SUMMER INTERNSHIP REPORT 2010

Topic: To Study Microfinance Product In Rural Varanasi.

Submitted to: Submitted by:

Bhavana
Chief Manager, MBA(Agribusiness)
Sonarpura Branch, 3rd Sem,
Bank of India, FMS, BHU
Varanas

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INDEX

1 Acknowledgement

2 Introduction
 What is microfinance
 Need of microfinance
 Features of microfinance
 Initiatives of Govt of India
 Sources of rural credit
 Different modeos of microfinance

3 Objective-1
To study microfinance product in rural Varanasi

4 Objective-2
To compare position of Bank of India with other banks regarding the distribution of
microfinance product in rural Varanasi region.

5 OBJECTIVE 3
To evaluate profile of customers taken loan from Bank of India under various schemes.

6 OBJECTIVE 4
To study position of Varanasi in UP under microfinance.

7 Problems faced by Bank of India in lending Microfinace in varanasi

8 Suggestions

10 Bibliography

11Questionare

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Acknowledgement

I convey my sincere gratitude to Prof.S.K.Singh (Head & Dean), Faculty of management studies,
B.H.U for providing me an opportunity to undergo this summer internship project. I am also
grateful to Dr. HP Mathur, Assistant professor, faculty of management studies, BHU,
Varanasi,for her consistent support and care.

I would like to express my sincere thanks to Mr.Rajeev Sexena Zonal Manager Bank Of India
Varanasi for giving me a chance to do my summer internship project in BANK OF INDIA
VARANASI. It was their sincere permission due to which I became to perform to such a
challenging project.
I am highly obliged to Mr. Rajdan, Chief manager, Sonarpura branch, BANK OF INDIA. For
providing me his valuable guidelines, support and for providing me an opportunity to undertake
this project. This project was a great opportunity for me to get a first hand experience of
professional culture that exists in an organization, about the market conditions that exists for these
products and qualities required to work under various conditions.
My gratitude also goes to Mr. Vivek Sharma for their valuable suggestions. I would also like to
thank all the members of Phoolpur, Tela, Kuhar, Musafirkhana, Latthudin, Jamui, Sukaha branch
for their support and generous cooperation.
I can’t forget expressing my thanks to all the respondents, because without their help my project
will remain incomplete.
The organizational culture of BANK OF INDIA changes a person on philosophical, psychological
and analytical levels. I came out of BANK OF INDIA a better person because of the learning that
I have gathered from these precious guides. Family and friends have always been a source of
incessant motivation during my project work; hence they are beyond words of thanks.

BHAVANA
MBA (AGRI-BUSINESS)
III-SEM , FMS, BHU

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Banking sector in India
Banking in India originated in the first decade of 18th century with The General Bank of India
coming into existence in 1786. This was followed by Bank of Hindustan. Both these banks are
now defunct. The oldest bank in existence in India is the State Bank of India being established as
"The Bank of Bengal" in Calcutta in June 1806. A couple of decades later, foreign banks like
Credit Lyonnais started their Calcutta operations in the 1850s. At that point of time, Calcutta was
the most active trading port, mainly due to the trade of the British Empire, and due to which
banking activity took roots there and prospered. The first fully Indian owned bank was the
Allahabad Bank, which was established in 1865.

By the 1900s, the market expanded with the establishment of banks such as Punjab National Bank,
in 1895 in Lahore and Bank of India, in 1906, in Mumbai - both of which were founded under
private ownership. The Reserve Bank of India formally took on the responsibility of regulating the
Indian banking sector from 1935. After India's independence in 1947, the Reserve Bank was
nationalized and given broader powers.

Early history

At the end of late-18th century, there were hardly any bank in India in the modern sense of the
term. At the time of the American Civil War, a void was created as the supply of cotton to
Lancashire stopped from the Americas. Some banks were opened at that time which functioned as
entities to finance industry, including speculative trades in cotton. With large exposure to
speculative ventures, most of the banks opened in India during that period could not survive and
failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently,
banking in India remained the exclusive domain of Europeans for next several decades until the
beginning of the 20th century.

The Bank of Bengal, which later became the State Bank of India.

At the beginning of the 20th century, Indian economy was passing through a relative period of
stability. Around five decades have elapsed since the India's First war of Independence, and the

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social, industrial and other infrastructure have developed. At that time there were very small banks
operated by Indians, and most of them were owned and operated by particular communities. The
banking in India was controlled and dominated by the presidency banks, namely, the Bank of
Bombay, the Bank of Bengal, and the Bank of Madras - which later on merged to form the
Imperial Bank of India, and Imperial Bank of India, upon India's independence, was renamed the
State Bank of India. There were also some exchange banks, as also a number of Indian joint stock
banks. All these banks operated in different segments of the economy. The presidency banks were
like the central banks and discharged most of the functions of central banks. They were
established under charters from the British East India Company. The exchange banks, mostly
owned by the Europeans, concentrated on financing of foreign trade. Indian joint stock banks were
generally under capitalized and lacked the experience and maturity to compete with the presidency
banks, and the exchange banks. There was potential for many new banks as the economy was
growing. Lord Curzon had observed then in the context of Indian banking: "In respect of banking
it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid
wooden bulkheads into separate and cumbersome compartments."

Under these circumstances, many Indians came forward to set up banks, and many banks were set
up at that time, a number of which have survived to the present such as Bank of India and
Corporation Bank, Indian Bank, Bank of Baroda, and Canara Bank.

Post-independence

The partition of India in 1947 had adversely impacted the economies of Punjab and West Bengal,
and banking activities had remained paralyzed for months. India's independence marked the end of
a regime of the Laissez-faire for the Indian banking. The Government of India initiated measures
to play an active role in the economic life of the nation, and the Industrial Policy Resolution
adopted by the government in 1948 envisaged a mixed economy. This resulted into greater
involvement of the state in different segments of the economy including banking and finance. The
major steps to regulate banking included:

• In 1948, the Reserve Bank of India, India's central banking authority, was nationalized,
and it became an institution owned by the Government of India.

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 • In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of
India (RBI) "to regulate, control, and inspect the banks in India."
• The Banking Regulation Act also provided that no new bank or branch of an existing bank
may be opened without a license from the RBI, and no two banks could have common
directors.

However, despite these provisions, control and regulations, banks in India except the State Bank
of India, continued to be owned and operated by private persons. This changed with the
nationalization of major banks in India on 19th July, 1969.

Nationalisation

By the 1960s, the Indian banking industry has become an important tool to facilitate the
development of the Indian economy. At the same time, it has emerged as a large employer, and a
debate has ensued about the possibility to nationalize the banking industry. Indira Gandhi, the-
then Prime Minister of India expressed the intention of the GOI in the annual conference of the
All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalisation." The
paper was received with positive enthusiasm. Thereafter, her move was swift and sudden, and the
GOI issued an ordinance and nationalised the 14 largest commercial banks with effect from the
midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a
"masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the
Parliament passed the Banking Companies (Acquition and Transfer of Undertaking) Bill, and it
received the presidential approval on 9th August, 1969.

A second dose of nationalisation of 6 more commercial banks followed in 1980. The stated reason
for the nationalisation was to give the government more control of credit delivery. With the
second dose of nationalisation, the GOI controlled around 91% of the banking business of
India.After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the
average growth rate of the Indian economy.

Liberalisation

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In the early 1990s the then Narasimha Rao government embarked on a policy of liberalisation and gave licences to
a small number of private banks, which came to be known as New Generation tech-savvy banks, which included
banks such as UTI Bank(now re-named as Axis Bank) (the first of such new generation banks to be set up), ICICI
Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, kickstarted the banking
sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely,
government banks, private banks and foreign banks.

The next stage for the Indian banking has been setup with the proposed relaxation in the norms for Foreign Direct
Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of
10%,at present it has gone up to 49% with some restrictions.

