report on allahabad bank by anup singh
TRANSCRIPT
RESEARCH PROJECT REPORT(MBA - 043)
ON
“FINANCE TO PRIORITY SECTOR FROM ALLAHABAD BANK”
Submitted in Partial Fulfillment of Master of Business Administration (MBA)
Programme : 2009 -11of
Gautam Budhha Technical University, Lucknow
Under the Supervision of SUBMITTED BY(Dr. S.P. GUPTA) ANUP SINGHMBA Department ROLL NO. -0901470008S.R.M.S.C.E.T., Bareilly
Faculty of Management ScienceShri Ram Murti Smarak College of Engineering & Technology, Bareilly
(College Code – 014)
1
Shri Ram Murti Smarak College of Engineering & Technology, Bareilly (U.P.)
Faculty of Management Science
Certificate
This is to certify that Mr. ANUP SINGH, a student of MBA IV Semester has
completed his Research Project Report titled “Finance to priority sector from
Allahabad Bank” assigned by MBA Department and under my supervision.
It is further certified that He has personally prepared this report that is the result of his
personal survey/observation. It is of the standard expected to MBA student and hence
recommended for evaluation.
Supervisor
(DR. S. P. GUPTA)
Above statement is endorsed.(Anant Kumar Srivastava)Head - MBA
DECLARATION
2
I, shikhar agrawal, hereby declare that I have carried out project report on Topic
“Finance to priority sector from Allahabad Bank”in Bareilly.
I further declare that project work is my original work and no part of this report has
been published or submitted to anybody or university for award of any other degree or
Diploma.
ANUP SINGH
MBA 4th sem.
3
ACKNOWLEDGEMENT
The extensive endeavour, bliss and euphoria that accompany the successful completion
of the task that would not be complete without the expression of gratitude to the people
who made it possible .I take this opportunity to acknowledge all those who
guided ,encouraged and helped me in winding up this project.
I am very thankful to Mr. Anant Kumar Srivastava(H.O.D,MBA deptt.) ,who gave me
guidance throughout my Project work. I would also like to extend my feelings of gratitude
towards my faculty mentor Dr. S. P. Gupta ,for his constant guidance, support and
correcting where I was wrong. I thank them with full zeal and enthusiasm that they gave
this big opportunity to me.
ANUP SINGH
DATE- MBA 4TH SEM
PLACE-
4
TABLE OF CONTENT
PAGE NO.
CHAPTER-1 Introduction 1-27
1.1 Introduction 1-1
1.2 About Allahabad bank 1-5
1.3 Principles of lending and priority sector lending 6-16
1.4 Targets & sub target under priority sector 17-19
1.5 Common guidelines for priority sector advances 20-26
1.6 Advances to priority sector by Allahabad bank. 26-26
1.7 objectives of the research 27-27
CHAPTER-2 Literature Review 28-39
CHAPTER-3 Research Design 40-42
3.1 Research methodology 40-40
3.2 Research design 41-41
3.3 Method of data collection 41-42
CHAPTER-4 Data Analysis and Interpretation 43-51
CHAPTER-5 52-54
5.1 Findings 52-52
5.3 Conclusion 53-53
5.3 suggestion 54-54
CHAPTER-6 55-55
Bibliography 55-55
5
LIST OF TABLE
PAGE NO.
Table no -1 Advance to priority sector. 43-43
Table no -2 Advances to agriculture sector. 44-44
Table no -3 Direct finance to agriculture sector. 45-45
Table no -4 Indirect finance to agriculture sector. 47-47
Table no -5 Finance to Micro Small Enterprises Sector. 48-48
Table no -6 Finance to sector such as housing loan education loan etc. 49-49
Table no -7 Finance to weaker section. 50-50
6
LIST OF FIGURE
PAGE NO.
Figure no -1 Advance to priority sector. 43-43
Figure no -2 Advances to agriculture sector. 44-44
Figure no -3 Direct finance to agriculture sector. 46-46
Figure no -4 Indirect finance to agriculture sector. 47-47
Figure no -5 Finance to Micro Small Enterprises Sector. 48-48
Figure no -6 Finance to sector such as housing loan education loan etc. 49-49
Figure no -7 Finance to weaker section. 50-50
7
CHAPTER-1
INTRODUCTION OF THE TOPIC
1.1 Introduction
The research project report on financing to priority sector from Allahabad bank is
taken as a part of my 4th semester course of MBA. Finance to priority sector is a prime
concern for the banks and it is given highest priority .
This chapter contains a brief summary about Allahabad bank and the research topic.
Section 1.2 deals with about Allahabad bank. Section 1.3 deals with principles of
lending and priority sector lending. The section 1.4 contains target & sub target under
priority sector. The section 1.5 contains common guidelines for priority sector advances.
The section 1.6 deals with advances to priority sector by Allahabad bank. The last Section
1.7 deals with objectives of the research work.
1.2 About Allahabad bank
Allahabad Bank was founded by group of Europeans on April 24 1865. The Allahabad
Bank has a history of 3 centuries. The Allahabad Bank is the oldest joint stock Bank
in India. Due to business considerations the head office of Allahabad Bank was
shifted to Calcutta (now Kolkatta) in 1923. In March 2007 the business of
Allahabad bank has reached to a mark of 150000 crores.
The Allahabad bank has main branches in Kanpur, Lucknow, Nanital, Kolkatta,
Jabalpur, Meerut, Nagpur, Mumbai, and New Delhi. The Chairman and Managing
1
Director of Allahabad Bank is Sri K.R. Kamath. Sri K.K. Agarwal and Sri J.P. Dua
are the executive directors of Allahabad Bank.
The Allahabad bank offers its services to self-employed persons, Professionals,
salaries employees, businessman. The Allahabad bank offers three kinds of products
Deposit products, Retail Credit Products and Other Credit Products. The Flexi-fix
Deposit, Rs.5 Banking, Tax Benefit Term Deposit are some of the famous Deposit
Products of the Allahabad Bank.
The Allahabad Bank also offers its services to NRI customers. It offers International
Banking facility for its NRI customers. The deposit schemes, tax benefits schemes,
remittance facility, forex services are offered by the Allahabad Bank. The NRI
services are available in 312 branches of the Allahabad Bank all over the country.
Philosophy of the Bank
The highest standards of ethical conduct and honest.
Accurate, Fair, Full, Sensible and timely disclosures in reports.
Compliance with laws, regulations and rules.
2
Nineteenth Century
The Oldest Joint Stock Bank of the Country, Allahabad Bank was founded on April
24, 1865 by a group of Europeans at Allahabad. At that juncture Organized Industry,
Trade and Banking started taking shape in India. Thus, the History of the Bank spread
over three Centuries - Nineteenth, Twentieth and Twenty-First.
April 24, 1865's The Bank was founded at the confluence city of Allahabad
by a group of Europeans.
Twentieth Century
1920's The Bank became a part of P & O Banking Corporation's
group with a bid price of Rs.436 per share,
1923 The Head Office of the Bank was shifted to Calcutta on
Business considerations.
July 19, 1969 Nationalized along with 13 other banks, Branches - 151
Deposits - Rs.119 crores, Advances - Rs.82 crores.
