A

PROJECT SYNOPSIS
ON
COMPARATIVE STUDY ON GOLD LOANS
AT
STATE BANK OF INDIA
SUBMITTED BY
CHILUPURI SANATH REDDY
Hall Ticket No. 1157-19-684-012
Under the guidance of
----------------------
(Assistant Professor)
Synopsis submitted in partial fulfillment for the award of the
Degree of

BACHELORS OF BUSINESS ADMINISTRATION

DEPARTMENT OF BUSINESS MANAGEMENT

PRAGATI MAHAVIDYALAYA DEGREE & PG COLLEGE

Hanuman Tekdi, KOTI, Hyderabad – 500095
(AFFILIATED TO OSMANIA UNIVERSITY)
(2020-2022)
 CHAPTER-I
INTRODUCTION
INTRODUCTION
A gold loan is a secured loan wherein the borrower keeps their gold, ranging from 18K to 24K, with a
bank or a financial institution as security and avails capital against it. On comparative terms, a gold
loan can be understood as a similar concept to a “mortgage loan” in which the owner keeps their
house or property as mortgage with the bank and takes a loan against it to fulfill their need for capital.
A gold loan is among banks’ profitable loans as banks are free from the worry of non-performing
asset (NPAs). This is because the jewelry which is taken as collateral remains with the bank even if
the borrower defaults on the payment of their monthly instalments (EMIs) on their loan.
Checking the quality: When a customer approaches a financial institution for a gold loan, the first step
the institution takes is to check the purity of the gold jewelry that is being considered as collateral
along with determination of value of the jewelry.
Know Your Customer (KYC): Know your customer norms and checks as stated by the Reserve Bank
of India (RBI) are performed by the bank, where the bank gets to know their customer’s details such
as identity, credit history, the necessity for applying for a loan and other details crucial in granting the
loan.
Approval of gold loan: Once the quality and value of jewelry is determined and the KYC procedure is
complete, the loan terms are agreed upon by both the financial institution and the consumer. Upon
agreement, the loan is approved and the amount is then credited to the borrower’s account. This entire
process can be completed within a couple of hours.
What are the Features of a Gold Loan?
Interest rates
The interest rates on gold loans vary based on the purity of gold. The higher the purity of gold, the
higher the amount that can be availed. Interest rates vary from 8% per annum to 18% per annum in
the public sector, whereas in the private sector these rates are as as high as 24% per annum.
Haircut and loan to value ratio (LTV)
According to the RBI’s guidelines, banks can give a maximum of 90% of the value of gold as loan,
implying a minimum 10% as haircut. Generally, the actual loan to value ratio varies from 55% to
65%, which means around a 35% to 45% margin for the banks, making it the safest loan for banks.
Loan to value ratio or LTV ration means the amount a customer will get against the value of gold. For
example, if the value of jewelry is INR 10,000 and the LTV is 65%, the maximum loan amount the
customer can get would be INR 6,500.
There are many reasons why customer expectations are likely to change over time. Process
improvements, advent of new technology, changes in customer's priorities, improved quality
