Disbursement of Home Loans by Commercial Banks

DEPARTMENT OF MANAGEMENT
DISBURSEMENT OF HOME LOANS

BY COMMERCIAL BANKS
A STUDY OF LUDHIANA CITY
Submitted to Lovely Professional University

In partial fulfillment of the requirements for the award of degree of
MASTER OF BUSINESS ADMINISTRATION
Submitted by: Supervisor:
MEHAK PURI MISS BHARTI AGGARWAL
2020070070 LECTURER
DEPARTMENT OF MANAGEMENT
LOVELY PROFESSIONAL UNIVERSITY
PHAGWARA
(2007-09)
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TO WHOMSOEVER IT MAY CONCERN
This is to certify that the project report titled “DISBURSEEMNT OF HOME LOANS
BY COMMERCIAL BANKS – ASTUDY OF LUDHIANA CITY” carried out by Miss
Mehak Puri D/o MR Ajay Puri has been accomplished under my guidance & supervision
as a duly registered MBA student of the Lovely Professional University, Phagwara. This
project is being submitted by him/her in the partial fulfilment of the requirements for the
award of the Master of Business Administration from Lovely Professional University.
Her dissertation represents his original work and is worthy of consideration for the award
of the degree of Master of Business Administration.
___________________________________
(Name & Signature of the Faculty Advisor)
Title: ______________________________
Date: ______________________________
Date:
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DECLARATION
I, "MEHAK PURI”, hereby declare that the work presented herein is genuine work done
originally by me and has not been published or submitted elsewhere for the requirement
of a degree programme. Any literature, data or works done by others and cited within this
dissertation has been given due acknowledgement and listed in the reference section.
_______________________
(Student's name & Signature)
_______________________
(Registration No.)
Date:__________________
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PREFACE
Research work in management is extremely important for it gives a close
view of the real business world and bridges the gap between theory and practical.
For any MBA student who is striving to perform outstanding, it is of paramount
importance that apart form theoretical knowledge one must also gain practical
knowledge. which in turn widely influence their conceptions and perceptions.
This project was undertaken towards the partial fulfillment of the requirements Lovely
professional university ,Phagwara. This really provided me an opportunity to
demonstrate my ability in applying theory to practical business situations.
The study undertaken by me is "disbursement of home loans by commericial banks " In
this, I have tried to perform my best.In the forthcoming pages an attempt has been made
to present comprehensive report concerning different aspects of my project.
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ACKNOWLEDGEMENT
"Gratitude is not a thing of expression, it is more matter of feeling."
There is always a sense of gratitude which one express towards others for their
help and supervision in achieving the goals.
This formal piece of acknowledgement is an attempt to express the feeling of
gratitude towards people who helpful me in successfully completing of my
training.
I would like to express my deep gratitude to Miss bharti Aggarwal my training
coordinator for their constant co-operation. she was always there with his competent
guidance and valuable suggestion through out the pursuance of this research project.
Special thanks to Miss Bharti Aggarwal who guided me to work honestly and to give
valuable suggestion for improving my work
Last but not least I would also like to place of appreciation to all the respondents whose
responses were of utmost importance for the project.
Above all no words can express my feelings to my parents, friends all those
persons who supported me during my project. I am also thankful to all the
respondents whose cooperation & support has helped me a lot in collecting
necessary information.
I would also like to thank almighty God for his blessings showered on me during the
completion of project report
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EXECUTIVE SUMMARY
Home is a dream of a person that shows the quantity of efforts, sacrifices luxuries and
above all gathering funds little by little to afford one’s dream. Home is one of the things
that everyone one wants to own. Home is a shelter to person where he rests and feel
comfortable. Many banks providing home loans whether commercial banks or financial
institutions to the people who want to had a home. The housing sector plays an important
role in the economic development of the country
My project title is “disbusremnt o f home loans by commericial banks “ a study o f
ludhiana city. I selected this topic because The Indian housing finance industry has grown
by leaps and bound in few years.Total home loans disbursements by banks has risen
which witnesses phenomenal growth from last 5 years. There are greater number of
borrowers of home loans.so by this study we can find out satisfaction level of customers
and problems faced by them in obtaining home loans.
My objectives of study are-
• To make comparative study of Disbursement of home loans by commercial banks.
• To study the satisfaction level of customers about home loans.
• To study the problems faced by customers in obtaining the home loans.
For this I had taken four commercial Banks in Ludhiana city namely ICICI Bank, PNB,
standard chartered Bank, SBI. It includes two public sector banks and two private sector
banks. The period of study is five years commencing from 2004-2008.
In the research methodology I had taken both primary data as well as secondary data , in
the primary data I had make a questionnaire to check the satisfaction level of customers
about home loans . in the secondary data I had studied the annual reports of RBI
,commercial banks & broachers of these bank
For the first objective I had collected the information about the number of account
holders of specified banks, no of disbursement of home loans and recovery of these loans.
After analysis I came to following findings
In the comparative study of specified banks Its found that
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Ø Punjab National Bank is having large number of customer base with high
loan disbursement and recovery of loans
Ø the standard chartered bank showed less outstanding balance which
presented in percentage form in the diagram
In case of second objective i.e customer satisfaction level it is found that
Ø On the basis of data the ICICI bank is emerging at higher position as
compare to Standard chartered bank and other public sector banks on
ground of professionally managed services, reliable & transparent system,
easy query handling etc
And problems face by customers in obtaining home loans are
§ The customer does not had proper knowledge about different
home loan products so they face problem in making a good
deal.
§ There are procedural delays, which harass the customers lot.
This will crush the curtsy of customers to avail the home loan.
§ The attitude of bank employees some times non cooperative
and it creates a hurdle in building trust and Confidence among
customers about banks.
§ The banks do not take into account the paying capacity of
customers. So some customers are not able to get amount of
loan needed by them.
Finally the whole research was carried out in a systematic way to reach at
exact results. The whole research and findings were based on the objectives
some of the limitation faced in collecting the data were
lack of time, lack of data, non-response, reluctant attitude and illiteracy of
respondents, which posed problems in carrying out the research.
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Some of the suggestions are
ü To increase their customers, the banks should provide specialized services
in this sector. These services can be such as proper guidance to the
customer regarding the processing of loans, especially for the customers
who are illiterate.
ü To satisfy their customers and for good dealings in future, the banks
should make prompt disbursement of loan amount to the customers so that
they can buy or construct their dream home as early as possible.
ü The Banks should use easy procedure, or say, less lengthy procedure for
the sanctioning of loan to the customer. There should be less number of
legal formalities, in case this exists, then, these should be completed in
less time. This will be helpful in attracting more customers.
ü Although the interest rates on specific norms, yet customers seek less
interest rate which can lower their cost of house. So banks should try to
lower their interest rates. Needles to say, that the bank which is having
lower interest rates, have the maximum clients for loans.
ü The public sector banks should improve their overall services to increase
the number of customers for home loans. They should recruit
professionals to provide such services and to satisfy the customers .
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CONTENTS
S.No Chapter Page no
1 1.1 Introduction 11
introduction to home loans

Advantages
Disadvantages
Disbursement o f home
loans 25
Objectives of study
Need of study 25
Scope of study
Methodology 25
Research design
Source of data 26
Tools for analysis
Limitation of study
3 Survey of Literature 29
4 . Disbursement of home loans by 34
commercial banks
5 Analysis of customer satisfaction level 46
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6 Conclusion & Suggestions 77
7 Bibliography 83
8 Appendix 85
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CHAPTER 1
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CHAPTER - 1
INTRODUCTION
1.1 INTRODUCTION TO HOME LOANS

Home is a dream of a person that shows the quantity of efforts, sacrifices
luxuries and above all gathering funds little by little to afford one’s dream.
Home is one of the things that everyone one wants to own. Home is
a shelter to person where he rests and feel comfortable. Many banks providing
home loans whether commercial banks or financial institutions to the people who
want to have a home.
Many banks are providing home loans at cheapest rate to attract
consumers towards them. The more customer friendly attitude of these banks,
currently offer to consumers cheapest loan over homes.
In view of acute housing shortage in the country, and keeping in
mind the social – economic role of commercial banks in the present times, the
RBI advised banks to encourage the flow of credit for housing finance.
With the RBI reducing bank rate, the home loan market rates nose-
diving by 50 basis points. The ICICI Bank and Standard chartered bank has
become the first player in this sector to announce a housing loan for a 20 years
period. No doubt it will enhance the end cost of the home but it will facilitate
people to plan their house over longer duration Now, it has been made easy for a
person to buy that dream house which he dreamt of long ago.
1.1 ADVANTAGES OF HOME LOANS
The various benefits of home loans arising to the customers are:-
(i) Attractive interest rates
The various banks offer attractive interest rates to boost and help
their customers. Many banks provide loans on fixed or floating rates to facilitate
consumers as per their needs.
(ii) Help in owning a home
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The home availed by a person with the help of banks, because they
provide technical and financial assistance to customers for owning their dream
home.
(iii) No requirement of guarantor
The commercial banks now a days, liberlise their laws regarding
home loans. Some of banks don’t even require the guarantor to grant loan to their
consumers. They also make consumers free by reliving him to find a guarantor to
complete the proceedings of availing loan.
(iv) Door-Step Services
These door to step services are provided from enquiry stage to the
final disbursement takes place such services are beneficial for customers in
present busy life. Banks like ICICI bank and standard chartered bank provide
door to step services to customers to borrow loan.
(v) Loan period
There are many banks which provide maximum loan tenures upto
15-20 years based on the loan amount and the creatibility of customers. This
relieves the customers to repay loan amount till a long period.
(vi) For accidental death insurance
Some banks provide free accidental death insurance with housing
loan which is also beneficial for the customers.
These benefits or advantages of home loans are responsible for
making than so popular among customer that a person who don’t have their home
and want to buy, they do it with home loan. Home loans help such persons in
making their dream home.
1.2 DISADVANTAGES OF HOME LOANS
The main disadvantages of home loans are high lightened as below:
(i) Delays in processing
Many times, there are huge delays in processing of providing home
loans because various formulations to be fulfilled in this process. Due to these
delays customers feel mentally as well as financially weak.
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(ii) Fluctuating interest rates
Some banks give home loans at floating rates, which fluctuate at
different intervals due to some reasons. These changes sometimes, may lead to
increase in interest rate which will increase the cost of home loans to the
customers.
(iii) High Cost
The public sector banks charge high processing cost for home
loan’s sanctioning. They are forced to pay serious charges at various stage to
fulfil the requirements. Some consumers are not able to pay such charges so such
people could not avail the benefits of home loan schemes.
(iii) Problems in disbursement

