ACKNOWLEDGEMENT

This seminar report has been made possible through the direct and indirect Cooperation of various persons, who have inspired me at every step of my work. It is a matter of pride for me to acknowledge my profound gratitude to my respected guide who always facilitates me in gaining practical knowledge. I am very much obliged and thankful to my esteemed Guide MR.JAGDEEP SINGH for his valuable Cooperation and Guidance.

JASPREET KAUR

PREFACE

The report provides an opportunity to a student to demonstrate application of his/her knowledge, skill and competencies required during the technical

session. Report also helps the student to devote his/her skill to analyse the problem to suggest alternative solutions, to evaluate them and to provide feasible recommendations on the provided data. The report is on the topic of VARIOUS LOAN FACILITIES PROVIDED BY PUNJAB STATE CO-OPERATIVE BANK . Although I have tried my level best to prepare this report an error free report every effort has been made to offer the most authenticate position with accuracy.

OBJECTIVES OF THE PROJECT

1) To Study about Loan 2) To Study risks associated with Loan 3) Recommending ways to Reduce the Probability of Defaults & Suggesting Strategies for same

COMPANY PROFILE

The

Punjab

State

Cooperative

Bank

was

established on 31st August, 1949 at Shimla vide registration No. 720 has a principle financing institution of the cooperative movement in Punjab. In 1951 its Head Office was shifted to Jalandhar from where it moved in 1963 to its present building at Chandigarh. In the cooperative Banking structure, the position of the Punjab State Cooperative Bank is extremely important as the whole credit system revolves around it. It has 18 branches and 3 extension counter in Chandigarh. There are 19 District Central Cooperative Banks having 813 branches all over Punjab, mostly in rural areas of the State. One new Central Cooperative Bank and 110 new bank branches have been opened during the last four years, 1997-2001.

Mission:
Promotion and sustainance of economic interest & providing easy finance, cost effective and quality banki

PSCB:
Punjab State Cooperative Bank. Experience a whole new Era of Banking Technology. Where banking is made easier and convenient for our customers. The Punjab State Cooperative Bank provides you with the New Generation banking architecture to progress in the future in an evolutionary manner. Punjab State Cooperative Bank (PSCB) is customer centric. Therefore it is designed to encompass all the constituents of the banking space- the management of the bank, the employees of the bank and the customers of the bank.

Organization Structure
Chairman

Board of Directors

Managing Director

Additional Managing Director (Administration)

Additional

Managing

Director (Banking)

General Manager (O&A)

General Manager (Development )

General Managers (Division Officer at Jalandhar , Bhatinda

Deputy General Manage r (System) Deputy Vigilan ce Officer Establishme nt Officer Liaison Officer ACF A Assistan t General Manage r Deputy Deputy Managers Assistant General Managers Assistant General Managers Deputy General Managers Deputy General Managers

& Amritsar)

Assistant General Managers

Deputy Managers

110 new branches of Cooperative Banks have been opened during the last four years as against 35 opened during 1992-1997. At present, 813 branches of Cooperative Banks are working. The Branch opening policy of the Cooperative Banks is being revamped. It is proposed to consolidate and strengthen existing branches and open new branches only in those areas where it is economically viable to do so. With a view to provide uniform identity to all Central Cooperative Banks and their branches, sign boards of all the branches, their building designs i.e. exterior as well as interior, have been designed on the same pattern. The branches of the bank are being renovated and designed to update and modernize their facilities. 74 branches have been shifted to new suitable places upto 31.1.2001 and 3 branches have constructed their own buildings. Telephone facility has been provided in 623 branches. The Punjab State Cooperative Bank has constructed a new building at Sector 34 at a cost of Rs. 8.96 crore. This building is spread over 13 bays and has 5 storeys. It is centrally air-conditioned. All the modern amenities have been provided in the building. The Chief Minister, Punjab inaugurated the new building on 19.11.2000.