October, 1989 United Industrial Bank Ltd. merged with Allahabad Bank.
1991 Instituted Allahabad Bank Finance Ltd., a wholly owned
subsidiary for Merchant Banking.
Twenty-First Century
3
October, 2002 The Bank came out with Initial Public Offer (IPO), of 10
crores share of face value Rs.10 each, reducing
Government shareholding to 71.16%.
April, 2005 Follow on Public Offer (FPO) of 10 crores equity shares of
face value Rs.10 each with a premium of Rs.72, reducing
Government shareholding to 55.23%.
June, 2006 The Bank Transcended beyond the National Boundary,
opening Representative Office at Shenzen, China.
Oct, 2006 Rolled out first Branch under CBS.
February, 2007 The Bank opened its first overseas branch at Hong Kong.
Vision
4
To put the Bank on a higher growth path by building a Strong Customer-base through
Talent Management, induction of State-of-the-art Technology and through Structural
Re-organization.
Mission
To ensure anywhere and anytime banking for the customer with latest state-of-the-art
technology and by developing effective customer centric relationship and to emerge as
a world-class service provider through efficient utilization of Human Resources and
product innovation.
5
1.3 Introduction of priority sector
Disposing of money or property with the expectation that the same thing (or an
equivalent) will be returned . Credit is the provision of resources (such as granting a
loan) by one party to another party where that second party does not reimburse the
first party immediately, thereby generating a debt, and instead arranges either to repay
or return those resources (or material(s) of equal value)
• Lenders - A loan is a type of debt. Like all debt instruments, a loan entails the
redistribution of financial assets over time
• To provide money temporarily on condition that the amount borrowed be
returned, usually with an interest fee.
Today ,the important types of banks, commercial and merchant banks, operating under
the regulation of the Central Bank. The commercial banks engage in retail banking
services through branch networks and operate with a broad deposit base consisting of
demand and time deposit – they provide short term lending. On the other hand,
merchant banks are licensed to provide wholesale banking, take deposit and arrange
syndicated loan facilities for long terms by pooling, sometimes, a consortium of
banks, including other financial institutions, to finance capital intensive projects. From
the foregoing, it is realized that banks are generally debtors; they borrow money in
order to lend them out to make profit. No bank can ever survive by just being a
custodian of deposit, but they exist by lending from the deposit on fixed interest
charged. Money lent on interest is always supposed to be secured on some guarantees
or security.
6
Since banks depend largely on lending, the need to adhere to the basic principles of
lending is quite inevitable. The principles, if strictly followed, will guarantee
depositors and shareholders’ funds, increase profitability and make a healthy turn
over. Such advances in turn assist in the transformation of rural environment, promote
rapid expansion of banking habit and improve and boost the nation’s economy.
The basic considerations in bank lending are the character of the client seeking loan
from the bank. The client must be an honest, upright customer whose record of
transaction with the financial institution or in the society is remarkable. The
information on the character of the borrower could be obtained through a completed
form of his guarantor or his statement of account.
For effective credit administration, the bank must assign functioning lending officers,
properly trained on lending, to be responsible for evaluation of reports and collection
and reporting findings to relevant senior schedule officers, for further consideration
and final approval or rejection
An internal credits/lending policy should be formulated, implemented and pursued
vigorously by the bank to minimize the risk of default from borrowers. The successful
banks operating within the financial system are those that consider and coordinate
basic principles of lending and monitor the activities of borrowers regularly.
The major business of banking company is to grant loans and advances to traders as
well as commercial and industrial institutes. The most important use of banks money
is lending. Yet, there are risks in lending. While lending loans or advances the banks
usually keep such securities and assets as a supports so that lending may be safe and
secured. Suppose, any particular state is hit by disasters but the bank shall get
7
advantages from the lending to another states units. Thus, the effect on the entire
business of banking is reduced. So the banks follow certain principles to minimize the
risk. Following are the important areas to be taken care while lending:
Principles of good lending
Basic principles General principle
Basic principles
The success of banks depends upon the basic principles. These are the prime
principles in lending as well as investment
Safety
Liquidity
Profitability
Safety
Normally the bank uses the money of depositors in granting loans and advances.
Because of that while granting loans the banker should think about the safety of
depositor’s money. The purpose behind the safety is to see the financial position of the
borrower, whether he can pay the debt as well as interest easily. Ensuring safety
means reducing risk associated with lending. The risk involved in lending money is
the credit risk.ie the possibility of the borrower not repaying the amount back on the
due date. It is necessary for the banks to maintain expert staff to appraise every credit
8
proposal received by it. Market risk also there , it can be avoided by preferring high –
grade securities of short terns.
Liquidity
It is a legal duty of a banker to pay the total deposited money to the depositor on
demand. So the banker has to keep certain percent cash of the total deposits in hand.
Moreover the bank grants loan. It is also for the addition of short term or productive
capital. Such type of lending is recovered on demand. A bank must have sufficient
liquid assets to meet the demands of the depositors .The liquid assets must have
posses certain characteristics.
It must be convertible in to cash quickly and easily.
The conversion must be without any loss of value or risk
SLR : The Banking regulation act of 1949 , section 24 . states that every commercial
bank have to maintain liquid assets in the form of cash , gold, and gilt edged securities
– which is not less than 25 % and not more than 40 % of NDTL ( Net Demand and
Time Liabilities )
Profitability
Commercial banks are profit earning institutes; nationalized banks are also not an
exception. They should have planning of deposits in a profitability way to pay more
interest to the depositors and more salary to the employees. Before taking any decision
the banker should make sure that it is profitable.
PRIORITY SECTOR LENDING
9
The Government of India through the instrument of Reserve Bank of India (RBI)
mandates certain type of lending on the Banks operating in India irrespective of their
origin. RBI sets targets in terms of percentage (of total money lent by the Banks) to be
lent to certain sectors, which in RBI's perception would not have had access to
organised lending market or could not afford to pay the interest at the commercial
rate. This type of lending is called Priority Sector Lending. Financing of Small Scale
Industry, Small business, Agricultural Activities and Export activities fall under this
category. This is also called directed credit in Indian Banking system.
Financing Priority Sector in the economy is not strictly on commercial basis as not
only the general approach is liberal but also the rate of interest charged on such loans
is less. Export finance is, in fact, available at a discount of 20% or more on the normal
rate of interest to Indian corporates. Part of the cost of this concession is borne by RBI
by means of refinancing such loans at concessional rate. Indian Banks, therefore,
contribute towards economic development of the country by subsidizing the business
activities undertaken by entrepreneurs in the areas which are consider "priority sector"
by RBI.