There are many problems in disbursement of home loan amount.
There are some delay in disbursement of loan amount to the customers due to
legal formalities. This causes problems to the customers.
These are limitations or disadvantages of home loans. But some
times some banks charges high installments to repay loan amount. Such also
causes problem to customers. These limitations can be removed by providing
good and promote services to the customers.
1.3 DISBURSEMENT OF HOME LOANS
The every bank has its own procedure to disburse the loan amount
among customers. After choosing your right home, the next step is disbursement
of home loans. The loan amount is disbursed after identifying and selecting the
property or home that are purchased and submit the requisite legal documents.
In the disbursement of home loans a clear title and full verification
to ensure that a person has full rights on his house. The 230A clearance of seller
and /or 371 clearances from the appropriate authority of income tax is also
needed.
(i) Eligibility criteria
However, if one is a resident or non-resident individual who is
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planning to buy a house in India, one can apply for a home loan. If a person has
decided to buy a property in the near future, he/she can apply for a loan before
even selecting the property. Once the maximum amount to put into the property
has been decided, the Housing Finance Institutions or Banks will let the
customer know that how much he/she is eligible for and this helps to plan out the
budget.
(ii) Conditions regarding co-applicants
All Housing Finance Institutions lay down conditions on who can
be co-applicants. All co-owners to the property. need to be co-applicants to the
loan necessarily. These institutions do not permit minors to join in as either co-
owner or as co-applicants because a minor is not eligible to enter into a contact
as per law. They do not permit even friends or relatives who are not blood
relatives to take a property jointly.
However, Income of co-applicants can be clubbed together to get
higher loan eligibility. Given below is a Table that throw light on acceptable
relationship of a co-applicant for clubbing of income.
Income Clubbing of Co-applicants:- It is as follows:-
Combination Income Clubbing: -
Ø Husband-Wife:- Income of husband-wife can be clubbed.
Ø Parent-son: - It can be clubbed if only son is there but not if any male
sibling exist.
Ø Brother-Brother: - If they are currently staying together and intend to
stay together in the new property, then only, their income-can be clubbed
for above purposes.
Ø Brother-Sister: - No clubbing-is possible.
Ø Sister-Sister: No clubbing is possible.
Ø Parent-Minor- Child: - No clubbing is possible in this case also.
(iii) General Terms and Conditions
The following are the terms and conditions applicable to the basic
home loan product only. These are likely to change on the basis of the variations
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of the home loan product. Typically, in a general home loans, the following
conditions are applicable: -
a) The loan to value ratio (LTV) cannot exceed a particular percentage. This
differs from product to product and from one Housing Finance
Institutional Bank (HFI/B) to another. The components of the value of the
property calculated here are covered under cost of property.
b) The maximum tenure of the bank is nominally fixed by HFI/Bs. However,
HFls/Bs do provide for different tenures with different terms and
conditions.
c) The installment that one pay is normally restricted to about-50-per cent of
the monthly-gross income of the candidate.
d) The total monthly outflow towards all the loans that have been availed of,
including the current loan is normally restricted to 50% of the gross
monthly income.
e) One will be eligible for a loan amount which is the lowest as per one's
eligibility. This is calculated as per the LTV norms, the HR, norms and
the FOIR norms as mentioned above.
f) Most HFls/Bs consider the profile before they judge the repayment
capacity. The judgement is based on age, qualifications, number of
dependents, employment details, employer credentials, work experience,
previous track record of repayment of any loans that have been availed of,
occupation, the industry to which the candidate's business relates to, if
he/she is self-employed, then the turnover in the last 3-4 years etc.
g) Some HFIs/Bs insist on guarantees from other individuals for the
repayment of the loan. In such cases, the customers has to arrange for the
personal guarantee before the disbursement of the loan takes place.
h) The property should be technically clear before the HFIs/Bs disburses the
loans amount. Most of institutions and banks have a teams of technical
experts who visit the site to get a technical report before the disbursement
of loan. This is also beneficial to the customer as they check for the
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technical quality and compliance with local laws.
i) The property should be legally clear before one can avail of a
disbursement of the loan amount. Housing-Finance Institutions /Banks
(HFIs/Bs) take legal clearance from their lawyers before the disbursement
of amount. This proves to be beneficial to the customers as a legal expert
checks his/her documentation to ensure that he/she get a proper title to the
property.
j) The disbursement of the loan is as per the progress of construction of the
property unless it is a ready property in which case the disbursement will
be by one single cheque. PEMI or simple interest on the loan amount
disbursed to the customer in case of a part disbursement will be payable
by the customer on the disbursement.
k) The disbursement in most cases will be favoring the builder or the seller
or the society or the development authority as the case may be. The
disbursement will come in the customer's favour under special
circumstances only.
l) The repayment of loan can be made either through deduction against
salary, post-dated cheques, standing instructions or Auto debit instructions
to bank.
m) The principle is amortized either on annual reducing or monthly reducing
basis as the case may be.
The above terms and conditions are generally true for most
Housing Finance Institutions/Banks with respect to the general Home Loans.
However, the specific terms and conditions vary with respect to special Housing
Finance Institutions or Banks.
(iv) Charges applicable to home loans
The different kinds of charges applicable to home loans are
discussed below:
a) Processing fees
First of all, comes the process fee. This is a charge that is levied by
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most HFls/Bs. This has to be paid at the time of submission of the application
form. It's normally charged as a percentage of the loan amount sanctioned. Some
HFls also charge a flat fee based on the loan amount instead of a percentage.
When a lower amount is sanctioned the excess fees paid at the time of
submission of the application is adjusted with the charges, which one make to the
HFI/B subsequently. Most HFls/Bs refund the processing fee if the loan
application is rejected.
b) Administrative fees
This charge is again, normally, a percentage of the loan amount
sanctioned. It is collected by the HFI/B for the maintenance of customer's
records, issuing interest certificates, legal charges, technical charges, etc. though
the tenure of the loan. It is payable by the customer when he/she accepts the
offer letter given by the HFI/B. This payment has to be made before the
availment of the disbursement. The mode of collection of these fees varies from
one HFI/B to another.
c) Rate of interest
This is the rate of interest applicable on the loan amount through
the tenure of the loan. It is charged on the principal monthly reducing method.
Most HFIs/Bs give an option to select either a Fixed rate of interest or a variable
rate of interest.
d) Legal Charges
Some HFIs/Bs mainly Public Sector Banks levy legal charges that
they incur on getting the property documents vetted by their panel of lawyers.
e) Technical Charges
These charges are also levied by certain Housing Finance
Institutions/Banks (HFIs/Bs) to meet their expenses on the technical site visits to
the customer's property. This ensures quality of construction and construction
within the norms as stipulated by the respective approval authority.
f) Stamp duty and registration charges
HFIs that go in for a registered mortgage, pass these charges on to
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the customer. These are rather heavy in certain states depending on the laws laid
down by the state where one buy a property.
g) Personal Guarantee from Charges
Since the personal guarantee provided by the customer need to be
stamped, these charges are also recovered from the customer. They are charged
to him by HFIs who demand for Guarantees.
h) Cheque Bounce Charges
In case the cheques through which one make a payment to HFls get
dishonored, some minimum charges are levied by the HFI. The same are
recovered from the customer.
i) Delayed payment charges
HFls/Bs charge delayed payment charges from the customer if
he/she delays the payment of installments beyond the due date.
j) Additional charges
These are levied as a percentage on the delayed payment charges by
most HFls. They are levied if one fail to pay the dues within the stipulated time
after a delay has taken place.
k) Incidental charge
This is payable in case the HFI/B sends a representative from their
organization to collect their outstanding dues. It is normally charged at a flat rate
per visit. These charges are levied by most HFls/Bs.
l) Prepayment Charges .
This is a penalty charged by HFls/Bs from when one makes either a
part prepayment or a full repayment of the loan. This charge is levied only on
lump sum payments and not on the EMls that one pays. This charge is levied on
the amount prepaid by one and not on the entire outstanding principal. These
charges are gradually being discount.
So, these are the charges levied by most Housing Finance
Institutions and Banks while granting home loan to the customers. Now, the
decision on the repayment capacity shall be talked about as follows: -
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(iv)* Judgement regarding repayment capacity on the basis of income
To understand how the income of a customer is considered to arrive

