Loans And Advance

University of Mumbai

A PROJECT REPORT ON “The Study of Loans And Advances In Oberoi Capital Pvt. Ltd.” Submitted In Partial Fulfillment of the Requirement for the Award Of MASTERS IN MANAGEMENT STUDIES SUBMITTED BY SAGAR ROHIDAS BHOIR M.M.S. (IVth semester) GUIDE Prof. Amruta Adhikari

CHANGU KANA THAKUR INSTITUTE OF MANAGEMENT STUDIES & RESEARCH, NEW PANVEL 2015-16

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DECLARATION

I hereby declare that project titled “The Study of Loans And Advances” is an original piece of research work carried out by me under the guidance and supervision of Prof. Amruta Adhikari. The information has been collected from genuine and authentic sources. The work has been submitted in partial fulfilment of the requirement of Masters in Management Studies (MMS-III SEM IV) to our college.

Place:

Signature:

Date:

Name of the Student:

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PREFACE Someone has rightly said that practical knowledge is far better than Classroom teaching. During this project I fully realized this and I came to Know about how a company actually work. The subject of my study is “The Study of Loans And Advances In Oberoi Capital Pvt. Ltd.”., which has slowly but steadily evolved from a beginner to a Corporate giant earning laurels and kudos throughout. The report contains first of all brief introduction subject and then about the Company. Finally there comes data analysis and findings in the end of my project report. I also put forward some of my suggestion hoping that they will help the institute. Move a step forward to being the very best.

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ACKNOWLEDGEMENT

Before we start the project I would like to say that it was a great pleasure and privilege for me to have the opportunity of undertaking the training at “Oberoi Capital Pvt Ltd”.

1I wish to express my sincere thanks to our Director Dr. S. T. Gadade and my project guide Prof. Nilesh Manore & Prof. Amruta Adhikari for providing me valuable guidance and inputs which helped me to complete this project in true sense. .

I would like to thank the financial institution for providing me such an opportunity. I express my sincere thanks to Managing Director Mr Baljeet Oberoi and Mrs, Joyti Vibhande manager of the institution at the vashi branch for guiding me right from the inception till the successful completion of the project.

I sincerely acknowledge my college for extending their valuable guidance support for literature critical reviews of project and the report and above all the moral support they had provided to me with all stages of this project.

I am sure that the knowledge and information that I have gained during this period would be of immense value for my growth in business world.

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TABLE OF CONTENT Chapter No. 1. 2.

Topics Executive summery Introduction

Page No.

a) Aim b) Objective c) Hypothesis

3. 4. 5. 6

Literature Review Scope & Limitations Research Methodology a) Company Overview b) Learning aspects

7. 8. 9. 10.

Finding & Analysis Result Conclusion Recommendation Bibliography

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The Study of Loans And Advances

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Executives summary In modern world, banks and financial institution are playing a key role for the development of economy. Business opportunities day by day rising, new products and services come in every month. Need for data and information about different topics and issue is very essential. Information plays a major role in all sector of a society. The report contains introduction to banks and financial institution and its past present activities and also include challenges face by banking industry in future. Research work for the oberoi capital pvt ltd. For 45 days and learn a great experience by watching life of people who are in credit and loan department as well as account department. Research successfully made study of these department, attend meeting with various authorities, customer and enjoy their summer training by participating as trainee. Banking as well as financial institution is one of the most important sectors of business and finance that assists the work of commerce to keep on running. Bank use the money they hold to finance loans, which they make to business and individuals to pay for operations education expenses and any number of other things. The term loan refers to the amount borrowed by one person form another. In finance a loan is a debt evidenced by note which specifies, among other things, the principal amount, interest rate and date of repayment. The amount is the nature of loan and refers to the sum paid to the borrower. Thus from the view point of borrower, it is borrowing and form the view point of bank t is lending. Loan may be regarded as credit. Granted where the money is disbursed and its recovery is made on alter date. It is adept for the borrower. While granting loans, credit is given for a definite purpose and for predetermine period. Interest is charged on the loan agreed rate and intervals of payment. Advance on the other hand, is a credit facility granted by the institution.

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This project is dined for to understand sanctioning procedure of loan, risk involved in loan, ways to,lending money. Loan schemes and purpose os to find out customer awareness about loan sanctioning process, to study requirement of loan for various sector, point out the nature of security provided for loan, to provide information about various loan scheme of oberoi capital pvt ltd. To people there are also problem when given the loan that is recovery of loan create more difficulty to recovery department due to monetary problem of people or other factors. Also process of sanctioning loans is too lengthy and there is too, much requirement of documentation. So it is very difficult to understand toan ordinary people.

Data collection for the project will done by both primary and secondary data collection which include discussion with branch manager assistant manager of loan department of institution meeting with loan department staff and other institution staff and also with customer and in secondary data include bank report, institution website.

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CHAPTER 1

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INTRODUCTION TO LOANS AND ADVANCES

The commercial institutions accept deposits and also lend money to the people who require it for various purposes. Lending of funds to traders, businessmen and industrial enterprises is one of the important activities of commercial institutions. The major part of the deposits received by institutions is lent out, and a large part of their income is earned from interest on such lending. There is a considerable difference between the rate of interest which the commercial institution grants on deposits, and the rate they charge on loans and advances. It is this difference which constitutes the main source of institution earnings. The most important asset item in the balance sheet of aninstitution is loans and advances. The profitability of institution depends upon the extent to which it grants loans and advances provided by institutions are cash credit, overdraft, loans, purchases and discounting of bill. Loans and advances granted by commercial institutions are highly beneficial to individuals, firms, companies and industrial concerns. The growth and diversification of business activities are effected to a large extent through institution financing. Loans and advances granted by institutions help in meeting short-term and long term financial needs of business enterprises. When aninstitution makes an advance in lump-sum against some security it is called a loan. Here, a specifiedamount is sanctioned by the institution to the customers. The loan amount so sanctioned is paid to the borrower either in cash or by credit to his account. A certain amount of interest has to be paid by the borrower for theloan that has to be borrowed. A loan can be repaid in lump-sum or in installments. Commercial institutionsgenerally provide short term loans up to one year for meeting the working capital requirements. But thesedays, term loans exceeding one pg. 10

year are also provided by institutions. The term loans may be either medium tremor long term loans.

