmy Deposit Scheme, in which it collected as little as 2 annas per day, at the doorsteps of the depositors through its agents. The scheme existing till date, earns the bank a sum of Rs. 2 crore daily. In the same year, Syndicate bank opened its first branch at Brahmavar in Dakshina Kannada District. It became a member of the Clearing House for the first time at Bombay, in 1937. Almost a decade later, Syndicate Bank opened 29 branches opened in a single day in rural areas. Its 100th branch opened at Ilkal in Karnataka in 1957. The bank with its socio-economic aim was making extensive growth and advancement and entered Foreign Exchange business by opening Foreign Exchange Department at Bombay. In 1964, the bank changed its name to 'Syndicate Bank Limited' and the head office was also shifted from Udupi to Manipal. The bank had then set up an Economic Research Department, being one of the first few Banks to emphasize on research in Banking, even before nationalization. In 1971, it opened the first specialized branch in Foreign Exchange, in Delhi. Five years later, it opened its first overseas branch opened at London. In 1984, Syndicate Bank opened its 1000th branch in Hauz Khas, Delhi. In the same year, it undertook the management of Musandam Exchange Co. in Muscat. Five years thence, in 1989, Syndicate Bank opened its 1500th branch at Kanakumbi. In 1999, it raised a capital of Rs. 125 Crore from its more than 4 lakh shareholders. Next year, in 2000, the bank established its first specialized Capital Market Services, at Mumbai. In 50
  • 2003, Syndicate Bank entered into a MOU with Bajaj Allianz, for distribution of Life Insurance products. In 2004, Syndicate Bank amalgamated with United India Insurance Co. Ltd. for distribution of Non-Life Insurance products. In 2004, Syndicate Bank also started utility bill payment services through Internet banking introduced. In 2005, the bank commenced the online reservation of railway tickets through Indian Railway Catering & Tourism Corporation Ltd for its customers. It was during this time that it entered into a MOU with SFAC for promoting of investments in Agri-business products. The 2000th branch was opened at Tondiarpet, Chennai, in 2006. In the same year, the bank commenced the first BPO outfit of a Nationalized Bank, SyndBank Services Limited. This was a wholly owned subsidiary of Syndicate Bank. With the age of progressive banking, Syndicate Bank has created a name for itself in the last 80 years. Rooted in rural India, the Bank has a clear picture of the grass root realities and a vision of future India. Changing with the changing times, the Bank has well equipped itself with all the facilities of the new age, without, however, altering its distinctive socio-economic and cultural culture. Syndicate Bank's unique principle of mutual development, of both the Bank and the people, has won it a long list of clientele, which includes both the rural and the semi-urban class. Products & Services Deposits Loans Internet Banking Insurance Cash Management Services ATM Services Recovery Channel NRI Services Electronic Funds Transfer (EFT) System SyndDemat (Depository Participant Services) Syndicate Gift Cheques 51
  • STATE BANK OF MYSORE State Bank of Mysore was established in the year 1913 as Bank of Mysore Ltd. under the patronage of the erstwhile Govt. of Mysore, at the instance of the banking committee headed by the great Engineer-Statesman, Late Dr. Sir M.Visweswaraiah (Bharat Ratna). Subsequently, in March 1960, the Bank became an Associate of State Bank of India.State Bank of India holds 92.33% of shares. The Bank's shares are listed in Bangalore, Chennai, and Mumbai stock exchanges. As an associate bank, State Bank of Mysore has a team of employees with a management. This bank has in excess of 650 branches, and 10200 employees. The bank has regional offices in Bengaluru, Mysore, Mangalore, Mandya, Hassan, Shimoga, Davanegere, Bellary,Tumkur,Kolar,Chennai,Coimbatore,Hyderabad,Mumbai and New Delhi. The bank's turnover in the year 2008-2009 was around US$10 Billion and Profit about US$65 Million. Product Loans, Credit cards, Savings, Investment vehicles 52