at his repayment capacity, it is first necessary to classify customers into salaried
and self employed individuals.
a) The income of the salaried individual is considered in the following
manner:
Gross monthly income as it appears on the salary slip
Less:- Any non regular variable income appearing on the salary slip (including
overtime, etc.)
Add: - 50 per cent of the average variable income of the last six months.
Add: - Any fixed cash/voucher payments for which proof can be submitted.
Add: - 50 per cent of the average variable cash/voucher payments with proof like
traveling reimbursement etc.
Add:- HRA receivable if not being received already in the salary slip.
The above income calculated for the calculation of eligibility using IIR and
FOIR norms. For calculation of FOIR, the installments of all the loans that one
has availed of currently for which repayment is being made is taken into account
as well. The lower of the two eligibilities is considered as the maximum
repayment capacity.
b) To consider income of Self-employed individuals we further classify them
into Professionals and non-professionals.
• Professionals: - Comprising doctors, chartered accountants, lawyers,
architects, etc. For calculation of eligibility of professional's income is
computed by most HFIs using the gross professional receipts instead of
the Net profit as in the case of self-employed non-professionals.
• Non-Professionals: - The income of non-professionals is normally
calculated by HFIs in the following manner: -
Average of the net profits of last 2 years as it appears in the profit and loss
account (Returns need to be filed for the same. They should be filed regularly
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before the due date is over).
Less: - Any income, which is unusual and non-recurring in nature like sale of
some asset, etc which affects profits substantially,
Add: - Any expense that is unusual and non-recurring in nature like repairs and
maintenance that has not been capitalized and effect profit adversely.
Add: - 50 per cent of the average depreciation of the last two years. The above
income is calculated for the calculation of eligibility using IIR and FOIR norms.
For calculation of FOIR the installments of all the loans that one has availed of
currently for which repayment is being made is taken into account and the
eligibility is worked out. The lower of the two eligibilities is considered as the
maximum repayment capacity.
(v) Credit documentation
Given below is the exhaustive list of credit documents- that need to
be submitted for a general home loan product. The documents vary from one
HFI/B to another based on one's employer, qualifications experience etc. The
general requirements are as follows: -
a) Income Documents: - For salaried slips for the last three months-
appointments letter-salary certificate-retainership agreement, if appointed as a
consultant-Form 16 issued by the employer in customer's name income document
for self employee - last three years profit and loss account statement duly
attested by Chartered Accountants. Last three years Balance Sheets duly attested
by Chartered Accountant, last three years Income Tax Returns with computation
chart duly filed and certified by the Income Tax authorities.
b) Proof of employment: - Identify card issued by the employer- Visiting
card.
c) Employer's details (In case of private limited companies): -
Profile of employer on employers letterhead (to be signed by a senior
person in the organization) comprising
• Name of promoter/directors
• Background of promoters/directors
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• Nature of business activity of your employer
• Number of employees
• List of branches/factories
• List of suppliers
• List of clients/customers
• Turnover of employer
• Annual reports of the employer for the last two to three years.
d) Proof of age (Anyone of the following): - Passport- Voter's ID card-PAN
card-Ration card-Employer's identity card-School leaving certificate-Birth
certificate.
e) Proof of residence (Anyone of the following): - Ration card-Passport-
PAN card-Rent agreement, if the customer is staying currently on rent- Bank
Pass book-Allotment letter from the company if he/she is residing in company
quarters.
f) Proof of name change (If applicable): - A copy of the official gazette -A
copy of a newspaper advertisement publicizing the name change-Marriage
certificates.
g) Proof if investment (If required): - Bank statement for the last six
months of all operating and salary accounts - Bank statements for the last six
months of all current accounts, if self-employed-any other photocopies of
investments held, if required by the HFC.
(vi) Legal documentation
Legal Documentation the typical legal documents that need to be
submitted to the HFC arc discussed here. Given below is a list of legal property
documents that need to be submitted to the HFC for mortgage of the property.
The name and the list of documents vary from state to state and also depend on
the type of property being financed. A broad outline of the documents required is
given below.
a) Acceptance copy of the offer letter issued by the HFC/B.
b) Title documents of the property that include -sale agreement duly
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registered-Own contribution receipts - Allotment letter-Registration
receipt-Land documents indicating ownership, if applicable- Possession
letter-Lease agreement, if applicable (Property bought from a
development authority) - Mortgage deed if the HFC opts for a registered
mortgage.
c) No Objection Certificate from the developer, society or development
authority as applicable.
d) Personal Guarantees, if applicable.
e) In case of alternator additional security, documents for the same
depending upon the security details.
f) Post dated cheques for the EMls.
The above documents are only indicative in nature and do not cover
the entire list. It may, also be noted that in a resale case, the previous chain of
agreement also need to be taken.
(vii) The tax benefits that are applicable to housing loans for individuals
Currently Tax Benefits to individuals are available only for the

Home Loans and Home Extension Loans products. The benefits available are
covered under these sections.
Property Insurance :- Is it compulsory to insure the property? Some HFls
insist on a mortgage redemption life insurance policy. In this case the customer
gets a benefit of an interest rate reduction. Though the HFI may not insist, it is
better to go in for property insurance to safeguard the asset against any sort of
damage or loss. The customer can select the tenure for the property insurance.
The insurance premium is changed up front. Most insurance companies provide
for huge discounts on the rate of premium for larger tenures. The premium
charged currently is seventy-seven for every lakh of property for a year.
So a customer has to fulfil various conditions to be eligible for
availing home loan from a Housing Finance Institution/Bank After fulfiling these
conditions, a customer can avail loan at low interest rate i.e. fixed rate or
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floating rate. A decision on whether one should go in for a fixed-rate loan or a
floating-rate loan now is a function of two factors i.e. One's perception of where
interest rates in the economy are headed and one' capacity to ride the interest rate
changes.
A floating-rate loan let one take advantage of further falls in
interest rates but one stand to loose if interest rate, rise again. However this
decision is based on the perception of the consumer.
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1.2 OBJECTIVES OF STUDY
There is no strongest foundation for your dream home, than a cheap loan.
Home loans have become that stronger foundations for people who want to own a
home. The main objectives of the study are as follows:-
i) To make comparative study of Disbursement of home loans by
commercial banks.
ii) To study the satisfaction level of customers about home loans.
iii) To study the problems faced by customers in obtaining the home loans.
1.3 NEED OF STUDY

The Indian housing finance industry has grown by leaps and bound in few years.Total
home loans disbursements by banks has risen which witnesses phenomenal growth from
last 5 years. There are greater number of borrowers of home loans.so by this study we can
find out satisfaction level of customers and problems faced by them in obtaining home
loans.
1.4 SCOPE OF STUDY
The present study will be confined to four commercial Banks in Ludhiana city namely
ICICI Bank, PNB, standard chartered Bank, SBI. It includes two public sector banks and
two private sector banks. The period of study is five years commencing from 2004-2008
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1.5 RESEARCH METHODOLOGY
Research Methodology
Research methodology is a way to systematically show the research
problem. It may be understood as a science of studying how research is done
scientifically. It is necessary for the researcher to know not only the research
methods but also the methodology.
This Section includes the methodology which includes. The research design,
objectives of study, scope of study along with research methodology and
limitations of study etc. To study the disbursement of home loans by commercial
banks, the study shall be conducted in the manner enumerated below-
1.5.1 Research Design

This project is based on exploratory study as well descriptive
study. It was an exploratory study when the customer satisfaction level was
studied to suggest new methods to improve the services of banks in providing
home loans and it was descriptive study when detailed study was made for
comparison of disbursement of home loans by commercial banks.
1.5.2 SOURCES OF DATA

To fulfill the information need of the study. The data is collected from primary as well as
secondary sources-
A -Primary source-
I decided primary data collection method because our study nature does not permit to
apply observational method.
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In survey approach we had selected a questionnaire method for taking a customer view
because it is feasible from the point of view of our subject & survey purpose. We
conducted 100 sample of survey in our project to judge the satisfaction level of customers
which took home loans.
• Sample size
For the questionnaire I have taken the sample size of 100 customers of selected banks
B - Secondary source
Secondary data is taken from such as:
• Information collected from customers.
• Annual published report of RBI
• The various reports and journals published by RBI concerned with banking
• Different brochure of banks.
Reports of various study group or working groups appointed by Government from time to
time
1.5.3 Tools of Analysis