In today’s competitive world everything happens only with the help of money or through the money every person need money. But some time a person has not cash on hand at that time he needs lone either from any friend or from any financial institute. Lone does not mean that only lower class person needs it but also upper class person it is needed. As per the requirement of the every person there are much type of loans are there in the Oberoi Capital Pvt. Ltd.

1.1

Meaning of Loans and Advances:

The term "loan" refers to the amount borrowed by one person from another. The amount is in the nature of loan and refers to the sum paid to the borrower. Thus, from the view point of borrower, it is 'borrowing' and from the view point of institution. it is lending'. Loan may be regarded as 'credit. Granted where the money is disbursed and its recovery is made on a later date. It is a debt for the borrower. While granting loans, credit is given for a definite Purpose and for a predetermined period. Interest is charged on the loan agreed rate and intervals of payment. 'Advance' on the other hand, is a 'credit facility' granted by the institution. Institutions grant advances largely for short-term purposes. pg. 11

1.2 Utility of Loans and Advances.  Loans and advances can be arranged from institutions in keeping with the flexibility in business operations. Traders may borrow money for day to day financial needs availing of the facility of cash credit, institution overdraft and discounting of bills. The amount raised as loan may be repaid within a short period to suit the convenience of theborrower. Thus business may be run efficiently with borrowed funds from institutions forfinancing its working capital requirements.  Loans and advances are utilized for making payment of current liabilities, wage and salaries of employees, and also the tax liability of business.  Loans and advances from institutions are found to be 'economical' for traders and businessmen, because institutions charge a reasonable rate of interest on such Loans/advances.

 Institutions generally do not interfere with the use, management and control of the borrowed money. But it takes care to ensure that the money lent is used only for business purposes.  Institution loans and advances are found to be convenient as far as its repayment is concerned. This facilitates for future and timely repayment of loans.  Loans and advances by the institutions generally carry element of secrecy with it. Institutions are duty-bound to maintain secrecy of their transactions with the customers. This enhances people’s faith in the institution system.

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1.3 Borrowing Rate and Lending Rate People make their funds available to the institutions by depositing their ‘savings’ in various types of accounts. In other words, institution funds mainly consist of deposits from the public, though institutions may also borrow money from other institutions and the Reserve Institution of India. Institutions thus mobilize funds through its deposits. On public deposits the institutions pay interest at and the rate of interest varies according to the type of deposit. The borrowing rate refers to the rate of interest paid by aninstitution on its deposits. The rates which the institutions allow depend upon the nature of deposit account and the period for which the deposit is made with the institution. No interest is generally paid on current account deposits. The rate is relatively lower on savings account deposits. Higher rates ranging from 6% to 12% per annum are paid on fixed deposit accounts according to the period of deposit. Institutions also borrow from other institutions as well as from the Reserve Institution of India. When the Reserve Institution of India lends money to commercial institutions, the rate of interest it charges for lending is known as ‘Institution Rate’. The rate at which commercial institutions make funds available to people is known as ‘Lending-rate’. The lending rates also vary depending upon the nature of loans and advances. rates also vary according to the purpose in view. For example if the loan is sanctioned for the purpose of activities for the development of backward areas, the rate of interest is relatively lower as against loans and advances for commercial/business purposes. Similarly for smaller amounts of loan the rate of interest is higher as compared to larger amounts. Again lending rates for consumer durables, e.g. Loans for purchase of two-wheelers, cars, refrigerators, etc. are relatively higher than for commercial borrowings.

However, the Reserve Institution of India from time to time announces changes in the interest-rate structure to regulate the lending of funds by institutions. Different pg. 13

rates of interest are prescribed for various categories of advances, such as advances to agriculture, small scale industries, road transport, etc. Graded rates of interest are prescribed for backward areas. Lower rate is normally charged from agencies selling food-grains at fixed price through Govt. approved outlets. Lastly, lower rate of interest is charged for loans granted to persons belonging to ‘weaker sections of the society’.

1.4 Lending of Money by Institution

The commercial institutions lend money in four different ways: (a) direct loans, (b) cash credit, (c) overdraft, and (d) discounting of bills. These are briefly discussed below.

1. Loans Loan is the amount borrowed from institution. The nature of borrowing is that the money is disbursed and recovery is made in instalments. While lending money by way of Loan, credit is given for a definite purpose and for a pre-determined period. Depending upon the purpose and period of loan, each institution has its own procedure for granting loan. However the institution is at liberty to grant the loan requested or refuse it depending upon its own cash position and lending policy. There are two types of loan available from institutions (a) Demand loan, (b) Term loan.

(a)

A Demand Loan:

Is a loan which is repayable on demand by the institution. In other words, it is repayable at short-notice. The entire amount of demand loan is disbursed at one time and the borrower has to pay interest on it. The borrower can repay the loan either in lump sum (one time) or as agreed with the institution. For example, if it is so agreed pg. 14

the amount of loan may be repaid in suitable instalments. Such loans are normally granted by institutions against security. The security may include materials or goods in stock, shares of companies or any other asset. Demand loans are raised normally for working capital purposes, like purchase of raw materials, making payment of short-term liabilities.