ACHIEVEMENTS AND AWARDS Deposits

The deposits of Central Cooperative Banks have touched Rs.2759.80 crore as on 31.12.2000, showing an increase of Rs.326.26 crore over the last year upto this date. The deposits of the State Coop. Bank have increased from Rs.810.00 crore as on 31.3.2000 to Rs.844.18 croreupto 31.12.2000, showing a net increase of Rs.34.18 crore

Advances
Agricultural advances Short Term Agricultural advances: During the year 2000-2001, the Punjab State Cooperative Bank has advanced loans of Rs.1950.49 crore up to 31.12..2000 against the target of Rs.1550.00 crore for financing agro-inputs for crop production.

Medium Term Agricultural advances:

The Central Cooperative Banks have advanced Rs.6.80 crore as Medium-term Agricultural advances in the State upto 31.10.2000. This loan is given to farmers for undertaking activities allied to agriculture

Loans for consumer durables to salary earners With a view to provide credit facilities to their customers, the Cooperative Banks introduced a scheme of loans for purchase of consumer durables. Under the scheme, every Government/semi-Government employee is provided loan upto Rs.50000/- repayable in 3-5 years in easy monthly installments. The loan can be utilized for purchase of TV, Refrigerator, Scooter, Furniture etc. A significant

section of the salaried class has benefited from the scheme. More than Rs.121 crorehave been advanced under the scheme upto 28-2-2001. The Punjab State Cooperative Bank has been awarded First Prize for its execlent performance for the year 1997-98 by NABARD, in All India ranking under the best performance awards scheme. The Fazilka Central Cooperative Bank and the Nawanshahr Central Cooperative Bank have also been adjudged as the best central cooperative banks in India for the years 1997-98 and 1998-99 respectively

Loan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.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. The loan is generally provided at a cost, referred to as interest on the debt, which provides an incentive for the lender to engage in the loan. In a legal loan, each of these obligations and restrictions is enforced by contract, which can also place the borrower under additional restrictions known as loan covenants. Although this article focuses on monetary loans, in practice any material object might be lent. 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.

Loan Schemes of PSCB

Special Settlement Scheme-2000 - This scheme provides opportunity for the customers who have not settled their payments for more than 5 years. This scheme also provides opportunity to defaulters by encouraging and assisting them to clear their dues with the bank. Objectives

Opportunity to borrower defaulters for more than five years to clear. Opportunity to clear Non Performing Assets (NPA) Reduction in cost and time for recovery. To encourage and assist genuine defaulters. To facilitate mutually accepted reconciliation and settlement of dormant loan accounts.

To provide Buy Back facility for decreed property. Defaulters for short, medium and long term loans for more than five years. Defaulters for medium term loans for purchase of assets for more than five years.

Defaulters for consumption loan to weaker section for more than five years.

Members/Ex-employees involved in embezzlements. Members whose land has been purchased. Short term loans converted into medium term loan due to natural calamities.

Duration & Eligibility Duration: The special settlement scheme is valid from 1st February to June 2001. Eligibility: All overdue cases for more than five years in case of CCBS/PACS and six years in case of PADBS as on 31.01.2000 even if arbitration, awards have been obtained and execution of proceedings have been initiated. OperationalGuidelines

Preparation and submission of list of eligible borrowers to block and District Level Review Comities.

Eligible borrowers or legal heirs (in case of death) can apply on prescribed form for the scheme.

After review block level, Default Review Comities (BLRC) recommends to District Level Default Review Committee (DLRC)

After hearing the applicant DLRC recommends the case. DLRC recommends to Provisional Authority (RA) and copy to applicant. BLRC would meet on every 1st and 3rd Tuesday whereas DLRC would meet on 2nd and 4th Monday.

RA after considering the recommendations of DLRC and facts, pass specific order of settlement amount and amount to be written off.

RA should seek a proof of payment of settlement amount before passing final order.