Principles of lending & Priority sector finance in Banks
• Cardinal principles of lending are Safety and liquidity , Profitability and
diversifications of risks and Productive purpose and security
• Liquidity with a banker means Cash on Hand, Cash and Bank balances and
Short term current assets to convert into cash
10
• Customer profitability analysis means Assess the profitability of customer’s
business
• Banker can reduce risk in lending to a borrower by ensuring that there will be
no default on account of lack of liquidity and lack of willingness to pay on the part of
the borrower
• In banker’s parlance, credit risk in lending refers to default of repayment by a
borrower
Priority sector comprise
Broadly, the priority sector comprises the following :
1. Agriculture
2. Small scale industries (including setting up of industrial estates)
3. Small road and water transport operators (owning upto 10 vehicles).
4. Small business (Original cost of equipment used for business not to exceed Rs 20
lakh)
5. Retail trade (advances to private retail traders upto Rs.10 lakh)
6. Professional and self-employed persons (borrowing limit not exceeding Rs.10 lakh
of which not more than Rs.2 lakh for working capital; in the case of qualified medical
practitioners setting up practice in rural areas, the limits are Rs 15 lakh and Rs 3 lakh
respectively and purchase of one motor vehicle within these limits can be included
under priority sector)
7. State sponsored organisations for Scheduled Castes/Scheduled Tribes
8. Education (educational loans granted to individuals by banks)
11
9. Housing [both direct and indirect – loans upto Rs.5 lakhs (direct loans upto Rs 10
lakh in urban/ metropolitan areas), Loans upto Rs 1 lakh and Rs 2 lakh for repairing of
houses in rural/ semi-urban and urban areas respectively].
10. Consumption loans (under the consumption credit scheme for weaker sections)
11. Micro-credit provided by banks either directly or through any intermediaty; Loans
to self help groups(SHGs) / Non Governmental Organisations (NGOs) for onlending
to SHGs
12. Loans to the software industry (having credit limit not exceeding Rs 1 crore from
the banking system)
13. Loans to specified industries in the food and agro-processing sector having
investment in plant and machinery up to Rs 5 crore.
14. Investment by banks in venture capital (venture capital funds/ companies
registered with SEBI)
‘Direct Finance’ for Agricultural Purposes
Direct Agricultural advances denote advances given by banks directly to farmers for
agricultural purposes. These include short-term loans for raising crops i.e. for crop
loans. In addition, advances upto Rs. 5 lakh to farmers against pledge/hypothecation
of agricultural produce (including warehouse receipts) for a period not exceeding 12
months, where the farmers were given crop loans for raising the produce, provided the
borrowers draw credit from one bank.
Direct finance also includes medium and long-term loans (Provided directly to
farmers for financing production and development needs) such as Purchase of
12
agricultural implements and machinery, Development of irrigation potential,
Reclamation and Land Development Schemes, Construction of farm buildings and
structures, etc. Other types of direct finance to farmers includes loans to plantations,
development of allied activities such as fishery, poultry etc and also establishment of
bio-gas plants, purchase of land for agricultural purposes by small and marginal
farmers and loans to agri-clinics and agri-business centres.
Indirect Finance to Agriculture
Indirect finance denotes to finance provided by banks to farmers indirectly, i.e.,
through other agencies. Important items included under indirect finance to agriculture
are as under :
(i) Credit for financing the distribution of fertilisers, pesticides, seeds, etc.
(ii) Loans upto Rs. 25 lakhs granted for financing distribution of inputs for the allied
activities such as, cattle feed, poultry feed, etc.
(iii) Loans to Electricity Boards for reimbursing the expenditure already incurred by
them for providing low tension connection from step-down point to individual farmers
for energising their wells.
(iv) Loans to State Electricity Boards for Systems Improvement Scheme under Special
Project Agriculture (SI-SPA).
(v) Deposits held by the banks in Rural Infrastructure Development Fund (RIDF)
maintained with NABARD.
13
(vi) Subscription to bonds issued by Rural Electrification Corporation (REC)
exclusively for financing pump-set energisation programme in rural and semi-urban
areas and also for financing System Improvement Programme (SI-SPA).
(vii) Subscriptions to bonds issued by NABARD with the objective of financing
agriculture/allied activities.
(viii)Finance extended to dealers in drip irrigation/sprinkler irrigation
system/agricultural machinery, subject to the following conditions:
(a) The dealer should be located in the rural/semi-urban areas.
(b) He should be dealing exclusively in such items or if dealing in other products,
should be maintaining separate and distinct records in respect of such items.
(c) A ceiling of upto Rs. 20 lakhs per dealer should be observed.
(ix) Loans to Arthias (commission agents in rural/semi-urban areas) for meeting their
working capital requirements on account of credit extended to farmers for supply of
inputs.
(x) Lending to Non Banking Financial Companies (NBFCs) for on-lending to
agriculture.
Small Scale Industries (SSI)
Small scale industrial units are those engaged in the manufacture, processing or
preservation of goods and whose investment in plant and machinery (original cost)
does not exceed Rs. 1 crore. These would, inter alia, include units engaged in mining
or quarrying, servicing and repairing of machinery. In the case of ancillary units, the
investment in plant and machinery (original cost) should also not exceed Rs. 1 crore to
be classified under small-scale industry.
14
The investment limit of Rs.1 crore for classification as SSI has been enhanced to Rs.5
crore in respect of certain specified items under hosiery and hand tools by the
Government of India
‘Tiny Enterprises’
The status of ‘Tiny Enterprises’ is given to all small scale units whose investment in
plant & machinery is upto Rs. 25 lakhs, irrespective of the location of the unit.
‘Small Scale Service & Business Enterprises’ (SSSBE’s)
Industry related service and business enterprises with investment upto Rs. 10 lakhs in
fixed assets, excluding land and building will be given benefits of small scale sector.
For computation of value of fixed assets, the original price paid by the original owner
will be considered irrespective of the price paid by subsequent owners.
Indirect finance in the small-scale industrial sector include
Indirect finance to SSI includes the following important items:
i. Financing of agencies involved in assisting the decentralised sector in the
supply of inputs and marketing of outputs of artisans, village and cottage industries.
ii. Finance extended to Government sponsored Corporation/organisations
providing funds to the weaker sections in the priority sector.
iii. Advances to handloom co-operatives.
iv. Term finance/loans in the form of lines of credit made available to State
Industrial Development Corporation/State Financial Corporations for financing SSIs.
v. Funds provided by banks to SIDBI/SFCs by way of rediscounting of bills
vi. Subscription to bonds floated by SIDBI, SFCS, SIDCS and NSIC exclusively
for financing SSI units.
15
vii. Subscription to bonds issued by NABARD with the objective of financing
exclusively non-farm sector.
viii. Financing of NBFCS or other intermediaries for on-lending to the tiny sector.
ix. Deposits placed with SIDBI by Foreign Banks in fulfilment of shortfall in
attaining priority sector targets.
x. Bank finance to HUDCO either as a line of credit or by way of investment in
special bonds issued by HUDCO for on-lending to artisans, handloom weavers, etc.
under tiny sector may be treated as indirect lending to SSI (Tiny) Sector.
Weaker sections within the priority sector
The weaker sections under priority sector include the following:
1. Small and marginal farmers with land holding of 5 acres and less and landless
labourers, tenant farmers and share croppers.
2. Artisans, village and cottage industries where individual credit limits do not
exceed Rs. 50,000/-
3. Beneficiaries of Swarnjayanti Gram Swarojgar Yojana (SGSY)
4. Scheduled Castes and Scheduled Tribes
5. Beneficiaries of Differential Rate of Interest (DRI) scheme
6. Beneficiaries under Swarna Jayanti Shahari Rojgar Yojana (SJSRY)
7. Beneficiaries under the Scheme for Liberation and Rehabilitation of
Scavangers (SLRS).