(b)

A Term Loans:

Medium and long term loans are called term loans. Term loans are granted formore than a year and repayment of such loans is spread over a longer period. The repayment is generally made in suitable installments of a fixed amount. Term loan is required for the purpose of starting a new business activity, renovation, modernization, expansion/ extension of existing units, purchase of Plant and machinery, purchase of land for setting up of a factory, construction of factory building or purchase of other immovable assets. These loans are generally secured against the mortgage of land, plant and machinery, building and the like.

2. Cash credit Cash credit is a flexible system of lending under which the borrower has the option to withdraw the funds as and when required and to the extent of his needs. Under this arrangement the institutionary specifies a limit of loan for the customer (known as cash credit limit) up to which the customer is allowed to draw. The cash credit limit is based on the borrower’s need and as agreed with the institution. Against the limit of cash credit, the borrower is permitted to withdraw as and when he needs money subject to the limit sanctioned.It is normally sanctioned for a period of one year and secured by the security of some tangible assets or personal guarantee. If the account is running satisfactorily, the limit of cash credit may be renewed by the institution at the end of year. The interest is calculatedand charged to the customer’s account. Cash credit, is one of the types of institution lending against security by way of pledge or hypothecation of goods. ‘Pledge’ means bailment of goods as pg. 15

security for payment of debt. Its primary purpose is to put the goods pledged in the possession of the lender. It ensures recovery of loan in case of failure of the borrower to repay the borrowed amount. In ‘Hypothetication’, goods remain in the possession of the borrower, who finds himself under the agreement to give possession of goods to the institutionary whenever the institutionary requires him to do so. So hypothetication is a device to create a charge over the asset under circumstances in which transfer of possession is either inconvenient or impracticable.

3. Overdraft Overdraft facility is more or less similar to ‘cash credit’ facility. Overdraft facility is the result of an agreement with the institution by which a current account holder is allowed to draw over and above the credit balance in his/her account. It is a shortperiod facility. This facility is made available to current account holders who operate their account through cheques. The customer is permitted to withdraw the amount of overdraft allowed as and when he/she needs it and to repay it through deposits in the account as and when it is convenient to him/her. Overdraft facility is generally granted by aninstitution on the basis of a written request by the customer. Sometimes the institution also insists on either a promissory note from the borrower or personal security of the borrower to ensure safety of amount withdrawn by the customer. The interest rate on overdraft is higher than is charged on loan.

4. Discounting of Bills Apart from sanctioning loans and advances, discounting of bills of exchange by institution is another way of making funds available to the customers. Bills of exchange are negotiable instruments which enable debtors to discharge their obligations to the creditors. Such Bills of exchange arise out of commercial transactions both in inland trade and foreign trade. pg. 16

When the seller of goods has to realize his dues from the buyer at a distant place immediately or after the lapse of the agreed period of time, the bill of exchange facilitates this task with the help of the institution. Institutions invest a good percentage of their funds in discounting bills of exchange. These bills may be payable on demand or after a stated period. In discounting a bill, the institution pays the amount to the customer in advance, i.e. before the due date. For this purpose, the institution charges discount on the bill at a specified rate. The bill so discounted is retained by the institution till its due date and is presented to the drawer on the date of maturity. In case the bill is dishonoured on due date the amount due on bill together with interest and other charges is debited by the institution to the customer’s account.

1.5 Long-term and Short-term Loans

Commercial institutions grant loans for different periods-long, short and medium term for different purposes.  Short-term loans Short term loans are granted by institutions to meet the working capital needs of business. The working capital needs refer to financial needs for such purposes as, purchase of raw materials, payment of wages, electricity bill, taxes etc. Such loans are granted by institutions to its borrowers to be repaid within a short period of time not exceeding 15 months. Short term loans are normally granted against the security of tangible assets like goods in stock, shares, debentures, etc. The rate of interest charged on short term loans ranges from 12% to18% p.a.  Term Loans pg. 17

Medium and long term loans are generally known as ‘term loans’. These loans are granted for more than 15 months. In case of medium term loan, the period ranges from 15 months to less than 5 years. Medium term loans are generally granted for heavy repairs, expansion of existing units, modernization/renovation etc. Such loans are sanctioned against the security of immovable assets. The normal rate of interest ranges between 12% to 18% depending upon the period, purpose, nature and amount of the loan. Though institutions may grant long term loans, they avoid granting loan for more than 5 years

1.6 Nature and Security of Loans

To ensure the safety of funds lent, the first and most important factor considered by aninstitution is the capacity of borrowers to repay the amount of loan;theinstitution therefore, relies primarily on the character, capacity and financial soundness of the borrower. But the institution can hardly afford to take any risk in this regard and hence it also has the security of tangible assets owned by the borrower. In case the borrower fails to repay the loan, the institution can recover the amount by attaching the assets. It can sell the assets offered as security and realize the amount. Thus from the view point of security of loans, we can divide the loans into two categories: (a) secured, and (b) unsecured. Unsecured loans are those loans which are not covered by the security of tangible assets. Such loans are granted to firms/institutions against the personal security of the owner, manager or director. On the other hand, Secured loans are those which are granted against the security of tangible assets, like stock in trade and immovable property. Thus, while granting loan against the security of some assets, a charge is created over the assets of the borrower in favours of the institution. This enables the institution to recover the dues from the customer out of the sale proceeds of the assets in case the borrower fails to repay the loan. There are various types of securities which may be offered against loans granted, but all of those are not acceptable to the institutions. pg. 18

The types of securities generally accepted by the institution are the following: »

Tangible assets such as plant and machinery, motor-van, etc.

»

Documents of title to goods, like Railway Receipt (R/R), Bills of exchange,

etc. »

Financial Securities (Shares and Debentures).

»

Life-Insurance Policy.

»

Real estate’s (Land, building, etc).

