A Project Report ON Retail Credit (With Special Reference To Bank of Maharashtra)

A PROJECT REPORT
ON
RETAIL CREDIT
(WITH SPECIAL REFERENCE TO
BANK OF MAHARASHTRA)
By:
SHRIRAM YADAV
Roll No-60 (PGDM-BFM)
This report has been submitted as partial fulfillment

of the requirements of PGDM Program of Pillai’s
Institute of Management Studies & Research
RETAIL CREDIT-Special reference to Bank of Maharashtra Page 1

ACKNOWLEDGEMENT
Every human being to whichever walk of his life he belongs, seeks success in
whatever he does. Success especially tastes sweet when it is combined with
hard work and sense of dedication. But he can’t take all credit for the success
he earns because some forces work in the background from him.
I take this opportunity to give due “Credit” to these forces they deserve and
show my gratitude towards them.
First and foremost I would like to thank my parents and colleagues for all their
support, which helped me reach where I am today.
It’s my real honor and pleasure to be associated with Pillai’s Institute of

Management Studies & Research. I deeply express my gratitude to the
institution for giving me an opportunity to work on the project.
I would like to thank “Bank of Maharashtra” to have faith on me and to

provide me with an opportunity for pursuing my Summer Internship. Indeed
the past two months has been a great learning experience for me. It was my
good fortune to have Mr. Rajan Korgaonkar (Asstt.General Manager) my
guide. It wouldn’t have been possible to complete my project without his
guidance and the invaluable Knowledge that he shared during my project.
Last but not the least, I would like to thank Prof.Monika Tikkoo for being my
project guide. It was due to her valuable support and guidance that I was able
to successfully complete my project. She not only reviewed my progress at
each step but also helped me design the project. It was because of her cordial
guidance and suggestions that I could implement project efficiently and in
time.

CERTIFICATE OF SUMMER INTERNSHIP
This is to certify that Mr. / Ms. ______________ of Pillai's Institute of Management

Studies and Research has successfully completed his / her summer internship with
us from May 2010 to June 2010.
During the summer internship Mr. / Ms. ________________ was found to be

punctual, positive and performance oriented.
Mr. / Ms. _______________ has completed his / her project on RETAIL CREDIT –
With Special Reference To Bank of Maharashtra.
We wish him success in his career.
Project Guide:
Mr. Rajan Korgaonkar
Asstt.General Manager
BANK OF MAHARASHTRA

DECLARATION
I am Shriram Yadav, currently pursuing Post Graduation Diploma in

Management with the Specialization of Banking and Finance (PGDM-BFM)
from Pillai’s Institute of Management Studies and Research, New Panvel.
I hereby want to declare that I have completed the project on “RETAIL

CREDIT – With Special Reference to Bank of Maharashtra” in the
academic
Year 2009-2011.The information submitted is genuine & practical to the best
of
our knowledge.
I also declare that this project report is the result of my own effort and has
Not been submitted to any other institute or University.
SHRIRAM YADAV
Roll no-60 (PGDM -BFM)

TABLE OF CONTENTS
TOPIC
PAGES
Chapter – I 06
1.1 Introduction ----------- 07

1.2 Objective of the Study ----------- 09
1.3Need of the Project ----------- 10
1.4Scope of the Project ----------- 11
1.5 Research Methodology ----------- 12
1.6 Limitations of the Project ----------- 13
Chapter – II 14
2.1 Company Profile ----------- 15

2.2 Organization Chart ----------- 26
2.3 Benefits given by Company ----------- 29
Chapter – III 31
3.1 Theoretical Background ----------- 32

3.2 Data Analysis & Interpretations ----------- 44
Chapter – IV 57
4.1 Findings ----------- 58
4.2 Suggestions / Recommendations ----------- 59
Bibliography ----------- 60
Annexure ----------- 61
CHAPTER – I
 Introduction
 Objective of the Study
 Need of the Project
 Scope of the Project
 Research Methodology
 Limitations of the Project

INTRODUCTION
The banking sector has under gone turbulent changes in the past few years. The financial
sector reforms have provide Nationalized bank with an opportunities to get entered an era of
fierce competition, posing tall challenges. The conventional banking as outlined above has
given way for professional and high-tech banking. There has been a paradigm
shift from the monopolies of nationalized banks to competitive banking. Nationalized banks
can no longer remain complacent with their conventional products and services. With walk
in business virtually being ruled out, banks are now scouting for quality consumers both for
building their resources and assets. There were times when the corporate clientele occupied
the centre stage and the retail ones were pushed to the back seat. The slowdown of the
economy,
sluggish industrial growth and slump in agricultural activities have pushed the commercial
banks to look to the retail customers.
Retail Credit Lending is one of the main functions of banking business and so an important
source of working fund for the bank. Retail credit is an indispensable factor to increase the
source of the Banks to serve effectively. The importance of credit facilities of the
nationalized banking structure is to provide satisfactory service to the retail customers in
order to fulfill their Economical or Financial needs and ultimately their social needs. The
success of the banking greatly lies on the Credit Lending performance of the bank as the
Credits are normally considered as a cost effective source of working fund. The bank is
operating various Retail Credit Lending schemes such as Housing, Education, Vehicle,
Personal and other special schemes to meet the varying requirement of the customers.
Credit Lending to the public provide low cost working fund for the bank. When it is not
fully augmented, the performance of the bank is affected. Innovative business has become
more essential for the banks to stay and to progress in this aggressive, ever-changing,
competition-packed marketing environment.
For a bank, Lending of Credit is as much essential as ‘Oxygen for Life’. In the post
liberalization scenario, the number of players in banking industry has increased
considerably which developed competition in bank marketing. ‘The survival of the fittest’
has made applicable for the banks. To enhance profitability, banks take appropriate steps to
minimize the Cost and Time for lending the credit. In the present context banks efficiency
can be measured with respect to Cost, Profitability and the Time taken for lending.
Banking is a business of taking risks. One of the important, all pervasive risks that Bankers
have to face at all points of functioning is the operational risk and supersedes other risks. It
is the risk, arising out of human or technical error. Functionaries not being fully aware of

the latest information regarding operations tend to make errors which may prove costly for
an individual and also for the bank. It is in this context that there is a need for everyone to
be abreast of the latest developments and extant operational guidelines so that the bank
could lend the credit facilities to its customer as per their requirements and thereby
satisfying them beyond their expectations. This will significantly minimizes the risk and
therefore help the bank to achieve its goal more efficiently and effectively.

OBJECTIVE OF THE PROJECT
The main objectives of the study are as follows:

• To study the Concept on which bank can practice active Retail Credit Lending
• To analyze the need for Retail Credit and the techniques & procedures used for the
processing of Retail Loans
• To provide the details of different modes of lending along with the steps involved in the
Credit lending
• To describe the various methods and techniques and important measures which are used
for processing of the Retail Credit Lending
• To study about Bank’s investment, Credit Deployment, and NPAs
• To provide the details of the Risks which are involved in the Retail Credit Lending
• To study about the Risk Management & vigilance of the risks which are associated with
Retail Credit Lending

NEED OF THE PROJECT
 To fulfill the Requirement of Summer Internship which is a part of our curriculum
 To know the concept of Retail Credit Lending
 To describe the different types of Retail Credit
 To describe the different ways of Credit lending
 To study the Deployment of Retail Credit
 Analysis and interpretation of the data collected
 To study the processing of Retail Credit and Risk associated with them
 To study the various methods and techniques used for management of the Retail
Credit
 To know the income, expenditure and profitability of the bank.
 To study how the Retail Credit is profitable to the Bank

SCOPE OF THE PROJECT
Following are the scope of the project:
• Source of funds in Banks
• Different ways of Retail lending
• Reasons for Retail Lending
• Tools and Techniques for managing Retail Loans
• Guidelines for Retail Credit Lending
• Risks involved in Retail Loans
• Describes the Risk Management

RESEARCH METHODOLOGY
Methodology is to collect the important data through secondary sources like

internet, books, circulars and journals. I approached each and every officers of
the bank and I obtained very useful information from them. To give a present
scenario on the topic I also spoke to the Asstt.General Manager of the bank
and his Team who also act like a secondary source of data for the completion
of my project report.

LIMITATIONS OF THE PROJECT
Following Problems were encountered during this project:

 Time constraint
 Collection of real time data
 Survey within the bank
 Bank staff could not provide the detailed information due to bank’s Policy.

CHAPTER - II
 COMPANY PROFILE
 ORGANISATIONAL CHART
- BOARD OF DIRECTORS
- TOP MANAGEMENT
 BENEFITS GIVEN BY THE COMPANY

COMPANY PROFILE
Name of the Bank : BANK OF

MAHARASHTRA
Area of Operation : Nationwide
No. of Branches : 1,421
Class : “A” Class
Chairman : SHRI. ALLEN C.A. PEREIRA
Managing Director : SHRI. ALLEN C.A.