  • DATA ANALYSIS AND INTERPRETATION 3.1 Comparative Study Of Interest Rate On Education Loan Sanctioned Punjab National Bank, Syndicate Bank And State Bank Of Mysore in 2007 – 2008 Banks Interest rate of loan amount up to 4 lakh Punjab National Bank 10.5 Syndicate Bank 12 State Bank of Mysore 12. 12 11.5 11 P unjab National B ank S yndic ate B ank 10.5 S tate B ank of 10 Mys ore 9.5 Interes t rate of loan amount up to 4 lakh In the above table we can see the interest rate of educational loan PNB, SYDICATE Bank and SBM. The interest rate of PNB is 10.50%, Syndicate bank is 12% and SBM is 12%. The interest rate is charge on the basis of PLR. The interest rate of loan amount upto 4lakh there is no security required. The actual interest rate at which an individual will be able to get a education loan depend on the individual's financial profile and negotiating ability. 53
  • Interest rate of loan amount up to 4 lakh Banks to 7.5 lakh Punjab National Bank 10.50 Syndicate Bank 12 State Bank Of Mysore 12.75 14 12 10 Punjab National 8 Bank 6 Syndicate Bank 4 2 State Bank Of Mysore 0 Interest rate of loan amount up to 4 lakh to 7.5 lakh In the above table we can see the interest rate of educational loan PNB, SYDICATE Bank and SBM. The interest rate of PNB is 10.50%, Syndicate bank is 12% and SBM is 12.75%. The interest rate is charge on the basis of PLR. The interest rate of loan amount upto 4lakh to 7.5 lakh it required collateral security. When compared to the interest rate of loan amount upto 4 lakh. The interest rate of loan amount upto 4 lakh to 7.5 lakh is raised. The actual interest rate at which an individual will be able to get a education loan depend on the individual's financial profile and negotiating ability. 54
  • Banks Interest rate of loan amount above 7.5 lakh Punjab National Bank 10.50 Syndicate Bank 12 State Bank Of Mysore 12.75 14 12 10 P u n jab Natio n al 8 B an k 6 S yn d ic ate B an k 4 S tate B an k O f 2 Mys o re 0 Interes t rate of loan amount above 7.5 lakh In the above table we can see the interest rate of educational loan PNB, SYDICATE Bank and SBM. The interest rate of PNB is 11.50%, Syndicate bank is 10% and SBM is 13.25%. The interest rate is charge on the basis of PLR. The interest rate of loan amount above 7.5 lakh it required collateral security. When compared to the interest rate of loan amount upto 4 lakh to 7.5lakh. The interest rate of loan amount above 7.5 55
  • lakh is same. The actual interest rate at which an individual will be able to get a education loan depend on the individual's financial profile and negotiating ability. 56
  • 3.2 Comparative study of interest rate on education loan sanctioned by Punjab national bank, syndicate bank and state bank of Mysore in 2008 -2009 Banks Interest rate of loan amount up to 4 lakh Punjab National Bank 10.5 Syndicate Bank 11 State Bank of Mysore 12.50 12.5 12 11.5 P unja b Na tiona l B a nk 11 S yndic a te B a nk 10.5 S ta te B a nk of Mysore 10 9.5 Inte re s t rate of loan amount up to 4 lakh In the above table we can see the interest rate of educational loan PNB, Sydicate Bank and SBM. The interest rate of PNB is 10.50% , Syndicate bank is 11% and SBM is 12.50%. the interest rate is charge on the basis of PLR. The interest rate of loan amount upto 4lakh there is no security required. 57
