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Sunday, December 9, 2012

Loans in KBS Bank


ABOUT KBS BANK :
Krishna Bhima Samruddhi Local Area Bank Limited (Samruddhi Bank) was incorporated in 1999 and was granted license by Reserve Bank of India, the bank regulator in India, to carry on banking business as a local area bank in the districts of Mahboobnagar in Andhra Pradesh state and Raichur and Gulbarga districts in Karnataka state. Samruddhi Bank is presently owned entirely by Bhartiya Samruddhi Investments and consulting services Ltd. (BASIX Ltd.) which has invested Rs.50 million in the bank. The Bank started operation in February, 2001

The concept of Local Area Bank (LAB) was introduced in 1996 with a view to mobilize rural savings and make them available for investment in the local area of operation of such banks. The local area banks were expected to bridge the gap in the availability of credit and strengthen the institutional credit framework in rural and semi-urban areas. LABs were required to finance and Isquo; priority sector and rsquo; that included agriculture and allied activities, trading activities, non-farm sector and cottage and village industries and small scale industries. Their lending to priority sector consisting of the above activities was to be minimum 40% of their net bank credit and lending to weaker section was to be at least 25% of their priority sector lending vast number of poor people particularly in rural areas.

Area of Operation:
Samruddhi Bank is operating in three most backward districts located contiguously in two states of Andhra Pradesh and Karnataka. Samruddhi Bank has a network of 14 branches locations are as under: As per the RBI report, all the three districts are considered as under-banked districts of the country. The profile of the area is given below:

Mahboobnagar District:
The district is located in the state of Andhra Pradesh.  Bank’s head office is located in the district headquarter two of Mahboobnagar.  There are 1477 villages in the district with a population of 35.13 Lakhs.  Agriculture is the predominant economic activity with more than 75% of the people depending on agricultural activities for their livelihoods.  48% of the landholdings are less than one hectare in area.  22 Percent of net sown area is under irrigation.  Normal annual rainfall is around 600 mm.  Millets, Pulses and oilseeds are the major crops with Castor alone occupying 30% of the area.  Other important economic activities are handloom weaving and sheep / goat rearing. 

There are 229 bank branches including RRBs (70) and co-oprative banks (19) operating in the district.  The deposits aggregate Rs.2,690 crores and advances Rs.2,481 crores as on 31.03.2008 and the Credit Deposit ratio is 92%.

Branches in Andhra Pradesh State:
Mahboobnagar
Atmakur
Kodangal
Gadwal
Nargarkarnool

Raichur District:
The district is situated in Karnataka state. It has 808 villages with a population of 16.70 lakhs. Normal rainfall is 621 mm and the predominant economic activity is agriculture. The principal crops are Paddy, Jowar, Tur, Groundnut, Sunflower and Cotton. 42% of landholdings have an average area of 2 hectares and above. Irrigated area constitutes 30% of the net sown area. The district also has substantial area under plantation crops like Mango and Coconut. The district is a major centre for cotton production. There are several agro based industries in the district viz. rice mills, oil mills, cotton ginning and pressing factories and spinning mills.

There are 129 bank branches functioning in the district. The aggregate deposits and advances as on 31.03.2008 are Rs.1456 crores and Rs.2002 crores respectively. Credit Deposit ratio is 138%.

Branches in Karnataka State: (Raichur District)
Raichur,
Manvi
Deodurg-Bank-on-Wheels (A Mobile Br.)
Sidhanur

Gulbarga District:
Gulbarga district is located in the state of Karnataka. The district has 1360 villages. Population is Rs.31.25 lakhs with majority of people involved in agricultural activities. 50% of landholdings have an average area of above 2 hectares. 14% of net sown area has irrigation facilities. Normal annual rainfall is around 700 mm. The major crops grown are Millets, Pulses, Sugarcane and oilseeds. Except for a few cement and Dal processing units, the district does not have any other industrial activity and is considered industrially backward. However, there are a sizeable number of rural go downs located in the district.

There are 209 bank branches operating in the district. The outstanding Deposits as on 31.03.2008 are Rs.2745 crores and advances are Rs.2966 crores. Credit-Deposit ratio is 108%.

Branches in Karnataka State: (Gulbarga Dist.)
Gulbarga
Yadgirs
Kamalapur
Chowdapur
Aland

In addition to deposits, advances have also shown healthy growth, especially in the farm and non-farm segments.


Loan Schemes:
Definitions
1.            A sum of money given to an individual or individuals with the intent that it is to be repaid at some future date along with any agreed upon interest.
2.            An advance of funds from a lender to a borrower on the agreement that the borrower pays interest on the loan, plus paying back the initial amount of the loan at or over an agreed time.
3.            When a lender gives money or property to a borrower, and the borrower agrees to return the property or repay the borrowed money.