The analysis of data is done on the basis of following statistical techniques:-
• Percentages.
• Averages
• Charts
•
1.5.4 Limitations of the study
This study also includes some limitations which have been discussed as follows:
i) The sample size of 100 customers and 4 banks might prove a limitation
because of difficulty in generalization of results.
ii) To collect the data from various banks was quite difficult due to non-
cooperation of some banks. This proved to be major limitation of the
Page 27
study.
iii) To access such a large number of customers was difficult because of non-
cooperative attitude of respondents.
iv) Lack of data was also the other limitation of the study as some of banks
do not have proper data on topic.
v) There was limitation of time to conduct such a big survey in limited
available time.
vi) Ignorance and reluctant attitude of customers was also a major limitation
in this study.
Thus above all were the limitations in this research study. The
maximum efforts were made to overcome these limitations in the study.
Page 28
CHAPTER 2
Page 29
CHAPTER - 2
REVIEW OF LITERATURE
SUMMARY
• After going through pervious studies of Home loans I came to conclude that-
• There is growth of home loans after 2001
• Home loans have an inverse relation with interest rates i.e. when interest rate low
the demand of home loans increase. (Ojha 1987)
• People are going more towards home loans than private mortgage insurance
(Berstain 2008)
• Government taking various steps to encourage people to go toward home loans
(Haavio, Kauppi 2000)
• Growth of home loans are due to increase of living standard of people, shifting
from joint family to nuclear family (La courr, Micheal 2007)
• There are some problems also attach with these home loans such as time i.e filling
of application of loan to closing ,people have their own specified needs from these
home loans which are not fulfilling. (La cour Micheal 2006)
• SBI provide a very low interest rate on home loans as compared to other banks.
(SBI May 2000)
Now after this conclusion the details of reviews are below-
Berstain David (2008) examined in his study taken from 2001 to 2007 that in this period
there is increase use of home loans as compared to private mortgage insurance (PMI).he
have divided his study into four sections. Section 1 describes why people are going more
for home loans than PMI. the main reason for this that now home loans market provide
Piggybank loans for those people who don’t have 20% of down payment. Section 2 tells
the factors responsible for the growth of home loans and the risks on shifting toward
Page 30
home equity market without any PMI coverage. PMI can protect lenders from most losses
up to 80% of LTV and the absence of PMI will result in considerable losses in an
environment. Section 3 tells the measures in changes of type of loans. For this he have
taken the data from the 2001 and 2007 AHS a joint project by HUD and CensusThe
results of this analysis presented in Table One reveal a sharp increase in the Prevalence of
owner-occupied properties with multiple mortgages among properties withNewly
originated first mortgages. Section 4 describe the Financial status of single-lien and
multiple-lien households and for this he have taken the survey of consumer finance and
show that financial position is more weaker in multiple loans than the single loans
Vandell ,kerry D (2008) analysis the sharp rise and than suddenly drop down home
prices from the period 1998- 2008. changes in prices are for the reasons as such economic
fundamentals , the problem was not sub prime lending per se, but the Fed‘s dramatic
reductions, then increases in interest rates during the early- mid-2000 , the housing
―boom was concentrated in those markets with significant supply-side restrictions,
which tend to be more price-volatile; he problem was not in the excess supply of credit in
aggregate, or the increase in sub prime per se, but rather in the increased or reduced
presence of certain other mortgage products
La courr, Micheal(2007) analysis in his study the factors affected the increase in the
level of Annual percentages rates (APR) spread reporting during 2005 over 2004. the
three main factors are changes in lender business practices; (2) changes in the risk profile
of borrowers; and (3) changes in the yield curve environment. The result show that after
controlling for the mix of loan types, credit risk factors, and the yield curve, there was no
statistically significant increase in reportable volume for loans originated directly by
lenders during 2005, though indirect, wholesale originations did significantly increase.
Finally, given a model of the factors affecting results for 2004-2005, we predict that 2006
results will continue to show an increase in the percentage of loans that are higher priced
when final numbers are released in September 2007.
La cour Micheal (2006) examined the home purchase mortgage product preferences of
LMI households. Objectives of his study to analysis the factors that determined factors
their choice of mortgage product , is different income groups have some specified need to
Page 31
met particular product. The role pricing and product substitution play in this segment of
the market and do results vary when loans are originated through mortgage brokers? For
this they have use the regression analysis and the results are high interest risk reduce loan
value. Self employed borrower chooses reduce documented loans than salaried workers.
use of this product type seems to be more prevalent among borrowers with substantial
funds for down payment and better credit scores. In case of pricing Multi families
requires price premium and larger loans carry lower rate. And the role of time,
particularly, the time required for the loan to proceed from application to closing it is find
that government lending taking the longest time and Nonprime loans the shortest time.
Multi family properties take longer time in closing. And during peak season take longer
time to close. And for last objective it is find that broker originated loans close faster.
The effect of mortgage brokers on pricing and other market outcomes is fertile ground for
additional research.
Dr. Rangarajan C. (2001) said that the financial system of India built a vast network of
financial institutions and markets over times and the sector is dominated by banking
sector which accounts for about two-third of the assets of organized financial sector.
Haavio, Kauppi (2000) stated that countries where a large proportion of the population
lives in owner – occupied housing are experiencing higher unemployment rates. Than
countries where the majority of people live in private rental housing, which might suggest
that rental housing enhances labour mobility. In this paper, they develop a simple inter
temporal two region model that allow us to compare owner occupied housing markets to
rental markets and to analyze how these alternative arrangements allocate people in space
and time. announced that it will offer loans for Rs. 2-10 lakh at 12.5 percent the lowest
rate offered by any housing finance provider, big brother SBI has taken the rate war in
the home loans category to new heights. This is because, apart from the low rate, the
interest on these loan is calculated on principal, which is reduced every month unlike
other housing finance companies which calculate interest on annually reducing basis.
Narasimham Committee (1991) points out that although the banking system in our
country has made rapid progress during the last two decades, there is decline in
productivity and efficiency and erosion of profitability. The committee strongly make
Page 32
indications of liberlising, deregulating economy to make Indian baking system more
competitive and efficient.
Ojha (1987) in his paper "modern international caparison of productivity and
profitability of pubic sector banks of India" making Comparison on the basis of per
employee indicators and taking examples of state bank group and Punjab National bank
noted that Indian banks are the lowest in all accounts. However such international
comparison will not be fair for numbers of reasons.
Godse (1983) in his essay, “looking a fresh at banking productivity” observe that
productivity aspect is only at the Conceptualization stage in banking industry. He
suggested improvement in productivity and procedures, costing of operations and capital
expenditure etc.
Fanning (1982), while examining bank productivity of British banks observed that
although the productivity of the UK clearing banks is improving, they are still heavily
over manned as compared with similar banks else where.
Kulkarni (1979) in his study “Development responsibility and profitability of banks”
stated that while considering banks costs and profits, social benefits arising out of it
cannot be ignored. He suggested that while meeting social responsibility banks should try
to make developmental business as successful as possible.
Varde and Singh (1979) in a study "profitability of commercial banks" over 15 years
gave consideration to two types of factors that effects interest rates levels i.e. internal
factors (including operational and managerial efficiency of individual basis).
Banking Commission (1972) reviewed bank operating methods and procedures and
made recommendations for improving and modernizing these, particularly relating to
customers services, credit procedure and internal control systems. It observed that present
methods of working out branch profitability are not appropriate and an integrated costing
and financial reporting system is needed.
Department of Banking operations and development, RBI : Bombay observed that the
rapid expansion of banks activities since 1970 called for a phase of consolidations to
improve the quality of banks operational efficiency, productivity and customer services.
Page 33
CHAPTER 3
Page 34
CHAPTER – 4
DISBURSEMENT OF HOME LOANS BY COMMERCIAL

BANKS
This chapter contains results and discussion on disbursement of

Home loans by Commercial Banks. It is divided into two parts one part is related
to the disbursement of home loans by different banks and the second part
included the comparative study of disbursement of home loans made by
commercial banks.
Disbursement of Home loans by different banks.
4.a ICICI Bank
Years No. of Home loan Home loan Disbursed
account holders. (in crore Rs.)
Distributed Recovered Balance
2004-05 700 90.07 63.05 27.02
2005-06 950 120.00 91.20 28.8
2006-07 1000 144.67 127.31 17.36
2007-08 1303 180.33 165.90 14.43

2008-09 1594 240.00 228.12 11.88
Interpretation
On the above table, it is evident that there are increase in No. of
account holders from 700 to 1594 in the year 2008-09. The loan amount
distributed among home loan account holder has also increased from Rs.90.07
crore in 2004-05 to Rs.240 crore in 2008-09. The recovery procedure for home
loans is also strengthening due to increment in recovered amount, i.e. Rs.63.05
crore to Rs.288.12 crore. So it nut shall there are upward trend in number of
accountholders and disbursement of home loans.
Page 35
4.b Punjab National Bank
Years No. of Home Home loan Disbursed
loan account (in crores Rs.)
holders. Distributed Recovered Balance
2004-05 810 120.15 97.28 22.87
2005-06 950 183.26 150.00 33.26
2006-07 1120 213.65 185.86 28.05
2007-08 1433 240.87 231.07 9.80

2008-09 1500 265.15 265.05 9.10
Interpretation
The Punjab National Bank is Public sector Bank. It comes second
after State Bank of India in its branch location and expansion. From the Table,
the figures show that there are increasing trend in customer base from 810 in the
year 2004-05 to 1500 in the year 2008-09. The bank also show enhancement in
loan amount up to Rs.265.15 crore in the year 2008-09. The recovery process of
loans in past is slow but now it is increasing.
4.c Standard Chartered Bank
Years No. of Home loan Home loan Disbursed
account holders. (in crores Rs.)
Distributed Recovered Balance
2004-05 106 6.21 5.27 0.94
2005-06 130 11.55 10.16 1.38
2006-07 154 17.06 14.35 2.70
2007-08 180 20.09 18.68 1.41