  • Banks Interest rate of loan amount up to 4 lakh to 7.5 lakh Punjab National Bank 10.50 Syndicate Bank 11 State Bank Of Mysore 13.25 14 12 10 8 P unjab National B ank 6 S yndic ate B ank 4 S tate B ank O f Mys ore 2 0 Interes t rate of loan amount up to 4 lakh to 7.5 lakh I found that interest rate on education loan of State bank of Mysore is 2.75%,Syndicate Bank 0.5% high as compare to Punjab National Bank. The actual interest rate at which an individual will be able to get a education loan depend on the individual's financial profile and negotiating ability. 58
  • Banks Interest rate of loan amount above 7.5 lakh Punjab National Bank 10.50 Syndicate Bank 11 State Bank Of Mysore 13.25 14 12 10 P u n jab Natio n al 8 B an k 6 S yn d ic ate B an k 4 S tate B an k O f 2 Mys o re 0 Interes t rate of loan amount above 7.5 lakh I found that interest rate on education loan of State bank of Mysore is 2.75%,Syndicate Bank 0.5% high as compare to Punjab National Bank. The actual interest rate at which an individual will be able to get a education loan depend on the individual's financial profile and negotiating ability. 59
  • 3.3 Comparative study of interest rate on education loan sanctioned by Punjab national bank, syndicate bank and state bank of Mysore in 2009- 2010 Banks Interest rate of loan amount up to 4 lakh Punjab National Bank 10.5 Syndicate Bank 10 State Bank of Mysore 12.50 14 12 10 P unjab 8 National B ank 6 S yndic ate B ank 4 S tate B ank of Mys ore 2 0 Interes t rate of loan amount up to 4 lakh In the above table we can see the interest rate of educational loan PNB, Sydicate Bank and SBM. The interest rate of PNB is 10.50% , Syndicate bank is 10% and SBM is 12.50%. the interest rate is charge on the basis of PLR. The interest rate of loan amount upto 4lakh there is no security required. I found that interest rate on education loan of State bank of Mysore is 2.5%,Punjab National Bank 0.5% high as compare to Syndicate Bank. The actual interest rate at which an individual will be able to get a education loan depend on the individual's financial profile and negotiating ability 60
  • Banks Interest rate of loan amount up to 4 lakh to 7.5 lakh Punjab National Bank 10.50 Syndicate Bank 10 State Bank Of Mysore 13.25 14 12 10 P u n jab 8 Natio n al B an k 6 S yn d ic ate B an k 4 S tate B an k O f 2 Mys o re 0 Inte re s t rate of loan amount up to 4 lakh to 7.5 lakh In the above table we can see the interest rate of educational loan PNB, Sydicate Bank and SBM. The interest rate of PNB is 10.50% , Syndicate bank is 10% and SBM is 13.25%. the interest rate is charge on the basis of PLR. The interest rate of loan amount upto 4lakh there is no security required. I found that interest rate on education loan of State bank of Mysore is 3.25%,Punjab National Bank 0.5% high as compare to syndicate Bank. The actual interest rate at which an individual will be able to get a education loan depend on the individual's financial profile and negotiating ability. 61
  • Banks Interest rate of loan amount above 7.5 lakh Punjab National Bank 11.25 Syndicate Bank 10 State Bank Of Mysore 13.25 14 12 10 P unjab National 8 B ank 6 S yndic ate B ank 4 S tate B ank O f Mys ore 2 0 Interes t rate of loan amount above 7.5 lakh I found that interest rate on education loan of State bank of Mysore is 3.25%,Punjab National Bank 0.5% high as compare to syndicate Bank. The actual interest rate at which an individual will be able to get a education loan depend on the individual's financial profile and negotiating ability. 62
  • 3.4 Comparative study of interest rate on education loan sanctioned by Punjab National Bank, Syndicate Bank And State Bank of Mysore In 2010 -2011 Banks Interest rate of loan amount up to 4 lakh Punjab National Bank 10.5 Syndicate Bank 10 State Bank of Mysore 12.50 14 12 10 P unjab National 8 B ank 6 S yndic ate B ank 4 S tate B ank of Mys ore 2 0 Interes t rate of loan amount up to 4 lakh In the above table we can see the interest rate of educational loan PNB, SYDICATE Bank and SBM. The interest rate of PNB is 10.50%, Syndicate bank is 10% and SBM is 12.50%. The interest rate is charge on the basis of PLR. The interest rate of loan amount upto 4lakh there is no security required. The actual interest rate at which an individual will be able to get a education loan depend on the individual's financial profile and negotiating ability. 63
