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ADECLARATION

I the undersigned declare that the report of


the project work entitled COMPARISON OF
HOME LOAN SCHEME OF DIFFERENT
BANKS, is based my own work carried out
during the course of my study under the
supervision of Dr.Sandeep kumar I assert
that the statements made and conclusions
drawn are an outcome of the research project
work. I further declare that to the best of my
knowledge and belief that the research
project report does not contain any part of
any work which has been submitted for the
award of any other degree/diploma/certificate
in this Institute or any other Institute.

Name:
Roll No.:

(Signature of the Candidate)


Date:

4
ACKNOWLEDGEMENT

Perfect is the famous saying and when a


person get practical experience under the
guidance of expert of the respective field, the
knowledge gained is priceless.

With the sense of great pleasure and


satisfaction, I present this project report
entitled COMPARISON OF HOME LOAN
SCHEME OF DIFFERENT BANKS completing a
task successfully is never a man efforts
similarly completion of this report is the
result of invaluable support and contribution
of number of the peoples in direct and
indirect manner. In the light of foregoing, first
of all my heartfelt great fullness and thanks
goes to Dr. Amit Kansal for helping me for
making this research project report. And
constant source of inspiration and guidance
throughout the project. Without his able
support the project would not have seen the
light of the day.

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At this juncture, I would also like to thank to
my collage facility. Without their
indispensable cooperation, the project wont
have been completed within the stipulated
time period. Finally I would like to thank the
staff of other home loan provider banks,
without whose cooperation in providing the
data for the project would have been
impossible.

PREFACE

Modern organizations are highly complex ad


dynamics systems. They operate under very
turbulent social economic and political
environment. They are required to reconcile
several incompatible goals. Conflicting roles
and divergent interest they are also fraught
with the use risk and uncertainties, hence
tactful management of such organization to
plan to execute guide, coordination and
control the performance of people to achieve
predetermined goals. Management has to
keep the organization vibrant moving and in
equilibrium. It has to achieve goal which

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themselves are changing it is therefore a
problem highly complex and ticklish.

This information will be asset to marketing


manager in making effective decisions. The
researchers are used to acquire and analyze
information and to make suggestions to
management as to how marketing problems
should be solved.

The marketing research is the process which


links to manufacturer, dealers and individuals
through information in important part of
curriculum of M.B.A. program me is project
taken by the students to institute under
which he or she is studying, after completion
of third semester of the program me.

The objective of this project is to enable the


students to understand the application of the
academics in the real business life. I am fully
confident that this project report will be
extremely useful to the management.

CONTENTS

CHAPTE PAGE
TITLES
R NO.
I

7
INTRODUCTION 8

II REVIEW OF LITERATURE
37
III OBJECTIVES OF THE STUDY
52
IV RESEARCH METHODOLOGY
55
V DATA ANALYSIS AND INTERPRETATION
57

VI FINDINGS AND RECOMMENDATIONS OF 110


THE STUDY
VII CONCLUSION 111

BIBILIOGRAPHY 112

Chapter- 1
INTRODUCTION

The roof over ones head and ground beneath


ones feet count as the bare necessities of
life. Theres nothing quite like owing a home,
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however humble to give that warm and
glowing feeling. But when one buys a home,
one has much more than a feel good
purchase in mind! Its also a crucial
investment decision, perhaps the biggest
spending decision of ones life. There are
ample opportunities today for young salaried
investors to plan their moves early and buy a
house at right time- and at right price. In the
process, not only do they fulfill that cherished
dream of owing a house, but also put
themselves on the path to acquiring property
that would meet the needs and aspirations of
their growing family, even as it leads to
wealth creation. Every individual aspires to
own a home. But many either spend a
lifetime saving to purchase a house or
exhaust money on monthly house rents.

Take a house loan and let the monthly


rent (easily converted into affordable
EMIs) build dream home.

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HOME LOAN

Home loans are loans you have access to,


depending on whether you want to buy or
build a house and can also be used to repair
or extend an existing house.

Who can avail of these loans?

According to lending institutions, any


Indian resident who is over 21 years of age at
the beginning of the loan and below 65at its
maturity can avail of the loan. Salaried
Employees as well as Self- Employed citizens
can apply. NRI Salaried and RBI Self
Employed, under RBI guidelines, can
approach only nationalized banks and other
HDFC for loans.

Why should one option for a loan to buy


a house?

