CHAPTER I

INTRODUCTION

1.1 Definition of Bank:

A Bank is a Financial Institutions that accepts deposit from the public and createsa
demand deposit which simultaneously making loans.
OR

Bank is a lawful Organization which accepts deposit that can be withdrawn on demand it
also lends money to Individuals and Business houses that needs it.

1.2 Early History of Banks in India:

The word ‘bank’ is derived from the word ‘bancus’ or ‘Banque’ that is French.
A bank may be defined as an institution that accepts deposits, makes loans, pays checks
and provides financial services. A bank is a financial intermediary for the safeguarding,
transferring, exchanging, or lending of money. A primary role of banks is connecting
thosewith funds, such as investors and depositors, to those seeking funds, such as
individuals or businesses needing loans. A bank is a connection between customers that
have capital deficits and customers with capital surpluses.Banks distribute the medium of
exchange. Banking is a business. Banks sell their services to earn money, and they must
market and manage those services in a competitivefield. Banks are financial
intermediaries that safeguard, transfer, exchange, and lend money and like other
businesses that must earn a profit to survive. Understanding this fundamental idea helps
you to understand how banking systems work and helps you understand many modern
trends in banking and finance.

1.3 Types of Bank:

The mainly three types of bank is following
1) Central Bank (RBI)
2) Commercial Banks
a. Public sector Bank
b. Private sector Bank
c. Foreign Bank
3) Development Bank
4) Cooperative Banks
 a. Primary Agricultural Co-operative Credit Societies (PACs)
b. District Central Cooperative Banks (DCCB)
c. State Cooperative Banks (SCB)

1) Central Bank:
A Bank is entrusted with the functions of guiding and regulating the banking system of a
country is known as a Central Bank such a bank does not deal with the generalpublic.
The Central Bank provides guidance to other banks whenever they face any problem it is
therefore known as Bankers Bank.

2) Commercial Banks:
This are Banking institutions that accepts deposit and grants short term loans and
advance to their customers. In addition to giving short term loans Commercial Banks
alsogives medium term and long term loan to business enterprises. Now days some of the
commercial Banks are also providing housing loans and the long term basis to
individual’s commercial Banks are of
1. Public Sector Bank

2. Private Sector Bank

3. Foreign Sector Bank

1. Public sector Banks – A bank where the majority stakes are owned by the
Government or the central bank of the country.
2. Private sector Banks – A bank where the majority stakes are owned by a private
organization or an individual or a group of people
3. Foreign Banks – The banks with their headquarters in foreign countries
andbranches in our country, fall under this type of bank
 Given below is the list of commercial banks in our country:

 Table 1.1: list of commercial banks in our country

Commercial Banks
Public Sector Banks Private Sector Banks Foreign Banks
State Bank of India Catholic Syrian Australia and New
Allahabad Bank Bank City Union Zealand Banking Group
Andhra Bank Bank Ltd.
Bank of Baroda Dhanlaxmi Bank National Australia Bank
Bank of India Federal Bank Westpac Banking
Corporation
Bank of Maharashtra Jammu and Kashmir Bank
Canara Bank Karnataka Bank Bank of Bahrain &
Kuwait BSC
Central Bank of India Karur Vysya Bank
AB Bank Ltd.
Corporation Bank Lakshmi Vilas Bank
HSBC
Dena Bank Nainital Bank
CITI Bank
Indian Bank Ratnakar Bank
Deutsche Bank
Indian Overseas Bank South Indian Bank
DBS Bank Ltd.
Oriental Bank of Tamilnad Mercantile Bank
Commerce United Overseas Bank
Axis Bank Ltd
Punjab National Bank Development Credit Bank J.P. Morgan Chase Bank
(DCB Bank Ltd)
Punjab & Sind Bank Standard Chartered Bank
Syndicate Bank HDFC Bank There are over 40
Foreign Banks in India
Union Bank of India ICICI Bank Westpac Banking
Corporation
United Bank of India IndusInd Bank Bank of Bahrain &
Kuwait
UCO Bank Kotak Mahindra Bank AB Bank Ltd.
Vijaya Bank Yes Bank CITI Bank
IDBI Bank Ltd. IDFC DBS Bank Ltd.
Bandhan Bank of Bandhan United Overseas Bank Ltd
Financial Services.
Bank of Baroda Dhanlaxmi Bank National Australia Bank
3) Development Bank:
Business often requires Medium and long term capital for purchase of machinery and
equipment for using latest technology or for expansion and modernization such financial
assistant is provided by development banks.
4) Co-operative Bank:
People who come together to jointly serve there common interest often from a
Cooperative Society act when cooperative societies engages itself in banking business is
called as cooperative Banks.