The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4
method (Borrow at 4%;Lend at 6%; Go home at 4) of functioning. The new wave ushered in a modern outlook and
tech-savvy methods of working for traditional banks.All this led to the retail boom in India. People not just
demanded more from their banks but also received more.

Current situation
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Currently, banking in India is generally fairly mature in terms of supply, product range and reach-
even though reach in rural India still remains a challenge for the private sector and foreign banks.
In terms of quality of assets and capital adequacy, Indian banks are considered to have clean,
strong and transparent balance sheets relative to other banks in comparable economies in its
region. The Reserve Bank of India is an autonomous body, with minimal pressure from the
government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without
any fixed exchange rate-and this has mostly been true.

With the growth in the Indian economy expected to be strong for quite some time-especially in its
services sector-the demand for banking services, especially retail banking, mortgages and
investment services are expected to be strong. One may also expect M &As, takeovers, and asset
sales.

In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak
Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed
to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any
stake exceeding 5% in the private sector banks would need to be vetted by them.

Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with
the Government of India holding a stake), 29 private banks (these do not have government stake;
they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They have a
combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA
Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the
banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.

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9
 INTRODUCTION TO BANK OF INDIA

HISTORY:-

Bank of India was founded on 7th September, 1906 by a group of eminent businessmen from
Mumbai. The Bank was under private ownership and control till July 1969 when it was
nationalised along with 13 other banks.

Beginning with one office in Mumbai, with a paid-up capital of Rs.50 lakh and 50 employees, the
Bank has made a rapid growth over the years and blossomed into a mighty institution with a
strong national presence and sizable international operations. In business volume, the Bank
occupies a premier position among the nationalised banks.

The Bank has 2884 branches in India spread over all states/ union territories including 155
specialised branches. These branches are controlled through 48 Zonal Offices . There are 27
branches/ offices (including three representative offices) abroad.

The Bank came out with its maiden public issue in 1997 and follow on Qualified Institutions
Placement in February 2008. . Total number of shareholders as on 30/06/2008 is 2,29,000.

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While firmly adhering to a policy of prudence and caution, the Bank has been in the forefront of
introducing various innovative services and systems. Business has been conducted with the
successful blend of traditional values and ethics and the most modern infrastructure. The Bank has
been the first among the nationalised banks to establish a fully computerised branch and ATM
facility at the Mahalaxmi Branch at Mumbai way back in 1989. The Bank is also a Founder
Member of SWIFT in India. It pioneered the introduction of the Health Code System in 1982, for
evaluating/ rating its credit portfolio.

The Bank's association with the capital market goes back to 1921 when it entered into an
agreement with the Bombay Stock Exchange (BSE) to manage the BSE Clearing House. It is an
association that has blossomed into a joint venture with BSE, called the BOI Shareholding Ltd. to
extend depository services to the stock broking community. Bank of India was the first Indian
Bank to open a branch outside the country, at London, in 1946, and also the first to open a branch
in Europe, Paris in 1974. The Bank has sizable presence abroad, with a network of 27 branches
(including three representative offices) at key banking and financial centres viz. London,
Newyork, Paris, Tokyo, Hong-Kong, and Singapore. The international business accounts for
around 20.10% of Bank's total business.

Organization
 Name of the Bank - Bank Of India

 Established in Sept. 07, 1906

 Head office - MUMBAI

 ZONAL OFFICES - 48

 BRANCHES - 2883

 EXTENTION COUNTER - 91

 TOTAL OUTLETS - 2974

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VISION AND MISSION

VISION-
“To become the bank of choice for corporate, medium business and up market retail customers
and developmental banking for small business, mass market and rural markets.”

MISSION-
“To provide superior, proactive banking service to niche markets globally, while providing cost
effective, responsive service to others in our role as a development bank, and so doing, meet the
requirements of our stake holders.”

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 FINANCIALS
Annual results in brief (Rs in crore)
Mar ' 09 Mar ' 08 Mar ' 07
Sales 12,355.22 9,180.33 7,028.70
Operating profit 8,693.73 5,709.77 4,128.00
Interest 8,125.95 5,739.86 4,396.72
Gross profit 3,701.21 2,394.99 1,701.22
EPS (Rs) 38.21 23.01 14.37

Annual results in details

Mar ' 09 Mar ' 08 Mar ' 07
Other income 2,116.93 1,562.95 1,184.38
Stock adjustment - - -
Raw material - - -
Power and fuel - - -
Employee expenses 1,657.01 1,614.00 1,328.13
Excise - - -
Admin and selling expenses - - -
Research and development expenses - - -
Expenses capitalised - - -
Other expenses 987.98 994.43 787.01
Provisions made 1,016.50 862.13 785.56
Depreciation - - -
Taxation 675.31 409.69 214.22
Net profit / loss 2,009.40 1,123.17 701.44
Extra ordinary item - - -
Prior year adjustments - - -
Equity capital 525.91 488.14 488.14
Equity dividend rate - - -
Agg.of non-prom. shares (Lacs) 1865.95 1488.22 1488.20
Agg.of non promotoHolding (%) 35.53 30.53 30.53
OPM (%) 70.36 62.20 58.73
GPM (%) 25.57 22.29 20.71
NPM (%) 13.88 10.45 8.54

(Rs
Balance sheet crore)

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 Mar ' 08 Mar ' 07 Mar ' 06
Sources of funds
Owner's fund
Equity share capital 488.14 488.14 488.14
Share application money - - -
Preference share capital - - -
Reserves & surplus 5,257.75 4,338.39 3,811.12
Loan funds
Secured loans - - -
Unsecured loans 1,19,881.74 93,932.03 78,821.44
Total 1,25,627.63 98,758.57 83,120.70
Uses of funds
Fixed assets
Gross block 1,733.50 1,674.00 1,575.00
Less : revaluation reserve 149.48 157.35 165.61
Less : accumulated depreciation 955.61 874.71 783.41
Net block 628.40 641.94 625.97
Capital work-in-progress 11.41 10.68 22.59
Investments 35,492.76 31,781.75 28,202.62
Net current assets
Current assets, loans & advances 3,013.50 3,062.83 2,422.55
Less : current liabilities & provisions 9,239.05 7,464.44 5,729.92
Total net current assets -6,225.55 -4,401.62 -3,307.37
Miscellaneous expenses not written - - -
Total 29,907.03 28,032.75 25,543.81
Notes:
Book value of unquoted investments - - -
Market value of quoted investments - - -
Contingent liabilities 71,927.74 69,930.86 68,571.04
Number of equity sharesoutstanding (Lacs) 4874.02 4874.00 4874.00

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Share holding pattern as on : 31/03/2009 31/12/2008 30/09/2006
Face value 10.00 10.00 10.00
No. Of Shares % Holding No. Of Shares % Holding No. Of Shares % Holding

Promoter's holding
Indian Promoters 338580000 64.47 338580000 69.47 338580000 69.47
Sub total 338580000 64.47 338580000 69.47 338580000 69.47
Non promoter's holding
Institutional investors
Banks Fin. Inst. and Insurance 47589339 9.06 17840492 3.66 17601063 3.61
FII's 79308142 15.10 79735627 16.36 80117925 16.44
Sub total 141443767 26.93 106337034 21.82 106234400 21.80
Other investors
Private Corporate Bodies 6638992 1.26 4964337 1.02 4561636 0.94
NRI's/OCB's/Foreign Others 3547984 0.68 3444147 0.71 3620469 0.74
Govt 750 - 750 - 750 -
Sub total 10187726 1.94 8409234 1.73 8182855 1.68
General public 34963307 6.66 34075932 6.99 34404645 7.06
Grand total 525174800 100.00 487402200 100.00 487401900 100.00

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PERFORMANCE HIGHLIGHTS- FOR THE YEAR 07-08 (RS. IN
CRORES)

MAR.2009 MAR.2008 CHANGE

Net Profit 2009.40 1123.17 INC.69.35%

Gross NPA% 1.68 2.42 DEC 0.74%

Net NPA 0.52 0.92 DEC 0.43%

Total business 264805 206673 INC 28.13%

Total deposits 150012 119882 INC25.13%

Gross credit 114793 86791 INC 32.26%

Earnings per share 40.83 23.04 INC.62.85%

PERFORMANCE HIGHLIGHTS 31ST MARCH 2009

 Deposits grew 25.13% on yoy basis to Rs.1, 50,012 crores.