Taking a loan seems like a good option when


the money at hand is insufficient to buy the
house of your dreams. Consider couples in
their twenties and thirties. They enjoy a good
income currently, buy their accumulated

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capital isnt enough to purchase a house.
Whereas a home loan can give them access
to capital their current earnings.
Also, if you take a 10 years old loan when
you are thirty, you could repay it by the time
youre forty. So you dont have to be
burdened with the interest and are free to
plan your retirement savings.

The Quantum of loan that one can avail


of:

Loan sanctioned depend on your repayment


capacity which is based on your current
income and your future repayment capacity.
You would include your spouses name to
enhance the loan amount.The maximum loan
can be sanctioned varies with each
bank/institutions and ranges from Rs.10 lakhs
to Rs. 1 crore.

Benefits of taking a home loan:

A home loan is very different from a personal


loan like a car loan for instance. You can
utilize a home loan for financing an asset that
will hold its value and even appreciate over

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the period of the loan. Though its price could
fluctuate in the short terms, Total Estate will
show capital appreciation over the years. The
value of your house generally while the loan
remains constant. If you had opted to wait,
save up and buy a house, it would, in the
long run cost you much more; home loans
also come with many tax benefits.

Tax benefits of taking a home loan:

The income tax authorities look with favor


upon those servicing a housing loan from
specified financial institutions. And, it is up to
you to be wise enough to take advantage of
this.

Section 24 of the Income Tax:

Interest on loan till Rs.1.5 lakhs per annum is


exempted form income tax (under section
23/24(1) of the Income tax act).

Section 88 of Income Tax Act:

You get a 20% rebate on repayment of


principle during a financial year. Once again,
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over the years, the principle repayment
eligible for rebate has been enhanced from
Rs.10,000 to the current limit of Rs.20,000
Stamp duty, registration fee or transfer of
such house property to the assesses is also
considered under this amount.

Financial Institutions, which give, home


loans:

Leading Banks Housing finance companies

FINANCIAL IMPLICATIONS OF
AVAILING A LOAN (SMALL OR BIG)

There are several expenses involved apart


from repayment of the actual loan amount:

1. Processing fees- A processing fee (PF)


is charges at the time of submission of the
application form and covers expenses
incurred for processing the application form.
This fee has to be paid upfront by the
customer in some cases, it is non-
refundable.
2. Administration fees- to meet
operating expenses.

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3. Pre-EMI- A simple interest calculated
on the disbursement amount in case of a plot
under construction.
4. EMI- The EMI is an abbreviated form of
the equated money installment and is simply
referred to as monthly installment in common
parlance. And, being a self-explanatory term
that is exactly what it is. The amount you will
have to pay you financier every month when
repaying your loan. Being a monthly
payment, at the end of the year, you would
have paid 12 EMIs.

TYPES OF LOANS AVAILABLE

Broadly two types- fixed rate and variable


rate loans; while the former deals with a fixed
rate of interest over the entire duration of the
loan, the latter has the rate of interest
changing according to the fluctuations in the
market.

LOAN THAT ONE CAN AVAIL

Up to 85-90% of the total cost based


primarily upon the individuals payback
capacity.

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GENERAL CONDITIONS THAT GOVERN A
HOME LOAN:

These are likely to vary with respect to the


different types of housing loans:

The maximum period of the loan is


normally fixed by HFIs. However, HFIs
do provide for different tenors with
different terms and conditions.
The Installment that you pay is normally
restricted to amount 45% of your
monthly gross income.
You will be eligible for a loan amount,
which is the lowest as per your
eligibility. This is calculated on the basis
of your gross income and payback
capabilities.
Some HFIs insist on guarantees from
other individuals for due repayment of
your loan. In such cases you have to
arrange for the personal guarantee
before the disbursement of your loan
tasks place.
Most HFIs have a panel of lawyers who
go through your property documents to
ensure that the documents are clear
and are not misrepresented. This is an

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added benefit that you get when you
avail of a loan from an HFI.
You repay the loan either through
Deduction against Salary, Post dated
cheques, and standing instructions or by
Cash/DD.

WHAT ALL ONE CAN TAKE THE LOAN


FOR?

There are different types of home loan


tailored to meet ones needs heres all some
of them.

Home purchase loan: This is the basic


home loan for the purchase of new
home.
Home improvement loans: These
loans are given for implementation
repair works & renovation in a home
that has already been purchased by the
client.
Home construction loan: This is
available for the construction of new
home.
Home extension loan: This is given for
expanding or extending an existing

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home for e.g.: addition of an extra room
etc.
Home conversion loan: This is for
those who have financed the present
home with home loan & wish to
purchase& move to another home for
which some extra funds are required
through home on version loan ,existing
loan is transferred to the new home
including the extra amount required
eliminating the pre payment of the
previous loan.
Land purchasing loan: this loan is
available for the purchasing of land for
both construction and investment
purpose.
Bridge loan: these are designed for
those people who wish to sell the
existing home & purchase another one.
The bridge loan help finance the new
home, until a buyer is found for the
home.