PEREIRA
Executive Director : SHRI. M.G. SANGHVI
Staff Members : 13,631

Company Profile in Tabular Form
Parameter Mar 2007 Mar 2008 Mar 2009

Total Business 57381.62 71556.36 87072.20
Total Deposits 33919.34 41758.33 52254.92
Aggregate Deposits 33663.20 41580.37 52219.43
Gross Advances 23462.28 29798.03 34817.28
Net Bank Credit 23220.87 29285.81 34290.77
CD ratio 69.70 71.66 66.67
% of Priority Sector Adv. 41.24 48.63 41.06
% of Agricultural Adv. 16.73 21.04 18.21
Total Investments 11298.40 12282.95 18382.14
Gross NPAs 820.28 766.27 798.41
% to Gross Advances 3.50 2.57 2.29
Net NPAs 277.38 254.05 271.90
% to Net Advances 1.21 0.87 0.79
Operating Profit 613.20 672.63 793.52
Net Profit 271.84 328.39 375.16
Other Income 380.28 500.02
378.52
(incl. treasury profits)
Capital Adequacy Ratio 12.06 10.75 12.05
P. E. B. ( in lacs ) 413.03 526.54 638.78
No. of Branches 1345 1375 1421
Of which Metro 264 351 368
Urban 290 257 271

Semi Urban 202 251 262
Rural 589 516 520

ABOUT BANK OF MAHARASHTRA
ESTABLISHED IN 1935
Bank of Maharashtra is a common man’s bank. Prof. V.G. Kale and the late Shri D.
K. Sathe registered as a banking company on the 16th of September, 1935 at Pune with an
authorized capital of Rs. 10.00 Lakh and issued capital of Rs. 5 Lakhs by a visionary group
of middle class men with the sole aim to serve the common man from Maharashtra who was
neglected in the field of banking at that time. Their vision was to reach out to and serve the
common man and meet all their banking needs. The bank started functioning on 8th
February 1936. In July 1969 when it was nationalized with 13 other major Bank had
developed its roots in entire Maharashtra and it enjoyed complete confidence of the
common man. Even before the government issued guidelines about deployment of 40%
advances to priority sector, the Bank was following the principle of serving common and
neglected people of the society, since its inception and it continues even today. Successive
leadership of the Bank and the employees has endevoured to fulfill their vision.
Rapid expansion after Nationalization

After Nationalization, the Bank expanded rapidly in other states and also reached the
nook and corner of Maharashtra. Around 38% of its branches are in rural area. Today the
bank is spread in 22 states and 2 union territories. It has already acquired the status of an all
India bank. At the same time it has gained predominance in Maharashtra state through 883
branches. The Bank has migrated 831 branches under CBS as against 773 branches as on
31.03.2009 and 798 branches as on 30.06.2009. The Bank thus holds the record of having
highest number of branches of any nationalized Bank in a single State. The mission of the
bank is “To be Best in Maharashtra and most liked in other states”.
Milestones
 Milestones: Pre Nationalization
1936 : Commenced business on February 8th.

1945 : Deposits crossed Rs. 1.00 crore marks.
1946 : Maharashtra Executor and Trustee Company (METCO) established.

1958 : Listed on Bombay Stock Exchange.
 Milestones: Since Nationalization
1969 : The Bank was nationalized with 153 branches.

1978 : Set up first Regional Rural Bank (RRB) 'Marathwada Gramin Bank' with
headquarters at Nanded. The Bank was appointed as Convener to
the State Level Bankers Committee (SLBC)
1979 : Bank's business crossed Rs.1,000 crore.
1980 : 500th branch of the Bank at Nariman Point, Mumbai inaugurated by the
late Smt. Indira Gandhi, the then Prime Minister of India.
1981 : Set up the second RRB “Aurangabad Jalna Gramin Bank”.
1984 Dr Manmohan Singh, the then Governor, Reserve Bank of India, launched
the Bank's Golden Jubilee Celebration.
1986 : Set up the third RRB “Thane Gramin Bank”
1987 : 1000th branch of the Bank opened at Indira Vasahat, Pune.
1996 : Bank's Diamond Jubilee Celebration launched by the then RBI Governor,
Dr. C. Rangarajan
2004 : Bank came up with Initial Public Offering (IPO)

2006 : 1. Launched ATM-cum-International Debit Card
2. Commenced Bancassurance business
3. Commenced distribution of Mutual Fund products.
4. Surpassed business landmark of Rs. 50,000 crore.
5. 1st CBS branch rolled out on 13th November at Karve Nagar, Pune.
2009 : 1444 branches, 345 ATMs, Total Business over Rs. 90,000 crore, 902 CBS
branches
2nd Mar 2010 : The Bank achieved 100% CBS coverage.
Vision 2010

To be a vibrant, forward looking, techno-savvy, customer centric bank serving
diverse sections of the society, enhancing shareholders’ and employees’ value while
moving towards global presence.
Mission
 To ensure quick and efficient response to customer expectations
 To innovate products and services to cater to diverse sections of society
 To adopt latest technology on a continuous basis
 To build proactive, professional and involved workforce
 To enhance the shareholders’ wealth through best practices and corporate

governance
 To enter international arena through branch network
Our Logo
 The Deepmal

- With its many lights rising to greater heights.
 The Pillar
- Our institution - Symbolizing strength
 The Diyas
- Our Branches- Symbolizing service.
 The 3 M's symbolizing
- Mobilisation of Money
- Modernisation of Methods and
- Motivation of Staff.
Our Aim
The bank wishes to cater to all types of needs of the entire family, in the whole country. Its
dream is "One Family, One Bank, Bank of Maharashtra ".
Secured Autonomy
The Bank is one of the progressive Nationalized Banks that got autonomy in the year 1998
and continues to enjoy the status as a result of excellent performance. It helps in giving
more and more services with simplified procedures without intervention of Government.
The Bank has earned profit for consecutive five years.
SOCIAL BANKING – for equitable economic development
The bank excels in social Banking, overlooking the profit aspect having the highest share of
priority sector in net Advances and it derives strength from the common man, as its savings
deposit are 29% of its deposits. Around 90% of its depositors are having deposits below
Rs.25000/-. The Bank provides an array of banking services that satisfy changing needs of
depositors as well as small and big borrowers. The bank has entered into correspondent

arrangement with Overseas Bankers also. It provides finance to various sectors ranging
from Agriculture to Industry and from Trade to Export.
The Bank has established Rural Development Centres at Hadapsar and Bhigwan in
Maharashtra to carry out Research, Technical Support, Education, Demonstration and Rural
Development Activities. The Bank has also established to trust under RDC, namely Gramin
Mahila VA Balvikas Mandal (GMVBM) and Maha Bank Agricultural Research and Rural
Development Foundation (MARDEF) Both are NGO’s and are engaged in improvement of
women and children in the rural and in transfer of technology in Agricultural sector.
-Priority Sector Lending

It has been the constant endeavor of the Bank to facilitate equitable and sustainable
development by making credit available to productive purposes to Small Borrowers, Small
& Marginal Farmers, Micro & Small Enterprises, Retail Traders, Professional & Self
Employed, Women Entrepreneurs and economically weak but with entrepreneurial
leanings. The outstanding advances under Priority Sector as of March 2009 aggregated to
Rs. 12,236 crore, constituting 41.06 per cent of the Adjusted Net Bank Credit of the
previous year as against the stipulated minimum target of 40 per cent. The rise in Priority
Sector Advances was Rs. 826 crore over March 2008 in absolute terms.
-Agriculture – sowing to reap

The Bank disbursed Rs. 3,143 crore under agriculture during the year 2008-09. The
outstanding advances increased to Rs. 5,427 crore showing an increase of Rs. 471 crore. As
on March 2009, total advances to agriculture are 18.21 per cent of Adjusted Net Bank
Credit. The Bank undertook awareness programmes for all branches for increasing
agriculture advances.
The Bank successfully implemented Agriculture Debt Waiver and Debt Relief Scheme of
the Government of India, by reaching out to 87,157 eligible small and marginal farmers for
debt waiver involving Rs. 218.32 crore. The number of farmers eligible for debt relief is
48,237.
-Micro, Small and Medium Enterprises (MSME) – for sustainable growth

SMEs are recognized as major growth engines for the Indian economy. They generate
opportunities for direct and indirect employment by facilitating use of natural resources and
local skills to stem the tide of migration to urban areas and promote low investment
enterprises. The Bank’s lending to MSMEs which was at the level of Rs. 2643 crores as at
March 31, 2008, has increased to Rs. 3074 crores as at 31st March 2009. Following the
special package announced by the Government in September 2008, fresh credit facilities to

the tune of Rs. 1170 crores have been extended to MSMEs between September 2008 and
March 2009.
Convener of State Level Bankers Committee

The Bank is the convener of State level Bankers committee and is successfully handling the
convenorship of state Level Bankers committee for the State of Maharashtra. It is also
convener of SLBC for Rajbhasha. It is entrusted with the responsibility of being the Lead
Bank under Lead District scheme in six districts namely Aurangabad, jalna, Nasik, Pune,
Satara and Thane, all from Maharashtra. The Bank has sponsored three Regional Rural
Banks with their head quarters in Nanded, Auraangabad and Thane, namely Marthwada
Gramin Bank, (MGB) Aurangabad Jalna Gramin Bank & Thane Gramin Bank. MGB
happens to be the biggest RRB in the country and covers 6 District in Maharashtra. Bank
offers Depository services and Demat facilities at 131 branches. Bank has a tie up with LIC
of India and United India Insurance Company for sale of Insurance policies. All the
branches of the Bank are fully computerized.
Computerization
Computerization activity in the Bank started a way back in 1982. By December 2000, 380
branches were computerized and the total business handled by these branches was more
than 69%. The Bank has also introduced sophisticated facilities like ATM, E-mail, Tele-
Banking, Query Terminal etc. at various branches/offices.
Highlights
 Autonomy secured in the year 1998 continues.

