BUNDELKHAND UNIVERSITY, JHANSI

SUMMER TRAINING PROJECT REPORT

ON
“PROCESSING OF LOAN IN SHRI RAM TRANSPORT FINANCE COMPANY LIMITED”

Submitted In Fulfillment for the Award of the Degree Of

MASTER OF BUSINESS ADMINISTRATION
(FINANCIAL MANAGEMENT)

(2017-2019)
Under The Guidance of: Submitted By:
Dr.Shilpa Sharma Rishi Sharma
Roll No.171145095036
MBA (FM) 3rd SEM

SUBMITTED TO
DEPARTMENT OF BANKING, ECONOMICS AND FINANCE, BUNDELKHAND
UNIVERSITY JHANSI (UP)
 A PROJECT REPORT
ON
“ PROCESSING OF LOAN IN SHRI RAM TRANSPORT
FINANCE COMPANY LIMITED ”
Submitted to
Bundelkhand University, Jhansi (UP)
Summer Training Report
Submitted in partial fulfillment for the degree of
MASTER OF BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
Submitted by
Mr.Rishi Sharma
Roll no. 171145095036
UNDER SUPERVISION OF
Dr.
Shilpa Sharma

INSTITUTE OF BANKING, ECONOMICS AND

FINANCE
BUNDELKHAND UNIVERSITY,
JHANSI - (UP)
(2017-2019)
 DECLARATION

I, Rishi Sharma, hereby declare that the Summer Training Report,

entitled “A Study Of Processing Of Loan In Shri Ram Transport Finance
Company Limited ”, submitted to the Institute Of Economics & Finance,
Bundelkhand University in partial fulfillment of the requirements for the award
of the degree of (Financial Management) is a record of original training
undergone by me during the period of 25 May 2018 – 9 July 2018 under the super
vision and guidance of Dr. Shilpa Mishra ( Assistant Professor ), Institute of
Economic& Finance, Bundelkhand University and it has not formed the basis for
the award of any Degree/Fellowship or other similar title to any candidate of any
University.

PLACE: Rishi Sharma

DATE: MBA (FM) 3rd SEM
Institute Of Economics and Finance
 INSTITUTE OF BANKING, ECONOMICS AND FINANCE
BUNDELKHAND UNIVERSITY, JHANSI - (UP)

CERTIFICATE

This is to certify that the Summer Training Report entitled “Processing of loan in
Shri Ram Transport Finance Company Limited ”, in partial fulfillment of the
requirements for the award of the Degree of Master of Business Administration
is a record of original training under gone by Rishi Sharma (Roll No.
171145095036) during the year 2017-19 of his study in the Institute of Economic
& Finance, Bundelkhand University, under my supervision and the report has
not formed the basis for the award of any degree/Fellowship or other similar title to
any candidate of any University.

Place: Jhansi
Date: Dr.Shilpa Sharma

Institute of Economics and

Finance
Bundelkhand University, Jhansi
 AKNOWLEDGEMENT
Training is essential to supplement theoretical knowledge with practical knowledge
and to include Right attitude and conduct regarding the profession, it improve
efficiency, and acts as a driving force in focusing our goals. As we all are aware of
the most sought after work is “success”, everybody wants it and some never realize
when they have got it. Concentration , dedication hard work and application are
essential but not the only factor to achieve the desired goal. Those must be
supplemented by the guidance and cooperation of experts to make it success.

Behind every study there stands a myriad of people whose people and contribution
make it successful. Firstly, I would here by like to offer my sincere thanks to
Dr.C.B. Singh (HOD) of Institute of Banking, Economics and Finance,
Bundelkhand University, Jhansi who provided me an opportunity to work in
dissertation report.

Secondly, I would like to offer my thankful regard to my project guide and mentor
Dr.Shilpa Sharma (Assistant Professor) Institute of Banking, Economics and
finance, Bundelkhand University. Who helped me as a torch bearer a friend and a
guide my entire project duration. I deem it to be proud privilege to work under the
guidance of her.

I came across and availed one such opportunity by undergoing my summer

internship Training at Shri Ram Finance limited, Jhansi which has been a great
learning as well as experience, certainly would have not been possible
without sincere guidance, cooperation and lectured by Mr.Adarsh Arjariya
(CSE) of the company.

My special thanks to “Mr. Manoj Kumar Singh Yadav” who assisted me in each
and every moments during the training in “finance department ” without which I
would not have imagined to complete my specialization successfully.

Rishi Sharma
Roll No.171145095036
MBA (FM) 3rd SEM
`

CHAPTER CONTENTS PAGE

NO NO

 Declaration 1
 Certificate 2
 Company 3
Certificate
 Acknowledgement 4
Chapter 1 Introduction of Loan
Chapter 2 Company Profile
Chapter 3 Classification of Loan
& their processing
Chapter 4 Conclusion
Findings
Limitations
Suggestions
Bibliography
 CHAPTER 1

INTRODUCTION OF LOAN

In finance, a loan is the lending of money by one or more individuals,

organizations, or other entities to other individuals, organizations etc. The recipient
(i.e. the borrower) incurs a debt, and is usually liable to pay interest on that debt
until it is repaid, and also to repay the principal amount borrowed.