2008-09 260 24.10 23.91 0.48
Page 36
Interpretation
The standard chartered bank is a private sector bank. It has also
upgrade its position in banking sector in Ludhiana. The figures shown in table
reveals that there is upward shift in customer base of Bank from 106 customers
to 260 customers. The bank has also increased its share in housing finance by
distributing Rs. 24.10 crores in 2008-09. The recovery procedure of Home loan
is very sound.
4.d State Bank of India
Years No. of Home Home loan Disbursed
loan account (in crores Rs.)
holders Distributed Recovered Balance
2004-05 650 104.33 98.12 6.21
2005-06 853 123.24 105.00 18.24
2006-07 1019 150.65 133.46 17.19
2007-08 1132 176.75 144.65 32.10
2008-09 1434 224.00 209.16 14.84
Interpretation:-
The amount reveal that there is tremendous increase in Home loan
accountholders. The amount distributed as home loan is also increased from Rs.
104.33 in 2004-05 to Rs. 224 crore in 2008-09. But the recovery mechanism of
the Bank is not so good thats why the outstanding amount shows fluctuating
trend.
Page 37
COMPARATIVE STUDY OF DISBURSEMENT OF HOME
LOANS BY COMMERCIAL BANKS:-
There are number of schemes and products, offered by commercial banks to

attract the customers. The comparison among different commercial banks which
offer home loans in regard of Disbursement of home loans are as:-
4.1 No. of Home loan accountholders

Table 4.1(a)
Years ICICI Punjab Standard State Bank
Bank National chartered Bank of India
Bank
2004-05 700 810 106 650
2005-06 950 950 130 853
2006-07 1000 1120 154 1019
2007-08 1303 1433 180 1132
2008-09 1594 1500 260 1434
Average of No. of accounts holders:-

Total of home loan customers
= --------------------------------------
No. of years
Page 38
Table 4.1 (b)
Name of Bank Average (Rs) Percentage of

Accountholders
ICICI Bank 1109 32
Punjab National Bank 1163 34
Standard Chartered Bank 166 5
State Bank of India 1018 29
Total 3456 100
35
Percentage of home loan holders
30
25
20
15
10
5
0
ICICI Bank Punjab Standard State Bank
National Chartered of India
Bank Bank
Name of bank
Fig. 4.1
Home loan holders of commercial banks
Interpretation
The figure reveals that Punjab national bank is having large number
of home loan accountholders. So it ranks first among other banks. But privates
sector bank ICICI bank is not behind so much with 31% also market leader. The
banks have shown increase in their customers base from 2004 tto 2008. But
Punjab national bank comes as market leader in the home loan cases.
Page 39
4.2 Home loans distributed by Commercial banks.
Table 4.2 (a)
Years ICICI Bank Punjab Standard State Bank

National chartered Bank of India
Bank
2004-05 90.07 120.15 6.21 104.33
2005-06 120.00 183.26 11.55 123.24
2006-07 144.67 213.65 17.06 150.65
2007-08 180.33 240.87 20.09 176.75
2008-09 240.00 265.15 24.10 224.00
(Rs. in crore)
Average of home loans granted
Total home loans granted

= ---------------------------------
No. of years
Table. 4.2 (b)

(Rs. in crore)
Name of Bank Average (Rs) Percentage of home
loans granted
ICICI Bank 155.01 29
Punjab National Bank 204.62 39
Standard Chartered Bank 15.80 3
State Bank of India 155.79 29
Total 531.22 100
To understand the comparison more effectively and closely, it has been shows
diagrammatically as follows:-
Page 40
Interpretation:
There is no doubt that every bank tries to maximize its home loan
disbursement. But on the basis of data it is concluded that Punjab national bank
shows high average of loan grants Rs. 20.62 crore as compared to ICICI,
standard charted bank and SBI respect
crores. On this analysis the public sector banks are higher loan provider as
compared to private sector banks due to credibility and loan offers by public
sector banks.
4.3 Recovery of Home loans
Table 4.3 (a)
(Rs. in crore)
Years ICICI Punjab Standard chartered State Bank
Bank National Bank of India
Bank
2004-05 63.05 97.28 5.27 98.12
2005-06 91.20 150.00 10.16 105.00
2006-07 127.31 185.86 14.35 133.46
2007-08 165.90 231.07 18.68 144.65
2008-09 228.12 256.05 23.91 209.16
Average recovery of home loans

Total home loans recovered
= ----------------------------------
No. of years
Table 4.3 (b)
(Rs. in crore)
Name of Bank Average (Rs) Percentage of home
loans recovered
ICICI Bank 135.21 30
Punjab National Bank 184.05 39
Total 471.80 100
It is more clear with the help of this diagram.
Page 42
Interpretation:
In the previous years the recovery process of granting loans are
very unorganized and inefficient. So there are less recovery of home loans by the
commercial banks. But it is evident from the table that every bank whether
public or private showed increase
national bank has the greatest recovery of home loans i.e. 39%, thereafter ICICI
bank recovered the 30% of sanction amount. The standard chartered bank is
having lowest recovery of their granted amount as home lo
4.4 Outstanding Balance
Table 4.4 (a)
(Rs. in crore)
Years ICICI Bank Punjab Standard State Bank
National chartered of India
Bank Bank
2004-05 27.02 22.87 0.94 6.21
2005-06 28.8 33.26 1.38 18.24
2006-07 17.36 28.05 2.70 17.19
2007-08 14.43 9.80 1.41 32.10
2008-09 11.88 9.10 0.48 14.84
Average of balance due
Total of Balance due in 5 years
= --------------------------------------
No. of years
Table 4.4 (b)

(Rs. in crore)
Name of Bank Average Percentage of
(Rs) balance due
ICICI 19.89 33
PNB 20.61 34
Total 59.15 100
Average of one bank

%age = --------------------------- x100
Total Average of Banks
Page 44
The Diagrammatically presentation of data is as below:
35
30
Percentage of balance due
25
20
15
10
0
ICICI Bank Punjab National Standard State Bank of
Bank Chartered Bank India
Name of bank
Fig 4.4 Balance due on home loans by commercial banks
Interpretation
From the above table and figure it shows that standard chartered
bank has been less outstanding balance among other banks. The public sector
banks got high balances due to large customer base, not proper recovery process
and lack of modernisation of activities. The private sector bank ICICI bank is
having more balance due i.e. 33% as compared to standard chartered bank.
Page 45
CHAPTER 4
Page 46
CHAPTER - 5
ANALYSIS OF CUSTOMER SATISFACTION LEVEL
The customer is king of market. The bank can perform its activities
effectively & efficiently if it gains reputation among customers. The analysis is
based on the responses given by customers through questionnaires.
Table 5.1
Reasons for getting the home financed
Sr.No. Number of Reasons Percentage
a. Non-availability
availability of funds 36
b. Reluctancy to pay cash in one go 35
c. Tax benefit 24
d. Any other 5
40
35
Percentage of customers
30
25
20
15
10
0
Non-availability
availability Reluctancy to Tax benefit Any other
of funds pay cash in
one go
Fig 5.1 Reasons for getting the home financed
Interpretation
To interpret the response of the questions, the figures shows that
most of the customers find the problem in availability of funds i.e. 36% and very
Page 47
less number of customers found problem in paying cash in one go is 35%,
customers get housing loan for tax benefits is 24%. This was the expected
response because a large number of people find a problem of availability of
funds which works as an obstacle in owning a dream home.
In today's life, people hardly earn both means and ends of life and
they don't have much of money to buy a home or a land to construct house
because of cost of property. So, they take the advantage of home loans provided
by different banks at different terms feasible to the customers. There are very
less number of people, who don't own home even when they have sufficient
funds and they take the advantage of home loans because they don't want to pay
huge cash in one go.
On the basis of study, it is concluded that most of people lack of
money in fulfiling their dreams and few of them were reluctant to pay cash in
one go and wanted to pay their home loans slowly in installments.
Table 5.2
From which of bank you have got your home financed
Name of Banks Percentage of customers
ICICI Bank 55
Punjab National Bank 15
Standard Chartered Bank 07
State Bank of India 20
Any other 03
To understand the response more effective and closely, it has been

showed diagrammatically as follows :
Page 48
60
50
40
30
20
10
0
ICICI Bank Punjab Standard State Bank Any other
National Chartered of India
Bank Bank
Name of bank
Fig. 5.2 From which of bank you have got your home
financed
Interpretation
The analysis showed that a large number of customers prefer ICICI
Bank as compared to others. The data shows that 7% of customers took loan from
Standard Chartered Bank, 20% of customers from State Bank of India 15%
customers took loan from Punjab National Bank, 55% of customers took loan
from ICICI Bank and a 3% of customers fall under the category of 'Any other'
which included State Bank of Patiala, Canara Bank, Punjab and Sind Bank, etc.
The data shows that most of people prefer private sector banks aas
compared to public sector banks. This is because of the extra services provided
by private sector banks. However, there is less difference in figures of State
Bank of India and Punjab National Bank. But there is considerable difference in
figures of the two private sector banks i.e. ICICI bank and Standard Chartered
Bank. As ICICI is the market leader in the home loans sector. This may be the
reason for such difference in Standard Chartered Bank's percentage and ICICI
Bank's percentage. Another reason for the preference of ICICI Bank may be their
specialized services in home loans, more amounts of loans, and efficient query
handling.
Page 49
However, the analysis showed that the people prefer ICICI Bank
for home loan because of their services and excessive feat
features
ures of home loans as
compared to other banks.
Table 5.3
Sources of information about Home Loans Scheme
Sources of information Percentage of customers
Newspapers 49
Magazines 16
Banners/Hoardings/Pamphlets 11
Word of mouth 20
Any other source 04
50
45
40
35
30
25
20
15
10
5
0
Newspapers Magazines Banners Word of mouth Any other
source
Fig 5.3 Percentage of sources of information about Home
Loans Scheme
Page 50
Interpretation
The data shows that around 20% of customers got information from
source of 'Word of Mouth' which includes information from friends, relatives,
colleagues etc. 49% of customers got information from newspapers, only 16% of
customers from magazines and 4% of customers got information about home
loans schemes under 'Any other source' and 11% through Banners/
Hoardings/Pamphlets
Table 5.4
Giving importance to the factors which influence the choice of bank
Factors
Most Very Importan Less Not
importan importan t importan importan
t t t t
(a) Less 58% 24% 16% 1% 1%