»

Fixed Deposit Receipt (FDR).

»

Gold ornaments, Jewellers etc.

1.7 Procedure of granting Cash Credit, Overdraft and Discounting Bills Institutions provide financial assistance to its customers in the form of loans, advances, cash credit, and overdraft and through the discounting of bills. The procedure of applying for and sanction of loans and advances differs from institution to institution. However, the steps which are generally to be taken in all cases are as follow:

1. Filling up of loan application form Each institution has separate loan application forms for different categories of borrowers. When you want to borrow money from aninstitution, you will have to fill up a loan application form available with the institution free of cost. The loan application form contains different columns to be filled in by the applicant. It includes all information required about the borrower, purpose of loan, nature of facility (cash-credit, overdraft etc) required, period of repayment, nature of security offered and the financial status of the borrower.

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A running business limit may be required to furnish additional information in respect of:  Assets and liabilities  Profit and loss for the last 3 years.  The names and addresses of three persons (which may include borrowers, suppliers, Customers and institutionary) for reference purposes.

2. Submission of form along with relevant documents. The institution application form duly filled in should be submitted to the institution along with the relevant documents.

3. Sanctioning of loan The institution scrutinizes the documents submitted and determines the credit worthiness of the applicant. If it is found to be feasible, the loan is sanctioned. If the loan is for Rs 5000 or less, normally the Branch Manager himself can take the decision and sanction the loan. In case the amount of loan is more than Rs 5000, the application is considered at regional, zonal or head office level, depending on the amount of loan.

4. Executing the Agreement When the loan is sanctioned by the institution and the borrower is informed about it, he will have to execute an agreement with the institution regarding terms and condition for the amount of loan raised. pg. 20

5. Arrangement of Security for Loan The borrower will now arrange for security against the loan. These securities may be immovable properties, shares, debentures, fixed deposit receipts, and other documents, like, KisanVikasPatra, National Savings Certificate, as per agreement. When the borrower completes all the formalities, he is allowed to get the amount of loan/advance/ over draft as sanctioned by the institution. In case of ‘discounting of bills’, the institution credits the amount of bill to the customer’s account before the realization of the bill and thus, makes available the fund. In case, the bill is dishonoured on due date, the amount due on the bill together with interest and other charges are payable by the party whose bill is discounted.

1.8 STATUTORY & OTHER RESTRICTIONS ON LOANS & ADVANCES

RBI has been issuing from time to time rules/regulations/instructions on statutory and other restrictions in respect of loans and advances to Institutions for implementation and to adopt adequate safeguards in order to ensure that the institution activities undertaken by them are run on sound, prudent and profitable lines, as under.

1. Statutory Restrictions 

Advances against institution own share:

Aninstitution cannot grant any loans and advances on the security of its own shares. (Section 20(1) of the Institution Regulation Act, 1949). 

Advances to institution Directors

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Institutions are prohibited from entering into any commitment for granting any loans or advances to or on behalf of any of its directors, or any company/firm in which any of its directors is interested as partner, manager, employee or guarantor (B.R Act (Section 20(1).

‘Loans & advances’ shall not include Loans or advances against Govt. securities, life insurance policies or fixed deposit. Loans or advances to the Agricultural Finance Corporation Ltd. Loans or advances to any of its directors in his capacity as an employee prior to becoming as director, loans or advances granted to its Chairman and Chief Executive Officer who was not an employee of the institution company immediately prior to his appointment as Chairman/ Managing Director/CEO, or to its whole-time director (for purchasing a car, personal computer, furniture or constructing/ acquiring a house for his personal use and Festival Advance), with the prior approval and subject to terms and conditions stipulated by RBI.  Loans & advances’ include, among others. Purchase of or discount of bills from directors and their concerns. Issuance of guarantees and opening of L/Cs on behalf of the institution’s directors etc.

2. Regulatory Restrictions  Granting loans and advances to relatives of Directors Without prior approval of the Board or without the knowledge of the Board, no loans and advances aggregating to Rs. 25 Lakh and above should be granted to relatives of the institution's Chairman/Managing Director or other Directors or other pg. 22

institution’s Directors (including Chairman/Managing Director) and their relatives, Directors of Subsidiaries/Trustees of Mutual Funds/Venture Capital Funds set up by the financing institutions or other institutions, including lending to directors and their relatives on reciprocal basis (Sec. 20 of B.R. Act). This restriction would also apply to grant of loans and advances to spouse and minor/dependent children of the Directors of institutions except those who own independent source of income arising out of his/her employment or profession and the facility so granted is based on standard procedures and norms for assessing the creditworthiness of the borrower. The term “relative” is explained in RBI Master Circular dt.01.07.13.

Loans & advances of less than Rs.25 Lakh to these borrowers can be sanctioned at appropriate level as per delegation with suitable reporting to the Board. The term ‘loans and advances’ will not include loans or advances against Government securities, Life insurance policies, Fixed or other deposits, Stocks and shares, Temporary overdrafts for small amounts, i.e. up to Rs. 25,000/-,Casual purchase of cheques up to Rs. 5,000 at a time, Housing loans, car advances, etc. granted to an employee of the institution The guidelines are applicable while granting loans/ advances or awarding contracts to directors of scheduled co-operative institutions or their relatives and to directors of Subsidiaries/trustees of mutual funds/venture capital funds set up by them as also other institutions.

 Grant of Loans & Advances to Officers and Relatives of Senior Officers of Institutions No officer or any Committee comprising, inter alia, an officer as member shall sanction any credit facility to his/her relative but only by the next higher sanctioning authority. Credit facilities sanctioned to senior officer shall be reported to board. pg. 23

Credit facilities to the relatives of senior officers of the institution sanctioned by the appropriate authority should be reported to the Board.  Restriction on payment of commission to staff members including officers Institutions should notpay commission to staff members and officers for recovery of loans. (Sec10 (1) b (ii) of BR Act).