8. Self Help Groups (SHGs)
16
1.4 Targets under priority sector lending
The targets under priority sector lending would be linked to Adjusted Bank Credit
(ABC) (total loans and advance plus investments made by UCBs in non-SLR
bonds) or Credit Equivalent amount of Off-Balance Sheet Exposures (OBE),
whichever is higher, as on March 31 of the previous year. Existing investments, as
on August 30, 2007, made by banks in non-SLR bonds held in HTM category will
not be taken into account for calculation of ABC. However, fresh investments by
banks in non-SLR bonds will be taken into account for the purpose. For the
purpose of calculation of credit equivalent of off-balance sheet exposures, banks
may use current exposure method. Inter-bank exposures will not be taken into
account for the purpose of priority sector lending targets/sub-targets.
The targets and sub-targets set under priority sector lending for UCBs are furnished
below:
Targets and sub-targets set under priority sector lending
Total Priority
Sector advances
40 per cent of Adjusted Bank Credit (ABC) or credit equivalent
amount of Off-Balance Sheet Exposure, whichever is higher.
Agriculture
AdvancesNo target.
Small Enterprise
advances
Advances to small enterprises sector will be reckoned in
computing performance under the overall priority sector target of
40 per cent of ABC or credit equivalent amount of Off-Balance
17
Sheet Exposure, whichever is higher.
Micro enterprises
within Small
Enterprises sector
(i) 40 per cent of total advances to small enterprises sector
should go to micro (manufacturing) enterprises having
investment in plant and machinery up to Rs 5 lakh and micro
(service) enterprises having investment in equipment up to
Rs.2lakh;
ii) 20 per cent of total advances to small enterprises sector
should go to micro (manufacturing) enterprises with investment
in plant and machinery above Rs 5 lakh and up to Rs. 25 lakh,
and micro (service) enterprises with investment in equipment
above Rs. 2 lakh and up to Rs. 10 lakh.(Thus, 60 per cent of
small enterprises advances should go to the micro
enterprises).
Advances to
weaker sections
Of the stipulated target for priority sector advances, at least 25%
(or 10% of the ABC or credit equivalent amount of Off-Balance
Sheet Exposure, whichever is higher) should be given to weaker
sections.
Advances to
Minorities.
Within the overall target for priority sector lending and the sub-
target of 25 per cent for the weaker sections, sufficient care may
be taken to ensure that the minority communities also receive an
equitable portion of the credit.
18
The targets and sub-targets set under priority sector lending for domestic and
foreign banks operating in India are furnished below :
Domestic banks (both public sector and private sector banks)
Foreign banks operating in India
Total Priority Sector advances
40 percent of net bank credit 32 percent of net bank credit
Total agricultural advances 18 percent of net bank credit No target
SSI advances No target 10 percent of net bank credit
Export credit Export credit does not form part of priority sector
12 percent of net bank credit
Advances to weaker sections 10 percent of net bank credit No target
1.5 COMMON GUIDELINES FOR PRIORITY SECTOR ADVANCES
Common guidelines for priority sector advances are following:-
19
MODE OF DISBURSEMENT OF LOAN:
Banks may disburse all loans for agricultural purposes in cash.
REPAYMENT SCHEDULE:
Repayment program should be fixed taking into account the sustenance
requirements, surplus generating capacity, the break-even point, the life of the asset,
etc., and not in an "ad hoc” manner.
RATES OF INTEREST:
The rates of interest on various categories of priority sector advances will be as per
RBI directives issued from time to time.
PENAL INTEREST:
The issue of charging penal interests that should be levied for reasons such as default
in repayment, non-submission of financial statements, etc. has been left to the Board
of each bank.
Banks will be free to levy penal interest for loans exceeding Rs 25,000
SERVICE CHARGES / INSPECTION CHARGES
No service charges/inspection charges should be levied on priority sector loans up to
Rs. 25,000/-.
For loans above Rs. 25,000/- banks will be free to prescribe service charges with the
prior approval of their Boards
PHOTOGRAPHS OF BORROWERS
There is no objection to taking photographs of the borrowers for purposes of
identification, banks themselves should make arrangements for the photographs and
20
also bear the cost of photographs of borrowers falling in the category of Weaker
Sections.
DISCRETIONARY POWERS
All Branch Managers of banks should be vested with discretionary powers to sanction
proposals from weaker sections without reference to any higher authority.
MACHINERY TO LOOK INTO COMPLAINTS
There should be machinery at the regional offices to entertain complaints from the
borrowers if the branches do not follow these guidelines, and to verify periodically
that these guidelines are scrupulously implemented by the branches.
AMENDMENTS
These guidelines are subject to any instructions that may be issued by the RBI from
time to time.
Common Guidelines/Instructions for lending to MSME Sector
Common guidelines for Instructions for lending to MSME Sector are
following:-
1. Processing of Applications
i. Loan Application
Revised Simplified application form will be used for Micro and Small Enterprise. The
existing Common loan Application form applicable to all loans irrespective of limit,
will be applicable for Medium Enterprises sector.
ii. Issue of Acknowledgement of Loan Applications:
Each branch will issue an acknowledgement for loan applications received from the
borrowers towards financing under this sector and maintain the record of the same.
21
iii. Disposal of Applications:
In case of Loans up to Rs.25000/- : Within 2 weeks
In case of Loans above Rs.25000 : Within 4 Weeks
(Provided the loan applications are complete in all respects and accompanied by a
'check list' enclosed to the application form).
iv. Register of Receipt/Sanction/Rejection of Applications:
a. A register should be maintained at branch wherein the date of receipt, sanction
/disbursement, rejection with reasons, should be recorded. The register should be
made available to facilitate verification by the Bank’s officials including Zonal
Manager during visit to the branch.
b. Branch Manager may reject application (except in respect of SC/ST). In the case of
proposals from SC/ST, rejection should be done at a level higher than Branch
Manager.
c. The reason for rejection will be communicated to the borrower in line with
stipulation mentioned in the Fair Practice Lenders Code.
v. Photographs of Borrowers
While there is no objection to take photographs of the borrowers, for the purpose of
identification, branches themselves should make arrangements for the photographs
and also bear the cost of photographs of borrowers falling in the category of Weaker
Sections. It should also be ensured that the procedure does not involve any delay in
loan disbursement.
2. Composite Loan
22
A composite loan with maximum limit upto Rs.1.00crore may be considered by bank
to enable the Micro and Small Enterprises {both for manufacturing and service sector}
to avail of their working capital and Term loan requirement through Single Window.
3. Types of Loans
The Bank may provide all types of funded and non funded facilities to the borrower
under this sector viz, Term Loan, Cash Credit, Letter of Credit, Bank guarantee, etc.