The document evidencing the debt, e.g. a promissory note, will normally specify,
among other things, the principal amount of money borrowed, the interest rate the
lender is charging, and date of repayment. A loan entails the reallocation of the
subject asset(s) for a period of time, between the lender and the borrower.

The interest provides an incentive for the lender to engage in the loan. In a legal
loan, each of these obligations and restrictions is enforced by contract, which can
also place the borrower under additional restrictions known as loan covenants.
Although this article focuses on monetary loans, in practice any material object
might be lent.

Acting as a provider of loans is one of the main activities of financial

institutions such as banks and credit card companies. For other institutions, issuing
of debt contracts such as bonds is a typical source of funding.
Types of loans
Secured
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or
house) as collateral.
A mortgage loan is a very common type of loan, used by many individuals to
purchase residential property. The lender, usually a financial institution, is given
security – a lien on the title to the property – until the mortgage is paid off in full.
If the borrower defaults on the loan, the bank would have the legal right to
repossess the house and sell it, to recover sums owing to it.
Similarly, a loan taken out to buy a car may be secured by the car. The duration of
the loan is much shorter – often corresponding to the useful life of the car. There
are two types of auto loans, direct and indirect. In a direct auto loan, a bank lends
the money directly to a consumer. In an indirect auto loan, a car dealership (or a
connected company) acts as an intermediary between the bank or financial
institution and the consumer.

Unsecured
Unsecured loans are monetary loans that are not secured against the borrower's
assets. These may be available from financial institutions under many different
guises or marketing packages:

 credit card debt

 personal loans
 bank overdrafts
 credit facilities or lines of credit
 corporate bonds (may be secured or unsecured)
 peer-to-peer lending

The interest rates applicable to these different forms may vary depending on the
lender and the borrower. These may or may not be regulated by law. In the United
Kingdom, when applied to individuals, these may come under the Consumer Credit
Act 1974.
Interest rates on unsecured loans are nearly always higher than for secured loans
because an unsecured lender's options for recourse against the borrower in the
event of default are severely limited, subjecting the lender to higher risk compared
to that encountered for a secured loan. An unsecured lender must sue the borrower,
obtain a money judgment for breach of contract, and then pursue execution of the
judgment against the borrower's unencumbered assets (that is, the ones not already
pledged to secured lenders). In insolvency proceedings, secured lenders
traditionally have priority over unsecured lenders when a court divides up the
borrower's assets. Thus, a higher interest rate reflects the additional risk that in the
event of insolvency, the debt may be uncollectible.

Demand
Demand loans are short-term loans that typically do not have fixed dates for
repayment. Instead, demand loans carry a floating interest rate which varies
according to the prime lending rate or other defined contract terms. Demand loans
can be "called" for repayment by the lending institution at any time. Demand loans
may be unsecured or secured.

Subsidized
A subsidized loan is a loan on which the interest is reduced by an explicit or
hidden subsidy. In the context of college loans in the United States, it refers to a
loan on which no interest is accrued while a student remains enrolled in education.

Concessional
A concessional loan, sometimes called a "soft loan", is granted on terms
substantially more generous than market loans either through below-market
interest rates, by grace periods or a combination of both. Such loans may be made
by foreign governments to developing countries or may be offered to employees of
lending institutions as an employee benefit (sometimes called a perk).
Target markets
Loans can also be subcategorized according to whether the debtor is an individual
person (consumer) or a business.

Personal
Common personal loans include mortgage loans, car loans, home equity lines of
credit, credit cards, installment loans and payday loans. The credit score of the
borrower is a major component in and underwriting and interest rates (APR) of
these loans. The monthly payments of personal loans can be decreased by selecting
longer payment terms, but overall interest paid increases as well.

Commercial
Loans to businesses are similar to the above, but also include commercial
mortgages and corporate bonds. Underwriting is not based upon credit score but
rather credit rating.

Loan payment
The most typical loan payment type is the fully amortizing payment in which each
monthly rate has the same value over time.
The fixed monthly payment P for a loan of L for n months and a monthly interest
rate c is:
Abuses in lending
Predatory lending is one form of abuse in the granting of loans. It usually involves
granting a loan in order to put the borrower in a position that one can gain
advantage over him or her; subprime mortgage-lending and payday-lending are
two examples, where the moneylender is not authorized or regulated, the lender
could be considered a loan shark.
Usury is a different form of abuse, where the lender charges excessive interest. In
different time periods and cultures the acceptable interest rate has varied, from no
interest at all to unlimited interest rates. Credit card companies in some countries
have been accused by consumer organizations of lending at usurious interest rates
and making money out of frivolous "extra charges".
Abuses can also take place in the form of the customer abusing the lender by not
repaying the loan or with an intent to defraud the lender.