 Restrictions on offering incentives on any institution products Institutions should not offer any institution products, including online remittance schemes etc., with prizes / lottery/free trips (in India and/or abroad), etc. or any other incentives having an element of chance, except inexpensive gifts costing not more than Rs. 250/-. Etc,

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1.9 The Advantages and Disadvantages of Loans

Loan is a form of debt, often with interest. There are several reasons why people apply for loans. Usually they borrow money to purchase a house, buy a car, or start a business. Often, applying for a loan is necessary because most do not have available financial resources they need to make a purchase. Other forms of loans, like the student loans have helped a lot of students get through school. Those who use student loan debt consolidation clearly have multiple student loans. They do this to manage their obligations better. Since loan is borrowed, the lender expects to receive payment with the interest specified. In addition, borrowers should make the payments at the specified due date for a certain period. This is where most people have problems. Most problems start when people cannot make the monthly payments required due to different circumstance. Some finds it difficult to pay their loan because of the many other debts they have. Some encounter additional problems such as medical emergencies and job loss. Since getting a loan is a commitment, you have to be very careful with your decisions. Choose the right lender. There is more to picking a lender than just looking for one with the least interest. Keep in mind that those with low interest require longer period. Remember, when choosing a lender, check its stability, its flexibility, repayment schemes, and interest rates. Before you decide to get a loan, it is only right that you review its advantages and disadvantages.

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Advantages Below are the advantages of getting a loan. These are also the reasons why many apply for it:  There is a loan for just about anything. If you are in need of money to purchase a house, you can apply for a housing loan. If you need a car, you can apply for a car loan. With all the loans available, you will be able to purchase everything you need.  It helps a person afford an expensive purchase. All of us wish to acquire a property. However, we do not have the amount of money to make the purchase. Loans allow us to do this. They lend us the money so that we can finally afford our desired property.  Payment is staggered, which makes it affordable. This enables the person to pay off the loan gradually. If a person has chosen a good deal, he should be able to finish paying off the loan in the time specified.  One gets the funding he needs. If a person wants to start a business, he can do so by applying for a business loan. He does not have to wait for his savings to build up before he can start his own business. They can also use the amount they loan for investment purposes.  Getting a loan is very helpful to start building your dream. However, you have to be very careful with your decisions. This is because of the problems you will possibly encounter if you mismanage your loans and other debts. If you have multiple loans, make sure to manage it well. Use a debt consolidation loan calculator and check if it is better to consolidate all your loans. Make sure that you manage your loans from the start. Keep in mind that loans have disadvantages too.

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 considering that lending institutions like institutions must always keep their depositors money working for them and earning more money and interest than it pays out to depositors, institution loans should, in theory, always be available to anyone seeking one.  If the borrower has all the appropriate documentation; any institution can process his application within an hour.

Disadvantages Here are some of the disadvantages of having loans:  It is a long-term debt. This means that you have to deal with it for a specified period, which means that you have to commit yourself to making monthly payments specified in your agreement for the period indicated to repay the loans.  If you miss payments, you will face serious consequences. You can face foreclosure or repossession of the property. In addition, you could also face penalties and legal issues. It will also reflect in your credit rating, which can lead to a low credit scores.  You may not be able to make early loan repayment. Few lenders give option for early repayment. Although there are some who will allow you to do this, they will charge you with early repayment fees.

Loans are very helpful. However, you have to manage them well because you can get into a lot of trouble if you fail to make the expected payments.

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1.10 Engaging Recovery Agents by institutions.  Institutions should have a due diligence process in place for engagement of recovery agents.  Institutions should inform the borrower the full details of the Recovery Agency Firm/companies while forwarding cases to the recovery agency.  The notice and the authorization letter should, among other details, also include the telephone numbers of the relevant recovery agency.  The up to date details of the recovery agency firms / companies engaged by institutions may also be posted on the institution’s website.  Each institution should have a mechanism whereby the borrowers' grievances with regard to the recovery process can be addressed.

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1.11 TYPES OF LOANS GRANTED BY COMMERCIAL INSTITUTIONS

1. Secured loan A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan. The debt is thus secured against the collateral — in the event that the borrower defaults, the creditor takes possession of the asset used as collateral and may sell it to regain some or the entire amount originally loaned to the borrower.

2. Mortgage loan A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan.

3. Unsecured loan In finance, unsecured debt refers to any type of debt or general obligation that is not collateralized by a lien on specific assets of the borrower in the case of aninstitution or liquidation or failure to meet the terms for repayment. In the event of the institution of the borrower, the unsecured

Creditors will have a general claim on the assets of the borrower after the specific pledged assets have been assigned to the secured creditors. The unsecured creditors will usually realize a smaller proportion of their claims than the secured creditors.

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4. Short-term loans Short term loans are granted by institutions to meet the working capital needs of business. The working capital needs refer to financial needs for such purposes as, purchase of raw materials, payment of wages, electricity bill, taxes etc. Such loans are granted by institutions to its borrowers to be repaid within a short period of time not exceeding 15 months. Short term loans are normally granted against the security of Tangible assets like goods in stock, shares, debentures, etc. The rate of interest charged on short term loans ranges from 12% to18% p.a

5. Term loans Medium and long term loans are generally known as ‘term loans’. These loans are granted for more than 15 months. In case of Medium term loan, the period ranges from 15 months to less Than 5 years. Medium term loans are generally granted for heavy repairs, Expansion of existing units, modernization/renovation etc. Such loans are sanctioned against the security of immovable assets. The normal rate of interest ranges between 12% to 18% depending upon the period, purpose, nature and amount of the loan. Though institutions may grant long term loans, they avoid granting loan for more than 5 years

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CHAPTER 2

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AIM To study in detail of Loans And Advances in Oberoi Capital Pvt. Ltd

OBJECTIVES: 1.