CCB/PSCB would debit the difference amount as per RA's order without further sanctions from RCS and also liquidate outstanding amount from records.

The above procedure shall be followed for buy back facility of land purchased by the PACS/CCBS/PADBS, no relief of interest to the farmers under buy back facility.

The above procedure shall be followed for embezzlement cases even after taking legal measures for cases older than six years.

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Relief
DLRC, on merits, decide about the charging of simple interest from date of account turned bad, provided that:

Amount reclaimed shall not be less than the principal amount plus 100% there of.

Amount received is principal amount plus 50% where the borrower has no asset or source of income.

In case of buy back facility, the original owner shall pay the total outstanding amount.

Any other action initiated earlier under IPC shall continue unabated, also the proceedings under the scheme shall not be prejudiced to on longing legal proceedings.

The amount of net loss to PACs/CCBs/PADBs shall be charged to reserve for Bad Doubtful Debts available with CCBs PADBs. There are no such reserves with PACs.

Revolving Cash Credit

In 1998, the cooperative banks launched a new scheme of revolving cash credit for the farmers. The scheme envisages to provide Cash credit limit to the farmers against the mortgage of their land for all credit requirements of the farmers. It aims at freeing them from the clutches of traditional money lenders. A cash credit limit of Rs.1,50,000/- is sanctioned to farmers having 5 acres of land and Rs.3 lacs for those having 10 acres of land. So far Rs.655.00 croreshave been sanctioned under the scheme. The scheme has been evaluated by experts from the department of economics and sociology, PAU, Ludhiana Key Observations

The recovery under the scheme has been excellent and more than 70% of the credit availed under the scheme has been spent for productive purposes, whereas remaining was provided for consumption and other purposes.
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Nabard should has no hesitation in providing refinance facility for the scheme.

The scheme has so far covered medium and large farmers and it should be extended to cover small and marginal farmers as well.

The rate of interest on credit facility under the scheme should be reduced

LOAN ACCOUNT TRANSACTIONS

PROCEDURES FOR AVAILING LOAN The appraisal officer attends to the queries of a prospective borrower. Various details. E.g., eligibility at alare discussed during this meeting.

Collect the application form, which is generally available at the reception counter.

After collecting the form the processing fees, which is about 1% of the loan amount is received. The fees arenon-refundable. Generally the applicant is asked to pay the fees only if the chances of theloan getting sanctioned are really good as per the Officer's analysis. But PSCB do not charge any such fees.

The date of the personal interview is fixed up as per mutual convenience. The appraisal Officer conducts the interview.

The Appraisal Officer prepares the file and discusses the case with the Branch Manager. The Branch Manager should substantiate recommendations of the Appraisal Officer. The file is then recommended for sanctioning by the competent authority.

The competent authority concerned sanctions the loan proposal. In case there aresome queries, the same have to answer by the Appraisal Officer to the satisfactionof the sanctioning authority.
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If approved, you collect the Loan Offer letter. You fill Property Details form and Acceptance Note and sign the same. This signifies your acceptance of the proposal. Then, you are required to collect the disbursement within a month of the acceptance of the offer letter.

The file is then transferred to the Legal department. You submit the legal documents to the Legal Officer. The Loan Agreement and the other documents are signed. The Legal Officer then prepares the Legal report after studying the legal documents in depth.

The Disbursement Memo is prepared and is signed by the Appraisal, Legal and countersigned by the Branch Manager.

The PEMI cheque of the amount disbursed is collected before releasing the disbursement amount cheque. PEMI is the interest charged on the amount already disbursed by the company.

Consequent to the final disbursement of the EMI starts which amortizes the interest and adjust the principle for the tenure allotted.

The documents mortgaged are released on closure of loan.