  • Banks Interest rate of loan amount up to 4 lakh to 7.5 lakh Punjab National Bank 11.25 Syndicate Bank 10 State Bank Of Mysore 13.25 14 12 10 P unjab National 8 B ank 6 S yndic ate B ank 4 S tate B ank O f Mys ore 2 0 Interes t rate of loan amount up to 4 lakh to 7.5 lakh In the above table we can see the interest rate of educational loan PNB, SYDICATE Bank and SBM. The interest rate of PNB is 11.50% , Syndicate bank is 10% and SBM is 13.25%. The interest rate is charge on the basis of PLR. The interest rate of loan amount upto 4lakh to 7.5 lakh it required collateral security. When compared to the interest rate of loan amount upto 4 lakh .The interest rate of loan amount upto 4 lakh to 7.5 lakh is raised. The actual interest rate at which an individual will be able to get a education loan depend on the individual's financial profile and negotiating ability. 64
  • Banks Interest rate of loan amount above 7.5 lakh Punjab National Bank 11.25 Syndicate Bank 10 State Bank Of Mysore 13.25 14 12 10 8 P unjab National B ank 6 S yndic ate B ank 4 S tate B ank O f 2 Mys ore 0 Interes t rate of loan amount above 7.5 lakh In the above table we can see the interest rate of educational loan PNB, SYDICATE Bank and SBM. The interest rate of PNB is 11.50% , Syndicate bank is 10% and SBM is 13.25%. The interest rate is charge on the basis of PLR. The interest rate of loan amount above 7.5 lakh it required collateral security. When compared to the interest rate of loan amount upto 4 lakh to 7.5lakh. The interest rate of loan amount above 7.5 lakh is same. The actual interest rate at which an individual will be able to get a education loan depend on the individual's financial profile and negotiating ability 65
  • 4.1 Findings SL. BASIS OF STATE BANK OF PNB SYNDICATE BANK NO. DIFFERENCE MYSORE 1 Max. loan for Rs. 10.00 Lacs Rs. 10.00 Lacs Rs. 10.00Lacs studies in India 2 Max. loan for Rs. 20.00 Lacs Rs. 20.00 Lacs Rs. 20.00 Lacs studies in Abroad 3 Interest Rates Upto Rs.4.00 lacs Upto Rs. 4 lakh p.a. Upto Rs.4.00 lacs PTLR Above Rs. 4 lakh 12.5% 11.% p.a. Above Rs.4.00 lacs Above Rs.4.00 lacs PTLR + 0.5% 13.5% 4 Repayment one year after one year after one year after Period starts completion of course completion of course completion of course from or 6 months after or 6 months after or 6 months after securing a job, securing a job, securing a job, whichever is earlier whichever is earlier. whichever is earlier 5 Repayment To be repaid in 5-7 To be repaid in 5-7 To be repaid in 5-7 Period years after years after years after commencement of commencement of commencement of repayment repayment repayment 6 Margin Upto Rs. 4.00 lacs Upto Rs. 4.00 lacs Upto Rs. 4.00 lacs : : Nil : Nil Nil Above Rs. 4.00 lacs Above Rs. 4.00 lacs Above Rs. 4.00 lacs : : Studies in : Studies in Studies in India India 5% India 5% 5% Studies in Abroad Studies in Abroad Studies in Abroad 15% 15% 15% 66
  • 7 Processing Fees Rs 25o processing Rs 200 processing Rs25o processing fee/upfront charges fee/upfront charges fee/upfront charges Deposit of Rs. 5000/- Deposit of Rs. 5000/- Deposit of Rs. 5000/- for education loan for for education loan for for education loan for studies abroad studies abroad which studies abroad which will be adjusted in the will be adjusted in the margin money margin money 8 Security Upto Rs. 4.00 Upto Rs. 4.00 Upto Rs. 4.00 lacs : No Security lacs : No Security lacs : No Security Above Rs. 4.00 lacs Above Rs. 4.00 lacs to Above Rs. 4.00 lacs : to Rs.7.50 lacs Rs. 7.50 lacs : Third Third Party Collateral Party Guarantee Guarantee Security of Suitable Above Rs. 7.50 lacs to Above Rs. 7.50 lacs to value Rs. 10 lacs(India) : Rs. 10 lacs(India) : or co-obligation of Tangible Collateral Tangible Collateral parents / guardian / security for full value security for full value third of loan of loan party. Above Rs. 7.50 lacs to Rs. 15 lacs(Abroad) : Above Rs. 7.50 lacs Tangible Collateral to Rs. 15 security of suitable Co-obligation of value of loan or third parents together with party guarantee tangible coll, Rs 15 lacs to Rs. 20 securities suitable lacs (Abroad) : value. Tangible Collateral security for full value of loan 67
