21-08-2012, 11:33 AM
RISK ANALYSIS IN HOME LOAN AT RCB LTD
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INTRODUCTION ABOUT BANKING INDUSTRY
The word bank originated from the word “Benque” or Italian word “Banco” which means an office for monetary transaction over the counter. In those day banks or desks were used as centers for monetary transaction.
During the better system also, there existed traces of banking, that is, people used to deposit cattle and agricultural products in specified places get loans of some other form in exchange for these. Showing some bank existed around 1700B.C. During this time, barley, gold, copper, etc., were used as a standard for valuation.
ORIGIN OF BANKING INDUSTRY
Greece was the first country to introduce a satisfactory system of coinage. After the invention of coins started, a meaningful system of banking came into existence taking into account all the avenue of banking a credit system.
Rome was first country to start a bank at the department of state level in the 4th century R.C. with transactions such as depositing and investments in other forms. In India ancient records shows that banking was popular and money lending was a common practice among the common people.
In the olden day’s goldsmith, merchants and moneylenders conducted the business. They had transactions among themselves by wish funds were transferred from one business to another. They and no general or uniform principles of banking, lending, rate of interest etc.
The Indian Companies Act defines the term banking as:
“Accepting for the sake of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdraw cheque, draft or otherwise”. Bank means financial institution that used funds deposited with it to lend money to companies or individuals, and provides financial services to its customers.
A bank is the dealer in money and credit. The business of banking consists of borrowing and lending. Banks acts as financial intermediaries between savers (lenders) and investors (bowers) by accepting deposits of money from a large number of customers and lending major portion of accumulated “pool” of money to those who wish to borrow.
In the process banks severe reasonable return for the savers, make funds available to the investors at a cost eaten a profit for themselves after covering the cost of funds and providing for the corporate taxes to the government. Thus, the banking institution in a country mobilizes the savings by accepting the monetary deposits from the people who participate in the mechanism for the exchange of goods and services and extend credit while lending money.
GROWTH AND DEVELOPMENT OF THE BANKING INDUSTRY
The basic elements of the banking industry were established during British rule (1757-1947). The national currency, the rupee, had long been used domestically before independence and even circulated aboard, for example, in the Persia gulf region. Foreign banks, mainly British and including some from such other parts of the empires. Hong Kong provided banking and other services.
The Reserve Bank of India was nationalized on January 1, 1949, and given broader powers. It was bank of issue for all rupee notes higher than the one rupee denomination and the agent (ministry of finance) in controlling foreign exchange and the banker to the central and the state governments, the commercial banks, state co-op banks and other financial institutions. The reserve bank formulated and administered monetary policy to promote stable prices and higher production. It was given increasing responsibilities for the development of banking and credit and to co-ordinate banking and credit with the five year plan. The Reserve Bank had number of tools with which to affect commercial bank credit.
ABOUT CO-OPERATIVE BANK
The co-operative banks in India started functioning almost 100 years ago. The co-operative bank is an important constituent of the Indian financial style, judging by the role assigned to co-operative, the expectations the co-operative bank is supposed to fulfill their number and the movement originated in the west, but the importance of such banks has assumed in India is rarely parceled anywhere else in the importance of such banks have co-operative banks.
Co-operative banks in India are registered under the co-operative societies Act. The RBI also regulates the co-operative banks. They are governed by the Banking regulation Act 1949 and Banking Laws (co-operative) Act, 1965,
GROWTH OF CO-OPERATIVE SECTOR IN INDIA
India has basically an agrarian economy with 72% of its total population residing in rural areas. The rural people need lot of services in daily life that are met by village co-operative societies. The seeds of co-operative in India were known in 1904 when the first co-operative societies Act were passes. Since then, the co-operative movement has made significant progress. Co-operative has extended across the entire country and there are currently an estimated 230 million members nationwide. The co-operative credit system of India has the largest network in the world and co-operative have advance more credit in the Indian agricultural sector than commercial banks.
The village co-operative societies provide strategic inputs for its agricultural sector; consume societies meet their requirements at confession rate. Marketing societies will help the farmer to get remunerative prices and processing units in value additions to the raw products etc. in addition, co-operative societies are helping in building up of storage go downs including cold storages, rural roads and in providing like irrigation, transport and health. Various development activities in agriculture, small scale industry marketing and processing, distribution and supplies are now carried on through co-operatives. In fertilizer production the Indian Fertilizers Co-operative (IFFCO) commands over 35% of the marker.
METHODOLOGY
The study has been conducted through a set of questionnaires. The questionnaires for the home loans related to the Risk analysis of home loan in RCB. All the data were collected mentioned it as confidential. A systematic process was equipped in this regard. Information and data was also collected directly from the Bank and through annual reports. It also includes visit to the bank for the collection of various information and data.
OVERALL ANALYSIS
The performance of the bank during the financial year 2009-2010 has been significant, as the bank has achieved a profit of Rs 5.34 crores and the bank has been running under continuous profit in all four years.
From the table and graph 3.4 it is analyzed that the growth of the deposits of the bank has been increased from the level of Rs 212.18 crores for the year 2005-06 to Rs 224.44 crores for the year 2006-07, in the year 2007-08 it is increased to 289.11 crores and in the year 2008-09, Rs 378.63 crores to Rs 486.88 for the year 2009-2010.
From the table and graph 3.5 it is analyzed that the loan position of the RCB has increased in all five years. There are in the year 2005-06 Rs 132.59 crores, 2006-07 Rs 150.18 crores, 2007-08 Rs 233.68, 2008-09 Rs 294.85 crores and 2009-10 Rs 352.98 crores.
From the table and graph 3.6 it is analyzed that the profit position of the company has been increased from year to year which was Rs 2.61 crores, Rs 3.55 crores, Rs 4.29 crores, Rs 5.17 crores and Rs 5.34 crores in the year 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10.
CONCLUSION
This project is carried out a RAJAJINAGAR CO-OPERATIVE BANK LTD Rajajinagar with regard to RISK ANALYSIS IN HOME LOAN to analyze the risk involved in home loan.
Risk analysis is process of defining and analyzing the dangers. Thus risk management place a very important role which effect on financial performance of the bank for long term growth of the bank. The bank want to concentrate on the risk level increases the profitability of the bank and value of the bank decreases. If it is lower risk the profitability and value of the bank increases. So bank it should mainly concentrate on reducing NPA.
From the above findings and suggestions it is conclude that, the bank has to give more reference towards the other loans and the bank should take effective legal action against defaulters by invoking SARFAESI Act. Otherwise this may lead the NPA which will not be good for the bank.