What is Loan?
A loan is a type of debt. This article focuses exclusively on monetary loans, although, in practice, any material object might be lent. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.

The borrower initially does receive an amount of money from the lender, which he has to pay back, usually but not always in regular installments, to the lender. This service is generally provided at a cost, referred to as interest on the debt. A loan is of the annuity type if the amount paid periodically (for paying off and interest together) is fixed.

A borrower may be subject to certain restrictions known as loan covenants under the terms of the loan.

Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding.

Legally, a loan is a contractual promise between two parties where one party, the creditor, agrees to provide a sum of money to a debtor, who promises to return the money to the creditor either in one lump sum or in parts over a fixed period in time. This agreement may include providing additional payments of rental charges on the funds advanced to the debtor for the time the funds are in the hands of the debtor (interest).

 

Secured

A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan.

A mortgage loan is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security - a lien on the title to the house - until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.

In some instances, a loan taken out to purchase a new or used car may be secured by the car, in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter - often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer. An indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer.

A type of loan especially used in limited partnership agreements is the recourse note.

A stock hedge loan is a special type of securities lending whereby the stock of a borrower is hedged by the lender against loss, using options or other hedging strategies to reduce lender risk.

A pre-settlement loan is a non-recourse debt, this is when a monetary loan is given based on the merit and awardable amount in a lawsuit case. Only certain types of lawsuit cases are eligible for a pre-settlement loan. This is considered a secured non-recourse debt due to the fact if the case reaches a verdict in favor of the defendant the loan is forgiven.

 

Unsecured

Unsecured loans are monetary loans that are not secured against the borrower's assets. These may be available from financial institutions under many different guises or marketing packages:
·                     Credit card debt
·                     Personal loans
·                     Bank overdrafts
·                     Credit facilities or lines of credit
·                     Corporate bonds

The interest rates applicable to these different forms may vary depending on the lender and the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974.

Other terms and conditions in Loan Products:
·                     Crop loans / Samruddhi Kisan Credit Card (SKCC)
All crop loans shall be though Samruddhi Kisan Credit Card, for SKCC loans the limit will be Rs.1,00,000/- maximum, in which upto Rs.25,000/- should be through JLG while above that will be individual loans with mortgage.  Loans upto Rs.10,000/- invariably in JLG only except for hospitalisation / emergency loan for staff.  Loans above Rs.10,000/- to Rs.25,000/- either in JLG or individual basis, with collateral security.  Maximum limit for JLG for all loans is Rs.25,000/- only.  Loans above Rs.25,000/- must invariably given as individual loans.  There should be a minimum of 15 days gap between date of loan closure and disbursements of repeat loan in crop loans.  Vegetable cultivation loans should be given under crop loans.

·                     Sudhama Loan:
Ceiling on Sudhama loan will be savings plus Rs.3000/-.

·                     Agri Investment Loans:
Agri-term loans can be given in villages which have at least 10 monthly recovery accounts and an OTRR >=95%.

·                     Lift Irrigation Loans:
Distance between points of lift to point of delivery must be 1500 Mtrs.  Maximum limit: Rs.20,000/- per acre and Rs.2,00,000/- per project.

·                     NFS Growth Micro Enterprises Loans (Composite term loan)
Growth enterprise loan product should be followed as given below;
Ø  Micro Loans: Rs.50 K at 21%.
Ø  Small Loans: > Rs.50K to Rs.200K at 15% - 18% based on rating.
Ø  Macro Loans: > Rs.200K to Rs.500K at 15% - 18% based on rating.

Composite term loan Includes loan for fixed assets and working capital requirements.  NFS growth micro loan can be given for first time borrowers.  Growth-Micro loans are restricted to activities, which generate direct and significant wage employment and have regular cash flows.

·                     Housing Construction / Repair or Extension:
Housing loans can be given in villages which have at least 10 monthly recovery accounts and an OTRR >=95%.

·                     Vehicle loans to employees / LSPs
Vehicle loan to employees / LSPs should be 85% of the vehicle cost (it will be only cost of vehicle) and 60% of the depreciated value for used vehicle.  All vehicles of staff and LSPs financed by must be hypothecated in favour of Krishna Bhima Samruddhi Local Area Bank Ltd.  Obtain copy of the R.C. book, insurance copy.  The same should be attested by the Branch Head duly verifying the originals and the same to be kept along with the loan documents.  Comprehensive insurance of the vehicle shall be done on the day of purchase and before on road.  Signature on the “Change of ownership form” Form No. 29 should be taken along with the application.  It is the responsibility of the BH to ensure this.

·                     Vidya Samruddhi Loan Product and Procedures:
Target customers of Vidya Samruddhi education loan will be students from rural areas / towns staying in Krishna Bhima Samruddhi Local Area Bank Ltd. (KBS Bank) operating areas and are admitted to job guaranteed courses offered by reputed institutes.