United States taxes

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

Income from discharge of indebtedness

Although a loan does not start out as income to the borrower, it becomes income to
the borrower if the borrower is discharged of indebtedness. Thus, if a debt is
discharged, then the borrower essentially has received income equal to the amount
of the indebtedness. The Internal Revenue Code lists "Income from Discharge of
Indebtedness" in Section 61(a)(12) as a source of gross income.
Example: X owes Y $50,000. If Y discharges the indebtedness, then X no longer
owes Y $50,000. For purposes of calculating income, this is treated the same way
as if Y gave X $50,000.

Business Overview
Area of operation All India
Branch Offices (As at 1,301
September 30, 2018)
Employees 26,156
Customers 2,040,000 and counting
Agency Force 15,000 plus Resident Representatives -
1300
Assets under Management ₹104,380 Crore
(As at September 30, 2018)
Net worth (As at ₹14,560 Crore
September 30, 2018)
Stock Exchange Listing Bombay, Madras and The National Stock
Exchanges
 CHAPTER 2
COMPANY PROFILE

Overview

Shriram Transport Finance Company Limited is the flagship company of the

Shriram group which has significant presence in Consumer Finance, Life
Insurance, General Insurance, Stock Broking and Distribution businesses.
Established in 1979, Shriram Transport is today the largest asset financing NBFC
in the country and holistic finance provider for the commercial vehicle industry
and seeks to partner small truck owners for every possible need related to their
assets. It has PAN India presence with 513 branch offices. Based at Mumbai, it
manages assets over Rs 41,900 crores and has a live customer base exceeding
8,50,000.

We are a part of the "SHRIRAM" conglomerate which has significant presence in

financial services viz., commercial vehicle financing business, consumer finance,
life and general insurance, stock broking, chit funds and distribution of financial
products such as life and general insurance products and units of mutual funds.
Our Company was incorporated in the year 1979 and is registered as a Deposit
taking NBFC with Reserve Bank of India under section 45IA of the Reserve Bank
of India Act ,1934.

STFC decided to finance the much neglected Small Truck Owner. Shriram
understood the power of 'Aspiration' much before marketing based on 'Aspiration'
became fashionable. Shriram started lending to the Small Truck Owner to buy new
trucks. But we found a mismatch between the Aspiration and Ability. The Truck
Operator was honest but the Equity at his command was not sufficient to support
the credit levels required to buy a new truck.

We did not have the heart to send the Truck Operator back empty handed; we
decided to fund Pre-owned Trucks. This was the most momentous decision that we
made. What followed was Sheer magic.

From Driver to Owner, even if only of a Pre-owned Truck and from Pre-owned
Truck to the New Truck, we have been with him in his journey of Prosperity as he
has been our partner in our road to success and leadership

For us at Shriram, credit-worthiness of the Small Truck Owner has always been an
article of faith. This faith has guided our journey from our pioneering days in
financing Small Truck Owners to the present day leadership. Today we are not
only the leader in Truck Finance; we are also India's largest Asset Based Non-
Banking Finance Company.

The inability of the economists to capture data relating to the economic activity of
the informal sector has resulted in its neglect at the policy-making levels in the
government.

The distribution of Truck Ownership being scattered among a large number of

individuals has resulted in this very important group being missed by the
institutional radar.

It is estimated that 80% of trucks in the country are in the hands of individuals.
Board of Directors

S. Lakshminarayanan (Chairman)

Mr. Lakshminarayanan Subramanian is a non-executive Director on our

Board. He holds master’s degree in Science in Chemistry and post
graduate diploma from University of Manchester (U.K.) in Advanced
Social & Economic Studies. Mr. Lakshminarayanan is a member of the
Indian Administrative Service (IAS-retired) and as such held several
senior positions in the Ministry of Home Affairs, Ministry of
Communications and Information Technology, Ministry of Information
and Broadcasting of the Government of India and in the Department of
Tourism, Culture and Public Relations, Department of Mines, Mineral
Resources, Revenue and Relief and Rehabilitation of the Government of
Madhya Pradesh.
Umesh Govind Revankar (Managing Director & CEO)

Mr. Umesh Govind Revankar holds a bachelor’s degree in business

management from Mangalore University and a master of business
administration (MBA) in finance. He attended the Advanced
Management Program at Harvard Business School. Mr. Revankar started
his career with the Shriram group as an executive trainee in 1987. He
has been associated with the Shriram group for the last 28 years and has
extensive experience in the financial services industry. During his stint
with the Shriram Group, he has shouldered various responsibilities and
worked in several key roles of business operations.
Our Journey
Our journey has seen us making several innovations while we stood at the very
edge of Organized Finance. The Banks and Institutions were guided by the
Economists' vision; the Small Truck Owner who always fell on their blind side was
given the miss.

With a track record of about 39 years in this business, we are among the leading
organized finance provider for the commercial vehicle industry with a focus to
provide various credit facilities to STOs. We have also added passenger
commercial vehicles, multi-utility vehicles, three wheelers, tractors and
construction equipment to our portfolio, making us a diversified, end to end
provider of finance solutions to the domestic road logistics industry. Besides
financing commercial vehicles (both new and pre-owned) we also extend finance
for tyres, engine replacement and working capital.