1. Primary Agricultural Co-operative Credit Societies (PACs)

2. District Central Cooperative Banks (DCCB)
3. State Cooperative Banks (SCB)

5) Specialized Banks:
There are some banks to the equipment and provide overall support for setting
upbusiness in specific areas of activity EXIM, SIDBI, NABARD banks. They engaged
themselves in some specific area or activity this called specialization banks.

1) Export Import Banks of India (EXIM)

2) Small Industries Development Banks of India (SIDBI)
3) National Banks for Agricultural and Rural Development (NABARD)

1.4 Importance of Bank in Agricultural Sector:

The important of bank in Agriculture to provide the loans and advance of various forms.
Bank are provide the loan of farmer to gives timely of credit of farmer.

1. Collections of Savings and Advancing Loans:

Acceptance of deposit and advancing the loans is the basic function of commercialbanks.
On this function, all other functions depend accordingly. Bank operates different types of
accounts for its customers.

2. Money Transfer:
Banks have facilitated the making of payments from one place or persons to another by
means of cheques, bill of exchange and drafts, instead of cash. Payment throughcheques,
the draft is more safe and convenient, especially in case of huge payments, this facility is

4
a great help for traders and businessmen. It really enhances the importance of banks for
the business community.
3. predominantly urban oriented and controlled by a few Encourages Savings:
Banks perform an invaluable service by encouraging savings among the people. They
induce them to save for profitable investment for themselves and for the national interest.
These savings help in capital formation.
4. Transfer Savings into Investment:
Bank transfer the savings collected from the people into investment and thus increase the
amount of effective capital, which helps the process of economic growth.
5. Overdraft Facilities:
The banks allow the overdraft facilities to their trusted customers and thus help them in
overcoming temporary financial difficulties.
6. Discounting bill of exchange:
The importance of banks can be seen through the facility of discounting the bill
ofexchange. Banks discount their bill of exchange of consumers and help them in
financial difficulties. By discounting a bill of exchange, they able to get the desired
amount for theinvestment they want.
7. Financing Internal & External Trade:
Banks help merchants and traders in financing internal and external trade by discounting
a foreign bill of exchange, issuing of letters of credit and other guarantees fortheir
customers.
8. Act as an Agent:
The bank act as an agent and help their customers in the purchase and sales of shares,
provision of lockers payment of monthly and dividends on the stock.
9. Issue of Traveller’s Cheques:
For the convenience and security of money for travelers and tourists, the bank provides
the facility of traveler’s cheques. These cheques enable travelers and tourists to meet
their expenses during their journey, as these are accepted by issuing bankers, restaurants,
and other businessmen both at home and abroad. No doubt, this is also one of the great
functions of banks and shows the importance of banks for us in more precise ways
10. General Utility Services:
The existence of commercial banks is essential for contribution to general prosperity.
Banks are the main factors in raising the level of economic development of theworld. In
addition to the above- cited advantages, banks also provide many services of general
utilities to the customers and the general public.

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1.5 Nationalization of Banks:
The provide sector Banks being large industrialists were not properly equipped to help
the achievement of the basis Socioeconomic objectives.
1st Spell of Nationalization -19 July 1969
1. Central Bank of India
2. Bank of India
3. Punjab National Bank
4. Bank of Baroda
5. United Commercial Bank
6. Canara Bank
7. United bank of India
8. Dena bank
9. Union Bank of India
10. Allahabad Bank
11. Syndicate Bank
12. Indian Bank
13. Bank of Maharastra
14. Indian Overseas Bank
2nd spell of Nationalization -15th April 1980
1. Punjab and Sindh Bank
2. Andhra Bank
3. New Bank of India
4. Vijaya Bank
5. Oriental Bank of Commerce
6. Corporation Bank
1.6 Objective of Nationalization Banks:
1) Social welfare:
It was the needs of the hour to direct the funds for the needy and required sectors of the
Indian economy sector such as agricultural small and village industries were in needof
funds for their expansion and further economic development.
2) Controlling private Monopolies:
Prior to nationalization many banks were controlled by private business houses
andcorporate families. It was necessary to check these monopolies in order to ensure a