Product:
·                     Minimum loan amount is Rs.10,000/-.
·                     Loan will be limited to maximum of 75% of the cost of study of the courses, subject to a ceiling of Rs.2,00,000/-.  The cost of study will include fee payable to the institution, cost of books (as per the estimate provided by the institution), cost of computer (if required for study and certified by institution).  All other expenses are to be borne out of the own resources of the applications.
·                     The repayment has to commence from 6 months after completion of study or immediately on securing employment, which ever is earlier.  The maximum repayment period will be 4 years from that date.  Thus the maximum tenor of the loan is 6½ years.  Interest has to be paid during the period of moratorium by the co-applicant or guarantor.
·                     Interest chargeable for Professional Higher Education courses would be at the rate of 15% on diminishing balance, upfront loan processing fee at the rate of 2% plus service tax as applicable.
·                     Interest chargeable for Vocational courses at the rate of 18% on diminishing balance, upfront loan processing fee of 2% and service tax as applicable.  Maximum exposure upto 75% of the course fee and tenure Upto 3 years.
·                     Recovery has to be made through post dated cheques (PDCs) and / or through Electronic Clearing System (ECS).
·                     Applicant would be the student, parent would be co-applicant (preferably who is earning), guarantor must be an employee with State / Central Government / PSUs / Reputed Corporate and Banks.  Minimum net monthly income of the guarantor should be Rs.5,000/- and should have sufficient service to cover the loan period.
·                     For the present, the scheme will be limited to cover only domestic courses.  The maximum duration of the course has to be 2 years. 

Procedures:
·                     At the time of disbursement we have to collect 3 PDCs from each applicant, co-applicant and guarantor as a security.
·                     Disbursement will be made by the branch favouring the educational institution and documents should be kept with unit.

Disbursement has to be made direct to the institutes / vendors.  Cost of books purchased can be reimbursed in cash subject to production of receipts.

Financial Services
Savings; Samruddhi Bank is offering different Deposit Products to its customers depending on the needs of the customers.S.no Saving Product

Product Description
1)           Fixed Deposit IAWPA fixed deposit, which will mature on a specific period in the future and payable after maturity along with the interest.
2)           Fixed Deposit ARIA fixed deposit which will mature on a specific period in the future and interest payable periodical basis as requested by the depositor.
3)           Savings Bank: A Normal savings bank with multiple deposits and multiple withdrawals.
4)           Samruddhi Life Savings Bank: A savings bank with multiple deposit and multiple Withdrawals. The deposit holders will get a free Accidental Insurance as well as Life Insurance
5)           Samruddhi Cash Certificate: A fixed deposit payable after maturity.
6)           Recurring Deposit: A Fixed deposit with monthly installments, payable on maturity along with interest.
7)           Samruddhi Daily Deposit: A daily deposit product, a multiple of Rs.10I- to Rs.2501- for aperiod of 6 months, payable on maturity.
8)           Current Account: A bank account with multiple deposits and multiple withdrawals normally used by business entities.
9)           Samruddhi Life Term Deposit Insurance linked fixed deposits.
10)        Samruddhi 365A fixed deposit which matures with 365 days and with 11% interest rate.

Loans
Samruddhi Bank offers a wide range of loans catering to different segments of the poor and their varied needs across a large number of economic activities, as follows:
·                     Crop Loans through Joint Liability Groups! Crop loans through Bore well users association.
·                     Samruddhi Kisan Credit Card : Credit Card for crop loans
·                     Sudhama Loans- Loans
·                     Agri Allied
·                     Non Farm Micro and Growth Enterprises
·                     Loans to SHG/MACTSNO
·                     Rural Housing Loans
·                     Loans against bank’s deposit
·                     Small Road Transport Loans

Money Transfer
Samruddhi Bank is offering cheaper money transfer facility payable at more than 228 locations across India in agency arrangement with lClCl bank.

Insurance
Samruddhi Bank is providing various insurance services as follows:
·                     Life insurance for customer - Aviva Life Insurance Company
·                     Livestock insurance - Royal Sundram Insurance Company
·                     Weather insurance - ICICI Lombard Insurance Company
·                     Crop insurance - Agricultural Insurance Company of India
·                     Health insurance - Royal Sundram Insurance Company

Samruddhi Bank has established; Samruddhi Centre for Livelihood Promotion; for extending Agriculture and Business Development services mainly to its customers. Over 1000 of its customers (largely dairy farmers) are already getting such services. The centre is in process of extending such services to customers with agricultural crops like red-gram, paddy and non-farm micro-enterprises like Kirana shops, vendors, small restaurants etc. The centre will also provide technical services for institutional development for such small groups of producers.

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