 Advances rose by 32.26% reach Rs.1, 14,793 crores.

 Net NPA drops to 0.52% (Rs.592 crore) from o.95%.

 Operating profit rose up by 54.53 %( Rs.3701 crore) propelled by net interest income and
other income.

 Net interest income rises by 23% to Rs.4229 crore to Rs.3440 crores.

 158 branches opened during the year and total number of offices is now over 3000.

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 1526 branches are functioning on CBS platform covering about 90% of the business,
spanning over 700 cities and towns.

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 AWARDS

• SERVICE BRANDS Bank has been ranked 8th in TOP 50 SERVICE BRANDS in The
Most Trusted Brands Survey 2010 and 2nd among all Public Sector Banks.

• The brand “Bank of India” now stands for Growth, Quality and Trust Bank has been
conferred with several awards and accolades. Some of them are
 India’s Best PSU Bank by NDTV
 Business Leadership Awards 2008,
 Number 1 Public Sector Bank by Business World - PWC Survey,
 Rank No.1 by Business Today
 KPMG Survey, Best Public Sector Bank
 Overall Best Bank in the country by Dun & Bradstreet Study 2008
 Top Indian Company under ‘Banks’ by Dun & Bradstreet
 Rolta Corporate Awards 2008
 Prestigious CIO 100 Award 2008 for the Bank’s Green IT initiative wherein solar energy is
put to use to power technology in rural branches.
Best Performance in Western Zone under the Rural Employment Generation Program (REGP) of
KVIC.

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Some of the notable performance under the areas of Priority Sector were :

Special Agriculture Credit Plan (SACP) : Bank has disbursed a sum of

Rs.7390 crore under agriculture sector as against the budget of Rs.7200
crore under SACP. The production credit accounted for Rs.3281 crore and
investment credit Rs.2345 crore. The Bank has implemented 17727 new
investment projects involving a credit outlay of Rs.1333 crore.

Kisan Credit Cards (KCC) : Bank has issued 203005 KCC with credit
limit of Rs.1594 crore. So far, 1048,181 Kisan Credit Cards (cumulative)
involving financial outlay of Rs.3770 crore has been issued.

Debt Swap Scheme : It is designed to help the indebted farmers to redeem

their outstanding dues to money lenders. Bank has so far covered 121
villages under the Scheme which have been declared as money lender free
villages. Disbursement amounted Rs.13.28 crore under the scheme
covering 8690 accounts towards Debt Swap and Rs.17.15 crore for other
ongoing farm activities of the beneficiaries.

Financial literacy cum Credit Counselling – ‘ABHAY’ : As a part of

social commitment, the Bank started credit counselling service centres
under the aegis of the trust - Abhay at four centres, namely Mumbai,
Chennai, Wardha and Gumla. All the four centres have so far handled
more than 3500 cases. These centres have also organized seminars to
educate people in respect of financial planning and judicious use of credit
cards.

The Star Swarozgar Prashikshan Sansthan (SSPS) : Bank sponsor

initiative for imparting training, counselling and consultancy guidance to
educate unemployed youth, farmer and women entrepreneurs. First such
training institute was started at Bhopal followed by another sub-centre at
Shivaji University, Kolhapur. As per the advise of Ministry of Rural
Development, GoI, Bank has opened seven RUDSETI type training centres
upto March 2009.

Financial Inclusion : Bank has been holistically taking all banking

products and services to those who were till now deprived of financial

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Farmers’ Club : Bank has assisted to form 3500 Farmers’ Club, which
are forum for transmitting the latest knowledge on agriculture technique,
adoption of appropriate technology for value addition and enjoy the benefits
of correct market price for input and output.

Financing under Differential Rate of Interest : Under the scheme to

finance at concessional rate of 4% to select income groups, the Government
of India has set a target of atleast 10 loans per rural branch per quarter.
Bank has sanctioned 6500 cases under DRI during the year.

Prime Minister’s new 15-point programme for the welfare of minority

communities : Bank has prepared a roadmap for next 3 years to ensure
that the priority sector lending to minority communities is raised to 15% by
the end of 2009-10. The outstanding position as on 31.03.09 was Rs.4818
crore which is 11.62% of target under priority sector.

Golden Jubilee Rural Housing Finance Scheme (GJRHFS) : The Bank

surpassed the targets given by National Housing Bank for the year by
financing 18104 cases under GJRHFS.

Micro Finance – ‘Self Help Groups’ (SHGs) : In order to enhance the

outreach to the rural populace, especially to the weaker sections of the
society, the Bank has promoted more than 188,000 SHGs of which 142,000
are credit linked to the Bank involving financial assistance of Rs.580
crore. The Bank has financed 21 Micro Finance Institutions (MFIs) for
onward lending to SHGs to the tune of Rs.240 crore. These MFIs are
having credit linkage for 99,599 SHGs with the membership of 1818,179.

Janashree Bima Yojana (JBY) : Bank has signed MOU with LIC of
India to provide with insurance cover under JBYfor the Women Self Help
Groups which are credit linked to the Bank and so far covered 50621

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women members under JBY.

Integrated development of 101 villages : The project was launched by

the Bank to develop self reliant villages through peoples participation and
Bank’s assistance and voluntary agencies support. So far, 128 villages
spread over 17 states and 78 districts have been covered under the scheme.

Rural Sanitation Scheme : Bank has launched the scheme to provide

civic and personal hygiene facility by providing assistance for construction
of low cost toilets in rural areas.

Credit Facilities to Scheduled Castes (SCs) & Scheduled Tribes (STs):

Bank is giving special emphasis on the welfare of the SCs & STs and
following initiatives are taken to step up advances to them :

.
In preparation of Block and District Credit Plans, special weightage is
given to SCs and STs.
.
District Level Consultative Committee is reviewing the performance
of finance extended to SCs and STs.

Lead District Managers are keeping a close liaison with District SC/
ST authorities for linkage of credit with employment and development
schemes.
.
Bank is periodically reviewing the lending procedures and policies to
ensure that the loans are sanctioned to SC/ST persons in time and in
adequate quantity.

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.
Credit is provided by the Bank to SC/ST beneficiary under several
centrally sponsored schemes for which subsidies received through
Government agencies.
.
Bank also organised SC/ST borrowers meet to inculcate the confidence
and to eliminate the middle man.
The Bank has extended finance to the tune of Rs.1699 crore to 276061 SC/
ST beneficiaries under priority sector. The recovery performance of loans
granted to SC/ST beneficiaries is as under:

(Rs. in crore)

Particulars Demand Recovery Recovery %

Agriculture 283 211 75%
Small Scale
Industries 56 36 64%
Other Priority
Sector 217 142 65%
TOTAL 556 389 70%

Lead Bank Responsibility

The Bank has been assigned with Lead Bank responsibility in 48 districts
spread over 5 states viz. Jharkhand (15), Maharashtra (12), Madhya Pradesh
(12), Uttar Pradesh (7) and Orissa (2). The Bank has been successfully
discharging its duties of Lead Bank in all these lead districts. The Annual
Credit Plan for the year 2008-09 was launched in all the Lead Districts
involving credit outlay of Rs.4223 crore for our Bank. The achievement of
the Bank is Rs. 4250 crore.