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DIFFERENT TYPES OF LOAN PROVIDED BY PUNJAB STATE CO-OP BANK

There are 5 types of loan provided by PSCB: 1) CONSUMER LOAN (UNSECURED LOAN) 2) CAR LOAN (SECURED LOAN) 3) PERSONAL LOAN (UNSECURED LOAN 4) EDUCATION LOAN (SECURED LOAN) 5) HOUSE BUILDING LOAN (SECURED LOAN)

UNSECURED LOAN: An unsecured bank loan is a type of financing that is granted to a borrower without collateral. Collateral can be in the form of real estate, an automobile, jewelry or anything that the lender qualifies as security. An unsecured bank loan is often approved for a smaller amount compared to secured loans because the risk of default is higher on financial agreements that do not have collateral associated with them. They may have higher interest and fees associated with them because the lender is taking a risk since there is no way to guarantee the loan. The credit requirements may vary depending upon the lender. Different types of unsecured loans include a line of credit tied to one's checking account, personal loans, payday loans, and emergency cash advances. Unsecured Loansalso called, also called signature loans or personal loans.An unsecured loan means the lender relies on your promise to pay it back. They're taking a bigger risk than with a secured loan, so interest rates for unsecured loans tend to be higher.

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What Does Collateral Mean?

Properties or assets that are offered to secure a loan or other credit. Collateral becomes subject to seizure on default. In lending agreements, collateral is a borrower's pledge of specific property to a lender, to secure repayment of a loan. The collateral serves as protection for a lender against a borrower's default- that is, any borrower failing to pay the principal and interest under the terms of a loan obligation. If a borrower does default on a loan (due to insolvency or other event), that borrower forfeits (gives up) the property pledged as collateral - and the lender then becomes the owner of the collateral.

Secured loan:Secured loans are those loans that are protected by an asset or collateral of some sort. The item purchased, such as a home or a car, can be used as collateral, and a lien can be placed on such purchases. The finance company or bank will hold the deed or title until the loan has been paid in full, including interest and all applicable fees. Other items such as stocks, bonds, or personal property can be put up to secure a loan as well. Secured loans are usually the best way to obtain large amounts of money quickly. A lender is not likely to loan a large amount without more than your word that the money will be repaid. Putting your home or other property on the line is a fairly safe guarantee that you will do everything in your power to repay the loan.

Demand loan
Demand loans are short term loans
[1]

that are atypical in that they do not have

fixed dates for repayment and carry a floating interest rate which varies according to the prime rate. They can be "called" for repayment by the lending institution at any time. Demand loans may be unsecured or secured.

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Subsidized loan
A subsidized loan is a loan on which the interest is reduced by an explicit or hidden subsidy. In the context of college loans in the United States, it refers to a loan on which no interest is accrued while a student remains enrolled in education.[2] Otherwise, it may refer to a loan on which an artificially low rate of interest (or none at all) is charged to the borrower. An unsubsidized loan is a loan that gains interest at a market rate from the date of disbursement

CONSUMER LOAN (UNSECURED LOAN)

The Rate of Interest charged is : For Gents 14 % For Ladies 13.5 % Any Individual with a monthly income of minimum Rs.5000/- can avail consumer loan. New consumer durable such as Refrigerator, Television, Air conditioner, Micro- oven, Cooking Range, Washing Machine, Music System, Furniture, Personal Computer, etc. can be financed by PSCB. The total amount of loan is 80% of the cost of consumer durable, subject to maximum of Rs.1 lac. However, the minimum amount of loan shall be Rs.I0000/-. Amount of loan together with Interest shall be repayable maximum in 60 equal monthly installments. Interest is charged on reducing balances. Formalities which are to be completed for availing the facilityPerforma Invoice of consumer durable(s) to be purchased.