Our pan-India presence through our widespread network of branches has helped in
our overall growth over the years. As on June 30, 2018 we had 1,230 branches, 854
rural centres and tie up over 500 private financiers across the country. As on June
30, 2018 our total employee strength was 24,533, including more than 15,356
product executives and credit executives who are colloquially referred to as our
field force.

We have demonstrated consistent growth in our business and profitability. Our

assets under management have grown by a compounded annual growth rate
(CAGR) of 15.74% from Rs. 53,116 crores in FY 2014 to Rs. 95,306 crores in FY
2018. Our total income and profit after tax in FY 2018 are Rs. 12,417 crores and
Rs. 1,568 crores respectively.

Today we have approximately 20-25% market share in pre-owned and

approximately 7-8% market share in new truck financing, with more than
19,70,000 custome

Vision
STFC was set up with the objective of offering the common man a host of products
and services that would be helpful to him on his path to prosperity. Over the
decades, the company has achieved significant success in reaching this objective,
and has created a tremendous sense of loyalty amongst its customers.

Operational efficiency, integrity and a strong focus on catering to the needs of the
common man by offering him high quality and cost-effective products & services
are the values driving STFC. These core values are deep-rooted within the
organisation and have been strongly adhered to over the decades.

STFC prides itself on a perfect understanding of the customer. Each product or

service is tailor-made to perfectly suit customer needs. It is this guiding philosophy
of putting people first that has brought the company closer to the grassroots, and
made it the preferred choice for all the truck financing requirements amongst
customers.

Our Accomplishments
Shriram Transport Finance Company wins CNBC TV18 Best Bank and Financial
Institution Awards 2012.

Awarded “Best NBFC” in “Asset Backed Lending” category by Chief Guest Dr. C.
Rangarajan, Chairman of the Prime Minister’s Economic Advisory Council.
MUMBAI, October 17, 2012: Shriram Transport Finance Company Limited
(STFC), the largest asset financing NBFC in the country, was chosen as the “Best
NBFC” in “Asset Backed Lending” category at CNBC TV18 Best Bank and
Financial Institution Awards 2012 held on October 17, 2012, at the ITC Grand
Central, in Parel, Mumbai.

Upon receiving the award, Mr. U.G. Revankar, Managing Director, Shriram
Transport Finance Company Ltd, said, “We are extremely honoured to
receive this prestigious award from CNBC TV18. This award signifies the
hard work that Shriram Transport Finance Ltd has been putting in over the
years. We at STFC are now even more determined to achieve greater heights
in the future.”

This distinction was accorded to STFC by a distinguished panel of jurors,

including Mr. Jagdish Capoor, former Deputy Governor at the RBI and former
chairman of HDFC Bank and of BSE, Mr. A.K. Purwar, Chairman of IndiaVenture
Advisors Pvt. Ltd & former chairman of State Bank of India, Mr. H.N. Sinor,
CEO, Association of Mutual Funds of India, former CEO, Indian Banks Assn and
former MD of ICICI and Mr. M.V. Nair, former Chairman, Union Bank.

The jury round was preceded by a robust and rigorous scoring process designed by
KPMG. The KPMG team scored all banks and financial institutions on criteria like
growth, profitability, capital ratios and even softer qualities like investor/customer
care and compiled a short list. In the second stage, the short-listed companies were
examined by the jurors who then vigorously debated the various nominations
before coming to a unanimous conclusion on each category.

Shriram Transport Finance Company is a part of the "SHRIRAM" conglomerate,

which has significant presence in financial services, viz., commercial vehicle
financing business, consumer finance, life and general insurance, stock broking,
chit funds and distribution of financial products such as life and general insurance
products and units of mutual funds. Apart from these financial services, the group
is also present in non-financial services business such as property development,
engineering projects and information technology.
 Classification of Loan in STFC
 Heavy Duty Trucks
 Medium, Intermediate Light Duty Truck
 Pickup Truck and Mini Truck
 Passenger Vehicle
 Farm Equipment
 Construction Vehicle & Equipment

 HEAVY DUTY TRUCK (HDT)

Defined as Heavy Commercial Vehicles or alternatively Multi Axle Vehicles
having gross vehicle weight upwards of 16.2 tons. Being a life line of the
economy, these vehicles are an integral part of the commercial activity of any
country and these vehicles are usually deployed in the long haul distance and in
transportation of materials at the ports as also in the extraction of natural resources
like Iron or Coal etc.

Almost 100 percent of these vehicles are purchased only under financing and it is
estimated that nearly 1.5 to 2 million HCVs are plying the Indian roads. Shriram
Transport offers financing options for the purchase of both new and used vehicles
to this segment which has some of the bigger fleet owners on one end of the
spectrum and the small fleet / single vehicle owner on the other.