of service provided by competitors are just a few examples. In today’s competitive world
there are many goods chasing few customers some are trying it expands their size and share
of existing market. As a result there are loser and winners. Winners are those who carefully
analyze needs identify opportunities and create aloe rich offers for target customer.
The objective of the market research to determine the demand and supply and use of the
product and competitors study so as to get the total market scenario of the product for
analyzing market problem research is needed. A firm can obtain market research in a number
of ways. It can hire market research firm or it can ask student to design and carry out market
research project. These marketing problems and opportunities if entrust to the student of
marketing. Especially when they seek the same during the project gives opportunities to
apply their theoretical knowledge and managerial knowledge. The type of research was
qualitative research. Qualitative research is collecting, analyzing and interpreting data by
observing what people do and say. The sources of the data for the study were primary and
secondary data. The questionnaire was prepared and administered to collect the relevant
primary data. The data collection method was based on questionnaire.
As researcher discussed in earlier he have got the topic for two months summer
internship program was “Market Scoping and Analysis OF Gold Loan and other loan
products”. For knowing the scope and analysis of gold loan in the market researcher have
conducted a small research with help of “QUESTIONARE”. Marketing research will help
researcher to identify the need of the customer by gathering the information by filling the
survey form from individual customer. Market Research is systematic problem analysis,
model building and fact finding for the purpose of important decision making and control in
the marketing of goods and services. It helps a firm in identifying what are the market
opportunities and constraints, in developing and implementing market strategies, and in
evaluating the effectiveness of marketing plans. Marketing Research is a growing and widely
used business activity as the sellers need to know more about their final consumers but are
generally widely separated from those consumers. Marketing Research is a necessary link
between marketing decision makers and the markets in which they operate. For gathering the
more and accurate information from the customer about financial product and gold loan
market researcher are made the questioner and filled the same from the individual customers.
RESEARCH METHODOLOGY
RESEARCH DESIGN
The study is based on survey technique. The study consists of analysis and Market Scoping
of Financial product of STATE BANK OF INDIA. For the purpose of the Study
Customers100 are picked up and their views solicited on different parameters. The
methodology adopted includes
 Questionnaire
 Random sample survey of customers
Personal interviews and informal discussions were held with customers to ascertain the
awareness level. Further applying simple statistical techniques has processed the data
collected.