4. Margin
Loan Size Minimum Margin
Up to Rs.25000.00 Nil
Above Rs.25000.00 As per lending policy of the Bank
i. While considering proposals under MSME sector, the book debt upto six months
may be treated as a current assets, for the purpose of computation of permissible bank
finance and drawing power calculation.
ii. The margin on the book debts may also be considered at 20% to 25% on merit of
the case.
iii. In regard to age of the book debts, a certificate preferably from Auditors
/Chartered Accountant to be obtained.
iv. All book debts more than 180days are to be treated as Non-current asset.
5. Security
5.1 No collateral or Third party guarantee for advances up to Rs.5.00 Lacs.
23
5.2 In case of good track record of the borrower Collateral Security and or third party
guarantee may be waived beyondRs. 5.00 Lac but up to Rs.100.00 Lacs, where
guarantee cover of 62.50% of the amount of default is available from CGTMSE, in
respect of term loan and/or working capital facilities extended to new and
existing entrepreneur. It has also been stipulated by CGTMSE that all proposals of
sanction of Guarantee approvals for credit facilities above Rs.50.00 Lacs and up to Rs.
100.00 Lacs will have to be rated internally by MLIs and should be of investment
grade. Accordingly, all proposals above Rs. 50 Lacs are to be rated on Credit Risk
Grading (CRG 2) as per applicable internal rating modules prescribed under Bank’s
Credit Risk Management Policy and proposals rated as AB-1 to AB-7 would only be
considered as investment grade subjected to other stipulated norms in relevant policies
/ guidelines. The commission of CGTMSE will be borne by the borrower
5.3. In case of Loan up to Rs.25000.00, minimum Asset Coverage Ratio (Primary
Security /Loan amount) would be 1:1. However, in case of schematic
lending/specified scheme, the guidelines as applicable will be complied with.
5.4. In case of Loan above Rs.25000/- and up to Rs.10.00 Lacs, a minimum asset
coverage ratio must be 1.25:1.
5.5. In case a loan is not covered under CGTMSE scheme for valid reasons, the
Security coverage Ratio for such loan above Rs.10.00 Lac will be based on the Risk
Rating status of the borrower.
24
Rating Grade
(As per our Rating module)
Minimum Security Coverage Ratio**
AB-1 1.25:1
AB-2 1.5:1
AB-3 1.75:1
Other rated accounts 2.00:1
** In each of the above case, Primary + collateral Security /Loan amount should
not be less than 1.25:1 so as to ensure the minimum stipulated margin.
1. Nevertheless, availability of collateral security shall not be the mere criterion for
arriving at credit decision.
2. In case of loan accounts not covered under CGTMSE scheme, it may be explored as
far as practicable that the credit facilities/loans extended, are supported by collaterals
in the form of liquid securities or fixed assets, immovable properties, based on
the credit Risks perception.
3. Collateral security shall not be insisted upon in those cases where the RBI
directives specifically advised the banks not to insist on obtaining Collateral security
/third party guarantee, in certain priority sector credit or Government sponsored
schemes.
4. The other guidelines/amendments as per lending policy of the Banks should be
closely observed.
25
1.6 Advances to Priority Sector by Allahabad Bank
Advances on Priority sector:-
Priority
sector/Schemes
March 2008 March 2009 March 2010
Amount(Rs. crores)
Amount(Rs. crores)
Amount(Rs. crores)
a. Priority sector 18,774 20,435 24,279
i. Agriculture 9,146 9,568 11,567
- Direct 6,571 7,306 8,340
- Indirect 2,575 2,262 3,227
ii. Micro small
enterprices
3,530 4,593 8,188
iii. Other 6,098 6,275 4,524
b. Weaker Section
4,455 5,010 6,150
(Source of information- Allahabad bank annual report)
1.7 Objectives of the study
The study has been undertaken with the following objectives :
1) To evaluate the growth of the Allahabad bank
2) To study of priority sector
26
3) To analyse the progress made by the Allahabad bank in the various components of
the priority sector lending i.e. agriculture, small scale industries and other priority
sector advances comprised of weaker section, education, housing etc.
4) To make an in-depth study of the priority sector lending of the selected bank.
5) To analyze targets achieved by Allahabad bank
6) To suggest ways and means for improving the quality of lending to this sector.
CHAPTER-2
Literature Review
The primary objective of social control and nationalisation is to ensure a better
alignment of the commercial banking system to meet the needs of the economy. It is
the duty of the banks to see that credit flows into channels, which are most productive
27
and most helpful to our growth and development. To promote the welfare of the
people who are socially and economically backward, the concept of priority sector
lending was evolved.
Quantitative targets were set for lending to priority sector and separate subtargets were
also set for lending to agriculture and weaker sections of the society. As a result,
lending to the borrowers in priority sectors have increased substantially. Increased
flow of credit to the different sectors assisted the developmental activities and thereby
expanded the income as well as the standard of living of the people.
Several studies on this subject in a restricted sense have been undertaken by particular
bank/group of banks, individuals and organisations. Number of Committees appointed
by the Govemment of India and RBI have also studied the banking problems of the
country. Reviews of such available literature are presented below.
V. V. Bhat (1970) proposed a scheme of appoved dealers to assist the Lead Banks in
providing finance and guidance to far1ners and small industrialists. In providing
finance and guidance effectively, the banks would have to collect the required
information, ensure recovery of loans and interest, assist in obtaining after sales
service and keep a watch on the working of the assisted enterprise. This work can be
made easier by creating and supporting a set of approved dealers.
P. N. Joshi (1972) requested the RBI to give clear and specific definition of the
different components of priority sectors. Some of the bankers are not clear about the
28
precise scope of agricultural lending. Guidance from the RBI would help them to
increase their involvement in farm credit on right lines.
M. A. Oommen (1972) found that among the institutional sources of finance to SSI in
Kerala, commercial banks provided the lion’s share. The assistance of commercial
banks in Kerala stands at par with some advanced countries.
M. C. Purohith (1973) conducted a survey in Jaipur city to examine the potential of
small artisans in relation to bank financing. The survey revealed that the average
amount borrowed per artisan from bank was Rs. 1,040 and from non-institutional
source was Rs. 3,133. The maximum amount borrowed by an artisan from a
commercial bank was Rs. 2,000 and from non-institutional source was Rs. 17,000.
The small artisans therefore were denied sufficient funds from the commercial banks
forcing them to borrow from non-institutional sources at higher rates of interest. Due
to lack of adequate financial accommodation from the banking system, the artisans
buy raw materials through other financiers at higher prices and sell the product to the
same agency at a low price. With the financial assistance from the banks, this vicious
circle can be broken up.
N. K. Thingalaya (1974) conducted a study among the village artisans of Kamataka
and found that they are receiving an insignificant per cent of their total credit
requirements from banks. Thus artisans are living under the influence of
moneylenders.
29
Vadilal Dagli (1975) is of the opinion that the aim of the banking policy should be to
uplift the under privileged class of the society in rural India from subsistence
existence to surplus existence. The concept of priority sector should include only the
real poor of the country and by providing them necessary financial assistance; they
can be lifted from the pitches of animal existence to the heights of human existence.
R. K. Hazari (1976) made it clear that institutional financing does not mean replacing
individual moneylenders with institutionalised moneylenders. Institutional financing
should enable the agriculturists to move on to a level of new technology that will
increase agricultural output and employment. This means productivity of both land
and human beings. Data relating to finance must be able to provide a basis for
assessing how much financing has really contributed to additional output and
employment.
