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Chapterwise LOAN MANAGEMENT

LOAN MANAGEMENT

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Chapterwise LOAN MANAGEMENT

  1. 1. CHAPTER – I Introduction 1.1 General Background Nepal is an underdeveloped country. A large no. of people are still below poverty line due to many difficulties, they are not able to eliminate the poverty and rise these standard of living. Income of most of the Nepalese is used for consumption purpose. They earn and spent all in daily uses like food, clothes etc. They can't save their earning and they don't have got any chances to invest in returnable assets so Nepalese are poor and poor not improving their life style in spite of this 21st contrary. They can't save their income some of them save their income but it is too little that it can not be invested for good and productive purpose so to utilize those small savings of each individual in the required sector and create the opportunity for employment various financial inspirations are established. The government should be making new strategic to attract the small saver then after Nepalese can invest different productive sectors. Amount them "Swastik Multipurpose Co-operative Society Ltd." is also established for the upliftment of standard of the individual and also of the society. Swastik Multipurpose Co-operative Society Ltd. was established in 2058-04-25 BS. It is located in Narayangarh-3, Chitwan. Its main objective is to collect the money in small amount from the people and utilize that money for different purposes like household, industries, education, agriculture etc. Main method of deposit collection is daily saving, monthly saving, child saving and periodic savings. The collected money from that different method is provided as loan for different individual and non individual purpose among those members. Swastik Multipurpose Co-operative Society Ltd. is legally established and registered to perform the functions of cooperative organization. There were initially 47 members during its established. New gradually the no. of members has increased to 483 with 192 men. This cooperative is continuously collecting money and providing loan to its members. It is operating under the rules and regulations of the organization. 1
  2. 2. In the contest of developing counting like Nepal these is great importance of co-operative society. It helps the weaker section of community for their social and economic enlistment. It collects the little money saver and provide the users who gives the return of that saving. From that process investors and users both got benefits at last directly or indirectly government/nations got advantages. A co-operative society is mainly focused for the poor and weaker section of community. 1.2 Literature Survey As we know that the commercial banks is an important business which plays great role in this business world. The background highlights the Nepalese Banks in the various ways above literature survey, Highlights the review of various article books legal documents and research works. According to Nepal Company Act 2031, "A Commercial banks refers to such bank which deals in money exchange, accepting deposits, advancing loan and commercial transaction except specific banking related to co-ordination agriculture industry and other objectives." According to U.S. law," Any institution offering deposit subject of withdraw on demand and making loans of commercial or business nature in bank." 1.3 Purpose of the study The purpose of this field work report is to introduce Swastik Multipurpose Co-operative Society Ltd., Narayangarh which help to promote business, agriculture and industrial especially in Chitwan's area periphery of Bharatpur, Gaidakoat. Certain word is done with special motive, without any target. It cannot active its destination. Preparation of this fieldwork report has also same objectives. Purpose of this fieldwork report is to have experience of actual work in real job of own cementation area for the students of BBS 3rd year. But it has also some specific purpose with are as follows. 1. To evaluate the loan lend and recovery amount in different fiscal year. 2. To study about the investment and recovery system of Nepal Bank Limited, in different sector of loan. 3. In this competitors days, how the bank has investing and recovering last years and these year. 2
  3. 3. 4. To know about rules of bank, interests rates and needs of documents while investing. 5. To know about the mobilization of the collected fund from the individuals. 6. To know about the loan invested and collected by the firm. 7. To know about the difficulties faced by the firm and individual in the process of loan mobilization. 1.4 Problems of study Problems of study are as flows:- 1. Lending procedure of this bank is not satisfactory compare to other commercial banks. 2. Loan distribution of staffs among the department is not satisfactory. 3. Co-ordination of staffs among the department is not satisfactory. 4. Interest rate for loan and advance are low compare to other commercial bank which is difficult to earn more profits. 1.5 Hypothesis It is assumed that the loan mobilization of the company is in better condition. Better loan mobilization means that the amount collected in the co-operation are mostly utilized as loan. We can also assume that the risk is diversified it means loan is allocable in different and suitable sectors. Loan if provide in only one sector may result loss to the company but if it is diversified, if loss occurs in one sector, it can be recovered from the profit of other sectors, in the same way the recovery of loan and interest is also assumed to be utilized in the productive sector which provides timely and better return. 1.6 Limitation of study Each and every study is followed by some limitation. This study too has some limitation which is as follows: 1. Time constraint is one of the Major factors of the field study. It took more than two weeks for the fieldwork to accomplish. 2. The main sources of the study are the answer given by the staffs of the organization. The accuracy of the data collected depends upon the sources. 3. Only five years of data are analysis. 3