6
smooth supply of credit to socially desirable sections.
3) Expansion of Banking:
In a large country like India the numbers of banks existing those days were certainly
inadequate. It was necessary to spread banking across the country. It could be done
through expanding banking network in the un-banked areas.
4) Reducing Regional Imbalances:
In a country like India where we have an urban rural divide, it was necessary for banks to
go in the areas where the banking facilities were not available.
5) Priority sector Lending:
In India, the agriculture sector and its allied activities were the largest contributor to the
national income. Thus these were labeled as the priority sectors. But unfortunately they
were deprived of their due share in the credit. Nationalsation was urgently needed
forcatering funds to them.
6) Developing Banking Habits:
In India more than 70% population used to stay in rural areas.it was necessary to develop
the banking habit among such a large population.

1.7 Merging of Banks:

1) Oriental Bank of Commerce (OBC) and United Bank of India will be merged into
Punjab National Banks (PNB). After the merger, these together will form the second-
largest public sector bank in the country, after State Bank of India (SBI), 1 April 2020
2) Syndicate Bank will be merged into Canara Bank, which will make it the fourth-
largest public sector lender.

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3) Indian Bank will be merged with Allahabad Bank, 1 April 2020.
4) Union Bank of India will be merged with Andhra Bank and Corporation Bank
5) Customers, including depositors of merging banks will be treated as customers of
thebanks in which these banks have been merged with effect from 1 April 2020.
6) After the merger, there will be 12 PSUs - six merged banks and six independent
publicsector banks.
 Six merged banks - SBI, Bank of Baroda, Punjab National Bank, Canara Bank, and
UnionBank of India, Indian Bank
 Six independent banks - Indian Overseas Bank, Uco Bank, Bank of Maharashtra,
Punjaband Sind Bank, Bank of India, Central Bank of India.
7) The Oriental Bank of Commerce and United Bank of India will operate as the
branchesof the Punjab National Bank from tomorrow (1 April 2020).
8) Syndicate Bank will function as the branch of Canara Bank effective 1 April 2020.
9) Similarly, all Allahabad Bank branches will be treated as branches of the Indian Bank
10) All branches of Andhra Bank and Corporation Bank will function as Union
Bank of India branches with effect from today i.e. 1 April, 2020.

1.8 Functions of Banks:

The major functions of banks are almost the same but the set of people each sectoror
type deals with may differ. Given below the functions of the banks in India:
1. Acceptance of deposits from the public
2. Provide demand withdrawal facility
3. Lending facility
4. Transfer of funds
5. Issue of drafts
6. Provide customers with locker facilities
7. Dealing with foreign exchange
1.9 Role of Commercial Banks in the Economy:
As we know the main objectives of a commercial bank are to earn profit by theprocess of
accepting of deposits and advancing loans through different methods. Although these
functions are the basic function of commercial banks, but there are a lot more
functions that enhance the importance of banks today.

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1. Acceptance of deposits, by opening different kinds of bank accounts
2. Advancing of loans to needy persons through different methods and requirements
3. Provisions of agency and general utility services to his customers
4. Making new investments in different organizations and increasing the
productivecapacity of the country
5. Promote capital formation in the country by mobilizing and collection of savings
forthe purpose of investments
6. Development of industries in the country according to the requirements of the economy
7. Balanced development in the economy is achieved in different sectors &
regionsthrough the resources of bank funds
8. Development in agricultural production is made possible by providing different
kindsof loans
9. These banks help in reducing reliance on foreign assistance by their efforts in
themobilization of domestic savings
10. These banks help in the implementation of an effective monetary policy
according tothe objective to the central bank.
11. Commercial banks also help in the creation and distribution of money through the
salesand purchase of securities.
12. Commercial banks are the custodian and distributor of liquid capital of the
country,which is the lifeblood of all commercial and economic activities of a country.