documentation
(b) Speedy 40% 51% 9% - -

processing
(c) Low interest rates 32% 45% 23% - -
(d) Flexible 29% 31% 35% 3% 2%

repayment
(e) Personal dealings 36% 20% 24% 16% 4%
(f) Reputation and 32% 33% 27% 8% -

credibility
Page 51
(g) Transparency and 34% 21% 26% 19% -
reliability
(h) Professional 29% 36% 29% 6% -

Management
Most important Very important Important Less important Not important
60%
50%
40%
30%
20%
10%
0%
a b c d e f g h
Factors
Fig. 5.4 Importance to the factors which influence the choice of bank
Interpretation
The data shows that almost all features were important to the
customers. Some of the factors were not important for a few numbers of
customers.
The analysis showed that 'Less documentation' as 'Most important'
for 58% of customers, 40% of customers quot
quoted
ed 'Speedy processing', 'Most
Important' to them, 'Low Interest Rates' were 'Very Important' for 45% of
customers. Most of people were neutral about repayment options, 36% of
customers gave importance to credibility and transparency of services,
'Professional
nal Management' was also of due importance to 36% of customers.
So, the data shows the highest percentage given to the factors like
Page 52
less documentation, speedy processing in disbursement of loan, and low interest
rates by the customers because the customers want to avail loan in less time,
without much of formalities and at less cost. That's why they give due
importance to factors like low interest rates, flexible repayment options etc. so
that they can feel ease while getting loan and after the disbursement of loan in
repayment of that loan properly.
In today's age, customers seek more facilities and beneficial
features from banks and they prefer a bank, which provides all these services at
low cost. So, all the features are important to a customer.
Table 5.5
Opinion about the services of different banks under study
a. ICICI Bank
Percentage of customers agreeing
Services of banks Strongly Agree Neutral Disagree Strongly
agree disagree
a. Professionally 86% 10% 4% - -

managed
b. Reliable & 67% 33% - - -

transparent
c. Socially responsible 75% 10% 15% 4% -
d. Customer care 20% 68% 8% - -
e. Query handling 20% 76% 4% - -
Page 53
Strongly agree Agree Neutral Disagree Strongly disagree
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
a b c d e
Factor
Fig. 5.5( a) Opinion of customers about ICICI Bank
Interpretation
Customers from ICICI Bank are quite satisfied from their services
like query handling and customers care. They give neutral response regarding
social responsibility of banks towards customers and professionally managed
services. They don't give so good response to reliability and transparency
services of banks. '
So, customer's satisfaction level towa
toward
rd ICICI bank's services is
lightly satisfied.
Page 54
5.5 b. Punjab National Bank

agree disagree

managed
b. Reliable & 53% 47% - - -

transparent
d. Customer care 10% 28% 40% 25% -
60%
50%
40%
30%
20%
10%
0%
a b c d e
Factors
Fig. 5.5( b) Opinion of customers about Punjab National Bank
Page 55
Interpretation
The analysis reveals that the customers of PNB are less satisfy
from their bank. They gave 60% to professionally managed services, 4% to query
handling, 15% to social responsibility, 53% to reliability and transparency. In
overall, the customer of Punjab National Bank were not fully satisfied by the
services offered by it.
5.5(c) Standard charted Bank
agree disagree
managed
b. Reliable & 43% 14% 43% - -

transparent
Page 56
80%
70%
60%
50%
40%
30%
20%
10%
0%
a b c d e
Factors
Fig. 5.5(c) Opinion of customers about Standard Chartered Bank
Page 57
Interpretation
The analysis shows that the customers of Standard Charted are
averagely satisfied from their bank. They gave 72% to professionally managed
services 57% to query handling, 14% to social responsibility, 43% to reliability
and transparency, as highest satisfaction level.
5.5 (d) State Bank of India
Services of banks
Strongly Agree Neutral Disagree Strongly
agree disagree
a. Professionally 50% 25% 20% 5% -

managed
b. Reliable & transparent 12% 58% 30% - -
c. Socially responsible 14% 14% 71% - -
e. Query handling 25% 63% 12% 10% -
Page 58
80%
70%
60%
50%
40%
30%
20%
10%
0%
a b c d e
Factors
Fig. 5.5(d) Opinion of customers about State Bank of India
Interpretation
The customers from State Bank of India
India,, also average satisfaction
level. They gave 58% to reliability and transparency, 65% to customer care, 63%
query handling and 25% to professionally managed services of banks.
So, customer are not so much agree with the socially responsible
services of the bank. They gave neutral response to this service. However, they
were also disagree with some of the services of the bank.
Page 59
Table 5.6
Opinion of customers about home loan schemes
5.6 (a) ICICI Bank
agree disagree
a. Amount of loan 60% 35% 5% - -
b. Legal formalities 42% 45% 14% - -
c. Interest rates 32% 56% 12% - -
d. Repayment options 26% 64% 10% - -
e. Security demanded 20% 32% 48% - -
f. Installments 55% 40% 5% - -
g. Services of bank 45% 30% 18% 6% 1%
h. Processing for 55% 24% 18% 3% -

sanction of loan
Page 60
70%
60%
50%
40%
30%
20%
10%
0%
a b c d e f g h
Factors
Fig. 5.6( a) Percentage of satisfaction level of customers of ICICI Bank
Interpretation
The analysis shows that the customers of ICICI bank gave 60 per
cent of amount of loan and legal proceedings, 56% to interest rates, 45% to
proceedings and services, 55% to installments.
So, customer of ICICI bank didn't give response regarding the
services
ices of the bank except to the amount of loan and legal formalities.
Page 61
5.6 (b) Punjab National Bank
Services of banks
agree disagree
a. Amount of loan 10% 60% 30% - -
b. Legal formalities 25% 34% 31% 10% -
c. Interest rates 33% 48% - 11% -
d. Repayment options 18% 30% 15% 17% 20%
h. Processing for 38% 48% 24% - -

sanction of loan
Page 62
60%
50%
40%
30%
20%
10%
0%
a b c d e f g h
Factors
Fig. 5.6.( b) Percentage of satisfaction level of customers of Punjab National Bank
Interpretation
On the basis of data the customers of Punjab National Bank give
average satisfaction level to their services. They gave 60% to the amount of loan
and legal formalities and 55% to the security provided, 48% to the installment
interest rates and proceedings. So the customers of PNB did not fully satisfied by
different home loan schemes offered by bank.
Page 63
5.6 (c) Standard Chartered Bank

agree disagree
a. Amount of loan 59% 31% 10% - -
b. Legal formalities 31% 45% 24% - -
c. Interest rates 14% 52% 24% 10% -
d. Repayment options 26% 30% 44% - -
h. Processing for 30% 13% 27% 30% -

sanction of loan
Page 64
60%
50%
40%
30%
20%
10%
0%
a b c d e f g h
Factors
Fig. 5.6( c) Percentage of satisfaction level of customers of Standard Chartered
Bank
Interpretation
According to the data, satisfaction level of customers of Standard
Chartered Bank, they were satisfied with the amount, security, proceedings
regarding the sanctioning of loan, services of the bank.
They gave 30% to the proceedings of the home loans, 55% to
services and the amount of loan provided, and security held for the loan amount,
50% to installments, 52% to interest rates etc. So, their satisfaction level was
less for proceedings and av
average for all other services.
Page 65
Services of banks Strongl Agree Neutral Disagree Strongly
y agree disagree
a. Amount of loan 38% 52% 10% - -
b. Legal formalities 38% 52% - 10% -
c. Interest rates 38% 48% - 14% -
d. Repayment options 18% 30% 15% 17% 20%
h. Processing for 38% 48% 24% - -

sanction of loan
Page 66
60%
50%
40%
30%
20%
10%
0%
a b c d e f g h
Factors
Fig. 5.6(d) Percentage of satisfaction level of customers of State
Bank of India
Interpretation
According to the data the customers of State Bank of India give
average satisfaction level to their services. They gave 52% to the amount of loan
and legal formalities and 55% to security provided. 48% to the installments
interest rates and proceedings. To they didn't show high satisfaction level to the
proceedings of the banks due to some reasons.
Page 67
Table 5.7
Please give importance to the factors that influenced your choice of bank
5.7 (a) ICICI Bank
Percentage of Customers agreeing
Most Very Important Less Not