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Details required for availing the loan:

Proof of residence Proof of Income Details of guarantor Return copy

CARLOAN (SECURED LOAN)

The Rate of Interest charged is : For Gents 11 % For Ladies 10.5 % Individuals and Business Concerns can avail car loan. Finance is also available for purchase of used cars not older than 3 years. The amount of Loan can avail from PSCB :

For individuals, loan amount shall be 25 times the Net Monthly Salary /Income, subject to maximum of Rs10.00 lac or 75% of the cost of the

vehicle whichever is less. The income of the spouse can also be taken into account for determining the amount of loan. In such cases, the spouse shall stand a guarantor. The repayment period for loan together with interest shall be repayable maximum in 60 equal monthly installments. However, for old car, loan together with interest is to be repaid maximum in 60 equal monthly installments. Formalities which are to be completed for availing the facility : 17

 Performa Invoice of Car to be Purchased Proof of residence Proof of Income Details of guarantor Return Copy

PERSONAL LOAN (UNSECURED LOAN)

The Rate of Interest charged is : For Gents 14 % For Ladies 13.5 % The Repayment period for the term loan will be in equal monthly installment within the following period :- Loan up to Rs 200000/ - 60 Months. The maximum limit of loan is 2 lacs.

EDUCATION LOAN
The Rate of Interest charged is : For Gents 9 % For Ladies 8.5 % Education loans are given for pursuing all types of education viz. general, Professional, technical and vocational courses. The costs which are financed under this scheme enables the needy students to meet the following costs for studies in India as well as abroad: admission fees, books & stationery, instruments required for the course, monthly fees, examination fees, insurance premium for policy on life of
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the borrowing student, caution deposit/ building fund/refundable deposit supported by bills/ receipts, expenses like study tours/ project work/ thesis etc. required to complete the course. Following is the eligibility criteria for getting loan under the scheme: Indian nationals, in the age group of 16-40 years. Students who have scored pass marks in their last qualifying examination and have secured admission in the courses mentioned above. The parents/ guardian should have regular source of income to the extent that they are able to repay the loan in case of need/ unforeseen circumstances. The amount of loan one can avail from PSCB is co-related to expenses involved in taking up the course and the expected earnings after qualifying, subject to a maximum of 5 lacs in India and 10 lacs in abroad

HOUSE BUILDING LOAN (SECURED LOAN)

The Rate of Interest charged is : For Gents 10 % For Ladies - 9.5 % The Maximum Period for allowing loan is up to 15 years. The documents required for availing facility are : Proof of residence Proof of Income Details of guarantor Return Copy Account Statement

The maximum House Building loan provided by PSCB is 20 lacs.

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Some other types of loans

Poor Credit Loan
A poor credit loan can give you the money you need without a lot of hassle. Many people are used to getting a loan that takes a great deal of time and effort to achieve. You can get a loan with bad credit fast and this is something that many people do not know about.

Turning to an online resource for a loan can give you the right resources for even the worst credit rating. When you go online to find a loan with poor credit, you will have a great deal of lenders to choose from. This can help you to get to know each lender and what they have to offer.

Knowing your interest rates can be very important to helping you find a loan with an interest rate that you can afford. A poor credit loan can be very easy to obtain and this can help you in a variety of situations where you need quick cash.

How can get a Loan even with Poor Credit ?

If you need to get a loan there are some great ways that you can do this fast. You do not have to fill out a ton of paperwork only to get denied through a bank. Using your own computer can provide you with access to many lenders to help you get the loan that you need. You can get a loan online and this will give you a way to get money without leaving your home. You can often get this money very quickly and this may be exactly what you need to help you with any financial obligation you have in your life. When you get a loan online this process can be very easy. If you have a verifiable job and bank account you may have all of the right tools to help you get the money you need. You can explore terms and choose the right loan for your personal need.
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Payday Loan Lenders

The requirements of payday loan lenders will vary depending on which lender you want to do business with. There are some ways that you can begin comparing each loan that you are seeking out and this can help you to get terms you are satisfied with. Instead of seeking out just one lender, it can be more informative to look for several lenders to compare. When you compare you will be able to find the best loan for your needs. You will not have to settle for any loan that you are not completely satisfied with when you explore several lenders ahead of time. Payday loan lenders can vary and you should always make sure that you seek out more than one lender to make a more informed decision. This can help you to get the money you need with terms you will be happy with now and in the future.