 Total business more than Rs. 91000.00 crore of which total deposits more than Rs.
54400 crore and Gross advances more than Rs36600 crore as of 30.9.2009
 Branch network comprises of 1433 branches spread over 22 states and 2 union
territories.
 CBS Branches
Bank has migrated 831 branches under CBS as against 773 branches as on
31.03.2009 and 798 branches as on 30.06.2009
 ATM Network
Bank has 345 ATMs. Bank has installed 11 Biometric ATMs.
Card base crosses 10 lakh

 Mahabank Insta International Visa Debit Card
Mahabank International Debit Card is issued in collaboration with VISA
 ATM Card along with PIN is given to the customer as “Welcome Kit” at the time of
opening of the current and SB account in all CBS branches. The customer can start
using ATM Insta card after 36 hours from date of issue. ( 36000 Insta Cards are
issued since July 09)
 Utility Bill Payment through Internet Banking Facility.
The customers can do on line shopping / e-commerce and utility bill payment
transaction through Internet Banking facility.( 37000 Customer are using Internet
Banking facility)
 “Maha e-Statement”
Customers can get their statement of account on registering their e-mail id and
desired frequency of statement with the Bank.
 Straight Through Processing (STP) STP of NEFT/ RTGS transactions has been
implemented for instant processing of inward and outward remittances through
RTGS and NEFT. (800 branches are offering RTGS/NEFT facility)
Specialized branches:
 S M E branches - 14
 Agro High-Tech branches - 4
 Industrial Finance branches - 2
 Overseas branches - 2
 Treasury & international Banking - 1
 Pension Branch -1
 Govt. Business Branch - 1
 Bank has 28 FEX centers to handle FEX business.
 Toll Free telephones at 11 major Metro centers.
 The bank is shouldering the responsibility of lead bank in six districts viz. Satara,
Pune, Thane, Nasik, Aurangabad and Jalna. Our bank is also convening State Level
Bankers’ Committee and various development issues are taken up to implement the
state credit plan and achieving the targets under various Government sponsored
schemes.
 The Bank has set up a Trust viz. Mahabank Agricultural Research and Rural
Development Foundation (MARDEF), which is engaged in providing Credit Plus
services to the farmers in specific specialized fields like commercial dairy, Emu
farming, sericulture, organic farming, etc.

 The Rural Development Centers at Bhigwan and Hadapsar in Pune District
undertake various labs to land programs on improved technologies. A fully fledged
soil-testing lab is being set up for the benefit of the farmers to go in for high-tech
agriculture.
 To provide activity specific training to educated unemployed youth, Bank has set up
five Mahabank Self Employment Training Institutes (MSETI) at Pune, Aurangabad,
Nagpur, Nasik & Amravati for providing training to rural youth for enabling them to
acquire skills for self-employment.
 Bank has formed a Trust by the name Gramin Mahila va Balak Vikas Mandal
(GMBVM), which is primarily engaged in formation, nurturing, training and linkage
of self-help groups to various banks, GMBVM has its area of operation in nine
districts and has been recognized by Government of Maharashtra as Mother NGO. It
also markets various products made by SHGs through its two retail outlets by name
“SAVITRI” in Pune district. The GMBVM is now in the process of scaling up
viable SHGs to SMEs.
 The Bank has floated a subsidiary company- The Maharashtra Executor & Trustee
Company Ltd. (METCO) which undertakes Trustee Business, Property Management
and Tax Consultancy as well.
 Bank is the Convener for Town Official Language Implementation Committee
(TOLIC) at Mumbai, Pune & Solapur. The Bank secured the First Prize for better
implementation of Hindi in both ‘A’ and ‘B’ Region and the Fourth Prize for
implementation of Hindi in ‘C’’ Region under Reserve Bank of India Rajbhasha
Shield Scheme for the year 2007-2008. The Bank also secured the Second Prize
under R.B.I. Bi-lingual House Magazine Competition for the year 2009.

M-SETI
M-SETI (Mahabank Self-Employment Training Institute) is an institute established

under the aegis of Mahabank Agricultural Research & Rural Development Fund
(MARDEF), a trust established by Bank of Maharashtra and co-sponsored by the National
Bank for rural development (NABARD). The institute is recognized by the Department of
employment & self-employment of Govt. of Maharashtra.
The institute trains unemployed youth from the districts of Pune, Kolhapur, Satara, Sangli,
Nashik, Ahmednagar, Jalgaon, Dhule and Nandurbar.
The objectives of the Institute are:
 To train the unemployed youth.

 To promote rural entrepreneurship.
 To increase self-esteem of participants and
 To help trainees in improvement, placement and counseling them for Bank facilities
and their subsequent status.
The following are the training programs identified by M-SETI:

 Entrepreneurship development programmes (EDPs) on technical courses viz. two
wheelers, TV and VCR and domestic appliances, repairs, motor rewinding,
photography and video shooting, beauty parlor, commercial painting, tailoring etc.
 EDPs specific to the Government sponsored schemes viz. PMRY, SGSY, SJSRY,
SHGs,
 Information technology; Electronic data processing, electronic data entering and
computer awareness programmes.
 The said training is free of cost.
MAHABANK INFO CENTER
1. Mahabank Info Center is a retail banking boutique set up by Bank of Maharashtra

having the following activities.
Providing information on services provided by the bank at its various branches and
specialized branches,
2. Mobilizing deposits for various branches in Pune city,
3. Marketing to increase ATM card base Directing prospective clients to respective

branches for financial aid on housing, vehicle, consumer durables, education &
foreign tours, etc.
4. Development of business through bringing in instructional accounts.
5. Image building exercises.

ORGANIZATIONAL STRUCTURE
 BOARD OF DIRECTORS
 TOP MANAGEMENT

BOARD OF DIRECTORS
Shri.V. P. Bharadwaj Shri. S.K. Gogia Shri. A. K.

Pandit

Shri. C. Patwari Shri. T. Parameswara Rao Shri. S. H.
Kocheta
Dr. D. S. Patel Shri. S. U. Deshpande
TOP MANAGEMENT

Shri. A. S. Banerjee Shri. B. K. Piparaiya Shri. K. H.
Waze
Shri. V. Kannan Shri. V. E. Dalvi Shri. V. Y.

Chapekar

Shri. R. H. Kulkarni Shri. M. V. Dhoble Shri. M. C.
Goyal
Shri.S. D. Arya Shri. V. R. Gupta Shri. Dilip. R.

Harnagle
Benefits Given By the Company

Following are the Services Provide By Bank of Maharashtra:-
 Bank Deposits
 Lending of Loans
 ATM Services
 Credit Cards
 Demat Services
 Bancs
 Bancassurance
 Distribution Of Mutual Funds
 Executors And Tustee Services
 MAHAbill Pay
 Mahabank Insta Remit Scheme
 Capital Market Application (ASBA)
 NEFT
 MAHAeTRADE (ON LINE trading facility)
Roles and Responsibility:-

During my summer internship in the Retail Hub of Bank of Maharashtra, I have learned
about the Retail Loans as much as I can. Especially Mr. Rajan Korgaonkar, Asstt.General
Manager of the bank and his Team helped me a lot in learning the Retail Credit operation
and the Risks involved in Lending Credit. The staff was really very helpful, supportive,
coordinating and friendly as well. I also got to realize the importance of know your
customer (KYC) norms According to which Bank opens an account or give loans &
advances to the customer. Banks completely follows the RESERVE BANK OF INDIA
guidelines for deposit and advances.
 In Bank of Maharashtra, I Learned how to deal with the following four types of
Retail Loans :
- Home Loan
- Education Loan
- Vehicle Loan and
- Personal Loan

 I am feeling benefited after learning the following operations in the Bank of
Maharashtra :-
- Assessment of the loan documents.