Micro, Small & Medium Enterpriese (SBU – SME)

During the year 2008-09, credit to SME sector grew from Rs.20400 crore
to Rs.25,441 crore i.e. a growth of 24.71% as against 25.8% during the
previous year. The average amount of finance per account stood for Rs.4.25
lacs. Collateral free loans are being given under CGTMSE scheme to

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MSEs, where for loans upto Rs. 50 lakhs, no collateral or third party
guarantee are stipulated.

Our strategies for the thrust areas are Cluster based lending, Channel
Credit, revamping of existing products such as Star Laghu Udyog Suvidha,
Priyadarshini Yojana for women Entrepreneurs. In all 88 cluster based
schemes across the country were implemented during the year and our
total credit exposure was over Rs.1000 crore. Some of these were artisan
clusters such as Wooden Handicrafts, Textile Dyeing/Printing, Handloom
Weavers, Stone Art, Silver Filigree, Wood Carvers, and Zari Workers.

The Bank has adopted the Code of Commitment to Micro and Small
Exterprises devised by Banking Codes and Standards Board of India. Our
Bank was represented on the Working Group constituted by RBI to study

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WHAT IS MICROFINANCE?

"From Backward to Forward"

The term “microfinance” (MF) refers to the provision of banking services to lower-income
people, especially the poor. These services include small loans for microenterprises and
individuals, savings, money transfer services, means of payment and insurance. Given their
nature, microentrepreneurs tend to operate on the margins of the formal economy, often without
permits and commercial documentation, and usually lacking fixed assets that could serve as
collateral. Formal expense and income records are generally scarce. Income is often on the lower
end of the scale, although operating margins for microenterprises in percentage terms can be
significant.

The proposed Microfinance Services Regulation Bill defines microfinance

services as “providing financial assistance to an individual or an eligible client, either directly or
through a group mechanism for :

i. An amount, not exceeding rupees fifty thousand in aggregate per individual,

for small and tiny enterprise, agriculture, allied activities (including for
consumption purposes of such individual) or

ii. An amount not exceeding rupees one lakh fifty thousand in aggregate per
individual for housing purposes, or

iii. Such other amounts, for any of the purposes mentioned at items (i) and (ii)
above or other purposes, as may be prescribed.”

NEED FOR MICRO-FINANCE : THE GAP BETWEEN

DEMAND AND SUPPLY
Since the 1950s, various governments in India have experimented with a large number of grant
and subsidy based poverty alleviation programmes. Studies show that these mandatory and
dedicated subsidised financial programmes, implemented through banking institutions, have not
been fully successful in meeting their social and economic objectives

Banks too never really looked on them as a profitable and commercial activity.

According to a 1995 World Bank estimate, in most developing countries the formal financial
system reaches only the top 25% of the economically active population - the bottom 75% have no
access to financial services apart from moneylenders -

In India too the formal financial institutions have not been able to reach the poor households, and
particularly women, in the unorganised sector. Structural rigidities and overheads lead to high cost

51
of making small loans. Organisational philosophy has not been oriented towards recognising the
poor as credit worthy. The problem has been compounded by low level of influence of the poor,
either about their credit worthiness or their demand for savings services. Micro-finance
programmes have often been implemented by large banks at government behest. Low levels of
recovery have been further eroded due to loan waiver programmes leading to institutional
disenchantment with lending to small borrowers.

All this gave rise to the concept of micro-credit for the poorest segment along with a new set of
credit delivery techniques. With the support of NGOs an informal sector comprising small Self
Help Groups (SHGs) started mobilizing savings of their members and lending these resources
among the members on a micro scale. The potential of these SHGs to develop as local financial
intermediaries to reach the poor has gained recognition due to their community based
participatory approach and sustainability - recovery rates have been significantly higher than those
achieved by commercial banks inspite of loans going to poor, unorganised individuals without
security or collateral.

The poor in India define the micro-finance market. The Planning Commission estimate of 1993-94
says 36% of the population or 320 million people live below the poverty line - there would be
140-150 million women alone living below the poverty line. Assuming that only 30% of the
country’s poor women are ready to adopt micro-finance as a method of poverty alleviation, it is
estimated that 40-45 million poor women would need credit.

As against this, it is estimated that all agencies in India engaged in the provision of micro-finance
services, would have together covered barely 1 million poor people by the close of 1998-99.

MAIN FEATURES OF THE MICRO-FINANCE SERVICES

1. It is a tool for empowerment of the poorest; the higher the income and better the asset position
of the borrower, the lower the incremental benefit from further equal doses of micro-credit is
likely to be.

2. Delivery is normally through Self Help Groups (SHGs).

3. It is essentially for promoting self-employment; the opportunities of wage employment are

limited in developing countries - micro finance increases the productivity of self-employment in
the informal sector of the economy - generally used for (a) direct income generation (b)
rearrangement of assets and liabilities for the household to participate in future opportunities and
(c) consumption smoothing.

4. It is not just a financing system, but a tool for social change, specially for women - it does not
spring from market forces alone - it is potentially welfare enhancing - there is a public interest in
promoting the growth of micro finance - this is what makes it acceptable as a valid goal for public
policy.

5. Because micro credit is aimed at the poorest, micro-finance lending technology needs to mimic
the informal lenders rather than the formal sector lending. It has to :

52
a) provide for seasonality

(b) allow repayment flexibility

(c) eschew bureaucratic and legal formalities

(d) fix a ceiling on loan sizes.

INITIATIVES OF GOVT OF INDIA

A survey of rural credit in 1950-51 showed that co-operatives could meet barely 3.3% of the total
requirements of farmers, while moneylenders accounted 93% of credit needs of poor.
The Govt of India accepted that rural credit could not be met by Co-operative societies alone
andthat the commercial banks should play an imp role in the rural sector which resulted I
following:

1. Nationalization of 14 banks in 1969

2. Setting up of credit guarantee corporation in 1971.

3. Setting up of RRB’s in 1975

4. Second time nationalization of 6 banks in 1980.

5. Setting up of NABARD in 1982.

6. SHG-Bank linkage programme in 1992 by NABARD.

7. Concept of local area bank was introduced in 1996-97

8. Launching of KCC (Kisan credit card) scheme in 1998 by NABARD.

9. The concept of financial inclusion has been introduced in 11th five year plan.

Flow of institutional credit to agriculture and allied activites(Rs in crores)

53
Institutional 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
credit from
Cooperative 23716 26959 31424 39786 42480 48258 35747
banks
RRB’s 6070 7581 12404 15223 20435 25312 25852

Commercial 39774 52441 81481 125477 166485 181087 202856

banks

250000 77%
200000

150000

100000
13%
50000 10%
0
Cooperative banks RRB’s Commercial banks

Institutional credit to agriculture and allie d activites in 2008-09

RECENT INITIATIVES

• Target for agricultural credit flow set at Rs. 3,25,000 crores for the year 2009-10. In 2008-09 it
was 2,87,000 crores

• Scheme of debt waiver and debt relief for farmers proposed in budget 2008-
09 with an amount of 60,000 crores

54
 SOURCES OF RURAL CREDIT

Institutional
Non Institutional
RBI

SCB’s NABARD

PUBLIC PRIVATE RRB’s Co-op BANKS

SECTOR SECTOR

NATIONALISED SBI GROUP

BANKS

Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
IDBI Bank
Indian Bank
Indian Overseas Bank
Oriental Bank of Commerce
Punjab & Sind Bank
Punjab National Bank
Syndicate Bank
UCO Bank
Union Bank of India
United Bank of India
Vijaya Bank 55
DIFFERENT MODELS OF MICROFINANCE

• THE DIRECT-ACCESS-BANK LED MODEL or SHG - BANK LINKAGE MODEL

This model involves the SHGs and individuals financed directly by the banks viz.,
Commercial Banks (Public Sector and Private Sector), Regional Rural Banks (RRBs) and Cooperative
Banks.