Small Personal Loans For Everyday Needs

If you are exploring small personal loans, you may not know where to begin seeking out this type of loan. Going online and looking for lenders can be one of the easiest ways to find a lender for a small loan. When you are seeking out a small loan online you will have instant access to many lenders. This can give you the option to compare lenders and terms to find what is best for your needs. If you have bad credit, you can find a loan online that does not require the use of your credit history in order to obtain. Small personal loans can be used for a variety of reasons. Seeking out this loan online can give you the right tools to help you find the money you need and this process can happen very quickly. This will allow you to get the money you need for any reason and you can go on w ith your life much faster. The Benefits of Quick Loans Quick loans do exist and this can help anyone that needs some extra cash. Many people think that their credit score will stand in the way of getting money. This is not the case and there are loans that you can apply for without using your credit.
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When you apply for an online loan you will want to make sure that you understand the qualifications of this type of loan. You will want to make sure that you have proof of employment. This is often a qualification of a quick loan. Your bank account is something else that you may need to show proof of and this is something you will want to be prepare for.

When you get quick loans you will not have to worry about your credit score holding you back. Even bad credit will not prevent you from getting a loan from the right lender.

Online Loans
Online loans can provide you with an easy way to get the money that you need. This is often a very quick way to get money and you can get some help until you get to your next paycheck.

When you are first thinking about getting an online loan you need to be very proactive. You should never agree to a loan where you do not know the terms. It will be your responsibility to learn more about this loan and then you can decide if you want to proceed forward.

You want to also consider what you are going to use this money for. If you are trying to pay off another loan, this is not a good idea and something you may want to reconsider, but if you are using this to help you get by until you make more money, this can be a great time to take advantage of online loans.

Target markets
Personal or commercial Loans can also be subcategorized according to whether the debtor is an individual person (consumer) or a business. Common personal loans include mortgage loans, car loans, home equity lines of credit, credit cards, installment loans and payday loans. The credit score of the borrower is a major component in and underwriting and interest rates (APR) of these loans. The monthly payments of personal loans
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can be decreased by selecting longer payment terms, but overall interest paid increases as well. For car loans in the U.S., the average term was about 60 months in 2009.[3] Loans to businesses are similar to the above, but also include commercial mortgages and corporate bonds. Underwriting is not based upon credit score but rather credit rating.

Abuses in lending
Predatory lending is one form of abuse in the granting of loans. It usually involves granting a loan in order to put the borrower in a position that one can gain advantage over him or her. Where the moneylender is not authorized, they could be considered a loan shark. Usury is a different form of abuse, where the lender charges excessive interest. In different time periods and cultures the acceptable interest rate has varied, from no interest at all to unlimited interest rates. Credit card companies in some countries have been accused by consumer organisations of lending at usurious interest rates and making money out of frivolous "extra charges". Abuses can also take place in the form of the customer abusing the lender by not repaying the loan or with intent to defraud the lender.

United States taxes

Most of the basic rules governing how loans are handled for tax purposes in the United States are codified by both Congress (the Internal Revenue Code) and the Treasury Department (Treasury Regulations another set of rules that interpret the Internal Revenue Code).Yet such rules are universally accepted: 1. A loan is not gross income to the borrower. Since the borrower has the obligation to repay the loan, the borrower has no accession to wealth.
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2. The lender may not deduct (from own gross income) the amount of the loan. The rationale here is that one asset (the cash) has been converted into a different asset (a promise of repayment). Deductions are not typically available when an outlay serves to create a new or different asset. 3. The amount paid to satisfy the loan obligation is not deductible (from own gross income) by the borrower. 4. Repayment of the loan is not gross income to the lender. In effect, the promise of repayment is converted back to cash, with no accession to wealth by the lender. 5. Interest paid to the lender is included in the lenders gross income. Interest paid represents compensation for the use of the lenders money or property and thus represents profit or an accession to wealth to the lender. Interest income can be attributed to lenders even if the lender doesnt charge a minimum amount of interest. 6. Interest paid to the lender may be deductible by the borrower. In general, interest paid in connection with the borrowers business activity is deductible, while interest paid on personal loans are not deductible. The major exception here is interest paid on a home mortgage.