 MEDIUM, INTERMEDIATE AND LIGHT

DUTY TRUCK (LDT)
These vehicles have a gross vehicle weight ranging from 5 to 16.2 tones and are
engaged in medium haulage business especially connecting rural/ semi urban roads
to urban centers. The population of these vehicles is estimated to be around 5
million. Shriram Transport offers tailor made financing solutions for the purchase
of both used and new LCVs across the country which has the highest component of
‘stand’ operators within its segmentation.
  PICK UP TRUCK AND MINI TRUCK ( P&MT)
These vehicles have a GVW of less than 5 tons and they fulfill the role of
transportation in the spoke in a hub and spoke arrangement. These vehicles have
high concentrations in short hauls and last mile delivery situations. Nearly 3
million of these vehicles occupy the bottom end of this industry of which about 0.3
to 0.5 million vehicles are three wheeler goods carrying vehicles, the balance being
four wheelers. Shriram Transport gives flexible loan options to prospective buyers
of these vehicles which incidentally has the highest concentration of the small
operator and driver cum owner category of vehicle users.

 PASSENGER VEHICLE
India being a country with a population of 1.4 billion coupled with a widespread
geographical area and an extensive road network, the volume of people moving
from one place to another is catered to by a wide range of passenger vehicles
starting from simple three wheelers, taxis, muv’s, vans to high cost and state of the
art Volvo / Mercedes buses travelling across the length and breadth of the country.
There are nearly 10 millions of passenger vehicles that exist which makes this as
one of the highest potential vertical for financing and the most insulated from
economic downturns. In the car segment Shriram Transport had earlier restricted
itself to finance on yellow board (Taxi) vehicles only, keeping in line with its
philosophy of lending against an earning asset but from 2010 personal car loans
have also been included in the product range, thus aligning ourselves to changing
lifestyles of the populace.

 FARM EQUIPMENT
Being an agrarian economy, a substantial part of India lives in its villages and a
major portion of our population is engaged in agriculture. Shriram Transport has a
granular footprint of more than 300 rural / semi urban branches which are located
in these centers to cater to the requirement of finance from buyers of tractors,
harvesters and various other farm equipments which are deployed both for
agricultural and commercial purposes. Hitherto a domain of co operative and
nationalized banks’ rural branches, this segment is 5millions lakh strong and is
ever growing thanks to mechanized methods of agriculture becoming a necessity in
the wake of rural labour in availability.

 CONSTRUCTION VEHICLE &

EQUIPMENT
The recent impetus given by the Indian Government for infrastructure spending has
exponentially increased the potential for construction equipment’s which in turn
prompted STFC to fund the capital requirements of large and medium contractors
engaged in building of roads, bridges, dams and other infrastructure projects.
STFC also caters to the needs of retail segment of this vast business with easy
solutions for buyers of tippers, dumpers, backhoe loaders and cranes and as also
for the purchase of pre-owned construction equipment.

STFC Policies
Interest Rate Policy
 Reserve Bank of India wide its notification No. DNBS. 204 / CGM (ASR)-
2009 dated January 2, 2009 and vide its Guidelines on FPC for NBFCs
DNBS.CC.PD.No.320/03.10.01/2012-13 dated February 18, 2013 have
directed all NBFCs to make available the rates of interest and the approach
for gradation of risks on the web-site of the companies.
 The base interest rate will be arrived at based on the weighted average cost
of funds, risk premium, other costs such as administrative expenses and
profit margin
 The base interest rate is reviewed periodically by the ALM Committee.
 The Interest rate applicable to each loan account will be assessed based on
multiple parameters like tenure, borrower profile, borrowers repayment
capacity based on the cash flows, loan to value of the asset financed, type of
collateral security provided by the borrower and past repayment track record
of the borrower, etc.
  The rates of interest for the same product and tenor availed during same
period by different customers need not be standardized but could be different
for different customers depending upon consideration of any or combination
of a few or all factors listed above.
 The Company shall intimate the borrower loan amount, annualized rate of
interest and method of application at the time of sanction of the loan along
with the tenure and amount of monthly installment.
 The company also offers variable and equated monthly installments
schemes.
 The other charges such as processing fees, additional interest charged on
delayed payments and cheque bouncing charges are mentioned in the
Schedule which is part of the Loan Agreement.
 The rates of interest applicable to each loan account is subject to change as
the situation warrants and is subject to the Management’s perceived risk on a
case to case basis.
 Claims for refund or waiver of charges/ penal interest / additional interest
would normally not be entertained by the company and it is at the sole
discretion of the company to deal with such requests if any.
 Accordingly the present annualised rate of interest charged to our customers
is in the range of:
Commercial Vehicles 12% - 27%

0% finance
0% financing (zero percent), alternatively known as discounted finance, is a widely
used marketing tactic for attracting buyers of consumer goods, automobiles, real
estate, or credit cards in different parts of the world.