• THE INDIRECT CHANNEL PARTNERSHIP or MFI - BANK LINKAGE MODEL

This model covers financing of Micro Finance Institutions (MFIs) by banking agencies for on-lending to
SHGs and other small borrowers covered under microfinance sector

BANK BANK

SHG – BANK LINKAGE MFI – BANK LINKAGE

MODEL MODEL
Branch MFI’s
NGO

SHG Ind./SHG/JLG

56
 OBJECTIVE 1.

TO STUDY MICROFINANCE PRODUCT IN RURAL

VARANASI

MF PRODUCTS OF BANK OF INDIA

Priyadarshini Yojana
BOI Artisan Credit Card (ACC)
Star Bhoomiheen Kisan Card
Boi Shatabdi Krishi Vikas Card

 GOVT SCHEMES
DRI
Special Component Plan
Manyawar Shri Kanshiram Ji Minorities Self-employment Scheme

PRIYADARSHINI YOJANA
57
With a view to empowering women by providing credit to women entrepreneurs, a scheme called
‘Priyadarshini Yojana’ was launched in 1989. Under ‘Priyadarshini Yojana’ women entrepreneurs are
extended credit facilities at liberal terms and at concessional rate of interest, for economic activities.
The salient features of the scheme at present are as follows:-

Eligibility
Women entrepreneurs, women enterprises where women entrepreneurs hold not less than 51% of
the financial holding.

Purpose
For economic activities like
i) Purchase of equipment, machinery, vehicle, furniture / fixtures etc. for capital investment and
working capital needs
ii) Agriculture & Allied activities
iii) Education Loan

Loan Amount
Need based depending upon project cost/ turnover etc.

Margin
For limit upto Rs.50,000/- - Nil
For limit over Rs. 50,000/-
15% to 20%.

Rate of interest
0.5% less than applicable rate for limits upto Rs.50,000.
1% less than applicable rate for limits above Rs.50,000 (This interest rate concession will be
applicable if no other interest concession like DRI loan or crop loan with concessional interest rate
are available)
Net interest concession in case of education loan would not exceed 2 %.

Security
No collateral for advances upto Rs.5 lakh in case of small scale industrial units, if a/c is covered
under CGTSI then no collateral including third party guarantee for limit upto Rs.25 lakhs

Repayment
Repayment schedule will be spread over 3 to 7 years depending upon the activity

BOI ARTISAN CREDIT CARD (ACC)

58
Purpose
To provide adequate and timely assistance to artisans to meet their credit requirements both investment
needs as well as working capital. Investment loans for purchase of tools/ Equipments by way of Demand
Loan/Term Loan with appropriate repayment schedule. The Scheme would be applicable both in rural and
urban areas.

Eligibility
 All existing artisan borrowers of the bank enjoying credit limits upto Rs.2 lakhs and having
satisfactory dealings with the bank.

 All artisans involved in production/ manufacturing process

 Preference would be given to artisans registered with Development Commissioner

(Handicrafts)

 Thrust in financing on cluster of artisans and artisans who have joined to form Self-Help
Groups (SHGs)

 Beneficiaries of other Government Sponsored schemes are not eligible

Issue of cards
A Photo Identity Card with sanctioned limit, validity period of credit facilities along with a passbook
incorporating Name, Address, Borrowing Limit, Validity Period, etc. will be issued.

Maximum Limit
Rs.2 lakhs per borrower.

Security
Hypothecation of Assets created out of Bank Finance.

Margin
Upto Rs.25,000/- : Nil Above Rs.25,000/- : 20% to 25%

STAR BHOOMIHEEN KISAN CARD

59
OBJECTIVE:
The main objective of Star Bhoomiheen Kisan Card (Star BKC) is to provide easy access to short term
production and consumption credit to meet genuine requirements of tenant farmers, share croppers and
oral lessees to help increase their income from agriculture production activities.

ELIGIBILITY:
a) Under the scheme, Branches may issue Star BKC to the tenant farmers, share croppers and oral lessees
who are otherwise eligible for sanction of short term credit for crop production.

b) The applicant should come from the operational area of the Branch sponsored by an SHG or a Farmers’
Club or a reputed NGO who is on the approved list of NABARD.

c) Branch Manager to ascertain eligibility by calling meeting of SHG / Farmers’ Club / NGO in the
village itself and the same should be incorporated in the pre-sanction inspection report.

d) Migratory tillers are not eligible under the scheme.

IDENTIFICATION:
The applicant must come from the service area of the Branch and his identity should be verified through
one or more of the following sources:

i) Documents related to house of the applicant,

ii) Ration Card and
iii) Voters’ list / Identity card.

PURPOSE:
Purchase of improved seeds, manures and fertilisers, plant protection materials, payment of hire charges
for tractors, irrigation charges, electricity charges etc. and also meeting part of consumption needs.

QUANTUM OF FINANCE / LIMIT:

a) Based on land area taken on tenancy for share cropping or on oral lease and scale of finance, maximum
Rs.24,000/=.

b) Additional Rs.1000/= for consumption needs.

c) Upon satisfactory conduct of the account for three years, the limit may be enhanced, if requested by the
card holder.

ISSUE OF CARDS:
a) The farmers under the scheme will be issued a credit card-cum-pass-book incorporating the name,
address, borrowing limit/sub-limits, validity period, etc. to facilitate recording of the transactions on an
on-going basis. The pass book, among others, would provide for a passport size photograph of the

60
beneficiary.

b) The beneficiary farmer should produce the passbook while operating the account.

c) The card-cum-pass book in use for KCC is to be used for Star BKC. However, a seal inscribing ‘Star
BKC’ is to be put on the face of the pass-book.

SANCTIONING AUTHORITY:
As per delegation of powers.

TYPE OF FACILITY:
a) Revolving Cash Credit – Annual Review. The farmer should be allowed for any number of drawals and
repayment within the limit.

b) The review may result in continuation of the facility, enhancement of the limit or cancellation of the
limit / withdrawal of the facility, depending upon the performance of the borrower.

c) The aggregate credits into the account during the 12 months period should atleast be equal to the
maximum outstanding in the account.

d) No drawal in the account should remain outstanding for more than 12 months in case of normal crops
and 18 months in case of sugarcane and banana crops.

e) In case of reschedulement of the period of repayment on account of natural calamities affecting the
farmer, the period for reckoning the status of operations as satisfactory or otherwise would get extended
together with the extended amount of limit. When the proposed extension is beyond one crop season, the
aggregate of debits for which extension is granted should be transferred to a separate term loan account
with stipulation for repayment in instalments as per existing guidelines.

f) As a measure of incentive for card holders with good performance, the Branches may at the time of
review, enhance the credit limit suitably to take care of increase in cost of inputs / labour, change in
cropping pattern, etc. but upto the maximum limit of Rs.25,000/=.

g) On credit balance in the Cash Credit account, interest at the rate and rule of Savings Bank is to be paid
to encourage the borrower to deposit the surplus funds at the time of harvest and marketing of produce.

DISBURSEMENT / OPERATION IN THE ACCOUNT:

a) The issuing Branch would maintain the ledger account in respect of each Star BKC account and all
the operations in the account will be through issuing Branch.

b) The card holders should be allowed to draw cash of the total sanctioned limit as per their
requirement.

61
 c) Withdrawal in the Star BKC account will be through withdrawal slip specially printed for the purpose
(green colour already in use for KCC).

d) At the time of withdrawal and deposit, the beneficiary should present the passbook for recording the
transaction.

e) Though drawals in the account are expected as per seasonality of the crops / sub-limits, yet, some
flexibility may be allowed to enable the farmer to purchase inputs at convenient time when availability /
prices are favourable.

f) Submission of invoices / quotations should not be insisted upon as limit / sub-limits are expected to
be used on the basis of scale of finance.