Sampling method Convenience sampling

Sampling area Hyderabad, Near STATE BANK OF INDIA

Sample size 100

Data collection Questionnaire , Interview method
method
Data collection day 18 days

SAMPLING METHOD
Probability sampling requires complete knowledge about all sampling units in the universe.
Since due to time constraint non-probability sampling was chosen for the study.

SAMPLING SIZE
A sample of hundred was chosen for the purpose of the study.
OBJECTIVES
 To study what kind of changes the organization has undergone in the recent past or
have initiated recently.
 To find out the competitors operating in the Gold Loan Market.
 To find out the competitive position of STATE BANK OF INDIA and the ways and
means to improve on the service by STATE BANK OF INDIA.
 To know the Gold Loan performance level in the present market.
 To study about consumer awareness& satisfaction, about operational Services &
procedures of STATE BANK OF INDIA.
 To understand the satisfaction level of clients with STATE BANK OF INDIA
regarding service provided
SOURCE OF DATA:
Primary data: Questionnaire
Secondary data: are published materials such as periodicals, journals, newspapers, and
website.
DATA COLLECTION METHOD
The data collected for the study purpose is through questionnaire.
DATA COLLECTION INSTRUMENT
Selected randomly for the study purpose and then the information revealed from the public is
analyzed and interpreted in the study.
DATA PROCESSING
From large number of public. Were randomly picked up.
NEED FOR THE STUDY
Our statement is “market scoping of gold loan and other loan products” in these
statement main problem is our main topic is gold loan and some part is other loan , in these
statement is not cover all products .our research report is only two months and limited
products so that is a main problem in our research statement. Our statement is market
scoping of gold loan products and other loan products in that our market area is not included ,
so we can say that our area of marketing is small so that is our main problem in our
statement. In second problem is not specified our main problem is on marketing of loan
products so that is our second problem of our statement.
LIMITATIONS OF THE STUDY
 Time limit is a major constraint.
 This research reflects on individual public in HYDERABAD only. So findings and
suggestion given on the basis of this research cannot be extrapolated to the entire population.
 Sample size of the Questioner is 100 which is very small that is not enough to study
the awareness of consumer of that particular above area.
 Respondent are not sincere and care full to fill up the questioner so we cannot find
right solution.
 As per the company rules many information was not disclosed.
 As the managers are busy in their duty schedules it is not possible for us to spend
more time in interaction and discussion with them.
 CHAPTER-II
REVIEW OF LITERATURE
1. GEETHA G. NAIR DR JANCY DAVY(2015) Gold loans have become a basis for
creation of new financial products such as loans for purchase of gold wherein gold is
purchased on the date of loan and held as a pledge until the equated monthly instalments are
paid. India is one of the biggest markets for gold and gold loan. Indian households typically
have an emotional attachment and sense of personal belonging to the gold they own, which is
usually in the form of jewellery, coins or bars. A gold loan is settled either by repayment or,
in case of default, by sale of the pledged. The formalities in availing gold loans are minimal
and procedures are simple. IUnlike other secured loans, the underlying asset in a gold loan is
not subject to depreciation. At the same time, unlike land, it is a liquid asset and the
transaction costs involved when enforcing the security are minimal Gold loans are ideal for
those employed in the informal or unorganised sector and do not have documents to prove
their income. This is a segment conventional banks generally avoid because their appraisal
and credit scoring is based on formal documentation. Incidentally, more than 90 per cent of
India’s workforce is in unorganised sector. In practice, the entire process should hardly take
15 to 20 minutes. This makes gold loans ideal for the micro-finance segment where the loan
amounts are small and where there is no point in testing the borrower’s patience with an
elaborate procedure. For borrowers, gold loans have emerged as one of the best means of
raising quick, short-term capital. Gold loans were preferred over conventional personal loans
due to less procedures, fast disbursement and easy instalments. The study shows that the
respondents preferred gold loans from the banks, and most of the respondents use the fund for
their consumption smoothing.
2. Sarika Malhotra (2013) says that not so long ago, NBFCs were a hot favourite of private
equity investors in India (Malhotra, 2013). With the Indian economy on a roll, most PE funds
wanted to put their money in non-banking finance companies (NBFCs) specialising in gold
loans. But, today, gold loan companies have lost their lustre because of a stricter regulatory
environment and a volatile gold market, pushing funds to vehicle finance companies instead.
And with the economy in a slowdown, exits from gold loan lenders have also become much
harder. For example, the vehicle financing company, Au Financiers, has been a virtual PE