 For the buyer, the scheme is offered as a steal, without any levied interest for
a specific period, subject to special terms or conditions
Mathematics behind 0% finance
The financial mathematics behind the 0% finance scheme is somewhat complex, as
the calculation differs with respect to the type of product and the country. These
deals are offered by finance companies or banks in conjunction with
a manufacturer or dealer network. The schemes offer "zero percent" finance, where
a customer pays for the financing cost in an indirect manner. The indirect cost will
include paying a processing fee, a significant amount as advance EMIs (equated
monthly installments), as well as a minimum cash down payment. Often, the
biggest cost may involve forfeiting a cash discount which might otherwise be
available on a cash purchase.
Suppose a customer opted for 0% finance to buy an electronic device worth $1000,
offered on a term of 6 months' EMIs, with a $50 application processing fee and one
month's EMI in advance. This sale actually results in a 12.48% effective interest
rate for the customer.
Several central banks have reacted strongly to zero percent or discounted interest
rate schemes and want them stopped, as they feel consumers are misguided by
such schemes into believing that bank funding comes for free. As such, schemes
serve the purpose of attracting and exploiting vulnerable customers.
Many agreements charge interest on the full price- backdated to the original
purchase date- if the remaining debt is not cleared before the end of the free credit
period. It has been suggested that credit providers make payment arrangements
intentionally more difficult and exploit consumers' expectation that they will be
sufficiently reminded (either by not reminding them or by presenting the reminder
in an inconspicuous manner) in order to invoke this clause and generate
income. Moreover, it has also been noted that with higher-value purchases such as
car deals, the costs for the 0%-financing are compensated by going up with the
price of the item.
Steps in Processing of Loan
We are principally engaged in the business of providing commercial vehicle
financing to FTUs and SRTOs. FTUs are principally former truck drivers who
purchase trucks for use in commercial operations and SRTOs are principally small
truck operators owning between one and four used commercial vehicles. Our
financing products are principally targeted at the financing of pre-owned trucks
and other commercial vehicles, although we also provide financing for new
commercial vehicles. Pre-owned commercial vehicles financed by us are typically
between five and 12 years old. We also provide financing for other kinds of pre-
owned and new commercial vehicles, including passenger vehicles, multi-utility
vehicles, tractors and three wheelers.

Vehicle Parts Finance and other ancillary

activities
Our customers also require financing for the purchase of vehicle parts in
connection with the operation of their trucks and other commercial vehicles. We
also offer financing for the acquisition of new and pre-owned vehicle equipment
and accessories, such as tyres, engines, chassis, and other vehicle parts.
We have entered into an agreement with Axis Bank (formerly UTI Bank Limited)
to market co-branded Visa credit cards to commercial vehicle operators for use in
India and Nepal. We provide marketing assistance for the sourcing of prospective
customers for such credit cards as well as assist in customer verification
procedures. Axis Bank - 127 - however retains the right to approve the application
by any such customer. Access to such additional credit enables our customers to
meet their short term financial requirements, including working capital
requirements.

Our Company’s Operations

 Customer Origination
  Customer Base
Our customer base is predominantly FTUs and SRTOs and other commercial
vehicle operators, and smaller construction equipment operators. We also provide
trade finance to commercial vehicle operators. These customers typically have
limited access to bank loans for commercial vehicle financing and limited credit
history. Our loans are secured by a hypothecation of the asset financed.

 Branch Network
As of March 31, 2012, we had a wide network of 502 branches across India and
15,057 employees. We have established branches at most major commercial
vehicle hubs along various road transportation routes across India. A typical
branch comprises nine to 10 employees, including the branch manager. As of
March 31, 2012, all of our branch offices were connected to servers at our
corporate office to enable real time information with respect to our loan
disbursement and recovery administration. Our customer origination efforts
strategically focus on building long term relationships with our customers,
addresses specific issues and local business requirements of potential customers in
a specific region.

 Branding/ advertising
We use the brand name “Shriram Transport Finance” for marketing our products
pursuant to a license agreement dated April 1, 2010 with Shriram Ownership Trust,
which is valid for a period of three years (i.e. till March 31, 2013). Our brand is
well recognized in India given its association with the brand of our promoter
Shriram and our own efforts of brand promotion. We have launched various
publicity campaigns through print and other media specifically targeted at our
target customer profile, FTUs and SRTOs, to create awareness of our product
features, including our speedy loan approval process with the intention of creating
and enhancing our brand identity. We believe that our emphasis on brand
promotion will be a significant contributor to our results of operations in future.
Customer Evaluation, Credit Appraisal and
Disbursement
Due to our customer profile, in addition to a credit evaluation of the borrower, we
rely on guarantor arrangements, the availability of security, referrals from existing
relationships and close client relationships in order to manage our asset quality. All
customer origination and evaluation, loan disbursement, loan administration and
monitoring as well as loan recovery processes are carried out by our product
executives. We do not utilize or engage direct selling or other marketing and
distribution agents or appraisers to carry out these processes. We follow certain
procedures for the evaluation of the creditworthiness of potential borrowers. The
typical credit appraisal process is described below:

Initial Evaluation

When a customer is identified and the requisite information for a financing

proposal is received, a branch manager or product executive meets with such
customer to assess the loan requirements and creditworthiness of such customer.
The proposal form requires the customer to provide information on the age,
address, employment details and annual income of the customer, as well as
information on outstanding loans and the number of commercial vehicles owned.
The applicant is required to provide proof of identification and residence for
verification purposes.