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Credit Risk Management

Credit Risk As observed by RBI, Credit Risk is the major component of risk management system and this should receive special attention of the Top Management of a bank. Credit risk is the important dimension of various risks inherent in a credit proposal, as it involves default of the principal itself. Credit risk may arise due to internal -meaning faulty appraisal, inadequate monitoring, unwillingness on the part of borrower to honor commitments despite being capable or external factors such as government policies, industry related changes.

Credit risk is the risk of financial loss owing to the failure of the counterparty to perform its contractual obligations. Lack of diversification of credit risk has been the primary reason for many bank failures. Banks have a comparative advantage in making loans to entities with whom they have an ongoing relationship. Credit risk is more difficult to quantify than market risk. Default probabilities are difficult to assess because of the infrequency of defaults. Credit risk has effectively three components: Default risk The risk of default by the counterparty and is measured by the probability of default. Credit exposure risk The risk of fluctuations in the market value of the claim on the counterparty. Recovery risk Uncertainty in the fraction of the claim recovered after default. Thus Credit risk deals with the combined effect of market, default and recovery risks.
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Risks of Bank Loans

There are many risks associated with bank loans, both for the bank and for those who receive the loans. A close analysis of risk in bank loans requires understanding what risk means. Risk is a concept which denotes the probability of certain outcomes--or the uncertainty of them--especially an existing negative threat for trying to achieve a current monetary objective. Risk in bank loans can include: credit risk, the risk that the loan won't be paid back on time or at all; interest rate risk, the risk that the interest rates priced on bank loans will be too low to earn the bank enough money; and liquidity risk, the risk that too many deposits will be withdrawn too quickly, leaving the bank short on immediate cash. Risk and Return Much of the economy can be characterized by a trade-off between risk and return. There are risks associated with all actions. "Risk" here means the chance that your investment, your time, effort or money, will go wasted rather than be used productively. Banking Risks When a banker makes a loan, he is taking a risk that the borrower will pay the loan back (credit risk), and also taking the risk that the funds loaned out won't be needed to pay out withdrawals or to take care of regular bank business, thereby preventing bank runs (liquidity risk). Further, the banker is undertaking "interest rate risk," which is more subtle but still present. Interest rate risk represents the possibility that the bank has somehow priced its loan and deposit interest rates incorrectly, be it the bank's fault or the fault of an ever-changing marketplace. If it turns out that the loan payments aren't high enough to cover deposit costs (or, if the bank's profit on loans is less than its losses on deposits), the bank will fail to be profitable.

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Depositor's Risks Depositors to banks have their own sets of risks. Most significantly, the depositor is worried about credit risk--if the bank fails, the depositor wonders if he will be able to get back the money he put in. However, depositors don't really have a comparable number of risks as bankers, because safeguards are in place. Borrower's Risks Risks are relative to each person, so it is hardly surprising that the borrower has his own sets of risks that he cares about. Firstly, the borrower got a loan for a reason. The biggest risk for a borrower, then, is that something will go wrong with the investment and he won't be able to pay back the loan.

Criminal under Indian Terminal Forum:-A person should not be declared as criminal under ITF. If a loan is provided to such type of person, the chances of risk will be huge as such person can make fraud at any time with the bank.

Wrong Intention:- Some persons apply loan with wrong intentions, in these cases the chances of risk for the bank is more.

Improper use of loan:- When a person apply for a loan, care must be taken that the loan provided to the applicant must be used in a proper way. Risk creates for the bank when a person uses the loan in some other activities against his requirement as sanctioned by the bank.