1.10 Objectives of study

1. To study the banking customer deposits in return for paying customers anannual
interest payment.
2. To acquire the knowledge of different types of agricultural loan.
3. To study the scale of finance of different crop.
4. To study the loaning procedure, credit advances and working capital of bank.
5. To study the documentation of agricultural loan.
6. To study the Pre sanction appraisal proposal and post sanction follow up ofcrop and
development loan.

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 CHAPTER-II
REVIEW OF LITERATURE
Government of India promoted Regional Rural Banks (RRBs) through the RRBs Act
of 1976 to bridge the gap in the flow of credit to the rural poor. The RRBs were
established “with a view to developing the rural economy by providing, for the purpose
of development of agriculture, trade, commerce, industry and other productive activities
in the rural areas, credit and other facilities, particularly to small and marginal farmers,
agricultural labourers, artisans and small entrepreneurs, and for matters connected
therewith and incidental thereto”. Regional Rural Banks in Maharashtra are an integral
part of the rural credit structure of the state. As we analyze the data it shows that RRBs
in Maharashtra are working for the 360 degree development of rural area of state. In
short we can say that it providing rural Maharashtra all round assistance and proved to be
an institution where "Growth with Social Justice" exists.

NABARD (1986) published “A study on RRBs viability”, which was conducted by

Agriculture Finance Corporation in 1986 on behalf of NABARD. The study revealed that
viability of RRBs was essentially dependent upon the fund management strategy, margin
between resources mobility and their deployment and on the control exercised on current
and future costs with advances. The proportion of the establishment costs to total cost
and expansion of branches were the critical factors, which affected their viability. The
study further concluded that RRBs incurred losses due to defects in their systems as
such, there was need to rectify these and make them viable. The main suggestions of the
study included improvement in the infrastructure facilities and opening of branches by
commercial banks in such areas where RRBs were already in function.

Vidhayavathi. K (2002) in her study evaluated the performance of housing finance

institutions on certain selected business parameters as well as through an opinion
survey over the home loan seekers and concluded that apart from interest rate
advertisement, service quality, courtesy and speed of service are certain other important
dimensions affecting the growth of housing finance industry.

Reddy A. Amarender (March 2006) examines the total factor productivity of RRBs. In
this Banks located in economically developed as well as low banking density regions
exhibited significantly higher productivity growth.

Sendhilvelan and Karthikeyan (2007) RBI has expressed that the development
towards general keeping money ought to have speedier dependability and proficiency
of the budgetary framework, yet without anyone else it cannot give a viable or feasible
answer for the operational issues of individual organizations emerging from credit
capitalization, abnormal state of NPAs vast resources liabilities crisscross, liquidity and
so forth. However in a business sector driven economy to confront the opposition one
variable is the size and subsequently, the passage of Universal banks is unavoidable for
the general monetary advancement of our nation. There is most likely step by step we

10
are moving towards the administration of a couple of substantial banks from the
administration of numerous little banks. This illustration is accomplished with the
idea of widespread managing an account which surely fortify the banking sector.

Kerry D (2008) broke down, amid the period 1998-2008, there was a sharp ascent and
afterward there was a surprising drop in the home costs. Financial basics were the
fundamental purposes behind these adjustments in home costs. Thusly the issue was not
a result of subprime loaning, but rather emotional diminishments in the Fed, a short
time later amid the early mid- 2000 there was an expansion in the rates of premium;
the development of housing was engaged in the business sectors where there were
critical supply-side limitations, that able to be more value unpredictable. Likewise the
issues laid in light of expansion and decline of certain home loan items, instead of credit
lack.

aveen K.Shetty and Dr.Veerashekharappa (2009) studied the significance of

microfinance in achieving money related incorporation. The paper concentrates on effect
of the expanding hole sought after and supply of money related administrations in
India which has prompted the expanding populace of the nation to be avoided from
the formal budgetary credit framework on housing advance.