CROP INSURANCE:
a) Crops financed should be insured as required by law or as covered under various schemes.

b) Crop Loan portion of the finance should be covered under the Rashtriya Krishi Bima Yojana
(RKBY) of the Agriculture Insurance Company of India Ltd. (AIC).

c) Insurance premium should be debited to the relative loan account and claims if any be credited to the
beneficiary’s account promptly.

PERSONAL ACCIDENT INSURANCE:

a) Star Bhoomiheen Kisan Card holders should be covered under Personal Accident Insurance scheme as
applicable to KCC / Kisan Samadhan Card.

b) The entire cost of insurance including that of farmer’s share to be borne by the Branch.

SUPERVISION AND FOLLOW-UP:

a) Pre-sanction inspections should be carried out in all cases. In cases of schematic lending, where finance
is granted through tie-up recovery arrangement with a sugar factory or a processing unit, inspection at
random basis in 10 percent cases should be carried out.

b) Similarly, post disbursement inspections should also be carried out to ascertain end use of funds. In
case of schematic lending also, post disbursement in atleast 10 percent accounts should be carried out.

REPAYMENT:
The sale proceeds should be routed through the cash credit account. Market linkages, wherever possible,
should be ensured.

OTHER OPERATIONAL GUIDELINES:

a) If a farmer has obtained short term finance from other Bank / Co-operative society, such farmer should
not be issued Star BKC.

62
 b) Wherever crop insurance is available, coverage needs to be obtained.

c) In case of default, the special facilities under the scheme should be immediately withdrawn and the
limit should be treated as normal crop finance which would broadly mean -

i) Withdrawal of cheque book facility (if issued).

ii) Future disbursement on regularisation of account against bills / receipts.
iii) Withdrawal of card (those who have been issued plastic cards).

APPLICATION OF PRUDENTIAL NORMS:

a) The Star BKC facility being in the nature of cash credit accommodation for agricultural purposes, the
prudential norms as applicable to such facilities would apply to the BKC accounts.

b) In other words, the credit card account would be deemed to be a Non-Performing Asset (NPA) if it
remains out of order for a period of two crop seasons / one crop season (as the case may be, depending on
the duration of the crops) after the repayment due date.

c) The crop seasons after the due date should refer to only those two consecutive crop seasons in which
the farmer usually undertakes crop production.

d) An account will be treated as out of order in the following circumstances:

i) There are no credits in the account continuously for two crop seasons as on the date of balance sheet, or

ii) The credits in the account are not sufficient even to cover the interest debited in respect of the account
for two crop seasons

BOI SHATABDI KRISHI VIKAS CARD

Our Bank was first to introduce ‘Indian Green Card’ for the farmers in the banking industry way back in 1980s.
The concept has been adopted in all the Banks, thereafter with further modifications. In our Bank, the product
has been further upgraded with value additions as Kisan Suvidha Card, Kisan Gold Card and Kisan Samadhan
Card, which is a line of credit for farmers with components of Production Credit, Consumption Credit,

63
Emergency Loan and Investment Credit requirements of farmers for 3 to 5 years.

2. With the advent of Information Technology and latest development in agriculture and marketing, it was felt
necessary that farmers should also be provided with the available latest technology in the banking industry to
provide them “Anywhere Anytime Banking” like any other clientele and accordingly “BOI Shatabdi Krishi
Vikas Card” was launched on 10.09.2005 under tie-up with Visa.

SALIENT FEATURES:
The salient features of the proposed VISA card, i.e., BOI Shatabdi Krishi Vikas Card are as under:

a) Eligibility – Farmers having satisfactorily conducted agricultural loan account with crop loan
facility / CC facility of Rs.50,000/= and above

b) Spending Limit – 50% of crop Cash Credit / CC limit sanctioned to the farmer – Maximum
Rs.50,000/= and Minimum Rs.25,000/=.

c) Cash Withdrawals – 30% of spending limit with cash withdrawals Maximum Rs.10,000/= per
day.

d) Charge account – Charge account shall be crop loan Cash Credit / CC account with card issuing
Branch.

e) Cash drawals – Cash drawals from our own Branches, ATMs of our Bank and under “BANCS” as
well as “CASH TREE”, VISA ATMs permitted with on-line authorization.

f) The card cannot be used on stand alone ATMs.

g) The card will be a photo identity card.

64
h) The Credit Card Department will send the charge slips to the respective card issuing Branch on
monthly basis and reinstate the spending / cash withdrawal limit to the card holder. In case the Branch
is not satisfied with the operations of the card and timely payment thereof, shall write to the Card
Department for cancellation or hotlisting of the same.

i) Penal / service charges in case of default @1.70% per month.

j) Insurance cover and all other facilities as applicable to VISA credit card scheme of the Bank.

k) No card issuance charges to be recovered. However, appropriate charges to be recovered for

issuance of fresh card in case of cancellation, lost card, etc. as per extant guidelines.

l) The Card Product Department will deal with the applications as per present practice received from
Branches and issue the Credit Cards to farmers as per the pattern followed in case of other Credit Card
Scheme.

4. The existing general guidelines on use of credit card advised vide Br. Cir. No. 98/170 dated
19.11.2004 holds good for this card also. The existing application forms ICD 14 Rev-2004 can be
presently used by affixing “BOI SHATABDI KRISHI VIKAS CARD” by rubber stamp or hand-
written on top of the front page of application and with slight modifications are to be used for the
captioned card.

5. Branches should bring in maximum number of dealers in agriculture inputs, dealers of animal
feeds, dealers in irrigation equipments, etc. operating in the area as well as other main dealers and
suppliers of day to day requirements of rural populace such as cloth merchants, medical shops, main
shop keepers from rural areas as Member Establishments to make this card a grand success.

6. Better utilisation of card by the farmers will substantially increase non-interest income to the
Branches and utilisation will solely depend upon Merchant Establishment network available to the
Branches.

7. The incentive available to staff members for marketing of credit card shall also be made available
for marketing of the captioned card.

65
 SPECIAL COMPONENT PLAN

GENERAL INFORMATION :

For all-round development of Scheduled Castes / Scheduled Tribes several developments

departments are implementing their schemes. Under Special Component Plan all the development
departments are implementing schemes for Scheduled Caste and Tribal subplan the schemes are
implementing for Scheduled Tribes. The following schemes are being implemented under the SCP
and the TSP :

INCOME GENERATING SCHEME

Under SCP Tribal subplan most of the schemes are covered by 60% subsidy of the unit cost or
Rs.10000/-unit cost whichever is less. The Social Welfare department is providing Computer
Training to SC candidates. It also provides assistance in the form of subsidy to an extent of 60 %
subject to max. of Rs 10000/- for various units , e.g.,

i. Sugar-cane crusher machines

ii. Decoticator
iii. Chilli grinder
iv. K.M.F Milk Diary
v. Floor Mill
vi. Photography and video
vii. Xerox Machine
viii. Cycle shop
ix. Bricks making
x. Carpentry
xi. Provision stores
xii. Other income generating schemes.

DRINKING WATER AND ROADS

Mini water supply scheme and drilling of Borewells is taken up in the Harijan colonies on need
basis. Preference is given to cluster villages. Link roads and approach roads to Harijanawadas
from the main road are taken up in this scheme.

NUTRITION

Nutritious food is being supplied to SC children.

HORTICULTURE

Maintenance of 1997-98 plots and distribution of seedlings are taken up under the scheme.

66
AGRICULTURE

To supply Agriculture inputs, PP equipment seeds and Fertilisers, diesel pumpsets and crushers.

VILLAGE AND SMALL INDUSTRIES

Training programmes and supply of free toolkits to the SC /ST trainees.