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HDFC BANK

INTRODUCTION

HDFC (Home Development Finance


Corporation) Home Loan, India have been
serving the people for around 3 decades and
providing various housing loan according to
their varied needs at attractive and
reasonable interest rates. Owing to their wide
network of financing, HDFC Home Loans
provide services at doorstep and helps you
find a home as per your requirements.

COMPANY PROFILE

HDFC Limited founded in 1997 by Ravi


Maurya and Hansmukh bhai Parekh, is an
Indian NBFS focusing on home loans. HDFC
operates through almost 450 locations
throughout the country with its corporate
head quarters in Mumbai, India. HDFC also
has an international office in Dubai, UAE with
service associates in Kuwait. HDFC is the
largest housing company in India for the last
27 years.

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HDFC was amongst the first to receive an in
principal approval from RBI to set up a bank
in the private sector, as a part of the RBIs
liberalization of the Indian banking industry. It
was incorporated on 30th august 1994 in the
name of HDFC Bank Limited, with its
registration office in Mumbai. HDFC began its
operations as a scheduled commercial bank
on 16th January 1995.

ABOUT THE PROMOTER

HDFC, the promoter, is Indias premier


housing finance company and enjoy an
impeccable track record in India as well as in
international markets.

Since its inception in 1997, HDFC has


maintained a consistent growth in its
operation and profitability. Its outstanding
loan portfolio covers over a million dwelling
units. HDFC has developed significant
expertise in retail mortgage loans to different
market segment and also has a large
corporate client base in relation to its
housing related credit facilities and its
investment in portfolio.

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With its tremendous brand equity, the strong
reputation in the Indian and international
financial services market, large shareholder
base and unique consumer franchise, HDFC
was ideally positioned to promote a bank in
the

Indian environment. HDFC (together with its


fully owned subsidiary HDFC Investment
Limited) owns about 31 % of the equity. They
had started with a strategic alliance with the
Natwest group in UK with 20% equity, which
has divested later on. The bank has also
signed a memorandum of understanding for
strategic business collaboration with chase
Manhattan Bank in Feb. 2, 1999.

BUSINESS PHILOSOPHY

The mission of the HDFC Bank is to be world


class Indian bank. This would imply a bank
that would meet various financial needs of its
customers in a convenient and cost effective
manner at international standard of service.

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The bank seeks to achieve the status of a
preferred organization among its major
constituents- customers, shareholders,
regulators, employees, suppliers etc. while
maintaining the highest level of integrity and
corporate governance.

The business philosophy at HDFC bank is


based on four core values: operational
excellence, customer focus, and product
leadership and people competitors.

The Bank faces the strong competition in all


of their principal lines of business. Their
primary competitors are large public sector
banks, other private sector banks, foreign
banks and in some product areas, non-
banking financial institutions.

WHOLESALE BANKING

Principal competitors in wholesale banking


are public and new private sector banks as
well as foreign banks. The large public sector
banks have traditionally been the market
leaders in the commercial lending. Foreign
banks have focused primarily on serving the
needs of multinational companies and the

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Indian corporations with cross- border
financing requirements including trade,
transactional and foreign exchange services,
while the large public sector banks have
extensive branch networks and large local
currency funding capabilities.

RETAIL BANKING

In retail banking, their principal competitors


are the large public sector banks, which have
much larger deposit bases and branch
networks,, other new private sector banks
and foreign banks in case of retail loan
products. The retail deposit shares of the
foreign banks are quite small in comparison
to the public sector banks, and have also
declined in the last five years, which we
attribute principally to the competition from
new private sector banks. However, some of
the foreign banks have a significant presence
among non-resident Indians and also
compete for non-branch based products such
as auto loans and credit cards. They face
significant competition primarily from foreign
banks. In provision of debit cards and also
expect to face competition from foreign
banks when we begin offering credit cards. In

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mutual fund sales and other investment
related products, their principal competitors
are brokers and foreign private banks.

TREASURY

In treasury advisory services for corporate


clients, the compete principally with foreign
banks in foreign exchange and derivatives
trading as well as SBI and other public sector
banks ion the foreign exchange and money
market business.