R.C. Dangwal and Reetu Kapoor (2010) conducted a study on financial performance
of commercial banks. In this study they compared financial performance of 19
commercial banks with respect to eight parameters and they classified the banks as
excellent, good, fair and poor categories.

Pati A.P. (June 2010) explains that in India an array of financial institutions are
operating in the area of rural financing. Among those institutions Regional Rural Banks
(RRBs) are prominent. The idea was to provide efficient service to the rural sectors so
that the rural economy could provide the necessary input to the overall economy.

Anioke Chisom.N, (2012),He suggested them to find out the effect of loan default on
public banks and also they took some measures that will be used in reducing the loading
of loan defaults.

Mohammed S. Chowdhury, Sheikh Mohammed Rafiul Huque and Zahurul Alam,

(2012),The major findings indicated that to extent that a reporting system allowing for
timely monitoring and follow-up action was established, an incentive system for on-time
payment was instituted, proper credit worthiness evaluation was done and work
mechanisms were free from political interference and pressure, the loan disbursement
and loan recovery problems would reduce to a great extent.

Kamaujohn, G, Wagoki juma, (2014), In this study carried out with the statistical
package for social sciences tools and result is huge implication debt collection recovery
of loan by family bank ltd.

11
md. Rostam Ali, md. Mostafizur Rahman & Syed Moudud-UI-HUq, (2014),This
study suggests that the branch must try to increase the no. of deposits accounts by
offering attractive deposits schemes, loan recovery department must more transparent
and there must have some regular supervision.

Kwadwo Obeng and Redeemer yao krah, (2015),The objective of the study is to
recognize and compare the techniques utilized by SIL and PCLS to reduce the threat of
loans default and to recovery of debt.

Bishnu Pada Banik, Prahallad Chandra Das, ACMA, (2015),The main objective of
this study is to compare the amount of classified loans and non-performing loans of 4
state-owned commercial banks and 4 first generation private commercial banks in
Bangladesh.

Hellen kamar, Caroline Ayuma,(2016),In this study suggests that same study be done
in other financial institutions not considered in this study to allow generalizations and
also provide rich advances for future studies.

G. Sathish, (2016),This paper highlights the per-stage and put-up stage sanction of loan
process of credit score in Tamilnadu urban co-operative banks.

Robin Thomas, Dr. RK Vyas, (2016),This study discusses the frame work of loan
recovery mechanism in Indian banking sector.

Shafiqul Alam, Md. Mahbubul Haq and Abdul Kader, (2015),This study has
concerned with investigating the factor of significant develop of NPLs in the banking
industry to Bangladesh and its impact on sustainability of that enterprise.

Sufi FaizanAhmed, Qaisar Alimalik, (2015),The major findings of this study the credit
term has significant have an impact on LP, CP and CRC are displaying their constructive
and insignificant influence on the efficiency of the mortgage.

Jhon N.N. Ugoani, (2016), This study discussion on the huge non-performing loans
portfolio erodes the capability of banks to make profits.

Vasantha Kumari and Dinesha GA, (2015), This study has found all sectors banks on
an average have maintained above 96 percent standard assets private sector banks have
maintained standards above 97%. However, in foreign banks, doubtful assets have increased
from Rs. 698 crores in 2006 to Rs. 2113 crores.

Bishnu Pada Banik, Prahallad Chandra Das, ACMA, (2015),The main objective of
this study is to compare the amount of classified loans and non-performing loans of 4
state-owned commercial banks and 4 first generation private commercial banks in
Bangladesh.

12
Hellen kamar, Caroline Ayuma,(2016),In this study suggests that same study be done
in other financial institutions not considered in this study to allow generalizations and
also provide rich advances for future studies.
CHAPTER –III

RESEARCH METHODOLOGY

3.1: Selection of Study Area:

The area of the research is Sangamner Tal – Sangamner Dist- Ahmednagar.
Ahmednagar district is located in the Maharashtra state, India.