The main objective to study this is to know the main concept of loans.

2.

To analyse the various securities options available in the institutions.

3.

To know the management function of loan providing company.

4.

To understand the repayment procedure of financing institution.

5.

To analyse the financing institutions entire loan policy.

HYPOTHESIS The Financial Institution provides a loan services by keeping in mind only the customer’s satisfaction, in comparison to other Financial Institution. Ho:  As the services which are provide by this institution is new as compare to the techniques used by others.  There is good response to these services in the current financial market.

H1:  As this is modern technique world so the new generation wants some more innovative services of financial services.

pg. 32

CHAPTER 3

pg. 33

LITERATURE REVIEW Loans and advances provided by this institution is can be categorised into short term funds and long term funds. The letter are advanced for purchase of plant and ,machinery while the former are provided for purchase of raw ,materials, stores spare parts and the like. However following the traditional British institution practice, commercial institutions provides more short term funds to the investors in industry and trade than long term loans. The pattern of credit disbursement has undergone substantial change since 1950.

 Gupta

(1969) andAmbegaokar (1969): observed that the use of funds from

institutions by the private corporate sector had exceeds its inventory formation. Gupta has argued that the small portion of such finance should go to mix fixed investments. Further he found the growth rate of physical asset to be, more directly and closely related to security issues the institution credit. Hence he argued that the fast growing firms relied heavily on security issue than the use of institutions credit. Ambegaolar found that the rate of risk in institution credit exceed that of inventory sales and output. Further he observed that its dependence on institutions for working capital had increased, accompanied by a decline in reliance on other financial instutions.

 Divatia and Shankar

in their paper discussed the role of internal and external

sources of funds and their components in financing capital formation of the private corporate sector. The study was based on the RBI company finance studies relating to medium and large public and private limited companies and covered the period 1961-76. They also discussed the trends and patterns of financing for four individual industries, viz, cotton textiles, jute, sugar and cement.

pg. 34

 L.S.

guptafrom the extensive study viewed that the growth of institutional

finance emerged in lndia due to structural change for industrial financing system with wide change of socio-political situations in lndia. He attempted to measure overall impact of financial institutions on capital formation in the organised private sector as also the allocative efficiency of financial system. He observed that during the first plan? Financial assistance rendered by special institutions represented only 4.1 per cent of gross fixed investment in private industry, which rose to 7.9 per cent in the second plan and further to 18.1% in the third plan period.

 Indigenous

Financial Agencies The availability of literature on indigenous

financial system is scarce. The Central and Provincial Institution Enquiry Committee Reports give comprehensive information regarding the working of the agencies. But even such information appears to have become outdated in many respects as the enquiry was conducted more than 55 years ago. The Rural credit survey and Central institution Enquiry Committee attempted to obtain quantitative information, including capital invested in the business from the agencies but failed in their task. Hence as far as the quantitative aspect is concerned, it is impossible to collect correct information from these agencies as their nature of business is selective and also as their exact number is not known.

 S. chantz; K. Datta' and Miraffab" argue that formal finance institutions are rarely willing to assist with the purchase of land, especially where the tenure, is insecure, to provide assistance with improvements to the rental housing stock or to support nonconventional household arrangements such as sharing of multiplefamily compounds. These limitations have implicit gendered consequences, as rental and shared housing are of particular importance to low income women who often lack the means to become homeowners. pg. 35



M.M. valeneaZ9 summarizes the conditions of Brazil's housing finance system by the 1980's as one of 'crisis, chaos and apathy.' Notoriously inadequate fund collection and loan enforcement rates exemplified these conditions. This condition of public-sector housing finance institutions was accentuated by political manipulations that passed these institutions from one ministry to another at short intervals. Valenea points out that as the economic crisis of the 1980s deepened, the fall in the real value of payrolldeductions with rising unemployment, the diversion of revenue sources to fund higher priority areas of the government budget and the withdrawal of savings from negative interest rate bearing accounts left many public sector housing finance institutions short of capital.

 David lsaac' provides

an introduction to property finance, bringing together

the professional disciplines related to finance and property investment and development. The book establishes the basic concept of finance examines the applications of these concepts in practice and gives an overview of the market, its history and position as of 1993.

 T.H. argues that even though new private finance companies have been set up, a few lower-income households qualify for loans because the eligibility criteria require proof of five years full employment, imposing a start-up fee equivalent to three months’ salary and taxes to approximately 25% of the loan value. Similarly US AID^^ points out that in Eastern Europe despite the establishment of DIMS in Poland, building certificates in Russia and indexed credit systems in Bulgaria, the bottom 80 per cent of the income profile has not been reached.

 pg. 36

 Robert

M. Buckley in his book 'Housing Finance in Developing Countries'

examines the way various changes have affected the financing and delivery of housing in developing and reforming economies. A framework for analysis as well as applications of the framework in case studies is presented in this book. A main emphasis throughout is the demonstration of the gains that can be realised from overcoming the often-blurred distinctions between fiscal and financial policies for housing. The book concludes with the evolution of the World Institution supported projects in this sector and a summary of some of the principles of effective housing finance systems.

pg. 37

CHAPTER 4

pg. 38

SCOPE OF THE STUDY

1.

To study the various types of loan and their policy.

2.

To study the securities that can be used against lending and the Calculation

of equated monthly instalments. 3.

To study process of lending loan to a borrower.

4.

To study the different types of borrower.

5.

To study the loan markets in current markets.