Important Important Important Important
(a) Less 40% 42% 18% - -

documentation
(b) Speedy 60% 25% 10% 5% -

processing
(c) Low interest 30% 55% 15% - -

rates
(d) Flexible 25% 60% 10% 5% -

repayment
(e) Personal dealing 55% 35% 10% - -
(f) Reputation and 45% 30% 15% 5% 5%

credibility
(g) Transparency 60% 40% - - -

and reliability
(h) Professional 80% 12% 8% - -

Management
Page 68
Most Important Very Important Important Less Important Not Important
80%
70%
Percentage of customer 60%

50%
40%
30%
20%
10%
0%
a b c d e f g h
Factors
Fig.5.7 (a) Percentage of reasons that influence the selection of bank for
customers of ICICI Bank
Interpretation
The analyse shows that the customers of ICICI gave more
important to professionally managed working, speedy work and personal dealing
they don't give much importance to interest rate and reputation. This shows that
customers of ICICI gave more importance to services of bank rather than low
cost of working at the time of selection of bank.
Page 69
5.7 (b) Punjab National Bank

(a) Less 24% 38% 28% 10% -

documentation
(b) Speedy 36% 42% 22% - -

processing
(c) Low interest rates 30% 44% - 26% -
(d) Flexible 20% 28% 14% 16% 22%

repayment
(e) Personal dealing 12% 28% 36% 24% -
(f) Reputation and 14% 32% 28% 10% 16%

credibility
(g) Transparency 54% 46% - - -

and reliability

Management
Page 70
60%
50%
Percentage of customer
40%
30%
20%
10%
0%
a b c d e f g h
Factors
Fig5 .7( b) Percentage of reasons that influence the selection of bank for customers of
Punjab National Bank
Interpretation
The analysis reveals that customers of Punjab National Bank gave high
importance to reliability, professional management and speedy processing. Interest is
also a factor of importance for them. Other factor like personal dealing or less
documentation are also important for them. This shows that customer gave a mixed
responses for the reason of selection of this bank.
Page 71
5.7 (c) Standard Chartered bank

(a) Less 30% 44% 26% - -

documentation
(b) Speedy 32% 16% 28% 24% -

processing
(c) Low interest rates 18% 50% 26% 6% -
(d) Flexible 22% 34% 44% - -

repayment
(e) Personal dealing 70% 16% 14% - -
(f) Reputation and 54% 30% 10% 4% 2%

credibility
(g) Transparency 44% 10% 42% 4% -

and reliability

Management
Page 72
80%
70%
Percentage of customer 60%
50%
40%
30%
20%
10%
0%
a b c d e f g h
Factors
Fig. 5.7.(c) Percentage of reasons that influence the selection of bank for customers of
Standard Chartered Bank
Interpretation
On the basis of the data it can be understood that according to the
customers of Standard Chartered the main reasons behind the selection of this bank is
professional management and personal dealing. They gave 50% to interest and 44% to
less documentation.. These also represent some of other reason for their customer the
which force them to select this bank.
Page 73

(a) Less 36% 48% - 12% -

documentation
(b) Speedy 36% 44% - 20% -

processing
(c) Low interest rates 38% 42% - 16% -
(d) Flexible 16% 26% 14% 20% 24%

repayment
(e) Personal dealing 24% 60% 14% 12% -
(f) Reputation and 30% 32% 14% 14% 10%

credibility
(g) Transparency 10% 50% 40% 10% -

and reliability
(h) Professional 40% 20% 20% 15% 5%

Management
Page 74
Most60%
Important Very Important Important Less Important Not Important
50%
Percentage of customer
40%
30%
20%
10%
0%
a b c d e f g h
Factors
Fig 5.7( d) Percentage of reasons that influence the selection of bank for customers of
State Bank of India
Interpretation
As per the data the main reasons behind the choice of this bank by
his customers are the low interest rates, speedy processing and reliability of the
bank. Personal dealing and less documentation also proves to be important for
them. So with this the cust
customers
omers of SBI puts near about equal weightage to each
an every reason.
Page 75
PROBLEMS FACED BY CUSTOMERS IN AVAILING HOME LOANS
There are everything in the world has good or bad points. No doubt
banking industry has made many efforts to enhance the customer satisfaction but
customer still faced some problems. These are high lightened as below:
1) The customer does not have proper knowledge about different home loan
products so they face problem in making a good deal.
2) There are procedural delays, which harass the customers lot. This will
crush the curtsy of customers to avail the home loan.
3) The attitude of bank employees some times non cooperative and it creates
a hurdle in building trust and Confidence among customers about banks.
4) The banks do not take into account the paying capacity of customers. So
some customers are not able to get amount of loan needed by them.
So above discussed are the problems which faced by customers
while availing home loans.
Page 76
CHAPTER 5
Page 77
CHAPTER - 6
CONCLUSION & FINDINGS
This is the last chapter of this project report. In this project report
the summary of the whole project has been covered how the whole project was
carried out and the analysis was made.
This project is based on the “Disbursement of home loans by
commercial banks”. This topic covers the objective of studying the customer
satisfaction level and comparative study of disbursement of home loans by
commercial banks. So first of all objectives were received to carry out this
project.
To study the topic under research the secondary as well as primary
data was collected secondary data was collected from the banks providing home
loans through personal visit to their offices, information provided them in
reports, sites of banks etc. The primary data was collected through
questionnaires. On the basis of collected data an analysis was made on the
disbursement procedures and services in regards of it and also a discussion was
made on the satisfactions level of customers availing home loans from these
banks.
The detailed study of these aspects of home loans revailed that in
what way banks can attract most of the customers towards them. The private
sector banks are attracting consumers by providing door-step services and by
establishing their franchise to service their customers. These banks have gained a
lot as compared to public sector banks.
While studying this project a lot of problems were faced in data
collection from banks as well as customers due to their non-cooperation and
ignorance and a lot of efforts were made to remove such limitations in the study.
To conduct the project more effectively and efficiently, first of all
detailed study of home loans was made i.e. regarding its benefits and limitations,
eligibility criteria and procedure of disbursement.
Page 78
Then according to topic considerable review of literature was made
as mentioned in chapter II. The review of literature was made to facilitate the
further study on the topic by taking help of findings of the previous researchers
or experts relating same field.
The most important part of the project was research methodology
which has been covered in chapter No. 3. In this various aspects like research
design scope of the study. Objectives of the study, data collection techniques are
used and the limitations of study are discussed.
In the chapter No. 4 i.e. Disbursement of home loans by
commercial banks the data collected is presented in tables and diagrams. To
make comparative study on the topic 4 banks namely ICICI Bank, Punjab
national Bank, Standard chartered Bank and State Bank of India are taken into
account. However, after collecting data, an analysis was made to know the
results on the basis of collected data on the basis of data the Punjab National
Bank is having large number of customer base with high loan disbursement and
recovery of loans. But the standard chartered bank showed less outstanding
balance which presented in percentage form in the diagram.
To know the customer satisfaction level primary data is collected
by questionnaire. The data was collected on the basis of responses were given by
respondents. But it was very difficult to collect data because people were non-
cooperative and ignorant about home loan. On the basis of data the ICICI bank is
emerging at higher position as compare to Standard chartered bank and other
public sector banks on ground of professionally managed services, reliable &
transparent system, easy query handling etc. The problem faced by customers
while availing home loans also revailed by this project. This analysis was the
basis of the suggestions on final results.
Finally the whole research was carried out in a systematic way to
reach at exact results. The whole research and findings were based on the
objectives. However, the study had some limitations also such as lack of time,
lack of data, non-response, reluctant attitude and illiteracy of respondents, which
Page 79
posed problems in carrying out the research. But proper attention was made to
carry out research in proper way and to make accurate suggestions for the banks
which may beneficial for banks to enhance their customer base.
Page 80
SUGGESTIONS
However, on the basis of the collected data and the analysis along
with detailed discussion made in conclusion of this report, some suggestions can
be made to the banks which will be helpful to them in improving their services.
These suggestions have been discussed as follows:
1. To increase their customers, the banks should provide specialized services
in this sector. These services can be such as proper guidance to the
customer regarding the processing of loans, especially for the customers
who are illiterate.
2. To satisfy their customers and for good dealings in future, the banks
should make prompt disbursement of loan amount to the customers so that
they can buy or construct their dream home as early as possible.
3. The Banks should use easy procedure, or say, less lengthy procedure for
the sanctioning of loan to the customer. There should be less number of
legal formalities, in case this exists, then, these should be completed in
less time. This will be helpful in attracting more customers.
4. Although the interest rates on specific norms, yet customers seek less
interest rate which can lower their cost of house. So banks should try to
lower their interest rates. Needles to say, that the bank which is having
lower interest rates, have the maximum clients for loans.
5. The public sector banks should improve their overall services to increase
the number of customers for home loans. They should recruit
professionals to provide such services and to satisfy the customers.
6. The scheme of Punjab National Bank is quite beneficial for the persons
who want to buy or construct their own home. But their scheme is not
properly reachable to general public or in rural areas. That's why they
have customers for home loans from their own staff or the account holders
in their bank only. So, they should make the scheme more transparent and
reachable to the common man so that they can avail the benefits of the
Page 81
scheme.
7. Although ICICI Bank is a market leader in 'home loans' sector but they
should innovate their services, viewing the- increasing competitions from
other banks such as Standard Chartered Bank.
8. The Standard Chartered Bank should fix the initial installments at lower
rates as their customers face problems in paying high initial installment
due to their financial problem. So, they should fix installments according
to the repayment capacity of the customer. This suggestion may be applied
to all other banks also.
9. As the banks provide loan according to the repaying capacity of the
customer and his/her eligibility. Due to which, some customers are not
able to get amount of loan needed by them. So, the banks should soften
their norms regarding the loan amount.
10. The Banks should try to provide proper knowledge regarding their home
loan schemes, even to people who don't know about such schemes and
their benefits especially in rural areas. So they should provide knowledge
to the ignorant customers, especially in rural areas and backward urban
area So, above are the main suggestions provided to the banks. By
considering these suggestions, the banks can strengthen their customer
base in home loans sector. They should improve their services and reduce
legal proceedings and should be friendly to their customers. All this will
be helpful to satisfy their customers.
Page 82
Page 83
REFERENCES
• REVIEWS
Ø Berstain David(2008), “Home equity loans and private mortgage insurance:
Recent Trends & Potential Implications”, Vol.3 No.2, August 2008, Pp. 41 - 53
Ø Dr. Rangarajan C. (2001), “A Simple Error Correction Model of House Price”.
Journal of Housing Economics Vol. 4, No. 3,pp 27 – 34
Ø Fanning (1982), “The Demand for Home Mortgage Debt” Journal of Urban
Economics, Vol 11 No 2, November, pp. 770-774
Ø Godse (1983), “looking a fresh at banking productivity”, Journal of Real Estate
Literature, Vol. No. 13, Page 141 to 164.
Ø Haavio, Kauppi(2000) , “Residential Lending to Low-Income and Minority
Families: Evidence from the 1992 HMDA Data," Federal Reserve Bulletin,Vol no
80(2), December 2000 Pp-79-108
Ø Kulkarni (1979), “Development responsibility and profitability of banks” Journal
of Economic Perspectives, Vol 9 No 1 ,pp. 26-32.
Ø La courr, Micheal(2007) , “Economic Factors Affecting Home Mortgage
Ø Disclosure Act Reporting” The American Real Estate and Urban Economics
Association, Vol.2 No. 2 May 18, 2007, Pp. 45 -58
Ø La cour Micheal(2006) , “The Home Purchase Mortgage Preferences Of Low-
and-Moderate Income Households”, Forthcoming in Real Estate Economics , Vol
18, No 4 , December 20, 2006, p. 585
Ø Narasimham Committee (1991), “Alternative Mortgage Products and Housing
Consumption. Working paper
Ø Ohja J (1987) “Productivity and profitability of Punjab sector banks in India, An
international compassion”, State Bank of India monthly review, Vol 28,
No78,July 1987, pp1013.
Ø Vandell ,kerry D(2008), “Subprime lending and housing bubble:tail wag dog?”
International Journal of Bank Marketing, vol 21,no 2, pp. 53-7
Page 84
Ø Varde and Singh, “prospects and problems of real estate of india”. International
Research Journal of Finance and Economics,Vol. No. 11, Page 279 to 324.
Ø Brochure on home loans from ICICI bank