P. C. D. Nambiar (1977) pointed out that the role of commercial banks in the priority
sectors is not confined merely to the provision of finance. They have to evaluate the
feasibility of the project and assist the entrepreneurs to select the right type of project.
He also emphasised the need for proper co-ordination between govemment agencies
and banks for better results in the development of priority sectors
S. L. Shetty (1978) in his study on the achievement of commercial banks since
nationalisation has found that the banks, which have relatively low priority sector
30
lending have been the ones with higher than the average credit deposit ratios. Another
finding noticed among the banks is that in regard to the priority sectors, a few
branches of banks achieved impressive ratios, to the neglect of the rest of the areas.
Again there is considerable concentration of priority sector advances in a few a States.
I. G. Patel (1979) reminded the banks about their socio-economic responsibility in the
up-liftment of the poorest strata of the society. A substantial portion of the people live
in abject poverty and the first priority should be to provide productive employment
opportunities to the very poor- whether they are in rural or urban areas. Banks should
equip themselves fully to serve as instruments of development for the poorer sections
of people.
Singh and Balraj (1979) conducted a study on commercial bank lending in Hissar
district of Haryana and concluded that villagers are relieved from the exploitation of
moneylenders by the operation of a nationalised bank. At the same time they also
reported other problems such as uneasy, untimely and non-availability of loans,
expensive and cumbersome procedures, excessive and useless formalities, unsuitable
procedure of loan repayment and the absence of easy accessibility of banking
facilities.
L. D’Mello (1980) is very much doubtful about the capacity and suitability of
commercial banks to provide large amount of credit to the priority sectors. Since
31
banks are high cost organisations, existing developmental agencies can be used by
commercial banks to reduce the cost and to improve efficiency in the use of credit.
C. L. Khemani and K. V. Balakrishnanu (1981) are of the opinion that if the borrower
selected under IRDP is made to approach the money lender for his very genuine
consumption needs, then the very objective of institutional finance for priority sector
will be defeated. Consumption credit granted on the basis of specific needs of the
target groups are not going to cause problems. The actual consumption loans will have
to be related to their minimum needs and their capacity to repay.
A. R. Patel and M. R. Patel (1983) proposed the need for assigning the task of
evaluating the working of various schemes under the 20-point programme to outside
agencies not connected with its implementation. This will result in correct evaluation
of the role played by implementing agencies, benefits derived by the beneficiaries and
deficiencies noticed in the plamiing and implementation process.
V. B. Angadils (1983) observed the concentration of priority sector advances in
general and agricultural advances in particular in a few States. The reasons for such
concentration are number of bank offices, deposit mobilisation, total cropped area,
land under certain food and cash crops, extent of irrigated land in respective States,
adoption of high yielding varieties, the availability of co- operative credit and the level
of political awareness in these States.
32
Senior Executive Seminar on Priority Sector Financing (1983) organized by NIBM
advised the banks to remember the philosophy behind the policy towards priority
sector and to develop faith in this philosophy. Priority sectors should be looked upon
as opportunities of developing the banks’ business.
B. K. Sarkarl (1983) is of the opinion that to launch a successful marketing drive for
the target groups in the priority sector, the environment pertaining to each segment of
the society has to be carefully scanned and vital information relevant to market
decisions such as ignorance, unwillingness, poverty, political interference etc. have to
be analysed. The best result can be derived only if the customer and his real need
situations are assessed in a meaningful way.
A. R. Patel (1984) conducted a survey on public sector banks to assess their
performance under DRI scheme. The study revealed that the banks had positively
responded to the increasing needs of SC/ST borrowers in respect of DRI loans and had
been able to increase their share of SC/ST borrowers, both in terms of number of
borrower accounts and the amount outstanding. At the same time, banks are finding it
extremely difficult to finance all those eligible identified beneficiaries who approach
them in view of the limited loanable funds available under the scheme. Thus, demand
and supply forces in respect of this scheme have created problems at the branch level
as well as the beneficiary level. While large numbers of deserving eligible
33
beneficiaries have so far remained out of the fold of this scheme, a good number of
influential and well to do persons have taken advantage of this scheme.
K. V. Patel and N. B. Shete (1984) analysed the behaviour of weaker section accounts
particularly with reference to their repayment behaviour by examining 1,554 accounts
operated by seven branches of three commercial banks located in five backward
districts in the states of Raj asthan, Madhya Pradesh and Kamataka. The study brings
out the very positive aspects of borrowers’ willingness to repay and the bankers’
promptness in making efforts for recovery. The analysis helps in clearing some of the
misgivings in weaker sections financing and in improving the image of development
banking.
K. V. Patel and N. B. Shete (1984) analysed the priority sector lending by commercial
banks in India from 1969 to 1980 and concluded that quantitatively a very impressive
coverage is achieved during the period of twelve years. The total priority sector
advances have gone up by more than fourteen times. But the credit absorption
capacities of the weaker sections are constrained by a variety of factors, which may
not be under the direct control of the banking industry. Therefore, the co-coordinated
efforts of executives and developmental agencies require special care and attention in
this matter.
I. Satya Sundaram (1984) opines that there is no point in setting up more and more
credit agencies to help the rural poor. The presence of numerous agencies is creating
34
confusion in the filed of rural credit. What is required is the proper co-ordination
among the various agencies in implementing the schemes that will be useful to the
rural poor.
Raut (1984) conducted a study on the scope and problems of financing tribal farmers
and concluded that the problem of overdues was mainly due to the misutilisation of
loans by the tribal farmers. The tendency to misutilise the loan was due to the fact that
the consumption priorities of tribal farmers were of more urgent nature than asset
building priorities.
Balishter and Roshan Singh (1984) found in their study of IRDP financed by SBI in
Bichpuri Block of Agra district that the recovery of loans advanced by the bank under
IRDP was satisfactory in all categories of families and this nullified the common
impression that advancing of loans to weaker sections would lead to accumulation of
bad debts.
Anil Kale and Namdeo Mali (1984) conducted a study in some of the drought-affected
villages of Pune and Nagar districts among the farmers and landless labourers. From
the analysis of data collected it is found that the poor people in rural areas are
subjected to various kinds of exploitations by the very developmental agencies, which
were created by the society or Govemment for their upliftment.
35
B. S. Viswanathan (1985) stated that the overdues to a large extent were on account of
wilful default, which was either due to ineffective recovery machinery or because of
unfavourable recovery climate.
D. P. Khankhoje and V. T. Godse (1985) found that procedural flaws and gaps cause
delays in the process of loaning activity in the priority sector. So the systems and
procedures adopted by banks particularly with reference to documentation and
accounting have to be simplified. But the simplification of systems and procedures
should not weaken the follow-up, supervision and control.
U. C. Kulshresth (1985) conducted a survey in the Western Region of Uttar Pradesh to
review the progress and working of the Lead Banks and concluded that the banks
which were assigned the lead role undoubtedly made considerable efforts in their lead
districts in conducting of economic surveys, preparing Credit Plans, branch expansion,
deposit mobilisation and credit deployment to priority sectors. Thus the Lead Bank
Scheme holds out the promise to attain socio-economic objects in the society and to
develop the rural economy at the district level.