- Preparing the Assessment sheet.
- Reporting to Concerned officer about the Assessment.
- Preparing the Housing Loan Processing Note.
- Preparing the Loan Appraisal forms.
- Preparing the Sanctioning Note.
- Criteria or Conditions for Sanctioning Loan.
- How to verify the Loan documents?
- How bank deals with Different Loan Requests?
I have learned all these operations by completing 24 Loan Proposals which includes all the
four types of Retail Loans like Housing, Education, Personal and Vehicle loan.

CHAPTER-III
 Theoretical Background
 Data Analysis & Interpretations

THEORETICAL BACKGROUND
GENERAL
Lending of funds to the constituents comprising of traders, businessman,

agriculturists etc. constitutes the main business of Banking Company. Bank has to ensure
that in granting of loans and advances, the deployment of funds is made in a most profitable
manner. Yet this business of lending is not without inherent risks. The test of a bank’s
strength and its success or failure depends on the nature and quality of its advances.
Therefore while lending, bank follows prudent policies and conduct its business on the basis
of principles of sound lending in order to minimize risks.
Safety, liquidity and profitability are the cardinal principles of lending. After
nationalization banks have been functioning as an instrument of social change. The GOI
and the RBI, during the last two decades have issued a number of directives in this regard
highlighting the social/economic purpose which they have to sub-serve. The traditional
principles of lending have come under stress. With regard to certain type of lending
particularly under priority sector the concept of security and profitability have undergone a
radical change and have been subordinated to social objectives.
A) Yet a banker has also to remember that he is dealing in funds collected from
public by way of deposits and is working as a trustee of their funds.
Therefore the basic principles of good and sound lending which are
fundamental observed by Banks. The principles may vary depending on
situation, however, basic frame will remain the same.
B) It needs to be borne in mind that advances form the most important

component of bank’s business. The advances portfolio needs to be monitored
with due care and responsibility, because of the risk involved in lending
operations.
C) Safety, liquidity and profitability are the three basic principles of lending.
Since the amount to be advanced mainly consists of depositors’ funds, bank
has to ensure and safeguard depositors’ interest. Bank should also remember
that some of bank’s deposits are withdrawable on demand or at short notice.
It would be in bank’s interest to see that the advances which bank grant are
easily liquidated. The canon of liquidity is more important. Bank should also
know that bulk of bank’s profit accrues from the advances. However,

profitability should not override the other two principles of lending i.e.
safety and liquidity. Therefore, the crux of bank’s lending lies in reconciling
these conflicting requirements by striking a good balance between these
conflicting principles.
COMPOSITION OF CREDIT PORTFOLIO
It is equally relevant to mention here that bank should diversify their advances and
should not concentrate such lending to any group or sector of industry/business in one
particular area/sector. The maxim “all eggs should not be kept in one basket” should be
borne in mind. The purpose for which the advances are to be sanctioned/recommended
should be legal and acceptable to the bank and the type of business activity to be financed
by the bank should be within broad lending policies framed by the Central Office. Bank
should ensure that the purpose of the advance is productive which will generate internal
surplus and provide definite source of repayment. The aspect of security (wherever
applicable) should not be lost sight of. Tangible security acceptable to the bank should be
considered as an insurance or cushion to fall back upon in case of emergency. Even after
application of all principles of lending, a particular proposal may not be acceptable to the
bank, if it is not in the National Interest. GOI and the RBI issue various directives from time
to time in this regard. These should be kept in view while sanctioning/recommending any
advance/s. Every proposal should conform to RBI/government/bank’s guidelines and
national policy.
Summary
Bank summarize below the principles of sound lending which should be observed
while sanctioning/recommending any advance.
1. Safety
2. Liquidity/Economic Viability/Technical Feasibility of the activity of the

borrower
3. Profitability
4. Purpose
5. Security
6. Diversification of risks
7. National Policy/RBI Credit policy

8. Bank’s credit policy.
SIGNIFICANT ASPECTS FOR EXAMINING THE ADVANCES
-Advances Portfolio
1. The manager/officer should study the composition and distributive pattern of the
credit portfolio of the branch and examine as to whether the branch has been
following the guidelines enunciated in credit policy of RBI / Bank.
The manager / officer should also ascertain as to whether the efforts made by the
branch in extending credit to the priority and weaker sectors of society are
adequate and that potential offered by the area of its operation for various types
of advances has been properly tapped.
2. It should be seen as to whether the branch has proper infrastructure facilities and
adequate arrangements for proper credit appraisals, post disbursement
supervision and follow up of advances/problematic/sick, weak accounts, more
particularly for recovery of non-performing advances/large overdues in these
accounts.
3. The manger should examine that he is exercising the delegated sanctioning

powers judiciously and there is proper and timely reporting of sanctions to the
competent authorities. As far as possible the Branch Manager is expected to
refrain from exceeding the delegated powers and it should be seen that in
unavoidable cases confirmation I obtained from the competent authority at the
earliest specifically giving the reasons as to why it was so necessary to extent ad
hoc/temporary/additional credit facility without obtaining prior sanction.
4. It should be verified that the guidelines on advances issued by RBI/HO from

time to time are strictly followed by the branch.
5. The assets acquired by the borrowers are available as security for bank’s dues
and the branch is taking adequate and necessary timely steps to safeguard
interest of the bank.
- Applications for credit Facilities
The managers/officers should ensure that:

1. The applications as far as possible are obtained in appropriate forms for different
categories of borrowers and types of credit facilities, prescribed by the Head Office.
2. The applications are accompanied by documents relating to the status of the

applicant i.e. individual/sole proprietorship/ society/trust deed, Memorandum and
Articles of association etc. are obtained and kept on record. The Branch Manager
should obtain financial statements for at least past 3 years, wherever so applicable,
true copies of latest income tax/sales tax and wealth tax returns and assessment
orders. For societies/local bodies/limited companies, certified copies of appropriate
resolutions authorizing the signatures/office bearers to operate the accounts and
borrow the funds from the bank be obtained and kept on record.
- Credit Reports
1. Credit reports on individual borrowers/company/obligant/guarantors are obtained

and are kept on record.
2. The Branch Manager has independently verified the correctness of the information
furnished by the borrowers/guarantors in personal information form and has
prepared confidential report in the prescribed form (F.85). the credit reports are
updated annually and fresh reports wherever required are obtained and held on
record.
3. Brief particulars of immovable properties owned by the individual/firm together

with the conservative estimates of their market value are kept on branch board.
Wherever required and found necessary fixed assets charged to the bank must be got
valued from approved Valuer and such valuation reports be kept on record.
4. That the nature and extent of credit facilities, if any, enjoyed by the
applicant/borrowers at different offices of the bank as also at other bank/banks are
obtained and kept on record at the branch., while arriving at the credit needs of the
applicant care is taken to take into account all such other credit facilities enjoyed by
the borrower
CREDIT APPRAISAL/PREPARATION OF APPRAISAL NOTES FOR

SANCTION/REVIEW/RENEWAL OF ADVANCES
The manager/officers should examine the quality of credit appraisal done at the branch and
ascertain to –

1. Whether the branch has been following generally accepted sound lending norms and
is examining carefully various aspects like proposed activity, diversification of
activity viability of the project, creditworthiness of the applicant/guarantors, purpose
and types of the credit facilities requested, competence of the borrowers to manage
the business activity etc.
2. Whether the past conduct of the accounts, compliance of terms and conditions of
sanctions submission of information like stock statements, QMR, financial
statements etc. have been taken into account.
3. Whether notes on review/renewal based on audited financial data contain details and
critical observations on performance of the unit, financial position of the unit and its
constituents, working results vis-à-vis Projections.
4. Whether status of the security charged to the bank has been re-examined. Wherever
eligible i.e. in respect of credit facilities of Rs.50.00 Lakhs and over, whether the
same has been verified by independent C.A. firm.
5. Whether operations in the account and availment of various credit facilities have
been to the satisfaction of the bank and the appraisal note contains comments about
the same.
6. Whether exercise for PBF/NWC etc. has been carried out correctly / critically.
7. Whether the branch is complying with RBI/IBA/Head office guidelines/instructions

regarding sanctions, review and renewal of advances.\
8. Whether Nayak Committee/ Ghosh Committee/ Selective credit control norms etc.
are followed.
9. In case the borrower has been banning/availing credit facilities with other banks,
whether latest opinion reports from such banks have been obtained.
10. Whether search with Registrar of Companies has been obtained before
sanction/review/renewal of credit facilities.
11. Whether it is ensured that partnership firm is registered with registrar of firms and
certificate for the same is held on record.
12. Whether necessary certificates which are required for commencement of business
activity have been obtained.
DOCUMENTATION