ANIMAL HUSBANDRY & VETERINARY DEPARTMENT

Milch animals are provided under the scheme.

SERICULTURE

Sanctioning 60 % subsidy for construction of rearing houses and providing inputs for mulbery
plantation worth of Rs.2000 are two components.

COMMUNITY HALL ( SAMUDAYA BHAVAN )

Samudaya Bhavanas are constructed at Harijana Colonies at a cost of Rs.2.00 lakh per unit.

DRI

67
Differential Rate of Interest (DRI) scheme was one of the earliest micro credit schemes introduced by the
banking sector as early as in 1972. Its objective was to extend loans at a concessional rate of 4 percent to
families below the poverty line. The annual target fixed for each bank was one percent of their outstanding
level of total advances made during the previous year. Lending one percent of the total advances at
concessional rate to the deserving poor, it was opined, would not adversely affect the overall earnings of banks.
Though this scheme has been in operation for over 37 years, it has not been able to achieve the desired goal till
date.

Government of India had formulated in March, 1972 a scheme for extending financial assistance at
concessional rate of interest @ 4% to selected low income groups for productive endeavours initially by public
sector banks and then by private sector banks also .

In para 95 of the Union Budget Speech for 2008-09, it has been proposed that borrower’s eligibility criteria for
availing loan under the (DRI) Scheme will be increased. Accordingly, borrowers with annual family income of
Rs.18000 in rural areas and Rs.24000 in urban areas will now be eligible to avail of the facility as against the
earlier annual income criteria of Rs.6400 in rural areas and Rs.7200 in urban areas, fixed by the Government of
India in 1986.

68
OBJECTIVE 2
To compare position of Bank of India with other banks regarding
the distribution of microfinance product in rural Varanasi region.

OBJECTIVE 3
To evaluate profile of customers taken loan from Bank of India
under various schemes.

OBJECTIVE 4
To study position of Varanasi in UP under microfinance.

DATA ANALYSIS
69
 OBJECTIVE 2

To compare position of Bank of India with other banks

regarding the distribution of microfinance product in rural
Varanasi region.

Survey was conducted to study how much various microfinance product were distributed & what were
target to be achieved by each bank in Varanasi zone. Basic motive to study this objective is to know the
position of Bank of India in Varanasi region with other nationalized bank operating in this region .
Microfinance product selected were common in all the bank they are following :

• Kisan Credit Card

• Artisian Credit Card
• Special Component Plan For sc st
• Shri Kashiram Employment scheme for minorities
• DRI
• No. of SHG formed during year 09-10

70
 POSITION OF BANK OF INDIA IN UTTAR PRADESH

No of Loan disbursed in 2009

Name of Bank SHG (lakhs)
UBI 8997 7144
SBI 4205 5768.27
BOB 2803 4412.31
Allahabad bank 2703 3521.23
Punjab and sindh bank 2294 5383.85
Bank of India 1241 1663.4
PNB 506 145.44
Central bank of India 407 421.3
Canara bank 374 157.85
Indian overseas bank 129 87
Syndicate Bank 112 171.56
oriental bank of
commerce 107 102.65
UCO bank 105 152.57
United bank of India 92 110.63
Indian Bank 42 35.12
Vijaya bank 16 21.97
Dena bank 11 34

71
1. To study distribution of KCC among various bank in Varanasi
during 09-10

Distribution of KCC in Varanasi in 2010

Name of bank Target No of KCC Distributed
UBI 2800 3197
SBI 1940 1245
Allahabad Bank 500 620
Central bank of India 504 485
Bank of Baroda 360 437
Bank of India 200 335
PNB 0 182
Vijya bank 0 38
UCO 30 35

Table 1: Distribution of KCC in 2010

72
2.To study distribution of ACC among various bank.

Artisian Credit Card

Name of bank Target Distributed
PNB 80 1320
Allahabad Bank 160 305
UBI 160 170
UCO 80 22
Bank of India 65 0

Table 2: Distribution of ACC in 2010

73
3.To study distribution of Special Component Plan among various
bank.

Special Component Plan For sc st

Name of bank Target Distributed
UBI 416 235
SBI 339 114
Allahabad Bank 118 78
Central bank of India 88 45
Bank of Baroda 85 36
UCO 23 18
PNB 16 10
Bank of India 42 6

Table 3: distribution of Special component plan in 2010

74
4.To study distribution of Shri Kashiram Employment
scheme for minorities among various bank.

Shri Kashiram Employment scheme for minorities

Name of bank Target Distributed
PNB 2 9
UBI 4 5
Bank of baroda 3 4
Central Bank 4 3
SBI 4 2
Allahabad bank 3 1
Bank of India 1 1
Oriental bank 2 1
Cooperation bank 1 1

Table 4: Distribution in 2010

75
5.To study distribution of no. of account provided DRI
among various bank.

DRI
Amount
Name of bank Account (in lakhs)
UBI 315 42.4
SBI 298 45.2
Allahabad bank 102 12.25
Others 75 10.2
Central Bank 30 3.95
PNB 28 2.2
Bank Of India 15 1.95
UCO 6 0.9
Syndicate bank 5 0.77

76
 Table 5: No. of account provided with DRI in 2010

6.No. of SHG’s formed by various banks in year 2009-10.

No. of SHG formed during 09-10 in Varanasi

Name of bank No of SHG Passed 1 Grade Passed 2 grade
UBI 1127 666 375
SBI 512 287 152
Allahabad Bank 418 276 174
Cenrtal bank of India 157 92 47
Bank of baroda 75 44 21
Bank of India 40 21 8
UCO bank 2 1 1
Dena Bank 1 1 1

77
OBJECTIVE 3.

To evaluate profile of customers taken loan from Bank of India

under various schemes.

Under this objective survey was conducted upon 63 people, who have taken loan from Bank of
India under various schemes of bank. Survey was done in 7 rural branches of Bank namely :
Phoolpur, Tela, Kuhar, Musafirkhana, Latthudin, Jamui, Sukaha. Approximately 9 people per
branch were interviewed.

Basic motive to study this objective was to know.

 For which activity people take maximum loan.
 Which activity provide maximum benefit.
 People of which age group take maximum loan.
 People of which caste take maxi loan.
 Educational level of people.
 How many people take loan from multiple agencies.

78
 Statistic of individuals taking loan from BOI in 09-10
No. of Avg Profit
Category Activity Amount Persons (weekly)
Animal 101000
Husbandary Goat, buffalo Rs(37%) 12 316 Rs/ Person
Grocery shop,
Trading tea shop, 66000 Rs
vegetable vendor (24%) 7 943 Rs/ Person
34000 Rs
Transport Pushcart
(13%) 3 520 Rs/ Person

Production Sewing machine, 50000 Rs

Sari Weaving (19%) 5 543 Rs/ Person
House repair,
Consumption Cancellation of previous 20000 Rs
loan (7%) 3 0

1.Percentage of amount of loan taken for each category

79
 2. No. of person taken loan in each category.

Category Amount of loan

Category No. taken
of Persons
Animal
Animal 212100
25
Husbandary
Husbandary
Trading
Trading 138,600
15
Transport
Production 71,400
6
Production
Transport 105,000
11
Consumption
Consumption 42,000
6

3. Profit in each category

80
 Avg Profit
Category (weekly)(Rs)
Trading 943
Production 543
Transport 520
Animal
Husbandary 316
Consumption 0

4. No. of person of each age group

Age of No of
person person
20-25 6
25-30 13
30-35 17 81
35-40 11
40-45 8
45-50 8
5.No. of person taking loan from each range.