  4. 4. 4. Being a student resources constraint is another factor that has limited the scope of the study. CHAPTER – II 2. Research Methodology Methodology is studying ways. This is important part in report writing. Researcher should be adopting good methodology in research. Actuality methods used for the project by research are discussed as below. 2.1 Research Design Research design refers to the framework of the planning of the research assignment the research main concentrate is to give the clear and pure data. We can show the research design procedure through the following figure: Figure No. 1 Research Design Procedures Selecting the organization Selecting the topics Data collection Primary data Secondary data Through data analysis Report writing 4
  5. 5. 2.2 Method of Data Collection It can be adopted different method to collect the data, while studying something we have to depend on nature and objective of relative's subject. To identify the planning of the project tow type of data collection .they are as follow:- A) Primary data collection B) Secondary data collection A.Primary data collection:- The originally collected data is known as primary data. in this method while preparing report we meet with related person and get the data by interacting with them , for the collection the primary data some available several procedure are: ►Interview ►Visiting with relative person ►Question ►Investigation ►Observation ►Phone & e-mail ►Firm’s daily book B. Secondary data collection:- There are many methods to collect secondary data. It was collected from annual reports and organization’s provided other publications and necessary data .it can be colleted indirectly. 2.3 Tool used in the process of preparing report The total used in the process of preparing report is: I. Interview II. Tabulation method III. Observation IV. Schedules V. Percentage method 5
  6. 6. VI. Graphical Presentation - Pie chart - Bar Diagram - Figure 2.4 Fieldwork Procedure Fieldwork procedures which are done during the data collection are as follows: 1. Orientation class was taken to get knowledge about the fieldwork with the help of lecture. 2. Than we have to select our topic in which we are going to write our fieldwork reports. 3. After choosing subjects, we have to write application which must be registered in collage. 4. Collage has provided us permission letter on behalf of student to collect the data form the bank. 5. Preparation of question for fieldwork data collects. 6. To make appointment with manager of bank. 7. Manager has given information to the staff of concern department. 8. Data were collected accordingly formatted question. 9. At last, data were presented and analyzed. In this way, fieldwork report has been prepared. 6
  7. 7. 2.5 Chapter Scheme The Chapter planning is found different ways which are given below: Chapter I – Introduction Chapter I – Research Methodology Chapter I – Presentation and Analysis of Data Chapter I – Summary and Conclusion 7
  8. 8. CHAPTER – III 3. Presentation and Analysis of Data 3.1 Presentation of Data It is needless to say that diagrams are more attractive, fascinating and impressive then the numerical data, since they are attractive they leave much lasting impression on mind. So here the data of Swastik Multipurpose Co-operative Society Ltd. of previous 3 year is presented in tabular form and pie and bar chart. A) Investment of Loan The fund collected from the individuals is invested in different sectors. Investment in the productive sector helps to generate employment opportunity as well as to earn a good return in the same way this collection also helps to solve the minor economic problems of the daily life by investing in nonproductive sectors. 8
  9. 9. Table No. 1 Investment of loan in various sectors NRs. '000' S.N. Fiscal year sector 060/061 061/062 062/063 1. Agriculture 430 510 580 2. Household 425 500 530 3. Housing 305 560 730 4. Business 360 515 830 5. Education 130 330 310 6. Emergency 80 120 130 Total 1730 2535 3110 (Sources: Annual audit report of SMCSL) Figure No. 2 Bar diagram of investment of loan in various sector 9 900 800 700 600 500 400 300 200 100 0 Agriculture Household Educatin Emergency Housing Business 060/061 061/062 062/063 Sectors
  10. 10. B) Recovery of Loan The loan invested is to be recovered within a specific time. Table No. 2 Recovery of loan from various sectors (Rs. In '000') S.N. Fiscal year sector 060/061 061/062 062/063 1. Agriculture 400 445 490 2. Household 205 315 370 3. Housing 145 310 473 4. Business 310 470 635 5. Education 105 170 185 6. Emergency 20 50 65 Total 1185 1760 2218 (Sources: Annual audit report of SMCSL) Figure No. 3 Bar diagram of Recovery of loan from various sector 10 700 600 500 400 300 200 100 0 Agriculture Household Housing Business Education Emergency 060/061 061/062 062/063 Sectors Amount (Rs.)