The manager/officers should verify that the branch has obtained all necessary
documents adequately stamped and properly executed as stipulated by the central office for
the facilities granted to the borrower. In case of advances above Rs.50.00 Lakhs certificate
from the correctness of documents taken is obtained and is held on record. In case law
officer is not available, certificate from the local panel advocate be obtained.
REPORTING SYSTEM
The manager/officers should verify that the credit facilities made available are correctly and
timely reported to the competent authority. The control returns submitted depict true picture
of the information incorporated.
IMPORTANT SCHEMES / PROJECTS OF THE BANK
- Retail Financing
The Bank is providing retail loans to Individuals, who are salaried persons, professionals,
businessmen and pensioners for purchase of consumer durables, two/four wheeler vehicles
and also for other personal needs. During the year, the Retail lending portfolio grew by 8.19
per cent.
- Housing loan to public

To promote the housing in rural and urban parts of India, the Bank has taken the housing as
a thrust area and has been lending under the Housing Loan to Public Scheme, on a priority
basis. The scheme is simplified and is customer-friendly. Housing loans are also made
available to NRIs. The Bank is also implementing Golden Jubilee Rural Housing Finance
Scheme in rural areas, having population not exceeding 50,000 (as per 1991 census). The
Bank’s lending to housing sector has grown by 13.28 per cent during the year.
- Model Educational Loan scheme – from learning to earning

With the objective of ensuring that no deserving student is denied an opportunity to pursue
higher education for financial reasons, the Bank implements a Model Educational Loan
Scheme. As of March 2009, the Bank’s educational loans stood at Rs. 347.19 crore to
19249 students. The Bank has provided the facility of submission of online application for
education loan through web-access.
CHARACTERISTICS OF RETAIL LOANS

- All these Retail Loans are considered as Fund-based Credit Facilities.
- They are also known as Term Loan
- It is an arrangement wherein the credit facility is sanctioned to a borrower

for a fixed period but repayable in installments.
- Once the loan amount is disbursed in full no subsequent debit is to be

allowed except by way of interest, insurance charges, DICGC guarantee fees
or expenses incurred for protection of the security charged to the bank etc.
interest is charged on the amount outstanding from time to time. Interest
chargeable is worked out on daily products and applied on quarterly
basis/half yearly basis.
- As there is no possibility of a loan account showing credit balance or

fluctuating debit balance unlike the operative cash credit account, the
operational cost of maintenance of loan account is lower as compared to cash
credit account. However, the period for which such loans are considered is
longer (ranging from five to seven years)
ADVANTAGES OF RETAIL LOANS
- Better yield and improved bottom line
- Risk calculation and NPA perception
- Builds customer base
- Helps economic revival of the nation through
- increased production activity
- Improves lifestyle and fulfills aspirations of the people through affordable

credit.
- Innovative product development
- Minimum marketing efforts in a demand-driven economy
- Risk weight in certain segments like housing loan

BORROWER AND CONFIDENTIAL REPORT
- Borrower Selection
Bank should have personal knowledge about the borrower/s and their business. As a
condition precedent to any advances we should make discreet enquiries about the position
and status of the borrower, security offered and repayment proposed etc. Care should be
exercised in selection of borrower and advances are to be sanctioned / recommended for
borrowers, whose integrity, reputation, capacity to conduct the business and credit-
worthiness are established to our satisfaction.
Three Cs: Character, Capacity and Capital are the basic principles for
consideration of an advance. The character of a borrower indicates his intention to repay the
advances and his capital and capacity indicate his ability to repay. To sum up integrity of
the borrower should be unquestionable. If the borrower’s integrity is questionable
(doubtful) Bank should refrain from sanctioning credit facility/ies even if a collateral
security is offered. Any amount of security cannot substitute integrity of a borrower. The
ability of a borrower to utilize the credit facility sanctioned by the Bank Profitably and to
repay the same with interest within a reasonable period needs to be looked into. Likewise
Bank should enquire into the financial position of the borrower. The lending should be in
proportion to the borrower’s own resources.
- Banking relations
We may ordinarily recommend/sanction credit facilities only to applicants who
agree to bank with us exclusively and that too with one branch unless the borrower has
offices at different places and his business warrants maintaining accounts with more than
one branch. A number of complications viz. Double financing, kite flying etc. arise when
borrower deals with more than one branch/bank and hence such precaution is necessary.
- Confidential Report
A) A confidential report of the borrower and/or guarantor needs to be scrutinized
carefully. Scrutiny should lead to some firm conclusions. Information furnished
by the borrower/guarantor needs to be independently verified. A conservative
estimate of the means of the borrower/guarantor should be formed in order to
determine the extent to which they may be considered creditworthy. If these
borrowers/guarantors are banking with other banks confidential opinion from all
such banks should be obtained when they propose to switch over to our bank to
their existing bankers.

B) Detailed scrutiny of all such repots compiled and/or collected need to be made
by managers to ascertain whether there is a significant variation in net worth of
borrowers/guarantors under the review period. Adverse features noticed during
annual review should be communicated to the controlling office/central office to
enable them to suggest remedial measures to be initiated. However, it should be
ensured by the Branch while compiling/collecting such reports or taking annual
review of such report/s that it exercises all possible tact and discretion to avoid
inconvenience to good customers of long standing while calling for elaborate
details. Our form No.157 in respect of collection of information from the
borrower and the guarantor should be got filled in and his latest income tax
/wealth tax returns/assessment orders should be perused all Personal information
forms should be updated on yearly basis.
RISK MANAGEMENT SYSTEMS IN BANKS
In the process of globalization and financial disintermediation, banks are now forced
with the prospect of facing a wide variety of risks, viz. credit, interest Rate, Forex,
Liquidity, legal Regulator, Reputational, operational and so on. These risks have assumed
significance, as the ability to identify measure, monitor and control the overall level of risks
have become crucial to the long-term viability and perspective of the banks.
Recognizing the significance of these risks as well as the need for their effective
management, RBI had issued risk management guidelines in October 1999 for
implementation of Risk Management Systems in banks. The RBI guidelines broadly cover
the management of credit, market and operational risks and, together with the earlier
guidelines on asset liability Management, are to serve as benchmarks for the establishment
of an integrated Rise Management System, which is to be operationalised by March 2001.
- What is risk Management all about?

The broad parameters of a risk management function should encompass:
i. Organizational structure
ii. Comprehensive risk management approach
iii. Broad approved risk management policies
iv. Board approved risk management policies
v. Strong M.I.S
vi. Well-defined procedures and a comprehensive risk reporting framework.
vii. Separate risk management framework independent od operational departments.

viii. Periodical review and evaluation.
The RBI guidelines focus upon setting up of departments/committees for Risk

Management, development of credit rating models to identify risk and risk pricing,
quantification of risk arising out of expected/unexpected losses, estimation of provisioning
requirement, calculation of risk capital requirement, monitoring and control of credit
portfolio management and Loan Review Mechanism (LRM), risk analysis of investments
proposal and database for credit risk modeling.
RISK MANAGEMENT – EFFECTIVE AND PROACTIVE
1. General
As of March 2009 all SCBs in India have come under the purview of Basel II capital
adequacy norms notified by the Reserve Bank of India. Banks are required to have
sufficient capital to cover credit risk, market risk and operational risk. In order to calculate
capital requirement under the Basel II norms, banks have to put in place a comprehensive
risk management frame work across the organization. The Bank’s approach to risk
management is proactive. The primary goal of risk management is to identify, assess the
impact of the risks inherent in the business and adopt risk management / mitigating
measures, so as to achieve business growth with improved safety, soundness and
profitability.
The Bank has also formulated a Risk Management Policy on the basis of the guidelines
issued by RBI recognizing the need to effectively identify measures, monitor and control
various risks in view of their implications on the Bank’s business growth and financial
soundness.
RISK MANAGEMENT SYSTEMS – CO-ORDINATE AND COMPREHENSIVE
Credit Risk
The Bank has in place a comprehensive Lending Policy and Loan Review Policy,
which prescribe instruments of Credit Risk Management. Various aspects of Credit Risk,
like asset concentration, norms for industry exposure, prudential limits and various financial
parameters, substantial exposure limits, standards for collaterals, and review of portfolio
etc. are spelt out in the above policies in line with the Risk Management Policy
prescriptions. The Bank has also set up Credit Approval Grids at various levels and at
Treasury & International Banking Division (TIBD) Mumbai to obtain preliminary clearance
on credit proposals from the risk perception view point. The Bank has put in place a

comprehensive credit policy and internal credit rating system under which all the
borrowable accounts with exposure of Rs. 2.00 lakh and above are rated on various
parameters. An in-house developed Credit Risk Rating Framework (CRRF) comprising of
risk rating models for existing as well as entry level borrowers recognizes the classes of
asset as desired under Basel II, like corporate, banks, commercial real estate and retail. The
Bank has prescribed bench-mark ratings for entry level exposures. In addition, as credit risk
management measures, substantial exposure limits and very large exposure limits have been
prescribed in the Risk Management Policy.
The Bank has undertaken migration analysis of credit risk rating and estimated probability
of default in line with Basel II requirements. Risk based pricing framework has been
implemented. Portfolio reviews and industry studies have been undertaken during the year
to assess the risks lying in the credit portfolio and to adopt strategies to improve credit
quality and reduce the potential adverse impact of concentration of exposure to particular
borrowers, sectors or industries. Policy on Stress Testing has been put in place and reports
on stress testing results are placed before the appropriate authorities for periodical review.
Interest Rate Risk –Dynamic Pricing