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WAYS & STRATEGIES FOR REDUCING RISK:-

FINANCIAL INVESTIGATION:-According to my opinion, the bank must investigate the financial position of the applicant while sanctioning a loan. The amount of mortgage should be such that the bank should recover the loan in case of discrepancy occurs during the tenure of the loan. To review the structured finance product activities, identify any violations of law and examine ways to strengthen existing regulatory prohibitions against abusive practices. For example, Sanctioning loan without any financial investigation dragged the US economy into the recession. Banking system should avoid repeat of those events which were responsible for the US recession.

KYC- KNOW YOUR CUSTOMER:-The adoption of effective know-yourcustomer (KYC) standards is an essential part of banks' risk management practices. Banks with inadequate KYC risk management programmes may be subject to significant risks, especially legal and reputational risk. Sound KYC policies and procedures not only contribute to a bank's overall safety and soundness, they also protect the integrity of the banking system by reducing the likelihood of banks becoming vehicles for money laundering, terrorist financing and other unlawful activities. Recent initiatives to reinforce actions against terrorism in particular have underlined the importance of banks' ability to monitor their customers wherever they conduct business.

FIELD INVESTIGATION:-After receipt of the application the field investigation agency should carry out basic address, job and individual verification regarding the applicant. It will help in reducing various types of frauds such as :
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Fake PAN cards the name may be genuine, but another individuals photograph is used.

Presenting proofs of non-existent residences or businesses Incorrect details like wrong contact details, improper qualification, salary figures and work experience.

Tie-up with insurance company:-The bank should tie-up with some good reputed insurance company so that the chances of risk can be reduced. The banks who have tied-up with insurance companies are operationally feasible and at the same time the risk related to borrowers is reduced i.e. if in case the borrower becomes defaulter then the insurance company pays the balance amount to the concerned bank.

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SWOT ANALYSIS

STRENGTHS

Brand name of Punjab State co-op bank is established over the years. Single window clearance - a single employee provides wide variety of facilities to the borrower, minimizing the hassle of wastage of time. Specialized software's are big assets. There is no penalty for prepayment from borrowers own service.

WEAKNESSES

Top management takes large amount of time to approve high value seeking loan borrowers.

People are not aware of wide variety of schemes offered by the company; tend to think the company as only providing housing and consumer loans

OPPORTUNITIES Special rates of interest are offered during exhibitions.

Special rates of interest can be introduced for employees of PSU'S & Reputed national or multinational companies'

THREATS The competition in market is very high due to the private players Innovative schemes with Horne loan from other players.

The processing process is quite slow which leads to low housing finance
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Comparison of PSCB with ICICI bank and PNB bank

Attributes

PSCB

ICICI Bank,

Punjab National Bank

Car loan, House Building Types of loans loan,

Home

Loan,

Car loan, Vehicle loan,

loan, Personal loan, Personal

Consumer loan, Personal loan,

Commercial vehicle Consumer goods loan, Education loan, Loan against loan, Personal loan, Loan against property, loan Education property

Education loan

Eligibility

Car House

loan-11%, building Home loan-10.25%, Car loan-11%, Personal loan-15.05%, Vehicle loan-16%, loan-12%, Education loan-

loan-10%, Rate of Interest

Consumer loan- Personal 14%, Personal Loan

against 12.25%, Home loan-9.25%, Loan against property-13.75%

loan-14%,

property-9.50%,

Education loan- Education loan-13% 9%

Emi Payments

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Mode of Transactions

Formalities

Less formalities are required

More

Less

Flexibility

Ease in Sanction

Amount of Sanction

Up to 20 lacs

Bank type

Nationalized

Private

Nationalized

Tagline

Committed to development

" Hum Hai Na

The name you can bank upon

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BIBLIOGRAPHY

http://pbcooperatives.gov.in/PSCB.htm www.google.com

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