magnet the past few years. It first hit the jackpot in 2008 when Motilal Oswal Private Equity
invested INR 20 crore. Funds have been pouring in since. oswal invested another INR 20
crore in the company in 2010 and International Finance Corporation (IFC) INR 35 Crore,
followed by INR 150 crore by Warburg Pincus and INR 33 crore by IFC last year. Chrys
Capital also invested INR 120 crore in 2013. At the same time, the lender has also grown
from strength to strength: Au's net worth has leapt to INR 500 crore from just INR 15 crore in
2008 while its valuation has galloped to INR 1,200 crore from INR 30 crore in the same
period. For Motilal oswal too, the investment was worth its weight in gold. A partial exit in
2012 is reported to have translated into a five-fold return on investment, while a further stake
sale took its returns up 10 times. Vehicle finance companies in particular have been attracting
more funding. Quoting experts, the researcher says they offer more stability than gold loan
firms which are subject to business risks such as price fluctuations and quality of collateral.
Gold players have been hit by uniform valuation methodology for jewellery and operating
model changes suggested by the RBI which requires them to seek permission to open new
branches and disburse higher value loans through cheques. Also, PE funds believe in the
business model of lending against income-generating assets such as commercial vehicle
finance, as compared to businesses operating in consumption-based lending. Vehicle loan
companies get most of their business from semi-urban and rural areas. Most people in urban
areas, looking to buy cars, go to banks for loans, but those seeking trucks, especially from
smaller towns, prefer vehicle finance NBFCs.
3. George Alexander (2013) focused on the safety measures of borrowers. This noted that
the large gold loan NBFCs is almost like banks and is well-governed, with established
policies and procedures. Their branches have sufficient security measures such as strong
rooms, CCTV cameras, guards and also specific procedures regarding access, in order to
ensure safety of the collateral. Besides, they insure the gold against theft and other unforeseen
events. Audits and inspections guarantee the continued integrity of the holdings. Handling
and storage is also done carefully, so as to avoid damage to the ornaments. Apart from these,
the reputation of the lenders and transparent institutionalized procedures followed by them
assures borrowers of a fair deal. The major gold NBFCs have in place proper KYC (know
your customer) as well as Fair Practice Codes. In cases of recovery, too, borrowers are given
notice and a chance to redeem the gold or keep their auction in abeyance through payment of
interest, as in any bank. The author said that, when a borrower approaches a lender, he/she
calculates the costs not only in terms of interest, but also in terms of security, KYC,
documentation procedures, appraising methods, auction procedures, etc. Many borrowers
from gold NBFCs are migrants from pawnbrokers. For them, the rates charged by the NBFCs
are considerably lower. The others that come weigh all the benefits of the against that at a
busy bank branch.
GROWTH AND DEVLOPMENT
These are the types of banks operating in today's market:
Commercial banks: This type of banking includes national and state-charted banks, stock
savings banks, and industrial banks. This kind of banking service has provided many services
to the society which includes the basic functions of savings, providing loans, dealing in time
deposits, etc. The reserve requirements of these banks are totally different from the mutual
saving banks.
Mutual savings bank: This type of banks provides some limited type of loans and deals in
savings and other deposits. But recently the modifications have been done and now, these
banks are also providing a huge number of facilities. In these banks, the investment and loan
amount depends on the available customer's deposits. Once, the national level banks started
rolling, the concept of international banking emerged. Actually, the growth in the trade and
commerce, the growth in the exchanges between countries, the multi-national trades, etc.
demanded some kind of international organization to carry out the business smoothly.
So, the following international banks were formed in order to fulfill the demands of the
modern global market:
World Bank (International Bank for Reconstruction and Development): It was founded in
1945 with the view to approve loans to private investors and to the governments of different
countries.
IMF (International Monetary Fund): The bank has been involved in simplifying the process
of debt clearance between the nations. It has also provided valuable suggestions to the
members in the field of international banking.
The European Central Bank (European monetary system): Has been founded in 1998 to
handle the joint monetary policy of those European countries, which have adopted a single
currency. 
There are several organizations, which have developed in the recent times and which are
performing some of the orthodox banking operations, but these are not under the supervision
of state or federal banking authorities. These organizations are also serving the society in the
same manner as the traditional banks serve. 