The Bank has put in place a system for regular review of lending and deposit rates in order
to minimize the interest rate risk. The Bank has put in place an Asset Liability Management
(ALM) Policy which is reviewed regularly. The Asset Liability Management Committee
(ALCO) of the Bank reviews the risk on a regular basis. Continuous Risk Management
measures are initiated depending upon the movement of interest rates in the market. The
movement in the interest rates is closely monitored for appropriate action.
Liquidity Risk – prudence adopted

The Bank ensures effective management of liquidity through the statements of Structural
Liquidity and Short Term Dynamic Liquidity. Models based on behavioral studies of assets
and liabilities have been adopted for maturity gap analysis. ALCO reviews the liquidity
position on an on-going basis and decides the strategy for funding and deployment. The
Bank has put in place a contingency plan for managing liquidity.
Investment Risk – Portfolio Quality of Essence

The Investment Policy is in place, covering various aspects relating to Investment decisions,
operations and monitoring thereof, from a risk management perspective including
Minimum rating/quality standard for investment in corporate.
Foreign Exchange Risk – Well Controlled

The Bank has adequate systems like prudential limits for open foreign exchange position,
set limits on the aggregate gap position. Prudential limits like Daylight limit, Overnight
limit, Net open overnight position, Stop loss limit, Limit for undertaking swaps/investment/
borrowing overseas, interbank exposure limits are in place. These limits are monitored on
daily basis.
Operational Risk – Business Continuity At The Core

For mitigating and controlling the operational risk, the Bank has a well established internal
control system and an administrative structure to formulate, implement and monitor systems
and procedures. The Bank has put in place a Business Continuity Planning Policy and
Operational Risk Management Policy. The Bank is in the process of collecting data on
operational risk. The Bank has also put in place a policy on outsourcing which facilitates
using the expertise available in the market and also as a means of risk transfer.
Regulatory Risk
The field functionaries will have to adhere to the guidelines of the regulatory authority and
it should be made clear that such guidelines / directive are to be adhering to their totality.
Legal Risk
Documentation has to be completed as per sanction terms and law officer wherever
prescribed as per the extant system of getting of borrowable accounts with limits of Rs.
50.00 Lakhs and above.
Environment Risk
Field staff should keep themselves abreast of the changes in the environment. Detailed
guidelines on such matters should be adhered to by the field functionaries and exposures
monitored even in cases where the limit is available. Deviations/expectations in such
exposures should be promptly reported to the component Authority.
Reputation Risk
The Bank’s business derived from the branches and it is, therefore, the duty of the field staff
to maintain the reputation of the bank high by ensuring extremely cordial relations while
observing the statutory guidelines scrupulously. Whether the Bank’s reputation would be at
stake while entering into a business relationship & transaction should be analyzed while
discharging duties.
STEPS PROPOSED BY RESERVE BANK OF INDIA IN IMPLEMENTING RISK

MANAGEMENT SYSTEM

In moving towards the development and implementation of an integrated risk
management system, the bank would be required to:
1. Set up Risk Management Committee
2. Set up Credit Policy Committee(CPC)
3. Establish Credit Risk Management Department
4. Achieve integration of ALCO and CPC
5. Designate Portfolio / Relationship Managers
6. Establish Mid Office for Treasury Function
7. Develop a robust MIS
8. Set up approval Grids
9. Arrange for training to core staff.
STATUS OF IMPLEMENTATION OF RBI GUIDELINES IN THE BANKS AND

PROGRESS MADE
1. Asset liability management is already in place.
2. Credit appraisal form redesigned so as to cover risk perception is introduced.
3. Credit Rating System duly revised has already been approved by the board.
4. Benchmark ratios finalized for credit analysis have been approved.
5. Board approved loan policy is in place.
6. Present lending policy articulates industry wise exposure limits on historical data. A
system utilizing scientific methods is in the process of formulization.
7. Setting up of the following has been approved by the Board.
a) Credit Risk Management Department
b) Risk Management Committee
c) Credit Policy Committee
d) Mid Office for Treasury Function
e) Approval Grid
8. Loan Review Mechanism is in operation.
VIGILANCE – PREVENTION IS THE KEY

Vigilance activity in the Bank is an integral part of the managerial function. Its objective is
to efficient administration, where officials can perform the duties without any fear or
favour. Vigilance in the Bank is maintaining a proper balance between flexibility and
accountability. Preventive Vigilance is the most important aspect of vigilance. With a view
to improve functioning at all levels, the Bank has taken the necessary steps as under:

1. In accordance with CVC directives, Vigilance Committees have been formed at the
Branches having staff of 20 and more, to review/ monitor sensitive and fraud prone
areas and report irregularities observed therein, if any.
2. High value transactions are scrutinized at more than one level.
3. Field staff at branches is periodically educated through internal communication
about the ‘modus operandi’ adopted in various cases of fraud and precautions to be
taken to avert similar kind of frauds.
4. ‘Vigilance Awareness Week’ is observed in the Bank every year during which
period lectures / talks by the eminent personalities are held for the members of staff
and general public at branches / offices, emphasizing the need for transparency,
ethical conduct and personal integrity besides preventive vigilance.
5. Sessions on ‘Preventive Vigilance’ are included in the training programmes
conducted by the Staff College.
6. A ‘Fraud Risk Management Policy’ has been framed and communicated to staff
and field functionaries. It is a guide on prevention, detection, classification and
reporting of frauds including action to be taken.

DATA ANALYSIS AND INTERPRETATIONS
 INVESTMENTS – PROFITABLE GROWTH
The Net investment of the Bank stood at Rs. 18382 crore as on 31.03.2009 as against Rs.
12283 crore as on 31.03.2008, registering a growth of 49.66 percent. 70.00 percent of the
portfolio was held under Held to maturity (HTM) Category, 29.27 percent in Available For
Sale (AFS) and balance 0.73 percent in Held for Trading (HFT) categories. The net interest
income from investment increased by 17.02 percent to Rs.989.84 crore from Rs.845.85
crore during the last year.
Particulars Amt in cr. As on Amt in cr. As on Total increase

31.03.2008 31.03.2009
Net investment 12283 18382 49.66 %
Net interest income 845.85 989.84 17.02 %
from investment
20000
15000
10000
5000
Total increase Amt in cr. As on 31.03.2008
0 Amt in cr. As on 31.03.2009
Amt in cr. As on 31.03.2008
Total increase
Interpretation:

The net interest income from investment increased by 17.02 percent to Rs.989.84 crore
from Rs.845.85 crore during the last year.
 CREDIT DEPLOYMENT
The Bank has put in place a lending policy with an emphasis on qualitative credit growth.
The policy is fully in conformity with the guidelines issued by RBI and also the Priority
Sector lending norms of the Government of India. The policy enunciates the thrust areas,
risk factors and also sets out prudential exposure limits to facilitate qualitative expansion of
credit. The Gross Advances increased from Rs.29,798 crores as on 31.3.2008 to Rs. 34,817
crores as on 31.3.2009 with a growth of 16.84 per cent. The Credit Deposit Ratio as on
31.3.2009 was 66.63 per cent.
Sectoral deployment of credit - diversified risk and balanced growth:

The Bank has continued its efforts to support core, manufacturing and priority sectors as
well as infrastructure projects, which serve to drive economic growth. This focus of the
Bank will continue in future, in the light of the national economic growth priorities.