LIMITATION OF THE STUDY

All the possible care has been taken to collect the information and make the study as authentic as possible. However it is subjected to certain information. They are as under: 1. All the findings and recommendations, which are stated, are applicable only for thecurrent period. 2. The detailed study of loans and advances is not possible due to time limitations.

3. Based on limited information it is not possible to arrive at a proper conclusion. 4. Unable to experience with all system software’s of institutions.

pg. 39

CHAPTER 5

pg. 40

RESEARCH METHODOLOGY Method of collecting data The data have been collected from the institution website, and with the help of manager of institution. The data collection for this project was done in two ways: Primary data The primary or basic information was collected by the help of discussions with the branch manager, the staff and the departmental head of the loan section. Secondary data Secondary data was the main source of getting information. The past record files with the institution. Moreover, balance sheet of past 2 years. Proved to be a concrete source to get the exact figure for loans. The balance sheet also proved to be of help in getting the profile of the institution and institution website. Annual report, journals publish by institution. Tools and Techniques The main method of data collection used by me was: 1. Reading 2. Observing 3. Discussions with managers. 4. Information has to be collected on the basis of discussions with the borrowers. 5. Internet prominent search engines have been used for collecting the data market watch is also used to some extent for interpretation analysis.

pg. 41

CHAPTER 6

pg. 42

Company Overview. An Overview ofOberoi Capital Pvt Ltd. Foundedin kamothe. The Managing Director Mr.BaljeetOberoihad started the institution in a very small scale. The managing director has started this business by keeping in mind those client who does not get the loan at lower amount and those the time period of loan is decided by the client. The institution products are people oriented and are focused on creating the highest value for the customer. At Oberoi Money, they are transparent and understand the need of the customer. They follow ethical practices in the relationships at all times and believe in serving the people and strive to maintain consistency in Quality. The main aim of the institution is to service the low income standard group of people. Because the most of the institutions are providing loans above 1, 00,000/-. But the persons who need the small amount of loan for very short time of period they can’t able to get from institutions. But this institution provides loans as per the needs and requirements of client. This company provides the loans from 10,000 to 5, 00,000 and as the security given by the client. The documentation in this institution is quite low and faster process.

pg. 43

Mission and Vision of the Institution. The mission of the company is to service low-income clients by providing them short term and long-term access to financial services, which are client, focused and designed to enhance their well-being. The services are delivered in a manner that is ethical, dignified, transparent and cost effective. The mission of the company is to fulfil the requirements of the low income clients, small scale business etc.

Products: 

Instant Loan on any Life Insurance Policy.



Life Insurance from Birla Sun Life.



General Insurance from New India Assurance Co Ltd.



Instant Cash Loans for business.



Loans against gold.



Loans against shares and debentures.

pg. 44

Business partner: Birla Sun life Insurance Co Ltd.

New India Assurance Co Ltd.

ReligareFinance.

LIC of India

pg. 45

»

Eligibility Criteria

If any client have a Shop in Navi Mumbai and they are also a resident of NaviMumbai, they can apply for a loan between Rs 10,000/- to Rs 5, 00,000/- . the client should have companies policy, (like life insurance of India, Birla, Kotak Life Insurance, Icicipreducational Life Insurance etc.)

»

Documentation

1.

Photo.

2.

Cheques of any Institution.

3.

PAN card or any other Photo ID.

»

Contact details:

Head Office:

Registered Office

Oberoi Capital Pvt Ltd,Oberoi Capital Pvt Ltd, 1206 Real Tech park,9 and 10 Krishna Kutir Sec 1E 30 A OppVashi Station Police Station Road, Vashi.Kalamboli, Navi Mumbai: - 400703

Navi Mumbai -410218

Tel.:- 27811151 / 65262020.

Sales 9223513564 9869642858 Email: [email protected] pg. 46

Awards and Recognition. 1. Birla sun life insurance awarded to Mr.BaljeetOberoi for acheicing 7 th position in vashi branch (April – December 2007) 2. The most promising new advisor Mr.BaljeetOberoi for 2007-08 3. .Birla sun life insurance awarded to Mr.BaljeetOberoi for being No. 4 Advisor on AP for July 2009. 4. Birla sun life insurance awarded to Mr.BaljeetOberoi for being no. 3 advisor on AP for the September 2009. 5. Certificate of honour awarded to Mr.BaljeetOberoi for ranking in top ten on policy and on premium. 6. Certificate of achievement to Mr.Baljeet Singh Oberoi for being in top five Advisor for December 2010.

pg. 47

LEARNING ASPECTS ANALYSIS AND INTERPRETATION OF COMPARATIVE STUDY ON LOANS AND ADVANCES Loans and Advances play an important part in the gross earnings and net profit of institutions. The basic function of Institutions is whether it is a commercial institution or any other credit institution, is to enable individuals and business enterprises to purchase goods or services. Consumers demand credit to acquire goods for which they pay in future. Demand for credit by business man arises because of time consuming nature of the productive and distribution process. Of all the functions of modern institution, lending with or without security, is by far the most important functions. Loans and advances constitute lending. Loans and advances from the major business activity of the institution, they pay the depositor as and when they are due for payment. And major part of institutions income is earned from interest earned on advances. The proper management of loans and advances is known as credit management. Therefore credit management can be defined as “management of loans and advances in institutions”.

pg. 48

4.1 Product Profile

The Different Types of Loans and Advances Are As Follows 1. Security Loan 2. Property Loan 3. House Construction Loan 4. Land Purchase loan 5. Business loan or Business improvement loan 6. LIC bond loan 7. Gold loan 8. Loans on deposits 9. Vehicle loan 10. Two wheeler loan

1. Security Loan Quantum Of Loan: Decided by the management Interest: 18% P.A (different institutions have different interest rate) Period Of Loan: 60 months Objective: To help the persons who is in need of funds Documents: Address proof and id proof. Introducer to the borrower. Any security documents. pg. 49

2. Property (Assets) Loans Quantum Of Loan: up to 40lakhs Interest: 15% P.A Period of loan: During of loan is 180 months (15 years)

3. House construction loan Quantum Of Loan: up to 40 lakhs Interest:15.00% P.A Purpose: For the construction of house Period Of Loan: 180 month (15 years) Objective: To provide financial assistance to the middle class people and the society members to build and own house Age criteria: A person must be at age of 18years and above

Procedures Applicant should fill up the form provided by the institution Applicant should pay the service charge as prescribed by the institutionDocuments It is own with sale people he should have the old owners paper which are favouring them If it is for father’s property then he should hold the document that he is the owner Recent tax receipts pg. 50

Site/construction plan Site photographs Address proof and income conformation.