  11. 11. C) Interest received by the co-operative Ltd. The collected deposit is invested in various sectors. For such investment certain percentage of interest in charged. Interest rate may be different for different purposes. Table No. 4 Interest received in various sectors (Rs. In '000') S.N. Fiscal year sector 060/061 061/062 062/063 1. Agriculture 93 157 203 2. Household 75 83 117 3. Housing 54 87 133 4. Business 81 141 231 5. Education 17 31 66 6. Emergency 16 19 38 Total 336 518 788 (Sources: Annual audit report of SMCSL) Figure No. 4 Bar diagram of interest received in various sectors 11 250 200 150 100 50 0 Agriculture Household Housing Business Education Emergency 060/061 061/062 062/063 Sectors Amount in Rs. '000'
  12. 12. D) Amount due to receive All of the amount invested can not be received on a certain date due to many problems. Table No. 5 Amount due to recover in various sectors S.N. Fiscal year sector Rs. In '000' % 1. Agriculture 185 8.36 2. Household 565 25.54 3. Housing 667 30.15 4. Business 290 13.12 5. Education 310 14.01 6. Emergency 195 8.82 Total 2212 100 (Sources: Annual audit report of SMCSL) Figure No. 5 Pie Chart of amount due to recover 8% 26% 30% 14% 13% 9% Agriculture Household Housing Business Education Emergency 3.2 Analysis of Data 12
  13. 13. a) Investment of loan The amount collected from the individual deposition is deposition is invested in different sectors; investment is done for various purposes such as household, agriculture, business, education etc. In the fiscal year 060/061 investment is Rs. 1730 thousand. In the same way in 2061/062 and 062/063 investment is almost increasing in every sector. In agriculture loan was Rs. 430 thousand in 2060/061 and it is increased to Rs. 510 thousand in 061/062 and to Rs. 580 thousand in 2062/063. In the same way loan for household, housing and business sector is also increasing in FY 2062/063 than that of FY 2060/061 and FY 2061/062. Loan for education in decreased in FY 2062/063 than of FY 2061/062. Demand for loan in same emergency case is also increased here in there three fiscal years. b) Recovery of loan It is clear from the data that recovery of loan is also increasing in each year. In the fiscal year 2060/061 Rs. 1185 thousand is recovered which is 68.49% of loan invested. In the same way in fiscal year 2061/062 Rs. 1760 thousand is received which is 69.42% and in 2062/063 Rs. 2248 thousand is recovered which is 71.31% of loan invested. Loan of agriculture purpose is satisfactorily received of previous three years and loan for emergency purpose can not be received satisfactorily. c) Interest received by Co-Operative Ltd. Interest earning rate is increasing each year. In FY 2060/061 Rs. 336 thousand interest was received which is 19.42% of invested amount in the same way in FY 2061/062 and 2062/063 also Rs. 518 thousand and Rs. 788 is received which is 20.43% and 25.33% of loan invested respectively. In average from the agriculture sector most interest is received. d) Amount due to receive Here amount due of aggregate of three years is given. In three years from the agriculture sector most little amount is due to receive whereas from the emergency is due to receive. 13
  14. 14. CHAPTER - IV Summary and conclusion 4.1 Summary Nepal is an underdeveloped country. For the gradual development of the country small savings of the individual also must be utilized in a productive sector. It helps in economic development as well as employment opportunity is general. So with this objective Swastik Multipurpose Co-operative Society Ltd. is established. Swastik Multipurpose Co-operative Society Ltd. was established in 2058 BS. with the objective of mobilization of the small savings of the individual. This survey is based upon the study of loan management of the Co-operative. These data about the investment and recovery of loan, investment, interest received in loan, are collected for the easy and effective study of the Co-operation. 4.2 Conclusion From the above presentation and analysis of data we concluded that fund collected is utilized in proper way. But the invested money is mainly invested in non-productive sector such as housing, household, education etc. If that was utilized in other sectors which can generate income from that or create employment opportunity in the society would be better. Even though the invested money is satisfactorily returned back and interest is earned. 4.3 Recommendation ¨ To increase in the investment of loan, delay in recovery must be eliminated. ¨ For the social and economic development of the country most of the investment should be done in productive sector. ¨ Since the Co-operative's earning is only interest it should be collected in time. 14
  15. 15. ¨ Co-operative can create a separate department of loan management. ¨ Co-operative should be investing in portfolio basis. ¨ Co-operative should give training their staff to improve working capacity ¨ New technology should be adopting to serve the customer fast. ¨ Co-operative should attract to customer in low interest and high interest in deposits. 15
  16. 16. Bibliography 1. Ahuja, B.N. (1992), "Dictionary of Management ", Academic- India Publishers, New Delhi 2. Bhandari, Dilli Raj. (2003), "Banking and Insurance: Principle & Practice", Utsav Books & Stationers, Kathmandu 3. Bhattarai, Pramod (2004), "The Nepalese Financial System", Asmita Books Publishers & Distributors, Kathmandu 4. Dahal, Bhuvan and Sarita Dahal (2002), "A Hand Book to Banking", Asmita Books and Stationary, Kathmandu 5. Joshi, Padam Raj (2004), "Fundamentals of Financial Management", Asmita Books Publishers & Distributors, Kathmandu 6. Shrestha, M.K. (1990), "Financial Companies in Nepal", Investment Management Training and Research Center, Kathmandu, Nepal 7. Shrestha Manohar K., Dipak B. Bhandari (2004), "Financial Markets and Institutions", Asmita Books Publishers & Distributor, Kathmandu 16
  17. 17. Appendix Some of the questions that will be guiding these research activities in the field are as follow: 1. How many member or share holders in the organization? 2. When was the organization established? 3. How many people are employed? 4. How many shareholders are investing in this co-operative? 5. What are the objectives of the institution? 6. What are the problems faces by the organization? 7. What is the expected civilization in the coming future towards the society? 8. Can you provide me income statement, balance sheet? 17

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