S. B. Dangat, S. R. Radkar and M. P. Dhongade (1986) conducted a micro level study
into the borrowings and utilisation of medium and long term loans in Ahmednagar
district and reported that the medium and long term loans were diverted for conduct of
marriages, for consumption and for construction of residential buildings in all the size
group of holdings in both developing and underdeveloped regions. Proper appraisal of
36
loan proposals, follow-up and supervision after the disbursement of loans were
suggested for effective financing of agriculture.
I. Satya Sundaram (1986) pointed out some of the problems facing the DRI scheme.
Funds are allocated, they are officially spent and yet the poor remains in the same old
state. If necessary safeguard are provided, the funds allocated for this purpose can
through up the desired result..
Economic Research Department of the State Bank of India, Central Office, Bombay
(1987) conducted a study to observe the impact of bank credit on weaker sections in
Kerala. The study revealed that bank loans enabled the borrowers to become self-
employed businessmen or artisans whereas previously they were mere wage eamers.
The utilisation of bank loans generally raised the income and employment of the
borrowers and thereby improved the quality of life.
N. J. Kurian (1987) conducted a concurrent evaluation of IRDP and found that
commercial banks account for 69 per cent of the loans, 23 per cent is accounted by
RRBs and the balance 8 per cent is provided by the co-operatives. The repayment of
loans by IRDP beneficiaries is no worse than that of other debtors who generally are
better off economically.
37
H. C. Malhotra and D. K. Kulshrestha (1987) made an assessment of the advances by
commercial banks to the weaker sections of the society and concluded that giving
advances to them will be of no use, unless it is ensured that the recipients use these
advances for productive purposes.
Suresh Mehta (2000) noticed that though the banks are flush with surplus funds, they
do not find it profitable and safe in lending to the SSI sector because they are already
saddled with high NPAs in this sector. To reduce the NPAs level, banks have to
strengthen their appraisal system and credit monitoring mechanism; and SSI units
have to develop capabilities to manage borrowed funds more prudently and more
transparently in business operations. These arrangements will help both the banks and
entrepreneurs to remain happy and prosperous.
Swami Agnives (2001) delivering the keynote address at a symposium on “New
Economic Policy and Problems faced by Agricultural Sector in Kerala” alleged that
while the banks have given the farmers a raw deal, it had written-off the loans availed
by top industrialists to the tune of rupees one lakh crore as non- performing assets.
The poor farmers’ house and properties are auctioned for recovering the loan amount
by the banks even though it would be a meagre amount.
A critical perusal and review of the studies reveal that most of these studies were not
scientifically designed and the opinion surveys were not properly structured. Also
38
most of the findings were just in the fonn of generalised observations made with out
testing the statistical significance.
Despite the availability of sufficient literature on priority sector lending and rural
credit, no comprehensive and schematic effort has been made to analyse the subject
based on the experience of bank managers and borrowers. The available literature on
the subject is only descriptive, partial and often biased. It covers only some micro
aspects of priority sector lending.
Priority sector lending is done through District Credit Plans. An analysis of priority
sector lending in the State through District Credit Plans is not attempted by any
scholar so far. This study is also an attempt in this direction. It is designed to analyse
the working of District Credit Plans, the weakness in the lending procedures, methods
of making priority sector lending profitable and beneficial and the difficulties
experienced by the bankers and borrowers in the implementation of the scheme.
Hence in this study, different aspects of lending to priority sector together with its
systematic impact are analysed.
CHAPTER-3
RESEARCH DESIGN
39
This chapter describe the research methodology, research design, method of data
collection and tools & technique which are used for the better presentation and right
explanation of the data.
3.1 Research Methodology
Research Methodology in a way is systematic representation of research or any other
problem. It is a written game plan for conducting research. It tends to describe the step
taken by a researcher in studying the research problem along with a logical
background.
It tends to describe methodology for solution of the problem that has been taken for
the purpose of study this project focuses on the methodology for technique used for
the collection, classification & tabulation of the data. This plan throws light on the
research problem, the objective of study & limitation of the study. Therefore, in order
to solve a problem, it is necessary to design a research methodology for problem as
the same way differs from problem to problem.
3.2 RESEARCH DESIGN:
Study is all about the research & analysis of credit to priority sector.
40
Study is being made for the purpose of analysis of credit to priority sector by the
Allahabad bank that predicts the future growth of the bank by providing better
services by bank can earns more profit.
Study will be carried out at Bareilly.
Secondary data is required for analysis of report.
3.3 METHOD OF DATA COLLECTION-
The study is totally based on secondary data to be suitably modified.
SOURCE- SECONDARY DATA
The secondary data collected from the already sanctioned annual report.
Collection of secondary data from Management journals.
Bank Annual Report 2008-09 and 2009-10
Project proposal.
Respective Banks Web Sites & other sites such as www.rbi.org.
Reference from Management Books.
Newspapers and Articles
Tools and Techniques:
41
As no study could be successfully completed without proper tools & techniques, same
with this project. For the better presentation and right explanation researcher used
tools of statistics and computer very frequently and Basic tools which have been used
for project are:
-BAR-CHARTS
- TABLES
Bar chart is very useful tools for every research to show the result in
a clear, simple way. Because researcher used bar charts in my project for showing data
in a systematic way. So researcher need not necessary for any observer to read all the
theoretical detail, simple on seeing the charts anybody that what is being said.
Technological Tools:
MS -WORD
MS-EXCEL
42
CHAPTER-4
DATA ANALYSIS AND INTERPRETATION
1. Financing to priority sector by Allahabad bank .
Table no-1 advances on priority sector
Priority
sector/Schemes
March 2008 March 2009 March 2010
Amount(Rs. crores)
Amount(Rs. crores)
Amount(Rs. crores)
Priority sector 18,774 20,435 24,279
18,774
20,435
24,279
financing to priority sector
200820092010
Figure no -1 Advance on priority sector
Interpretation:
Credit to priority sector grew from Rs.18,774 Crore as on March 2008 to Rs.20,435
Crore as on March 2009 and Credit to priority sector grew from Rs.20,435 Crore as on
43
March 2009 to Rs.24,279 Crore as on March 2010. registering an absolute YOY
growth of Rs.3844 Crore (18.81 %). Bank has exceeded the National Goal (40.00%)
by achieving 41.29% as on Mar 10
i. Financing to agriculture sector by Allahabad bank.
Table no-2 Advances on agriculture sector
Priority
sector/Schemes
March 2008 March 2009 March 2010
Amount(Rs. crores)
Amount(Rs. crores)
Amount(Rs. crores)
i. Agriculture 9,146 9,568 11,567
9,146
9,568
11,567
financing to agriculture
200820092010
Figure no -2 Advances on agriculture sector
44
Interpretation:
Agriculture Credit outstanding increased from Rs.9146 Crore as on March 2008 to
Rs.9,568 Crore as on March 2009 and Agriculture Credit increased from Rs.9568
Crore as on March 2009 to Rs.11,567 Crore as on March 2010 , registering an
absolute YOY growth of Rs.1999 Crore (20.90%). Bank has exceeded the National
Goal (18.00%) of Agriculture to ANBC by achieving 18.68% as on Mar’10.
