SUMMER

PROJECT
CO-OPERATIVE
BANKING &
ITS CREDIT APPRAISAL
MECHANISM

Presented By : Chandni Devani

Objective of Study:

1. To understand the Indian Co-operative banking industry.

2. To understand the concept & Mechanism of credit

appraisal & various services rendered by Abhyudaya Co-op
Bank Ltd.

3. The project emphasis on understanding the procedure and

process used by Abhyudaya Co-operative Bank Ltd. to assess
the credit worthiness of the borrower.

4. The study in the form of cases deal with calculations of

MPBF (Maximum Permissible Bank Finance), along with going
through the borrowers information, general information of
the proposal, past record of borrower and details of security
mortgaged.

5. To suggest the steps to be taken to increase the

efficiency of Abhyudaya Co-op Bank Ltd. regarding Credit
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Appraisal.

INDIAN BANKING STRUCTURE

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CO-OPERATIVE BANKING
ACo-operative Bankis a financial entity which belongs
to its members, who are at the same time the owners and
the customers of their bank.
Registered under the Co-operative Societies Act
They are governed by the Banking Regulations Act
1949 and Banking Laws (Co-operative Societies) Act,
1965.
MAIN FEATURES
As per B.R. Act 1949 co-operative bank cannot undertake
trading activities.
A co-operative bank is prohibited
immovable property
Except for own use
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from holding any

Co-operative bank cannot carry on business of banking in

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india unless
Minimum paid up share capital and reserves is less than

TYPES OF LOANS & ADVANCES

1.Personal Loan
2.Gold Loan
3.Rent Securitization Loan
4.Mortgage Loan
5.Hosing Loan
6.Educatin Loan
7.Vehicle Loan
8.Group Loan
9.Project Loan
10.Loan Against NSC/RBI
Bonds/LIC/KVP)
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Process of lending in Co-op Banks Begins with Membership:

In co-op banks the borrowers must be the members
(shareholders) of the bank
There are 2 types of members
1. Nominal members
2. Regular members

What is credit appraisal?

Credit Appraisal is the process by which a lender appraises
the technical feasibility, economic viability and bankability
including creditworthiness of the prospective borrower.
Components of Credit Appraisal Process/
Mechanism
We can tabulate all the conditions under three
parameters.
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PARAMETER COMPONENTS & HOW BANK ASSES YOUR

CREDITWORTHINESS THROUGH IT

Technical
What bank is looking for
Feasibility
Living standard Decent living standard with some tangibles like
T.V. & fridge will provide assurance to bank
regarding your residential status.
Locality
Presence of some undesirable elements like
local goons or controversial areas adversely
affects your loan appraisal process.
Telephonic
At least one response is need from person to
Verification
establish the identity of the person from
contact point of view.
Educational
Not an essential barrier but essential to
Qualification
understand the complex terms & conditions of
bank loan.
Political
An interesting reference point in the sense that
Influence
they are one of major category of loan
defaulters.
References
To establish the residential identity of person
from human contact point of view & cross
check of their loans.

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Economic Parameters
MPBF

Maximum Permissible bank finance

calculation is done on the basis of loan
amount.
Ratio
To check the financial position and
analysis
repayment capacity of the borrower.
Financial
To find out the current and projected
statements value of borrower income.
IRR
Internal Rate of Return is calculated of
the borrower.
DSCR
To check the ability of the project to
generate sufficient cash flows to repay
the debt taken to finance the project.

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Bankability
Parameters Norms
Parameter
Bank
Statements

Business
continuity
proof
Credit
interview

Security
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Checkpoints
12
months
bank To
check
the
statements need to be average
amount
furnished
client
is
maintaining in the
account is sufficient
to
pay
the
installment amount
or not.
Two year IT returns To enquire primary
made compulsory
source of income.
For
the
big
loan To
check
the
amount
credit general attitude of
interview is necessary. customer
along
with efforts are put
in to understand
their needs better.
Asset of value equal to To safeguard bank
or more than loan interest against any
amount taken has to future default.
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be put as pledge or
collateral.

Credit Appraisal Process

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Case study

Loan Type
: Housing Loan
Applicant
: Mrs. Prachi Ghaisas
Co-Applicant
: Mr. Uday Ghaisas
Amt Applied
:40,00,000
Installment :180
1. Details of Applicant & Co-Applicant is collected:

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Applicant

Co-Applicant

Date of Birth
Membership No.
Pan No.
Residential status

15/6/1976
Applied
A0mpp6087B
Ownership

03/05/1976
Applied
Afzpp6527k
Ownership

Area sq.ft.
Address
Name & Address of
Business

1250
Goregaon east
Navami Enterprise,
Goregaon east

1250
Goregaon east
Sahara One , sahara
point, Goregaon west.

Gross Salary P.M.