4. Site Purchasing Loan Quantum of loan: 40 lakhs. Interest:15% P.A Period of loan: 180months (10 years) Processing fee: According to the changes in future course institutions decision involved in it.

5. Business and Business Improvement Loan Quantum Loan: up to 40lakhs Interest Rate: 15% P.A Purpose: Institution provides loans to its membership customer for their Business transaction and business improvement. Special Feature This Loan is provided to small scale Business to improve. To Improve Business with the financial assistance.36 This loan helps in self employment of the people. pg. 51

Provided the necessary documents like Incorporation certificate, Commencement certificate If Business place is rented one, then the applicant should get letter from the owner that he is paying his rent regularly.

6. Lic Bond Loans Amount of loan70% on premium paid on LIC Bonds. Interest Rate: Up to 15% P.A Interest Amount Rate may charge from period as per the direction of reserve institution and administration board Way of treating and transferring: The persons have to transfer bonds to the institution and register in the concerned department and get the letter or document showing the transfer to the institution. Procedure: In common policy assignment letter related every policy holder’s signature with written letter and the letter should be written to the insurance company holder. This should be enlisted in the insurance company. A receipt regarding the last instalment paid the policy holder and gets the surrendered value details from the policy company.

7. Gold Ornaments Loan Quantum of loan: Maximum up to 10 lakhs on gold ornaments as a gram gold Rs.2, 000/Duration of loan: 24 months Interest Rate: 15% P.A pg. 52

Documents: ID Proof and address proof. There is no much of security needed

8. Vehicle Loan [Three wheelers, cars, trucks, buses] Quantum of loan: up to 15lakh Period of loan: During of loan is 60 months (5 years) Interest: 15% P.A Procedures and documents: Applicant should for Performa invoice Duplicate of driving licenses holders will be applicant Permit letters from the transport office for running the vehicle If the vehicles are given to BMTC/KSRTC then should provide necessary letter required by institution. Membership ID cards and address proof duplicate Income conformation paper. Get necessary blank forms for the transfer of the vehicle ownership. Promissory note Hypothecation.

pg. 53

9. Two Wheeler Loan Quantum of loan: Up to 1 lakh Purpose: Purchases of new two wheeler (Scooter, Motorcycle, and Moped) for personal use only. Duration of loan: Up to 28 Months Interest Rate: 15% P.A Documents & Procedures: Performa invoice from the vehicle company. Applicant driving license duplicate. Declaration letter from the loan beneficiary ID card showing customer of the institution& address proof duplicate. Proof of income from employer 

pg. 54

CHAPTER 7

pg. 55

FINDINGS Here are some findings that can make a huge different for future.

 Never borrow a huge amount of loan even if it is pre-approved. Borrow only as much as you need.

 Evaluate your requirement and do not fall into the debt trap.  Set a budget before you go shopping for a mortgage loan or any other type of loans

 Evaluate your monthly income to

ensure that you will be able to make the

monthly payments on time.

 Never borrow more than you can afford or more than what you need  Read the terms and conditions rather the fine print before entering a mortgage loan or any other loans

 Never carry credit balances/  Save some money for contingencies or other loan related expenses.  Loans have several types of fees associated with them. You must have some cash on hand to meet these expenses.

pg. 56

CHAPTER 8 pg. 57

CONCLUSION The study has been conducted on “comparative study on loans and advances “in “Oberoi Capital Pvt. Ltd’’. According to the objectives through the study As we know the population is been increasing day by day the more and more people will not have employment opportunity due to this, the interested people will come for the loans to start their own business, but the people who are in middle class people they have the basic needs due to less income the middle class people will come to take loans to fulfil their needs, the needs in the sense like house construction and for vehicle. The institution also provides the loans for the staff who are working in the institution for less rate of interest. The loans like, festival advance, staff vehicle loans, staff house building etc…. If an account holders wants they need to have the loan the institution will help the customers to have huge amount for less rate of interest. If the customer’s performance / transaction are good in the institution the institutions will provide advances, over draft etc. The study has concluded that the institution should announce more innovative loan services to their customer.

pg. 58

CHAPTER 9

pg. 59

SUGGESTIONS

 The profit position can be improved by reducing the interest rates on loans.

 The providing of loans must be increased so it will help raising the income.

 Online institution should be adopted so that customers can transact easily.

 The institution should provide loans on lic bonds. So that the institution can secure of lending and make profit as well.

 The institution should include English and Hindi with Kannada which helps to different communities. It helps to gain more customers.

 The institution has to open the branches throughout state and cities so that they meet needs of all customers.  Institution has to introduce new loan schemes to encourage more and more different classes of people. There are some suggestions to the borrower also  As the cash coming to them is in loan form so they are liable to return it.

 The borrower should take loan only when it is really need.

pg. 60

References and Bibliography

» www.rbi.org.in » www.oberoi capital pvt. Ltd. » shodhganga.inflibnet.ac. » https://en.wikipedia.org/

pg. 61