LOANS

HDFC brings back you a wide range of loans


to cater your financial needs.
The bank offers the following loans:

1) Personal loans.
2) Consumer loans.
3) Auto loans
4) Loans against shares
5) Loans against RBI bonds
6) Loans against insurance policy
7) E- Instant loans give the facility of loans
approval in the 60 second on the
internet.

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8) HDFC has offices spread all over the
country. This extensive network helps
HDFC in providing services to large and
well spread out clients. This network of
interconnected offices (on data circuits)
helps HDFC to process application for
purchase of property anywhere in India.
HDFC has further established an office
in Dubai and service associates in
Kuwait, Oman and Quarter to make to
easier for Middle East based non-
resident Indians to apply for loan to
HDFC-India.
9) HDFC is pioneer of housing finance in
India and has been a leader in business
for the last 23 years. HDFC has vast
experience and a very committed and
skilled staff to handle housing loan
applications and solving customer
problems.

HDFC LOAN SCHEME PURPOSE

HDFC Limited offers loans for the following


purposes:

Land purchase
Home construction/purchase

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Home extension
Home improvement loans
Short-term bridge loans
Non-resident premises loans for
professionals.

LOAN AMOUNT

You can avail of maximum of up to 85% of


the cost of the property, including the cost of
the land.

LOAN TENURE

You can repay the loan over a maximum


period of 20 years under both FRHL and
ARHL. Repayment will not ordinarily extend
beyond your age of retirement (if you are
employed) or on your reaching 65 years of
age, whichever is earlier. However, HDFC will
endeavor to determine the repayment period
to suit your convenience.

RATE OF INTEREST

The rate of interest of HDFC is 8.75%.under


the monthly rest option, interest is calculated
on monthly rests. Principal repayment is
credited at the end of every month.
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At HDFC you have the choice between the
normal FRHL and the innovative ARHL.
Alternatively you can also avail the part of
the loan under FRHL and balance under
ARHL.
HDFC also offers you the option to switch
between schemes for the nominal fee.
Interest rates on ARHL will be linked to
HDFCs Retail Prime Lending Rate (RPLR)
which currently is 13.75% .The rate on your
loan will be revised every three months from
the date of first disbursement, if there is a
change in RPLR, i.e. the interest rate on your
loan may change. However, the EMI on the
home loan disbursed will not change. (if the
interest rate increases, the interest
component in an EMI will increase and the
principal component will reduce, resulting in
an extension of the term of the loan, and vice
versa when the interest rate
decreases).customer will be provided with an
annual statement indicating the details of the
interest and principal payment made during
the year.

SECURITY

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Security for the loan normally is first
mortgage of the property to be financed
and/or such other collateral security as may
be necessary. Interim security may be
required, if the property is under
construction. Collateral or interim security
could be assigned to HDFC of life insurance
policies, the surrender value of which is at
least equal to the loan amount, guarantees
from sound and solvent guarantors, pledge of
shares and such other investments that are
acceptable to the HDFC.

Loans from HDFC are available even if you


are availing a housing loan from your
employer. HDFC has already entered into
arrangements with several employers
enabling employees to avail of loans both
from the employer as well as HDFC for the
same property. Please do ensure that the title
of the property is clear, marketable and free
from encumbrance. To elaborate there should
not be any existing mortgage, loan or
litigation which is likely to affect the title to
the property adversely.

DOCUMENTS/SUPPORTING DOCUMENTS
TO BE ATTATCHED:

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FOR ALL THE APPLICANTS:

1) Allotment letter of the o-operative


society/association of the apartment
owners.
2) Copy of approved drawings of proposed
construction/purchase/extension.
3) Agreement for sale/sale deed/detailed
cost estimate from architect/engineer
for the property to be
purchased/constructed/extended/renova
ted.
4) If you have been in your present
employment/business or profession for
less than a year, mention an a separate
sheet details of the of the occupations
for previous five years, giving position
held, reason for change and period of
same.
5) Applicable processing fees.
6) Proof of residence: attested copy of any
one of the following:

a) Ration card
b) Passport
c) Driving license
d) Voters identity card

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e) Current telephone bill/electricity
bill/gas bill
7) Proof of identity: attested copy of ay one
of the following:
a) Passport
b) Driving license
c) Voters identity car5d identity card
issued by the employer (if
employed in state/central
government)
d) PAN card
8) Certificate of loan outstanding issued by
the lender (for refinance cases only)
9) Any other information regarding your
repayment capacity that is necessary
and will assist HDFC in appraising the
loan proposal.