In connection with the loan application, the applicant is also required to furnish a
guarantor, typically another - 129 - commercial vehicle owner, preferably an
existing or former customer. Detailed information relating to such guarantor is also
required to be provided. For pre-owned commercial vehicles, a vehicle inspection
and evaluation report is prepared by our executives to ascertain, among other
matters, the registration details of the vehicle, as well as its condition and market
value. A field investigation report is also prepared relating to the place of residence
and of various movable and immovable properties of the applicant and the
guarantor. Each application also requires two independent references to be
provided.

Credit policies
We follow stringent credit policies to ensure the asset quality of our loans and the
security provided for such loans. Any deviation from such credit policies in
connection with a loan application requires prior approval. Our credit policies
include the following:
• Vehicle type: We only finance vehicles that are used for commercial purposes.
As these are income generating assets, we believe that this asset type reduces our
credit risk.

• Guarantor requirement: Loans must be secured by the personal guarantee of

the borrower as well as at least one third party guarantor. The guarantor must be a
commercial vehicle owner, preferably our existing or former customer, and
preferably operating in the same locality as the borrower.

• Loan approval guidelines: From time to time, our management lays down loan
approval parameters which are typically linked to the value of the vehicles.

• Age limit for used vehicles: We only extend loans to vehicles that are less than
12 years old.

• Period: In case of pre-owned commercial vehicles, the repayment term ranges

between 24 and 48 months. For new commercial vehicles, the repayment term
ranges between 36 and 60 months.

• Prepayment charges: The borrower is charged prepayment charges in the event

of termination of the loan by prepayment.

• Release of documents on full repayment: Security received from the borrower,

including unutilized postdated cheques, if any, is released on repayment of all dues
or on collection of the entire outstanding loan amount, provided no other existing
right or lien for any other claim exists against the borrower.

• RTO records: In case of used vehicle financing, Regional Transport Office

(“RTO”) records must be inspected for non-payment of road tax, pending court
cases, and other issues, and the records retained as part of the loan documentation.

• Physical inspection and trade reference: In case of all pre-owned vehicle

financing, the branch manager must physically inspect the vehicle and assess its
value. The branch manager’s determination regarding the condition of the vehicle
is recorded in the evaluation report of the vehicle. The branch manager must also
conduct contact point verification as well as a trade reference check of the
borrower before an actual disbursement is made, and such determination is
recorded in the proposal evaluation records.
Approval Process
The branch manager evaluates the loan proposal based on supporting
documentation and various other factors. The primary criterion for approval of a
loan proposal is based on the guarantee provided by another commercial vehicle
operator, preferably an existing or previous customer, as well as the valuation of
the asset to be secured by the loan. In addition, our branch managers may also
consider other factors in the approval process such as length of residence, past
repayment record and income sources.

The branch manager is authorized to approve a loan if the proposal meets the
criterion established for the approval of a loan. The applicant is intimated of the
outcome of the approval process, as well as the amount of loan approved, the terms
and conditions of such financing, including the rate of interest (annualized) and the
application of such interest during the tenure of the loan.

Disbursement
Margin money and other charges are collected prior to loan disbursements. The
disbursing officer retains evidence of the applicant’s acceptance of the terms and
conditions of the loan as part of the loan documentation. A chassis print of the
vehicle is also obtained and maintained in the loan file. The relevant RTO
endorsement forms are also required to be executed by the borrower prior to the
disbursement of the loan. Prior to the loan disbursement, the loan officer ensures
that a Know Your Customer checklist is completed by the applicant. The loan
officer verifies such information provided and includes such records in the relevant
loan file. The loan officer is also required to ensure that the contents of the loan
documents are explained in detail to the borrower either in English or in the local
language of the borrower, and a statement to such effect is included as part of the
loan documentation. The borrower is provided with a copy of the loan documents
executed by him. Although our customers have the option of making payments by
cash or cheque , we may require the applicant to submit post-dated cheques
covering an initial period prior to any loan disbursement. For used vehicles, an
endorsement of the registration certificate as well as the insurance policy must be
executed in our favour.
Loan administration and monitoring
The borrower and the relevant guarantor are required to execute a standard form of
Loan cum Hypothecation Agreement setting out the terms of the loan. A loan
repayment schedule is attached as a schedule to the Loan cum Hypothecation
Agreement, which generally sets out monthly repayment terms. The Loan cum
Hypothecation Agreement also requires a promissory note to be executed
containing an unconditional promise of payment to be signed by both the borrower
and the relevant guarantor. A power of attorney authorizing, among others, the
repossession of the hypothecated vehicle upon loan payment default, is also
required to be executed.