CreditDeployed
infrastructure,petroleum,iron,textil
es,engineering,chemicals
Agriculture
1 2.04 MSME
5.11
8.5 Other priority sector
37.88
13.05
retail sector
11.92 housing
8.83 15.59
education
Exports
commercial real estate
Interpretation:
The Gross Advances increased with a growth of 16.84 per cent. The Credit Deposit Ratio
has also increased.
 RISK CATEGORY WISE COUNTRY EXPOSURE
(Rs. In
Crore)
Risk Category Exposure (net) as Provision Exposure Provision
at March 31 , held as at (net) as at held as at
2009 March 31, March 31, March 31,
2009 2008 2008
Insignificant 970.13 0.00 774.49 0.00
Low 391.01 0.00 293.59 0.00
Moderate 73.23 0.00 77.06 0.00
High 23.25 0.00 4.31 0.00
Very high 8.51 0.00 11.71 0.00
Restricted 0.11 0.00 0.00 0.00

Off-credit 0.00 0.00 0.00 0.00
Total 1466.24 0.00 1161.16 0.00
Interpretation: Since Bank’s net funded exposure for risk category-wise exposure for each
country is less than 1% of bank’s total assets as on 31.03.2009, no provision is required in
terms of a particular RBI Circular.
 NON-PERFORMING ASSETS
 Non-Performing Assets (NPA)
Particulars 31.03.2010 31.03.2009
(i) Net NPAs to Net Advances (%) 0.79 0.87

(ii) Movement of NPAs (Gross)
(a) Opening balance 766.27 820.27

(b) Additions during the year 368.56 252.12
(c) Reductions during the year 336.42 306.12
(d) Closing balance 798.41 766.27
(iii) Movement of net NPAs
(a) Net opening balance 254.05 277.38
Add: ECGC/DICDC Settled 26.29 22.75
amount
Gross: Opening Balance 280.34 300.13
(b) Additions dduring the year 181.39 167.80
(c) Reductions during the year 167.63 187.60
(d) Gross closing balance 294.10 280.34
Less: ECGC/DICGC Settled 22.20 26.29
amount
Net Closing Balance 271.90 254.05
(iv) Movement of provisions for NPAs
(excluding provisions on standard assets)
(a) Opening balance 485.93 520.14
(b) Provisions made during the year 187.17 84.31
(c) Write-back of excess provisions 168.79 118.52
(d) Closing balance 504.31 485.93
Interpretations:
The ratio of Net NPAs has improved from 0.87 percent to 0.79 percent.
 Details of Loan Assets subjected to Restructuring during the year.

(Rs. In crore)
Category Particulars CDR SME debt Others

Restruc-
turing
Standard No. of Borrowers 3 3084 4029

Advances
Amount Outstanding 46.28 461.61 552.73
restructured
Sacrifice (Diminution in the fair 3.67 13.16 12.79

value )
Sub-Standard No. of Borrowers 0 96 134

Advances
restructured
value )
doubtful Advances 0 3 3
restructured
0 7.85 4.86
0 0.24 0.01
Total No. of Borrowers 3 3138 4166

value )
Interpretations:
NPA coverage has also improved from 65.54 percent 63.16 percent.
 Additional disclosure in respect of Restructuring

(In terms of RBI circular dated 17.04.2009)
Sr. No Disclosures Number Amount
1 Applications received for restructuring, in respect 6662 1145.82

of accounts which were standard as on September
1, 2009.
2 Of (1), proposal approved and implemented and 6373 1033.07

thus became eligible for special regulatory
treatment and classified as standard assets as on

the date of the balance sheet.
3 Of (1), proposal approved and implemented but 222 41.48

could not be upgraded to the standard category.
4 Of (1), proposal under process/ implemented 64 70.21

which were standard as on March 31,2010
5 Of (1), proposal approved and implemented which 3 1.06

turned NPA but are expected to be classified as
standard assets on full implementation of the
package.
 Details of financial assets sold to securitization/Reconstruction

Company for Asset Reconstruction
(Rs. In
Crore)
Particulars 31.03.2010 31.03.2009
(i) No. of accounts 0 36
(ii) Aggregate value(net of provisions) of accounts 0.00 0.00

sold to Securitization / Reconstruction
Company
(iii) Aggregate consideration 0.00 13.25
(iv) Additional consideration realized in respect of 0.00 0.00

accounts transferred in earlier years
(v) Aggregate gain over net book value 0.00 13.25
Interpretations: Bank has now started the practice of restructuring and reconstructing the
NPAs effectively and efficiently.
 BRANCH NETWORK AND EXPANSION
During the year, the Bank opened 43 new branches besides upgrading 3extension counters
into full fledged branches. As on 31.03.2010, the total branch network comprised of 1421
branches spread over 22 states and 2union territories. The branch network included
specialized branches in the areas of foreign exchange, government business, treasury and
international banking, industrial finance, small-scale industry, hi-tech agriculture, Pension
Payment Branch and Central Pension Processing Cell. The area wise classification of
branches as on 31.03.10 is given in the table below:

Sr.No. Classification As On 31.03.09 As On 31.03.10
1 Rural 516 520
2 Semi-Urban 251 262
3 Urban 257 271
4 Metropolitan 351 368
Total 1375 1421
600
500
400
300
AsOn 31.03.09
200 AsOn 31.03.10
100
0 AsOn 31.03.10
Rural AsOn 31.03.09

Semi-Urban
Urban
Metropolitan
Interpretation:
The Bank opened 43 new branches besides upgrading 3extension counters into full fledged
branches and like this it is continuously expanding its network in allover India.
 ASSET PERFORMANCE – IMPROVED
The ratio of Gross Advances has improved from 2.57 percent as on 31.03.2008 to 2.29
percent as on 31.03.2009. The ratio of Net NPAs has improved from 0.87 percent at
31.03.2008 to 0.79 percent at 31.03.2009. NPA coverage has also improved from 65.54
percent as on 31.03.2008 to 63.16 percent as on 31.03.2009.

Particulars 31.03.2008 31.03.2009
Ratio of NPAs 2.57% 2.29%

Ratio of Net NPAs 0.87% 0.79%
NPA coverage 65.54% 63.16%
70
60
50
40
31.03.2008
30
31.03.2009
20
10
31.03.2009
0
31.03.2008
Ratio of NPAs
Ratio of Net NPAs
NPA coverage
Interpretations: The ratio of Gross Advances has improved 2.57 percent to 2.29 percent
and the ratio of Net NPAs has improved from 0.87 percent to 0.79 percent. NPA coverage
has also improved from 65.54 percent 63.16 percent.
 INCOME, EXPENDITURE AND PROFITABILITY
 Income
Incomes 2008-2009 2009-2010 Variations (%)

Interest on bills 2561.12 3266.60 27.55
Income on 845.85 989.84 17.02
investments
Total interest income 3440.47 4291.56 24.75
Non-interest income 380.28 500.02 31.48
Total income 3820.76 4791.58 25.41
Interest on 191.27 251.82 31.65
borrowings
5000
4500
4000
3500
3000
2500
2008-2009
2000
2009-2010
1500 variations ()%
1000
500
Interpretations:
The income factors of the bank has grown in a very positive and in a very significant manner
as compare to previous year and this indicates the sound health of the bank.
 OPERATING INCOME RISES 11.88% TO RS 1246.49 CRORE

Net profit of Bank of Maharashtra rose 1.26% to Rs 139.06 crore in the quarter ended
March 2010 as against Rs 137.33 crore during the previous quarter ended March 2009.
Total operating income rose 11.88% to Rs 1246.49 crore in the quarter ended March 2010
as against Rs 1114.15 crore during the previous quarter ended March 2009.
For the audited full year, net profit rose 17.17% to Rs 439.57 crore in the year ended March
2010 as against Rs 375.17 crore during the previous year ended March 2009. Total
operating income rose 10.35% to Rs 4735.56 crore in the year ended March 2010 as against
Rs 4291.56 crore during the previous year ended March 2009.
Particulars Quarter Ended Year Ended
Date Mar. 2010 Mar. 2009 % Var. Mar. 2010 Mar. 2009 % Var.
Sales 1246.49 1114.15 12 4735.56 4291.56 10
OPM % 66.15 67.46 -2 72.15 70.98 2
PBDT 142.33 130.04 9 568.82 511.06 11
PBT 142.33 130.04 9 568.82 511.06 11
NP 139.06 137.33 1 439.57 375.17 17
 OPERATING INCOME RISES 11.88% TO RS 1246.49

CRORE
18
16
14
12
10
%Var. Of Quarter Ended march 2010
8
%Var of Year Ended 2009
6
0
sales %Var. Of Quarter Ended march 2010
-2 OPM PBDT PBT NP
Interpretations:
Net profit of Bank of Maharashtra rose 1.26% to Rs 139.06 crore in the quarter ended March
2010 as against Rs 137.33 crore during the previous quarter ended March 2009.

 Expenditure
Expenses 2008-2009 2009-2010 Variations (%)

Interest on deposits 2,120.52 2783.22 31.25
Interest expenditure 2311.79 3035.03 31.28
Staff expenses 485.29 579.62 19.44
Non-staff expenses 351.04 383.40 9.22
Total non-interest expenses 836.34 963.02 15.14
Total operating expenses 3,148.13 3998.06 27.00
3500
3000
2500
2000
2008-2009
2009-2010
1500
Variations (%)
1000
500
0
Interest on Interest Staff expenses Non-staff
deposits expenditure expenses
Interpretations:

Due to the very high competition and in order to capture more and more market share, the
bank had to incur more expenses to make its facilities more attractive and more worthy so
that the bank can retain its customer and it also helps in acquiring new customers.
 Profitability
Profitability 2008-2009 2009-2010 Variations (%)
Operating Profit 672.63 793.52 17.97

Provisions And 344.24 418.36 21.53
Contingencies
Net Profit 328.39 375.16 14.24

800
700
600
500
2008-2009
400
2009-2010
Variations (%)
300
200
100
0
OperatingProfit ProvisionsAnd Net Profit
Contingencies
Interpretations:
Above figure shows that there is a positive and consistent increase in the bank’s profitability
because the bank’s business and income has also moved up towards a positive direction.