ADDITIONALLY

IF YOU ARE EMPLOYED:

1) Verification of the employment form


with only part I filled in.
2) Latest original salary slip/salary
certificate showing all deductions.

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3) If your job is transferable, permanent
address where correspondence relating
to the application can be mailed.
4) A letter from your employer agreeing to
deduct the EMI towards the repayment
of the loan from your salary. This will
expedite the processing of your loan
application.
5) Your updated original bank pass book/s
or original bank statement/s showing
salary and saving entries for the last six
months.
6) A photo-copy of your Form-16 (issued by
your employer) for the last assessment
year.

IF YOU ARE SELF EMPLOYED:

1) Balance Sheets and Profit & Loss


Accounts of the business/profession
along with copies of individual income
tax returns for the last three years
certified by the Chartered Accountant.
2) A note giving information on the nature
of your business/profession, form of
organization, clients, suppliers, etc.
3) Copies of individual tax chalans for the
last three years

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4) Copy of advance tax chalan (if any)
5) Your updated original Bank Pass Book/s
or Original Bank Statement/s showing
saving s entries for the last twelve
months.

TAX BENEFIT

You are eligible for certain tax benefits on


principal and interest components of a loan
under the Income Tax Act, 1961.

ELIGIBILITY

The repayment capacity as determined by


the HDFC will help in deciding how much we
can borrow (the cost of the property or
Rs.1crore whichever is lower). Repayment
capacity takes into consideration factors such
as income, age, qualifications, number of
dependents, spouses income, assets,
liabilities, stability and continuity of
occupation and saving history. And, of
course, HDFCs main concern is to make sure

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you can comfortably repay the amount you
borrowed.

ABOUT THE PRODUCT

HDFCs Home Loans offers you various


unique benefits and are easy to arrange and
repayable in easy monthly installments. The
terms of the loan can be structured according
to the customer requirement.

Home loans can be applied for by either


individually or jointly. Proposed owner of the
property, in respect of which the loan is being
sought, will have to be co-applicants.
However, the co-applicants need not be co-
owners. Loans can avail up to a maximum of
85% of the cost of the property (including the
cost of the land). HDFC lends up to a
maximum of Rs. 10000000 on a home loan to
an individual. You can repay the loan over a
maximum period of 20 years. They determine
the loan amount after evaluating the
repayment capacity of the individual. HDFCs
main concern is to help individuals
comfortably repay the borrowed amount.

SUPERIOR PROCESSING CAPACITY:

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HDFC has over the years invested
substantially into the computer systems and
training. This has enabled HDFC to respond
to customer needs and build up capabilities
to approve loan on the spot or disburse them
fast.

BRANCH NETWORK:

HDFC has offices spread all over the country.


This extensive network helps HDFC in
providing service to large and well spread out
clients. This network of interconnected offices
(on data circuits) helps HDFC to process
applications for purchase of property
anywhere in India. HDFC has further
established an office in Dubai and service
associates in Kuwait, Oman, Qatar, Bahrain
and Saudi Arabia to make it easier for Middle
east based non-resident Indians to apply for
the loan to HDFC-India.

EXPERIENCED TRAINED STAFF:

HDFC is a pioneer of housing finance in India


and has been a leader in the business for the
last 25 years. HDFC has vast experienced

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and very committed and skilled staff to
handle housing loan applications and solving
customer problems.

FREE COUNSELLING:

HDFC believes that it is in the business of


providing solutions to an individuals need for
owing a house, and not just in the business of
providing finance. Keeping this in mind HDFC
will provide free counseling to on how and
where to buy a house in India (property
services) or what are the prices and trends in
the real estate market or what precautions
one should take before buying a house. This
service is offered at any of the HDFCs
offices.

LEGAL AND TECHNICAL GUIDANCE:

HDFC has qualified legal and technical staffs


who liaise with developer to collect and
scrutinize the property documents and
permissions. We have master files of most
projects being developed by the reputed
developers. It has always been HDFCs
endeavor to protect the interest of the
borrower, as we believe that the buying a

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house is one of the most Important decisions
in this life.

FLEXIBLE (CUSTOMIZED) REPAYMENT


SCHEMES:

Keeping in mind the fact that each individual


has unique problem requiring unique
solution, HDFC has developed various
repayment options like Step Up Repayment
Facility (SURF), Flexible Loan Installment Plan
(FLIP) Balloon Payment plan and Structured
Repayment Plan.

