University of Lucknow

Internship report on:

Study of Potential & market share in car loans at lucknow centre and strategies to improve their share in it.

Name of the student: Arpita Srivastava

Project mentor: Ms. Saumya Lahiri At the bank: State Bank of India (Munshipuliya , Lucknow)

APRIL_2013 to JUNE_2013

Acknowledgement

Table of CONTENTS

Early history of banks

Banking industry in India
The banking history of India can be divided into two major categories Pre- independence banking history Post-independence banking history

Pre-independence banking history

The origin of modern banking in India starts way back in the 18th century with the establishment of the Bank of Hindhustan in the year 1779 at Calcutta (currently known as Kolkata) under the European Management. Bank of Hindhustan was the first formal bank to be established in India. The banking concept in India was introduced by the Europeans, but for their own benefit and therefore another bank named general bank was setup. On 2nd june, 1806 the bank of Calcutta was established in Kolkata (formerly known as Calcutta). This was the first presidency bank to be established in India under the British raj. Bank of Calcutta was majorly established to fund General Wellesleys wars against Maharashtra and Tipu Sultan. Thus it did not fulfill any public needs. On 2nd January 1809, Bank of Calcutta was renamed as Bank of Bengal. Following this two other banks namely bank of Bombay and bank of madras were established on 15th April 1840 in Mumbai (formerly known as Bombay) and 1st July 1843 in Chennai ( formerly known as Madras) respectively. The two were also established under the British raj. The oldest private sector bank to be established in India was the Allahabad Bank which is still working today. This bank was established in the year 1865. This bank is still working successfully in India for over 145 years. Calcutta was supposed to be the most active trading port in India. Hence whatever financial activities took place in India had its roots in Calcutta and from there they branched out to other parts of the countries. But then in 1895 Punjab national bank was established in Lahore in Punjab province (India was not divided by then). This bank was the first to be wholly managed by Indians. This bank is still running successfully and is the second largest bank in India. The first bank which was wholly owned and managed by Indians is the central bank of india. This bank captured the swadeshi movement of the country then. This bank was the first commercial bank of india.

A number of banks established between 1906 to 1918. Some survive till date while other were unable to bear the economic crisis of the World War I and collapsed. And then in the year 1934, on the recommendation of Hilton-young commission the reserve bank act was passed. The reserve bank was established on 1st april, 1935, with an initial share capital worth 5crore with share dividend on 5lakh rs.100 share dividend. It was largely an evolutionary development spanning through a period from 1770 to 1935. But, the initial impetus behind establishment of the first government-sponsored bank in Europe generally related to financial advantages. Governments felt that they could obtain from support of such bank. There was no intention that they would undertake the functions of a modern central bank, which included discretionary monetary management on the one hand and regulation and support of the banking system on the other.
http://www.igidr.ac.in/money/mfc_08/Concept%20of%20Deregulation...KV%20Bhanu%20Murthy%20& %20Ashish%20Tatu%20Deb.pdf http://www.bankingawareness.com/banking-gk/pre-independence-banking-history-in-india/

Post- independence history of Indian banking industry

Immediately after the independence, the partition of India in 1947adversely affected the economies of Punjab and west-bengal by paralyzing banking activities for months.
http://www.bankingawareness.com/banking-gk/banking-history-in-india-post-independence-bankinghistory/

http://www.uptransport.org/AnnualReport2012-13.pdf

Loan
A loan is a kind of debt which is secured by some kind of a promissory note which is includes the principal amount of the loan, interest to be paid and the date of repayment. Definition: The act of giving money, property or other material goods to another party in exchange for future repayment of the principal amount along with interest or other finance charges. A loan may be for a specific, one-time amount or can be available as open-ended credit up to a specified ceiling amount.
( )

The terms of a standardized loan are formally presented (usually in writing) to each party in the transaction before any money or property changes hands. If a lender requires any collateral, this will be stipulated in the loan documents as well. Most loans also have legal stipulations regarding the maximum amount of interest that can be charged, as well as other covenants such as the length of time before repayment is required. Loans can come from individuals, corporations, financial institutions and governments. They are a way to grow the overall money supply in an economy as well as open up competition, introduce new products and expand business operations. Loans are a primary source of revenue for many financial institutions such as banks, as well as some retailers through the use of credit facilities. In a loan, the borrower initially receives or borrows an amount of money, called the principal, from the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later time. Typically, the money is paid back in regular installments, or partial repayments; in an annuity, each installment is the same amount. This same amount of instalment is popularly known as EMI (equal monthly installment).

Car loan

Car loan by SBI

History

Features:
The car loan from SBI has the following characteristics1) 2) 3) 4) The borrower need not pay any advance EMI of his/her loan. The repayment period may extent up to a span of 7 years. SBI charges the lowest rates of interest compared to its competitors which is 10.45% It has the highest LTV ( ) of 85% of the cost of the car inclusive of its insurance, registration, and cost of accessories not exceeding an amount of rs. 25000. 5) SBI also provides flexibility to the borrower for payment of the EMI anytime of the month. No specific date is allotted for repayment failure to which adds up interest to the borrowed amount. 6) Also, SBI makes no charges against pre-payment of loan. The customer is entitled to pay the entire amount and close his/her loans account anytime during the repayment period. The bank will not charge any extra amount for it. 7) SBI also provides free accidental insurance of *.. . The borrower can also opt for SBI life cover. 8) SBI also provides overdraft facility to every borrower. Under the overdraft facility the bank provides customer with the advantage of even withdrawing the amount deposited in the loan amount. This facility is of significance to the business people who may be in need of money urgently. 9) The interest is calculated on the loan amount on daily reducing balance basis rather on monthly basis. 10) Also if the borrower is unable to pay any due amount and for that there is no pre-payment of penalty.

Purpose
The purpose of such kind of loan is financing of MUVs (multi utility vehicle) and SUVs (single utility vehicle).

MUVs are vehicles that are used for purpose other than personal use e.g. for business purposes . SUVs are vehicles used for personal use. such vehicles are not intended for the purpose of business like, carriage, freight etc.

Eligibility
to avail a loan from SBI it is important for the borrower to fulfill minimum eligibility criteria. 1) The age of the borrower should be between 21-65 years. Any individual whos age does not fall in this limit is not eligible for loaning. 2) Only a government central/state government, Public Service Undertaking, private company, or employee from some reputed establishment is eligible to take a loan. This is done to know the authenticity of the employee and his/her ability to pay back the borrowed amount. 3) If a person is self employed, a businessman, a proprietary/partnership, he/she should necessarily be an income tax assessee. Such peoples 2 years ITR (Income Tax Return file) is necessarily required. 4) People engaged in agricultural and allied activities can also apply for a car loan from SBI. 5) The borrowers net annual income should be at least more than Rs.2,50,000.

Loan amount
There is no upper limit for a car loan at SBbut yet the loan amount cannot exceed 48 times of the net monthly income or 4 times of the net annual income of the borrower. This is because the EMI cannot exceed 50% of the borrowers monthly income and the loan cannot exceed more than for 7 years. Any borrower who is need of a loan cannot apply for a loan of amount less than rs.100,000. The minimum EMI which the borrower pays to the bank is on an amount of 100,000 for 7years at the rate of 10.45 which amounts approx. 1683.

Documents required while applying for an SBI loan

. For different section of people different documents are required to be submitted by the borrower to SBI. For employees of SBI: For other government/PSU: Froe private company or reputed establishment: For any income tax assessee:
http://www.scribd.com/doc/117412312/vehicle-loan-project http://www.docstoc.com/docs/105305335/Arab-Bangladesh-Bank-Internship-Report