Ø Brochure on Home loans from Standard Chartered banks.
Ø Brochure on home loans from State Bank of India
Ø Brochures on home loans from Punjab National Bank.
• WEB PAGES
ü www.allinfinance.com/credithttp://www.allinfinance.com/credit
ü http://www.bseindia.com/downloads/HomeLoans.pdf
ü http://www.business-standard.com/india/news/pnb-obc-hike-home-loan-
rates/283616/
ü www.ficci.com/general/new-addition/housing-highlights.pdf
ü http://www.icicibank.com/pfsuser/loans/homeloans/hlratesandfees.htm
ü http://www.indiahousing.com/standard-chartered-bank-home-loans.html
ü http://www.statebankofindia.com/viewsection.jsp?lang=0&id=0,3,513
Page 85
Page 86
QUESTIONNAIRE
Dear Sir/ madam
I am Mehak Puri doing MBA from Lovely professional university . I m perpariing a
project on DISBURSEMENT OF HOME LOANS BY COMMERICIAL BANKS . For
this I have designed a Questionniare to know your views and satisfaction level of home
loans .please fill the given as per your thinking and experiences with this. I will be
thankful to you for this .
1. Do you own a home

Yes [ ] No [ ]
If Yes, then, Proceed.
2. Have you get it financed?

Yes [ ] No [ ]
If Yes, then, proceed
3. What is reason for getting it financed?

1. Non availability of funds [ ]
2. Reluctance to pay cash in on go [ ]
3. Tax benefit [ ]
4. Any other (please specify) .........................................
4. From which of the following banks you have got if financed?

Standard Chartered Bank [ ] State Bank of India [ ]
ICICI Bank [ ]
Any other (please specify) ...........................................
5. From where have you got information about home loans scheme?
Page 87
(Check list)
Newspapers [ ] Magazines [ ]
Hoarding/banners [ ] Word of mouth [ ]
Any other (please specify) ...........................................
6. What is your general opinion about the services of the bank. From where you
have got home loans?

agree disagree
a. Professionally
managed
b. Reliable &
transparent
c. Socially responsible
d. Customer care
e. Query handing
Page 88
7. Give your satisfaction level for the following of your home loan scheme?
Strongly Satisfied Neutral Dissatisfied Strongly

satisfied dissatisfied
a. Amount of loan
b. Legal formalities
c. Interest
rates
d. Repayment option
e. Security
demanded
f. Installments
g. Services of bank
h. Processing for
sanction of loan
Page 89
8. Please give importance to the factors that influenced your choice of bank

(a) Less
documentation
(b) Speedy processing
(c) Low interest rates
(d) Flexible repayment
(e) Personal dealing
(f) Reputation and
credibility
(g) Transparency and
reliability
(h) Professional
Management
9. What problems did you face while getting home loans?

a. Lack of knowledge
b. Procedural delays and non cooperation
c. Any other (please specify) ........................................
10. Did you face any problem after sanction of loan?
11. What suggestions do you want to give for improvements in home loans
scheme?
Page 90
Name: _____
Age: [ ] 20-30 years [ ] 30-40 years
[ ] 40-46 years [ ] above 50 years
Income:
Occupation: [ ] Business [ ] Service
Any other (please specify) ............................................
Sex: [ ] Male [ ] Female
Address:
Phone No.:
THANKS
Page 91
Page 92
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DEPARTMENT OF MANAGEMENT

DISBURSEMENT OF HOME LOANS

Submitted to Lovely Professional University

Submitted by: Supervisor:

MEHAK PURI MISS BHARTI AGGARWAL

Research work in management is extremely important for it gives a close

For any MBA student who is striving to perform outstanding, it is of paramount

knowledge. which in turn widely influence their conceptions and perceptions.

professional university ,Phagwara. This really provided me an opportunity to

demonstrate my ability in applying theory to practical business situations.

The study undertaken by me is "disbursement of home loans by commericial banks " In

to present comprehensive report concerning different aspects of my project.

"Gratitude is not a thing of expression, it is more matter of feeling."

help and supervision in achieving the goals.

This formal piece of acknowledgement is an attempt to express the feeling of

gratitude towards people who helpful me in successfully completing of my

I would like to express my deep gratitude to Miss bharti Aggarwal my training

valuable suggestion for improving my work

responses were of utmost importance for the project.

persons who supported me during my project. I am also thankful to all the

respondents whose cooperation & support has helped me a lot in collecting

some of the limitation faced in collecting the data were

lack of time, lack of data, non-response, reluctant attitude and illiteracy of

respondents, which posed problems in carrying out the research.

S.No Chapter Page no

introduction to home loans

4 . Disbursement of home loans by 34

5 Analysis of customer satisfaction level 46

1.1 INTRODUCTION TO HOME LOANS

(iii) Problems in disbursement

To understand how the income of a customer is considered to arrive

Currently Tax Benefits to individuals are available only for the

1.3 NEED OF STUDY

1.4 SCOPE OF STUDY

1.5.1 Research Design

1.5.2 SOURCES OF DATA

1.5.3 Tools of Analysis

Now after this conclusion the details of reviews are below-

DISBURSEMENT OF HOME LOANS BY COMMERCIAL

This chapter contains results and discussion on disbursement of

2004-05 700 90.07 63.05 27.02

2005-06 950 120.00 91.20 28.8

2006-07 1000 144.67 127.31 17.36

2007-08 1303 180.33 165.90 14.43

2004-05 810 120.15 97.28 22.87

2005-06 950 183.26 150.00 33.26

2006-07 1120 213.65 185.86 28.05

2007-08 1433 240.87 231.07 9.80

2004-05 106 6.21 5.27 0.94

2005-06 130 11.55 10.16 1.38

2006-07 154 17.06 14.35 2.70

2007-08 180 20.09 18.68 1.41

There are number of schemes and products, offered by commercial banks to

4.1 No. of Home loan accountholders

2004-05 700 810 106 650

2005-06 950 950 130 853

2006-07 1000 1120 154 1019

2007-08 1303 1433 180 1132

2008-09 1594 1500 260 1434

Average of No. of accounts holders:-

Name of Bank Average (Rs) Percentage of

ICICI Bank 1109 32

Punjab National Bank 1163 34