STEP UP REPAYMENT FACILITY

HDFC Ltd has a hitherto with you, right


through .This statement HDFC proves time
and Again by developing close relationship
with individual customers and by constantly
Developing and marketing in the market new
and innovative products that increase the
Comfort level of the customers. Along the
same philosophy HDFC came up with Step Up
Repayment Facility which once again
reassures customers that HDFC helps you
achieve your dream.

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This facility is especially helpful to those
customers who want to get a loan on an
amount
that is not falling within the permissible limit
of their repayment capacity. It also is in line
with HDFCs aim to provide greater degree of
personalization in service and the tools.
Hence there can be the situation wherein the
applicant is not in the position to pay the
required EMI which is calculated by the ILPS
(Individual loan processing system).HDFC in
this case offers to let the applicant use one of
the two plans to repay the loan amount.

The EMI Chooser 1

In this plan the applicant gets the advantage


from HDFC to select the amount that
he wants to pay as his fist EMI. This means
that HDFC will let the applicant decide
what amount he can comfortably pay to
HDFC in the first term of his Loan Repayment
Schedule. The system will calculate the next
two EMIs for the next two terms

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The customer can hence decide when he
wants to repay the maximum amount of the
Loan to HDFC and when he wants to repay
minimum leftover or remaining amount of the
loan in the form of still smaller EMIs.

The EMI Chooser 2

This plan is an extension of the


aforementioned plan .In this plan HDFC helps
the Applicant by letting him choose two
EMIs .This means that the Applicant can
select the amount that he wants two pay for
both the First and the Second terms of his
repayment schedule. This translates into
more help and more convenience to the
applicant. However the benefits of these
plans dont stop here.

The Applicant can also allocate the term


length for which he wants to pay what
amount
This translates into a great advantage to the
Applicant .He can now link
1. His current salary
2. The rate of average increment,
3. His existing and expected obligations,
4. His existing and expected expenses

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5. The length of the term among others.

HDFC can hence assist the Applicant in


developing a much more personalized loan
plan as compared to its competitors in the
Housing Loan market.

The Applicant can also save money by using


these plans .This is because the total Outflow
in case of a regular plan is more as compared
to these special plans. The Applicant will
hence obtain more benefit in case of
Prepayment and elsewhere.

C. All Loans from HDFC Ltd are subject to


Tax exemption and be treated as Rebate.
Hence HDFC lets the customer save their
hard earned money.

FLEXIBLE LOAN INSTALMENT PLAN


(FLIP)

Another First of its kind product from HDFC


.This is also to assist the Applicant to easily
secure a loan in the following condition. FLIP
is used when the applicant and co-applicant
want to jointly repay the loan. There is
however a problem in the situation which
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would otherwise not allow the loan to be
sanctioned. There are two applicants hence
two incomes .Therefore in the joint payment
they can combine their income to repay the
loan .Let there be Mr. A and B who want to
take a loan for 14 years .A is the father and
B is the son of A .Now consider the situation
in which A and B want to take a loan and
jointly repay it .But A is 52 years old and B is
only 25 .Hence A will retire after 8 years and
will not be repaying the EMI but B can
continue to repay the loan. In that case
although there will be a problem at other
places but in HDFC this is solved by taking
different incomes in the terms. Hence the
income that will be considered earlier will be
the fathers income and at his retirement or
at any other selected stage of repayment we
will begin to consider only the income of the
son.

The advantage of FLIP in terms of the


Applicant is that of joint payment,
personalization, easy repayment, and
freedom from many possible problems. In the
Illustration the father is going to pay only for
105 months and after that we are to consider

39
the sons salary only for the next remaining
60 months.

PARI PASSU/SECOND MORTGAGE


ARRANGEMENT:

HDFC has a tie-up with a large number if


public sector organizations and banks which
enable us to offer loans to your employees
with the flexibility of their spouse also
availing a loan from his/her own employer.

SAFE DOCUMENT STORAGE FACILITIES:

HDFC has state of art storage facilities which


are theft and fire proof, at various locations
where loan and property documents are
stored. In this way valuable documents are
stored safely over the period of the loan and
are released almost immediately after a
customer repay his loan.

ELECTRONIC MAIL:

40
HDFC through its E-mail services can
promptly respond to queries. In addition,
HDFC can promptly send its application form
cum brochure and other detail on its loan
products by e-mail to interested individuals.
For Non-resident Indians our interactive
website offers another means of contacting
us. In our effort to reach out globally
dispersed Non-resident Indians, we will
continuously enhance our website.