  • Summary of findings 1. Frequent changes in regulation made by central bank affect the banks to a larger extent because banks has to follow according to the directions given by the central bank which reduces the profit of the bank. 2. Now a days banks cannot charge their own management interest rates they are force to look the market and follow according to the RBI rules and regulations, this has unable them to balance both the income and expenses ,for eg., now the fixed deposit interest rate is 10.5% and is housing loan interest rate is 8.5%, they have the bear the loss of -2% which the banks have to pay themselves. 3. Middle class people cannot afford to the current interest rate, it is too expensive for them. 4. Procedures for applying the loan is very time consuming , lengthy and very complicated. 5. Inflation has also affected the banks indirectly. 6. Political pressures. 7. Sanctioning of loan is not easy, it takes longer time. 8. Misappropriation in the bank. 68
  • Suggestion and recommendation Banks should go for advertisement Campaign from Scratch. Banks should try to cash its brand image. Strong branch network should be made and staff personnel‟s incentives should be increased. Banks should increase its product line in education loans. Special scheme for non-professional students as well as for professional students should be increased. Banks should introduce some new model keeping in mind the loan suitable for medium income group customer. Presence of some famous personality in Advertisement or in Pamphlet‟s insuring better retention in the mind of customers. In this age of information, the customer before taking loans collects all the information about various brands. The banks should provide a combined booklet of the product range in order to upgrade the knowledge of future takings of loans. 69
  • Conclusion On the basis of above findings and comparison among PNB, Syndicate bank and SBM it is clearly observe that public banks have more reach, variety and flexibility in their education loan schemes Maximum loan for studies in India is ranging from Rs. 7.50 lacs to 10.00 lacs and for studies in Abroad it is Rs. 15-20 lacs by public banks Interest rates are vary from 9.5% to 11.5% p.a and PNB uses PTLR system. All banks have same repayment facility i.e. one year after completion of course or 6 months after securing a job, whichever is earlier. Repayment period is also vary from 5-7 year after commencement of repayment in the case of education loan is taken from public banks Margin is same in PNB,Syndicate Bank and SBM i.e. Upto Rs. 4.00 lacs : Nil Above Rs. 4.00 lacs : Studies in India 5% Studies in Abroad 15% PNB, Syndicate Bank and SBM charge processing fees .Deposit of Rs. 5000/-for education loan for studies abroad which will be adjusted in the margin money. 70
  • BIBILIOGRAPHY Books referred: Dr.P.C.Tulasian, “Financial Management”, 1st edition, S.Chand Publication, Pg.no.13.13 - 13.15 E.Dharmaraj, “Financial Services”, 1st edition, S.Chand Publication, Pg.no.65 - 72. K.D. Basava “Elements of Indian economics” page no 10.5 12th edition of loan compendium- retail banking schemes. Websites:- www.pnb .com www.statebankof mysore.com www.syndicate bank in.com www.pnb.com www.apnaloan.com www.timesofmoney.com www.pnbhfl.com 71