Selection of Banks
Table 3.1 Survey of Banks

Sr. No Name of Institute Address

1. State Bank of India Near, Vidya Nagar, Sangamner Bus Stand Rd,
Dist:Ahmednagar, Maharashtra 422605
2. Bank of Baroda PB NO-14, Swatantrya Chowk - Pande Chowk Rd,
Sangamner, Maharashtra 422605
3. Canara Bank Dherange Patil Building New Sagar Road Sangamner,
Sangamner, Maharashtra 422605
4. HDFC Bank Ramtirth, Jantaraja Marg, near Malpani Hospital,
Sangamner, Maharashtra 422605
5. Maharashtra Gramin H6J3+2HR, Lane Number 4, Ganesh Nagar,
Bank
Sangamner, Maharashtra 422605
6. Bank of Maharashtra City Survey No 150, Mahale Building New Nagar
Road,
Link Rd, Sangamner, Maharashtra 422605
7. Union Bank yeshodhan complex, Navin Nagar Rd, Vidhyanagar,
Sangamner, Maharashtra 422605
8. ICICI Bank Poonam, Ashoka Heights Near Malpani Lawns
Opp.Hotel, Pune - Nashik Hwy, Sangamner,
Maharashtra 422605
9. Bank of India H6J3+V45, Ganesh Nagar, Sangamner,
Maharashtra 422605
10. Overseas Bank H6C6+W22, Navin Nagar Rd, Vidhyanagar,
Sangamner,

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 Maharashtra 422605

Table 3.1 Says that I had surveyed 8 different banks in my locality and gathered information
about them. On the basis of bank in agriculture sector I had selected MGB bank for my project

14
3.1 Method of Data Collection:

Data relating to bank and financial performance analysis are collected from Both Primary
data and secondary data are used in research .The primary data is collected in order to fulfill
the information requirement of certain objectives. Thus, primary data I collected to describe
the present scenario of bank sector. The secondary data is collected to fulfill the information
requirement of few Objectives.

i. Primary Data:

Primary data were used in the study. The primary data from bank manager of the unit
Canara bank on the types of loan, loaning procedure, rate of interest etc. Were collected with
the help of pre-tested questionaries’ and other set of questionnaires.
Personal Interview:
The personal interview are conducted in Canara Bank are taken to gather theinformation
required for study.

ii. Secondary data:

a) Websites:
Websites are the important source which is helped to gathered secondary data
.thegovernment of the India websites for bank sector along with some research institutes
websites also used to collect required information for project work
b) Research paper:
Research paper related to the objectives of the study were used to get knowledge related to
the project work
c) Reference books:
1. Agriculture Finance and Management
2. State Bank institutions of rural Development report
Fig.3.1: Location of State Bank of India - Sangamner

INDIA MAP MAHARASTRA MAP

AHMEDNAGAR MAP
 CHAPTER IV
RESULT AND DISCUSSION
Survey of bank
Table 4.1: Survey of banks
Sr. No Name of Institute Address
State Bank of India
1. Near, Vidya Nagar, Sangamner Bus Stand Rd,
Dist:Ahmednagar, Maharashtra 422605
2. Bank of Baroda PB NO-14, Swatantrya Chowk - Pande Chowk Rd,
Sangamner, Maharashtra 422605
3. Canara Bank Dherange Patil Building New Sagar Road Sangamner,
Sangamner, Maharashtra 422605
4. HDFC Bank Ramtirth, Jantaraja Marg, near Malpani Hospital,
Sangamner, Maharashtra 422605
5. Maharashtra Gramin H6J3+2HR, Lane Number 4, Ganesh Nagar,
Bank
Sangamner, Maharashtra 422605
6. Bank of Maharashtra City Survey No 150, Mahale Building New Nagar
Road,
Link Rd, Sangamner, Maharashtra 422605
7. Union Bank yeshodhan complex, Navin Nagar Rd, Vidhyanagar,
Sangamner, Maharashtra 422605
8. ICICI Bank Poonam, Ashoka Heights Near Malpani Lawns
Opp.Hotel, Pune - Nashik Hwy, Sangamner,
Maharashtra 422605
9. Bank of India H6J3+V45, Ganesh Nagar, Sangamner,
Maharashtra 422605
10. Overseas Bank H6C6+W22, Navin Nagar Rd, Vidhyanagar,
Sangamner,
Maharashtra 422605
Table 4.1 shows the name and address of different banks and I select State Bank of India
from above 10 survey