HOME CONVERSION LOAN:

HDFC offer the option of a home conversion


loan to its existing customer who are
interested in moving to a new house.
Through this scheme the customer can apply
to have their existing loan transferred
towards the purchase of the new home.
Customers may also apply for an additional
loan amount for the purchase of the new
house. This gives the customers the option of
selling t6heir existing house if they wish to,
without having to repay their old loan

APPLICATION CAN BE MADE BEFORE


SELECTING THE PROPERTY:

41
Individuals may make an application for the
loan even if the property has not been
selected or the construction has not
commenced. HDFC can provide assistance in
locating an appropriate house to such
customers.

HOME IMPROVEMENT LOANS:

As an exclusive offer to its existing customers


HDFC offers Home Improvement Loan up to
100% of the improvement cost as compared
to the home improvement loans up to 70% of
the improvement cost offered to the general
public.

FEE:

A processing fee of 0.5% of the loan amount


applied for rs.5 per rs.1000 of the loan
applied for is payable when the application
form is submitted to HDFC. This fee is in the
respect of costs incidental to the application.
For example:

Loan applied for


fees

42
Rs.20000
Rs.100
Rs.100000
Rs. 500

On approval of the loan, a loan offer is made


to you on acceptance of the offer. You have to
pay an administrative fee of Rs.0.5% of the
loan approved. You can also pay the
processing fee and administrative fee upfront
i.e. 1% of the loan at the time of submission
of the loan application itself. This fee is in
respect of the costs incidental to the
application. Taxes as applicable will be
charged on the fees collected.

CHARGES:

For Fixed Rate Home Loan (FRHL) an early


redemption charge of 2% of the amount
being prepaid is payable, if the amount being
repaid is more than 25% of the opening
balance. However under Adjustable Rate
Home Loan (ARHL) option early redemption
charges of 2% is payable only in case of
commercial refinance. You may be required
to submit the copies of your Bank Statements

43
or any other documents that HDFC deems
necessary to verify the source of
prepayment.
You can make payment for fees and charges
by cheque marked payees account only
drawn on a bank in a city where HDFC has an
office or by demand draft (payable at par to
HDFC).

HOW TO APPLY

Customer can either download (in PDF


format) the application form or get the
application form by E-mail. Alternately the
customers can collect the application form
from any of your nearest HDFC offices.
Customer need to submit it along with
supporting documents and processing fee at
any HDFC office that is convenient to the
customer. Customers can make payments by
the cheque marked payees account only
drawn on a bank in a city where the HDFC
has an office, by demand draft (payable at
part to HDFC) or by cash. Customer can
make an application at any time after they
have decided to acquire a house even when
the house has not been selected or
construction has not commenced.

44
HDFC will consider your application, make
enquiries as it deems necessary and convey
its decision to you. On acceptance of the
offer, you will have to pay an administrative
fee for the loan approved. Customer can take
the disbursement of the loan after the
property has been completed and you have
invested your own contribution in full (own
contribution is the total cost of the property
less HDFCs loan). The loan will be disbursed
in full or in suitable installments (normally
not exceeding three in number)taking into
account the requirement of the funds and the
progress of the construction, as assessed by
HDFC and not necessarily according to the
builders agreement.

STAGES OF HOME LOAN


45
Data Entry
Application
Munirka
HUB
Login Scanning

DISBURSE
The Loan Double Checking
Fix Over (DCOVR) Recommendation
Chrg Over (ROVR)
es

PROCESS

First of all documents are collected

Chapter- 2

46
REVIEW OF
LITERATURE

Ben R. Craig had studied about the Federal


Home Loan Bank Lending to Community
Banks, are Targeted Subsidies Necessary?
The Gramm-Leach-Bliley Act of 1999
amended the lending authority of the Federal
Home Loan Banks to include advances
secured by small enterprise loans of
community financial institutions. Three
possible reasons for the extension of this
selective credit subsidy to community banks
and thrifts are examined, including the need
to: subsidize community depository
institutions, stabilize the Federal Home Loan
Banks, and address a market failure in rural
markets for small enterprise loans. They
empirically investigate whether funding
constraints impact the small-business lending
decision by rural community banks.
Specifically, they estimate two empirical
models of small-business lending by
community banks. The data reject the
hypothesis that access to increased funds will
increase the amount of small-business loans
made by community banks.