We provide three payment options: cash, cheques or demand drafts. Repayments

are made in monthly installments. Loans disbursed are recovered from the
customer in accordance with the loan terms and conditions agreed with the
customer. As a service to our customers our product executives offer to visit the
customers on the payment date to collect the installments due. We track loan
repayment schedules of our customers, on a monthly basis, based on the
outstanding tenure of the loans, the number of installments due and defaults
committed, if any. This data is analyzed based on the vehicles financed and
location of the customer.

Our MIS department and centralized operating team monitors compliance with the
terms and conditions for credit facilities. We monitor the completeness of
documentation, creation of security etc. through regular visits to the branches by
our regional as well as head office executives and internal auditors. All borrower
accounts are reviewed at least once a year, with a higher frequency for the larger
exposures and delinquent borrowers. The branch managers review collections
regularly, and personally contact borrowers that have defaulted on their loan
payments. Branch managers are assisted by a set of product executives in the day-
to-day operations, who are typically responsible for the collection of installments
from 105 to 150 borrowers each, depending on territorial dispersal.
Each branch customarily limits its commercial vehicle financing loans to
approximately 1,000 customers, which enables closer monitoring of receivables. A
new branch is opened to handle additional customers beyond such limit to ensure
appropriate risk management. Close monitoring of debt servicing efficiency
enables us to maintain high recovery ratios.
Collection and Recovery
We believe that our loan recovery procedure is particularly well-suited to our
target market in the commercial vehicle financing industry, as reflected by our high
loan recovery ratios compared to the average in the financial services industry. The
entire collection operation is administered in-house and we do not outsource loan
recovery and collection operations. In case of default, the reasons for the default
are identified by the local product executive and appropriate action is initiated,
such as requiring partial repayment and/or seeking additional guarantees or
collateral.

In the event of a default on three loan installments, the branch manager is required
to make a personal visit to the borrower to determine the gravity of the loan
recovery problem and in order to exert personal pressure on the borrower.

We may initiate the process for repossession of the vehicle in the event of a
default. Branch managers are trained to repossess vehicles and no external agency
is involved in such repossession. Repossessed vehicles are held at designated
secured facilities for eventual sale. The notice to the customer specifies the
outstanding amount to be paid within a specified period, failing which the vehicle
may be disposed of through auction. In the event there is a short fall in the
recovery of the outstanding amount from the sale of the vehicle, legal proceedings
against the customer may be initiated.

The laws governing the registration of motor vehicles in India effectively establish
vehicle ownership, as well as the claims of lenders. As a result, vehicle
repossession in the event of default is a relatively uncomplicated procedure, such
that the possibility of repossession provides an effective deterrent against default.
Conclusion
We know it can be hard to take that first step. But remember—even if you’re not
up-to-speed on your credit history, others will be—decision-makers who can
seriously impact your ability to move forward in life.

We can’t fix what we won’t face, so the first step towards rebuilding positive credit
is to take a good, long look at your credit score and credit report, reminding
yourself as you do that this is just where you’re starting from—not where you’re
going

As you have researched, loans are expensive. Sometimes we need to consider the
opportunity cost of decisions we make. Although we can afford the monthly
payment for a vehicle loan, we need to look at how much interest on the loan will
cost us. Having a better understanding of loans and interest rates will help you
make large purchase decisions in the future.
Findings
 Most of the borrower does not pay their payment timely.
 Although all the existing manpower is utilizing their utmost efforts
productivity sees not adequate due to lack of utilization of latest technology.
 Heavily dependent on head office decisions delayed the prompt disposal of
decisions or service delivery.
 The credit risk management is quite commendable, systematic and timely
monitoring and appropriate documentation are tried to be maintained.
 Customer satisfaction level is quite good. Informal conversation with some
customers reveals that they are quite satisfied with the service in regards to
disposals of credit proposals .
Limitations
I have tried my best to provide with all the necessary information about Shri Ram
Transport Finance Company Limited but the main problem faced in preparing the
paper was the inadequacy and lack of availability of required data. Besides others I
have faced the following limitations for preparing this report:
 Difficulty in accessing latest data of internal operations for security reasons.
 Non-availability of some preceding and latest data.
 Some information was withheld to retain the confidentiality of the company.
 Since the company personnel are very busy with their activities, as a result
they were not in a position to provide desired level of information about the
report.
 I was placed in the credit department for only 1 month of time.
Suggestions

 Respective personnel should be trained to overcome the deficiency in regards

to increase productivity of employees. The Company can organize more
training program and workshop to make the employees more efficient in their
sector.
 An uninterrupted network system has to be ensured. It will save the officials
from much hassle and will save time.
 Decision making process can be made more decentralized participative
approach should be adopted to gain prompt and effective result.
 Filing is very important component of proper documentation .It has to be
dealt with importance
 The credit sanction procedure should be made quicker since competition is
very hard in today’s business world .People do not want to wait for three to
four weeks on an average to get a loan which is even protected by security .
Bibliography

 Visited SHRI RAM TRANSPORT FINANCE COMPANY LIMITED

Websites :
 www.google.com
 www.scribd.com
 www.wikipedia.com
 www.stfc.in