Presentation

on
Loans &
Advances
By
Dheeraj

Loans & Advances

A loan is a type of debt. Like all

debt instruments, a loan entails the

redistribution of financial assets
over time, between the lender and
the borrower.
In a loan, the borrower initially
receives or borrows an amount of
money, called the principal, from
the lender, and is obligated to pay
back or repay an equal amount of
money to the lender at a later
time. Typically, the money is paid
back in regular installments, or
partial repayments; in an annuity,
each installment is the same
amount.

Utilityofloansandadvances

(A)loans and advances can be arranged from banks 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,
bank overdraft and discounting of bills. The amount raised as loan
may be repaid within a short period to suit the convenience of the
borrower. Thus business may be run efficiently with borrowed
funds from banks for financing its working capital requirements.
(B) loans and advances are utilized for making payment of current
liabilities, wage and salaries of employees, and also the tax liability
of business.
(C) loans and advances from banks are found to be 'economical' for
traders and businessmen, because banks charge a reasonable rate of
interest on such loans/advances.

Types of Loans

Demand loan

A Demand Loan is a loan which is repayable on

demand by the bank. 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 bank .
For example, if it is so agreed the amount of loan
may be repaid in suitable installments. Such loans
are normally granted by banks 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 purpose like purchase of raw materials,
making payment of short-term liabilities.

Term loan
Medium and long term loans are called term loans. Term loans are
granted for more than a year and payment of such loans is spread over a
longer period. Term loan is required for the purpose of starting a new
business activity renovation, modernization, expansion of existing units,
purchase of their land for setting up 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.

Two categories of loan

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.

Secure
d are those which are
Secured loans
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 favor of
the bank. This enables the bank to
recover the dues from the customer out
of the sale proceeds of the assets in
case the borrower fails to repay the
loan.

Forms of Advances
The advances can be classified two
categories
Loans, cash credits and overdrafts.
Bills discounted and purchased.

Cash credits
This account is the primary method in which
banks lend money against the security of
commodities and debt. It runs like a current
account except that the money that can be
withdrawn from this account is not restricted
to the amount deposited in the account.

Overdrafts
The word overdraft means the act of
overdrawing from a bank account. In other
words, the account holder withdraws more
money from a bank account than has been
deposited in it..

Bills discounted and

purchased
Bank takes the bill drawn by borrower on
his(borrower's) customer and pay him
immediately deducting some amount as
discount/commission

Procedure for granting loans

and advances:
(I) FILLING UP OF LOAN APPLICATION FORM

(II) SUBMISSION OF FORM ALONG WITH DOCUMENTS

(III) SANCTIONING OF LOAN

(IV) EXECUTING THE AGREEMENT

(V) ARRANGEMENT OF SECURITY FOR LOAN

DATA
ANALYSIS
&
INTERPRETATI
ON

Q1. Are you interested in taking loan?

Response

No. of response

Percentage %

Yes

65

65

No

35

35

Total

100

100

Response
Yes
No

Q2. What kind of loan you want to avail?

Response

No. of response

Percentage %

House loan

15

15

Educational loan

35

35

Personal loan

21

21

Vehicle loan

29

29

Total

100

100

No. of respondent
40
30
20
10
0

No. of
respondent

Q3. For how many years you want to avail loan?

Responses

No. of response

Percentage %

Less than 1 Year

15

15

1 to 3 Year

35

35

3 to 5 Year
More than 5 Year
Total

21

21
29

29

100

100

No. of Response
Less than 1 Year
1 to 3 year
3 to 5 Year
More than 5 year

Q4. Which Bank is preferred by you for making

more transactions relating to loan & advances?
Banks

CANARA Bank

No. of respondents

37

Other Pvt. Banks

Other Nationalized

24

Banks
39

50
40
Canara
Other Pvt. Bank
Nationalised
bank

30
20
10
0

No. of respondent

Q5. Which class avail the maximum bank -loan

services?
Occupation

Businessman

No. of

35

Serviceman

Self-employed

Others

38

people
11

16

respondents

40
35
30
25
20
15
10
5
0

Businessman
Serviceman
Self-employed
people
Others
Occupation

Q6. How you prefer to pay your installments ?

Response

No. of response

Percentage %

MONTHLY

25

25

QUARTERLY

40

40

ANNUALLY
Total

35

35
100

100

No. of Response
40
30

No. of
Response

20
10
0

Monthly Quarterly Annualy

Q7. From which sector you will be interested to avail loan ?

Response

No. of response

Percentage %

Public Sector

65

65

Private Sector

25

25

Co-operative Sector

10

10

100

100

TOTAL

No. of Respondent
70
60
50
40
30
20
10
0

No. of
Respondent

Limitations
Due to inflexibility in account opening it is difficult

to convince customers.
No authentic evidence of customers is found.
No special facilities of loans to businessman are
given in semi rural or rural area.
The bank is not tapping untapped areas.
Lack of communication & delivery channels.
Lack of social banking.
Loans are not provided without security.
Loans are not provided at ease lot of paper work &
documentation is involved.
The time bound period is the major limitation in
research projects.

Recommendations
More customer convenience
Services for businessmen
Service for Self employed &

Servicemans
Rural Banking
Social Banking

Conclusion
The cutthroat competition of 21 st century

demands not just a satisfied but

delighted customer as a key to success
in a service industry.
Strength, Weakness, Opportunities,
threat analysis are apply in the bank to
do the work more efficiently.
Also, improved advertising efforts,
embracement of latest technology, more
and more awareness about internet
banking thus facilitating customers while
providing solutions at their convenience
and easy reach.