Net Salary P.M.
Income tax paid

15000
14800
380

2,50,000
2,00,000
7,21,449

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2.Details of Applicants family members is collected.

3.Account Details:
4. Details of Loans & Advances availed from other bank/financial institution/credit
societies:

Name of Loanee

Amt Sanctioned

Bank

Date of Sanction

Mr.Uday Ghaisas

89,00,000

Syndicate Bank

03/05/09

Mr.Uday Ghaisas

50,00,000

NKGSB

1/12/09

5. Securities: A. Prime (Purchase of flat/house) mortgage of immovable property:

Particulars of property
Area (Sq.ft.)
Purchase on
Agreement value
Builder / Vender Name
Present Value
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A-1823, Garden Estate, Goregaon (w)

Mumbai 400 062
(955)- 653 Sf carpet
6/10/2010
70,00,000
M/s. Vicky Joshi & Co.
Market Value: 1,10,79,000 lakh
Distress Value: 88,64,000 lakh 8/18/2011

6. Details of projected cost/Budget:

Purchase of Flat(Total amt) : 70 lakh

Advance paid
: 30.50 lakh
Amt applied
: 40 lakh
Balance in Account
: 10,000
Deficit
: Nil
7.

Guarantee: 2 Sureties
8. Check list of Documents
9. Declaration cum Undertaking by Mortgagers.
10. List of Documents
Agreement for Sale
Stampduty paid receipt
Registration receipt
Valuation receipt
11.Housing Loan Agreement
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12.Undertaking:
I Mrs. Prachi Ghaisas the borrower will repay 180 EMIs of
Rs. 44300/- @10.5%(floating) on daily reducing balance
Purpose : Purchase of Flat
13. Scrutiny by branch:
Full details of applicant,coapplicant,surety 1 & 2.
Calculation of EMI factor:

Applicant
Co-applicant

DOB

Age as on date

15/6/76
03/5/76

34
34

Installment
available
180 months
180 months

Installment Asked: 180 months

Max Permissible: 180 months
Rate of Interest : 10.5% (ROI)
EMI factor 100000 on basis of installment period Rs.1105/-

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Calculation of Repayment capacity:

Gross
Salary
Other loan
Net
deduction
Applicant
15000+20000*
200
52450
166902
Co-applicant 231135+14500+130
00*
Total
293635
52650
166902
*Rent Income

74083

Repayment Capacity

= 293635-52650 * 166902 (Net salary)

(other loan)

15000
(Take home salary)

14. Cost of Project:

As per Agreement (Rs.)
Value/Cost
Stamp Duty
Reg. charges

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Total
90/85/80% of
Cost of project

70,00,000
33260

As per Government(Rs.)
51,05,400

30380
73,62,980
58,90,384

54,68,380
43,74,704
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A) Applied
: 40.00lakh
B)%
:90 lakh (as per value construction)
C)Eligible as per repayment capacity : 59083/1105*100000 = 53.47
lakh
D) Loan Amount Eligibility (Lower of A/B/C of above)
= Rs. 40.00
lakh

15.Visit report:
16. Documents Checked:
1. Rent income deposit letter
2. No share certificate issued by society
3. No maintainence received by Society
4. CIBIL report explanation letter
5. Salary confirmation letter
6. Rent agreement
7. Employer Bond

17. Western Zonal office Remark:

1. Co-applicant is employed with sahara one & is head-distribution
(motion pictures) since march 2008 & draws net salary 178695 in month
of oct 2010. Salary credited to Axis bank.
2. The applicant is employed with the firm Navami enterprise as
manager & is earning net salary 14800 credited to HDFC
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3. Applicant and co- applicant has given there 3 flats at kandivali (e) and

FINDINGS
SWOT ANALYSIS OF Abhyudaya Co-op Bank Credit Appraisal:

STRENGTHS

WEAKNESSESS

Customer Service
Sureties must
capacity Too
Repayment
judgment is proper
Documentation
OPPORTUNITIES

much

THREATS

Income related Growth Inflation

Introducing New Types NPA
of Loans
Customized loan
Technology

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RECOMMENDATION

IN EVERY BRANCH ONE STAFF

ALLOWTMENT FOR DOING CALLING WORK
SYSTEM UPGRADATION
BOOKLET OF AGREEMENT/SECURITY
DOCUMENTS

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CONCLUSION & LEARNING

Credit appraisal is done to check the commercial, financial &

technical viability of the project proposed its funding pattern.
A bankers task is to identify/assess the risk factors/parameters
& manage/mitigate them on continuous basis.
I worked in loan Department & understood the meaning of
Customer service.
One thing I got is Though all banks are different entities,
they all are under one roof that is RBI.
To be a good manager you need to have good interaction with
others & show involvement in their difficulties. Hence one should
always be open to new ideas to experience the innovation.

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