- Direct finance to agriculture sector from Allahabad bank.
Table no -3 Direct finance to agriculture sector
Priority
sector/Schemes
March 2008 March 2009 March 2010
Amount(Rs. crores)
Amount(Rs. crores)
Amount(Rs. crores)
- Direct in
agriculture
6,571 7,306 8,340
45
6,571
7,306
8,340
direct finance to agriculture
200820092010
Figure no -3 Direct finance to agriculture sector
Interpretation:
Direct finance to agriculture of the Bank grew by Rs. 6,571 crores as on 31.3.2008 to
Rs. 7,306 crores as on 31.3.2009 and Rs. 7,306 crores as on 31.3.2009 to Rs. 8,340 as
on 31.3.2010.
46
- Indirect finance to agriculture sector from Allahabad bank.
Table no -4 Indirect finance to agriculture sector
Priority
sector/Schemes
March 2008 March 2009 March 2010
Amount(Rs. crores)
Amount(Rs. crores)
Amount(Rs. crores)
- Indirect 2,575 2,262 3,227
2,575
2,262
3,227
indirect finance to agriculture sector
200820092010
Table no -4 Indirect finance to agriculture sector
Interpretation:
Indirect finance to agriculture of the Bank grew by Rs. 2,575 crores as on 31 march ,
2008 to Rs. 2,262 crores as on 31 march , 2009 and Rs. 2,262 crores as on 31.3.2009
to Rs. 3,227 as on 31.3.2010.
47
2. Financing to Micro Small Enterprises Sector from Allahabad Bank.
Table no -5 Financing to Micro Small Enterprises Sector
Priority
sector/Schemes
March 2008 March 2009 March 2010
Amount(Rs. crores)
Amount(Rs. crores)
Amount(Rs. crores)
Micro small enterprises
3,530 4,593 8,188
3,530
4,593
8,118
Financing to Micro Small Enterprises Sector
200820092010
Figure no -5 Financing to Micro Small Enterprises Sector
Interpretation:
Credit to Micro and Small Enterprises (MSE) grew from Rs. 3,530 Crore as on March 2008 to Rs.4593
Crore as on March 2009 and grew from Rs.4593 Crore as on March 2009 to Rs.8,118 Crore as on
March 2010, registering an absolute YOY growth of Rs.3595 Crore (78.27%). Share of Micro
Enterprises to total Micro & Small Enterprises has exceeded the National Goal (60%) by achieving
62.25% as on Mar’10.
48
3. Financing to other sector such as housing loan education loan etc. From
Allahabad bank.
Table no -6 Financing to sector such as housing loan education loan etc.
Priority
sector/Schemes
March 2008 March 2009 March 2010
Amount(Rs. crores)
Amount(Rs. crores)
Amount(Rs. crores)
Other 6,098 6,275 4,524
6,098
6,275
4,524
financing to other sector
200820092010
Figure no -6 Financing to sector such as housing loan education loan etc.
49
Interpretation:
Credit to other sector such as housing loan, education loan etc. grew from Rs. 6,098 Crore as on
March 2008 to Rs.6,275 Crore as on March 2009 but in 2010 credit to other sector was decline from
Rs. 6,275 Crore as on March 2009 to Rs. 4,524 Crore as on March 2010.
4. Financing to weaker section from Allahabad bank.
Table no -7 Financing to weaker section
Priority
sector/Schemes
March 2008 March 2009 March 2010
Amount(Rs. crores)
Amount(Rs. crores)
Amount(Rs. crores)
Weaker Section 4,455 5,010 6,150
50
4,455
5,010
6,150
Financing to weaker section
200820092010
Figure no -7 Financing to weaker section.
Interpretation:
Credit to weaker section grew from Rs. 4,455 Crore as on March 2008 to Rs. 5,010
Crore as on March 2009 and credit grew from Rs. 5,010 Crore as on March 2009 to
Rs. 6,150 Crore as on March 2010. Credit to weaker section from Allahabad bank
increased year to year .Credit to weaker section was 10.77% of ANBC as against
stipulated norms of 10%.
51
CHAPTER -5
5.1 Findings
Credit to priority sector increased as on 31 march 2008 to 31 march 2010. Bank
has exceeded the National Goal (40.00%) by achieving 41.29% as on Mar 10.
Bank has exceeded the National Goal (18.00%) of Agriculture to ANBC by
achieving 18.68% as on Mar’10
Share of Micro Enterprises to total Micro & Small Enterprises has exceeded the
National Goal (60%) by achieving 62.25% as on Mar’10.
Credit to other section such as housing loan education loan has been increased
as on march 2009 but march 2009 to march 2010 credit to other section has
been decreased.
Credit to weaker section from Allahabad bank increased year to year .Credit to
weaker section was 10.77% of ANBC as against stipulated norms of 10%.
52
5. 3 Conclusion
My research in the field of financing to priority sector from Allahabad bank and
Allahabad bank has been grew year to year. This has some interesting facts which can
be drawn from the above analysis.
Bank has exceeded the National Goal (40.00%)of priority sector by
achieving 41.29% as on Mar 10
Bank has exceeded the National Goal (18.00%) of Agriculture to ANBC by
achieving 18.68% as on Mar’10
Share of Micro Enterprises to total Micro & Small Enterprises has exceeded
the National Goal (60%) by achieving 62.25% as on Mar’10.
Credit to other section such as housing loan education loan has been
increased as on march 2009 but march 2009 to march 2010 credit to other
section has been decreased.
Credit to weaker section from Allahabad bank increased year to year .Credit
to weaker section was 10.77% of ANBC as against stipulated norms of
10%.
53
5. 2 Suggestion:
priority sectors are big source of revenue for banks, so bank should encourage
also the unregistered units by providing more facilities like less paper work.
Bank has to increase their credit limit and also decrease the installment amount.
The best way to encourage lending to micro small industries is to improve the
ability of existing institution to construct profitable and efficient lending
programmes.
Building awareness among small business people about the financial sources
offering by bank. Especially in the case of housing loan and education loan is
must. So there is mutual benefits are possible
While granting the loans the bank does not adhere with the margin.
The process followed by the bank in sanctioning the loan is unmanageable;
hence it is suggested to make the process easier in sanctioning the credit
facilities to the priority sector.
54
Bibliography
1. E. Gup Benton & W . Kolari James, Commercial Banking 3rd
Edition,Singapore ,John Wiley &sons (Asia) ,2005 .
2. Shekher K C & Shekher Lekshmy , Banking theory and practice 19th Edition,
NewDelhi, Vikas Publishing House ,2007 .
3. Natarajan S & Parameswaran, Indian Banking 5th Edition ,NewDelhi, Sulthan
Chand &Co ltd ,2007 .
4. Maheswari S. N & Paul R R,Banking theory &practice 3rd Edition ,NewDelhi,
Kalyani publishers,2006 .
WEBSITES
www.allahabadbank.com
www.banknetindia.com
www.mybankersbank.com
http://www.rbi.org.in
55