82
 Amount of No of
loan person
1000-5000 4
5000-10000 38
10000-
15000 11
15000-
20000 6
20000-
25000 4

83
6.No of person of each category

No of
Caste person
Gen 10
OBC 17
SC 30
ST 6

7.Educational level of beneficiaries

84
 No of
Education person
Illiterate 22
Below 5th class 26
Above 5th class but
below 10th 11
Above 10th Class 4

8.Percentage of customer taking loan from more than one

institution

85
 No of
person
Loan taken from 1 institution 57
Loan taken from more than 1
institution 6

OBJECTIVE 4

To study position of Varanasi in UP under microfinance.

Basic motive to study this objective is to determine position of Varanasi in Uttar Pradesh under microfinance. For
that data(zone wise) is collected from UP govt website and analysed.

No. of SHG formed in U.P. (zone wise)

No. of SHG formed No. of SHG formed in
Zone since 1999 2009-10
LUCKNOW 64669 3333
FAIZABAD 40464 3297
ALLAHABAD 29653 4374
DEVIPATTAN 28909 3691
GORAKHPUR 28513 4356
VARANASI 28295 6615
KANPUR 26487 3325
BAREILLY 25121 1930
MIRZAPUR 22647 4861

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AZAMGARH 21961 2934
BASTI 14529 890
MORADABAD 14209 1576
AGRA 14025 1029
CHITRAKOOT DHAM 11406 1775
JHANSI 9980 1051
ALIGARH 7471 727
MEERUT 4801 393

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Table 6: No of SH G formed in 09-10

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 FINDINGS

 OBJECTIVE 2
To compare position of Bank of India with other banks regarding the distribution of
microfinance product in rural Varanasi region.

 Bank of India stands on 6th position in Uttar Pradesh in having SHG’s and amout of loan
disbursed. During year 09-10 bank have disbursed 1663.4 lakh loan among 1241 SHG.

 Bank of India have distributed 335 KCC in Varanasi region while its target for the year
was 200, i.e 135 KCC more than target. But it stands on 6th position.UBI being lead bank
of region stands on 1st position and have distributed 3197 KCC in Varanasi.

 BOI’s target for distribution of ACC in 2010 was 65, but not even a single is distributed till
now. So bank need to concentrate on areas where artist resides.

 BOI have distributed 6 special component plan against the target of 42. To increase its
distribution bank need to concentrate on area where max SC/ST lives.

 However Shri Kashiram Employment scheme for minorities is scheme of govt of U.P. but
it is not promoted well as many banks have distributed this product more than their target.

 Bank of India have provided 15 account with DRI with an amount of 1.95 lakhs.

 Bank of India have formed 40 SHG in Varanasi region, and with that it stands on 6th
position in Varanasi region. However Bank of India have formed largest no of SHG’s in
U.P. during 09-10.

OBJECTIVE 3.

89
To evaluate profile of customers taken loan from Bank of India under various
schemes.

 Individuals of Varanasi region have taken loan for 5 purpose they are : Animal
husbandary, Trading, Transport, Production, Consumption.

 Maximum loan is taken for animal husbandary i.e. 37% of total, also maximum no of
people (40%) take loan for rearing animals.

 However maximum profit is enjoyed by individuals who do trading i.e 41 % (943 Rs per
week).

 No. of people taking loan for production is minimum i.e. 9%, while avg profit obtained by
this category is 2nd in number i.e 23% (543 Rs per week). So bank should promote loan for
this category so that people get max benefit and bank can have fast recovery.

 Maximum loan is taken by middle aged people i.e. belonging to range of 30-35. So bank
should try to promote and train them specially.

 Max loan is taken for amount of Rs 5000-10000. So, bank should design more product to
attract new customer of similar needs.

 Max loan is taken by SC & OBC (total of 75%), so Bank of India should promote all its
microfinance schemes in the ambedkar gram of district where SC & OBC resides in max
no.

 Max loan is taken by illiterates so bank staff must have patience and skill to make them
understandable about the terms of schemes.

 10% people take loan from more than one financial institution to fulfil theirextra needs. To
decrease this percentage bank need to design more flexible product for successful
individuals who need more money for expansion of their business, So that they dont have
to get loan from other institution.

90
OBJECTIVE 4
To study position of Varanasi in UP under microfinance.

 Number of SHG formed in Varanasi since 1999 is 28295, which is on 6th no in state. While
maximum SHG’s were formed in Varanasi in year 2010, i.e. 14% of the state.

 So we can say that Varanasi zone is progressing day by day & have lots of scope here.
Bank of India need to explore new avenues and touch those area which are weak to grab
better position in this zone under microfinance.

Problems faced by Bank of India in lending

Microfinace in Varanasi

 Less no. of rural branches in Varanasi

 Less staff in rural branches, so don,t have time for survey and monitoring.

 40% of population migrate to other places. 70% of population depend on them. As

efficient worker migrate and taking loan become less.

 Cost of documentation for both less amount and high amount is same so bank prefer to
give loan to people having demand of high amount for gaining high interest.

 Women are not supposed to go out of home, in villages. So they don’t prefer to do their
own business hence don’t take advantage of schemes provided to women.

 People residing in villages don’t have knowledge and skills to do business.

 NGO,s in rural Varanasi are not enough active to support institutional credit.

 Interpersonal conflicts among the member of SHG also create hurdle in forming successful
group.

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SUGGESTIONS :
 The poor face more risk than well off, so it is necessary to offer micro-insurance with
microcredit. Microcredit without micro-insurance is self-defeating.

 To increase outreach to the poor Bank of India need to utilize existing govt organizations
and NGO’s having greater acceptability among financially excluded.

 To make people aware of benefit of microfinance bank should organize MF MELA. So

that people who are not member of SHG and are not beneficiaries of microfinance can
interact and get influenced from the same.

 Bank should appreciate and reward NGO, MFI’s and SHG doing excellent job in
distribution and recovery of microfinance. For motivating to do their best.

 To increase publicity among villagers bank should publish photos of individuals/SHG

doing good, in their regional newspaper.

 Bank should hang banners in major HAAT/MANDI so that people become aware of
microfinance product.

 Bank should establish RUDSETTI- training institutes to help rural youth to stand on their
feet in Varanasi region.

 Sensitization of staff working in rural/semi urban branches towards microfinance.

 Special SHG cell should be opened at major branches of bank.

 Special schemes should be launched for members of SHG or the individual taking benefits
of microfinance.

92
 BIBLIOGRAPHY

Websites:

Bank of India
RBI
NABARD
UP Govt

Books and journals

Circulars of Bank of India

Yojana
Microcredit and economic development: By R. Rajkumar and Dr Sitaram
Singh

QUESTIONNAIRE

93
QUESTIONNAIRE FOR
VILLAGERS
………………………………
1) NAME ……………….
………………………………
2) Age ……………….
………………………………
3) Sex ……………….
………………………………
4) Caste ………………..
………………………………
5) Education ………………..
………………………………
6)Amount of loan taken ………………..
………………………………
7) purpose ……………….
………………………………
8)Profession ……………….
………………………………
9) Average profit (weekly) ………………..

No (
10)Loan taken by other institution Yes ( ) )
………………………………
if yes , (1) purpose ………………..
………………………………
(2)How much ……………….
………………………………
(3) From whom ……………….

QUESTIONNAIRE FOR BANKERS

94
 …………………………………………
1) Name …….
…………………………………………
2) Branch name …….
…………………………………………
3) Branch opening year …….

4) No. of SHG formed In 2008: ………..

In 2009: ………..
In 2010: ………..

5)Amount of loan disbursed by them in

In 2008: ………..
In 2009: ………..
In 2010: ………..

6) How they are formed:

Through Bank:……………….
Through NGO:………………
Through MFI:………………..

7) No. of KCC distributed in the year:

……………………………………………….

8) No. of ACC distributed in this year:

……………………………………………….

9) How many women have taken Loan under

…………………………………………
Priyadarsini Yojana: …….

10) No. of Accounts provided with DRI:

……………………………………………….

95