Some of these organizations are:

Savings associations
Loan associations
Finance companies
Mortgage companies
Insurance companies
Credit unions
Investment bankers
Credit securities
Brokers and dealers in securities
Financial sector is the set of institutions, instruments, markets. It also includes the legal
and regulatory framework that permit transactions to be made through the extension of
credit. Fundamentally, financial sector development concerns overcoming “costs” incurred in
the financial system. This process of reducing costs of acquiring information,
enforcing contracts, and executing transactions results in the emergence of financial
contracts, intermediaries, and markets. Different types and combinations of information,
transaction, and enforcement costs in conjunction with different regulatory, legal and tax
systems have motivated distinct forms of contracts, intermediaries and markets across
countries in different times.
The five key functions of a financial system in a country are: (i) information production ex
ante about possible investments and capital allocation; (ii) monitoring investments and the
exercise of corporate governance after providing financing; (iii) facilitation of the trading,
diversification, and management of risk; (iv) mobilization and pooling of savings; and (v)
promoting the exchange of goods and services.
PERFOMANCE AND OTHER STASTICAL DATA
The word ‘Performance is derived from the word ‘parfourmen’, which means
‘To do’, ‘to carry out’ or ‘to render’. It refers the act of performing; execution,
accomplishment, fulfillment, etc. In border sense, performance refers to the
accomplishment of a given task measured against preset standards of accuracy, completeness,
cost, and speed. In other words, it refers to the degree to which an achievement is being or
has been accomplished. In the words of Frich Kohlar
“The performance is a general term applied to a part or to all the conducts of activities of an
organization over a period of time often with reference to past or projected cost efficiency,
management responsibility or accountability or the like. Thus, not just the presentation, but
the quality of results achieved refers to the performance. Performance is used to indicate
Firm’s success, conditions, and compliance. Financial performance refers to the act of
performing financial activity. In broader sense, financial performance refers to the degree to
which financial objectives being or has been accomplished. It is the process of measuring the
results of a firm's policies and operations in monetary terms. It is used to measure firm's
overall financial health over a given period of time and can also be used to compare similar
firms across the same industry or to compare industries or sectors in aggregation.
In the last decade the banking industry of India has experienced exponential growth. The
CNX Bank Index1 has grown by more than 1100% in absolute terms, and at a compounded
annual growth rate of over 25% in the period from 2000 – 2010, while the Sensex2 grew at a
compounded annual growth rate of 14%. In the year 2010 the banking sector
contributed16.35% to the GDP of India.3 This calls for an analysis of the performance of
Indian banks. The reforms of 1991 and 1998 have helped improve the performance,
profitability and efficiency of the Indian banking system. Prior studies have shown the
effectiveness of there forms on Indian banks in helping improve total factor productivity,
efficiency and profitability among other things. Much less has been done to examine how the
banking industry of India has fared compared to other countries in recent years. In addition,
there is insufficient published research on the performance of the public and private banks in
the wake of the financial crisis, which is a true litmus test. The purpose of this thesis is to
analyze the growth of the banking\sector of India, starting in the 21st century. The analysis is
conducted in two parts: (1) examination of the performance of private and public banks in
India in the last ten years and (2)comparison of the performance of the Indian banking sector
share price performance to the banking sectors and overall market indices of other developed
and developing countries over the last ten year.
Nationalization led to major structural changes in the banking sector of India. Branch
expansion was accompanied by development of priority sectors of the economy, with credit
being directed towards these sectors contrary to profit motives of the banks. The Credit
Guarantee Corporation of India Ltd. was established for providing guarantees against the risk
of default in payment, which increased the number of loans to smaller borrowers by the
banks. The number of rural bank offices increased from 1,443 branches in 1969 to 19,453
branches in 1981\(Reserve Bank of India 2008a). The amount of credit outstanding increased
from Rs. 1.15 billion in 1969 to Rs. 36 billion in 1981, which accounted for 11.9% of the
total loans to the rural areas (Reserve Bank of India 2008a). RBI was monitoring the
economy by controlling and changing micro factors affecting banks, to prevent banking
failures during crises. In April 1980, there was a second wave of nationalization when an
additional six banks were nationalized. All these banks had deposit liabilities of Rs. 2 billion
or more. The number of public sector banks reached twenty, representing 92% of the deposits
of the banking sector. The government increased the Cash Reserve Ratio (CRR) and the
Statutory Liquidity Ratio (SLR).5 Banks were earning less than the market rate eligible on
CRR balances and yield on government securities was lower than the interest rate paid by the
banks on deposits. The nationalization phase was marked by stringent controls on the banking
industry. As of September 22nd, 1990 the Cash Reserve Ratio was 15.00% and the Statutory
Liquidity Ratio was 38.5% (Reserve Bank of India), combined they amounted to 53.5% of all
demands and liabilities being saved in liquid government securities or as cash with the RBI.
The banks were being used by the government to fund their projects for economic
development. This led the banks to be unprofitable forcing the government\to adopt changes
and thus, came about the reforms of 1991 led by the Narasimham Committee. There are two
main approaches to banking regulation. One endpoint is government ownership of the
banking industry and the other endpoint is free banking system. Barth, Caprio and Levine
(2008) describe the two main approaches as the “Public Interest Approach” and the
“Private Interest View of Regulation”.