CHAPTER – IV
- Findings
- Suggestions / Recommendations

FINDINGS
1.
In today’s era of heavy competition and the fight to sustain in the market, the bank had to
incur more expenses to make its facilities more attractive and more worthy so that the bank
can retain its customer and it also helps in acquiring new customers which will not only
increase the income of the bank but also leads to capture more and more market share.
2.
There is a positive and consistent increase in the bank’s profitability because the bank’s
business has increased and the income of the bank has also moved up towards a positive
direction because the bank has started capturing more and more market share.
3.
The ratio of Gross Advances has improved from 2.57 percent to 2.29 percent. The ratio of
Net NPAs has improved from 0.87 percent at 31.03.2008 to 0.79 percent. NPA coverage
has also improved from 65.54 percent to 63.16 percent. The asset performance has
significantly changed and it has not changed but also improved in a positive way.
4.
The investment of the bank is also proved to be a significant source of income because the
net income from investment has made a large contribution to the profit of the bank
5.
While financing the various segments of the economy, the Bank has endeavoured to
maintain a diversified credit portfolio, with a view to ensuring credit-dispersion across
sectors. This will minimize the risk and ultimately increase the profit of the bank.

SUGGESTIONS / RECOMMENDATIONS
 The data in the tables have clearly shown that how the Bank of Maharashtra has
consistently increased its profit by managing its credit but the bank needs to deploy
its credit in a more diversified manner which will minimize the risk of losses and
also increase the profitability of the bank.
 The overall inference from the table and Chart is that the Retail Financing of Bank
of Maharashtra is healthy as compare to other nationalized banks. But it needs to be
brought up in order to sustain the financial position of the bank. The Housing and
Education Loan must be increased to more than 30 per cent while other loan
schemes can also be amended.
 The NPAs are reducing in a very positive way which is the result of avoiding high-
risk lending and high monitoring of the credit disbursed. The bank needs to study
and analyze from its past losses because it will help in future lending by avoiding
high risk proposals and ultimately let the bank to grow more efficiently and
effectively.
 Loan products are the ideal Products for the bank to ensure the profitability and
therefore, the bank should continuously adapt itself to the changed situation in
search of new markets and to provide new attractive schemes and services for the
existing customers to retain its market share and at the very same time acquire new
customers to expand its market share.
 Efforts are to be oriented towards verifying and processing the loan request. In case
of deposits, an added advantage available to the bank is to improve clientele base
but in case of borrowings such an advantage does not exist. So the bank must
work out some effective strategies for their Loan Products in order to make
the clientele base for borrowings.
 The increased number of deposit customers and the increased number of individual
membership provide a comfortable clientele base for the bank to choose good
borrowers to whom the bank can provide credit facilities. Good borrowers with
integrity are as important to the bank as the depositors.

 Raising individual membership, mobilizing more low-cost deposits and avoiding
high-risk borrowings are the strategies which could be followed by the bank to
improve its efficiency, market share, productivity and profitability.
BIBLIOGRAPHY
Name of Book/Site Author Publication

 Bank Credit Management Dr.G.Vijayaragavan Himalaya Publication
 Promotion Examination Bank of Maharashtra Bank of Maharashtra
 www.iibf.co.in
 www.iba.org
 www.rbi.org
 www.bankofmaharashtra.in
 www.financial.indiamart.com
Annual Report:
 Bank of Maharashtra

ANNEXURE
ATM Automated Teller Machine
GOI Government Of India
RBI Reserve Bank Of India
NPA Non-Performing Assets
MSME Micro, Small And Medium Enterprises
NP Net Profit
HTM Held To Maturity
HFT Held For Trading
AFS Available For Sale
CVC Core Vigilance Committee
KYC Know Your Customer
MGB Marthwada Gramin Bank
RRB Regional Rural Bank
LIC Life Insurance Corporation
SLBC State Level Bankers Committee
SMES Small And Medium Enterprises
NBC Net Bank Credit
RDC Rural Development Centres
GMBVM Gramin Mahila Va Balak Vikas Mandal
MARDEF Maha Bank Agricultural Research And Rural Development
Foundation
NGO Non-Government Organizations
CBS Core Banking Solutions
IPO Initial Public Offer
METCO Maharashtra Executor And Trustee Company
STP Straight Through Processing
NEFT National Electronic Fund Transfer
RTGS Real Time Gross Settlement
MSETI Mahabank Self Employment Training Institutes
TOLIC Town Official Language Implementation Committee

NABARD National Bank For Agricultural And Rural Development
EDPS Entrepreneurship Development Programmes
PMRY Prime Minister’s Rozgar Yojana
SGSY Swarna Jayanti Gram Swarojgar Yojana
SJSRY Swarna Jayanti Shahari Rozgar Yojana
MIS Management Information System
LRM Loan Review Mechanism
CPC Credit Policy Committee
ALM Asset Liability Management
ALCO Asset Liability Management Committee
TIBD Treasury & International Banking Division
CRRF Credit Risk Rating Framework
TIBD Treasury & International Banking Division
CRRF Credit Risk Rating Framework

A Project Report ON Retail Credit (With Special Reference To Bank of Maharashtra)

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A Project Report ON Retail Credit (With Special Reference To Bank of Maharashtra)

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A PROJECT REPORT

This report has been submitted as partial fulfillment

RETAIL CREDIT-Special reference to Bank of Maharashtra Page 1

It’s my real honor and pleasure to be associated with Pillai’s Institute of

I would like to thank “Bank of Maharashtra” to have faith on me and to

RETAIL CREDIT-Special reference to Bank of Maharashtra Page 2

This is to certify that Mr. / Ms. ______________ of Pillai's Institute of Management

During the summer internship Mr. / Ms. ________________ was found to be

We wish him success in his career.

RETAIL CREDIT-Special reference to Bank of Maharashtra Page 3

I am Shriram Yadav, currently pursuing Post Graduation Diploma in

I hereby want to declare that I have completed the project on “RETAIL

RETAIL CREDIT-Special reference to Bank of Maharashtra Page 4

1.1 Introduction ----------- 07

2.1 Company Profile ----------- 15

3.1 Theoretical Background ----------- 32

RETAIL CREDIT-Special reference to Bank of Maharashtra Page 6

RETAIL CREDIT-Special reference to Bank of Maharashtra Page 7

RETAIL CREDIT-Special reference to Bank of Maharashtra Page 8

The main objectives of the study are as follows:

• To study about Bank’s investment, Credit Deployment, and NPAs

RETAIL CREDIT-Special reference to Bank of Maharashtra Page 9

 To fulfill the Requirement of Summer Internship which is a part of our curriculum

 To know the concept of Retail Credit Lending

 To describe the different types of Retail Credit

 To describe the different ways of Credit lending

 To study the Deployment of Retail Credit

 Analysis and interpretation of the data collected

 To know the income, expenditure and profitability of the bank.

 To study how the Retail Credit is profitable to the Bank

RETAIL CREDIT-Special reference to Bank of Maharashtra Page 10

Following are the scope of the project:

• Source of funds in Banks

• Different ways of Retail lending

• Reasons for Retail Lending

• Tools and Techniques for managing Retail Loans

• Guidelines for Retail Credit Lending

• Risks involved in Retail Loans

• Describes the Risk Management

RETAIL CREDIT-Special reference to Bank of Maharashtra Page 11

Methodology is to collect the important data through secondary sources like

RETAIL CREDIT-Special reference to Bank of Maharashtra Page 13

Following Problems were encountered during this project:

 Collection of real time data

 Survey within the bank

RETAIL CREDIT-Special reference to Bank of Maharashtra Page 14

 BENEFITS GIVEN BY THE COMPANY

RETAIL CREDIT-Special reference to Bank of Maharashtra Page 15

Name of the Bank : BANK OF

Area of Operation : Nationwide

No. of Branches : 1,421

Class : “A” Class

Chairman : SHRI. ALLEN C.A. PEREIRA

Managing Director : SHRI. ALLEN C.A.

Executive Director : SHRI. M.G. SANGHVI

Staff Members : 13,631

RETAIL CREDIT-Special reference to Bank of Maharashtra Page 16

Parameter Mar 2007 Mar 2008 Mar 2009

RETAIL CREDIT-Special reference to Bank of Maharashtra Page 17

RETAIL CREDIT-Special reference to Bank of Maharashtra Page 18

Rapid expansion after Nationalization

 Milestones: Pre Nationalization

1936 : Commenced business on February 8th.