47
2) In December 2006 Fulbag Singh and
Reema Sharma had studied about the
housing Finance in India. Housing, as one of
the three basic needs of life, always remains
on the top priority of any person, economy,
government and society at large. In India,
majority of the population lives in slums and
shabby shelters in rural areas. From the last
decade, the Government of India has been
continuously trying to strengthen the housing
sector by introducing various housing loan
schemes for rural and urban population. The
first attempt in this regard was the National
Housing Policy (NHP), which was introduced
in 1988. The National Housing Bank (NHB)
was set up in 1988 as an apex institution for
housing finance and a wholly-owned
subsidiary of Reserve Bank of India (RBI). The
main objective of the bank is to promote and
establish the housing financial institutions in
the country as well as to provide refinance
facilities to housing finance corporations and
scheduled commercial banks. Moreover, for
the salaried section, the tax rebates on
housing loans have been introduced. The
paper is based on the case study of LIC
Housing Finance Ltd., which analyzes region-
wise disbursements of individual house loans,

48
their portfolio amounts and the defaults for
the last ten years, i.e., from 1995-96 to 2004-
05 by working out relevant ratios in terms of
percentages and the compound annual
growth rates. A relevant chart has also been
prepared to highlight the results.

3) In May 18, 2007 Michael LaCour-Little had


studied about the Economic Factors Affecting
Home Mortgage Disclosure Act Reporting.
The public release of the 2004-2005 Home
Mortgage Disclosure Act data raised a
number of questions given the increase in
the number and percentage of higher-priced
home mortgage loans and continued
differentials across demographic groups.
Here we assess three possible explanations
for the observed increase in 2005 over 2004:
(1) changes in lender business practices; (2)
changes in the risk profile of borrowers; and
(3) changes in the yield curve environment.
Results suggest 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

49
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.

4) In May 1991 Stephen F. Borde had studied


about the Is the Savings and Loan Industry
Facing Extinction? This article tells about the
saving and loan crisis. Proposed solutions are
discussed in the context of the industry as it
currently stands. With a somewhat similar
liability structure to that of banks (mainly
short-term deposits), the asset structure of
S&Ls is quite different. Whereas banks assets
consist of short-term loans, S&L assets
consist largely of long-term loans, such as
home ownership mortgages. Therefore, in the
absence of adequate hedging measures,
S&Ls are more vulnerable to interest rate
risk, which can lead to lower profits when
interest rates rise.

5) In June 29, 2001 Joshua Rosner had


studied about the Housing in the New
Millennium: A Home without Equity is Just a
Rental with Debt. They studied about the

50
prospects of the U.S. housing/mortgage
sector over the next several years. Based on
our analysis, we believe there are elements
in place for the housing sector to continue to
experience growth well above GDP. However,
we believe there are risks that can materially
distort the growth prospects of the sector.
Specifically, it appears that a large portion of
the housing sector's growth in the 1990's
came from the easing of the credit
underwriting process. Such easing includes: *
The drastic reduction of minimum down
payment levels from 20% to 0% * A focused
effort to target the "low income" borrower *
The reduction in private mortgage insurance
requirements on high loan to value
mortgages * The increasing use of software
to streamline the origination process and
modify/recast delinquent loans in order to
keep them classified as "current" * Changes
in the appraisal process which has led to
widespread over appraisal/over-valuation
problems If these trends remain in place, it is
likely that the home purchase boom of the
past decade will continue unabated. Despite
the increasingly more difficult economic
environment, it may be possible for lenders
to further ease credit standards and more

51
fully exploit less penetrated markets.
Recently targeted populations that have
historically been denied homeownership
opportunities have offered the mortgage
industry novel hurdles to overcome. Industry
participants in combination with eased
regulatory standards and the support of the
GSEs (Government Sponsored Enterprises)
have overcome many of them. If there is an
economic disruption that causes a marked
rise in unemployment, the negative impact
on the housing market could be quite large.
These impacts come in several forms. They
include a reduction in the demand for
homeownership, a decline in real estate
prices and increased foreclosure expenses.
These impacts would be exacerbated by the
increasing debt burden of the U.S. consumer
and the reduction of home equity available in
the home. Although we have yet to see any
materially negative consequences of the
relaxation of credit standards, we believe the
risk of credit relaxation and leverage can't be
ignored. Importantly, a relatively new method
of loan forgiveness can temporarily alter the
perception of credit health in the housing
sector. In an effort to keep homeowners in
the home and reduce foreclosure expenses,

52
holders of mortgage assets are currently
recasting or modifying troubled loans. Such
policy initiatives may for a time distort the
relevancy of delinquency and foreclosure
statistics. However, a protracted housing
slowdown could eventually cause
modifications to become uneconomic and,
thus, credit quality statistics would likely
become relevant once again. The virtuous
circle of increasing homeownership due to
greater leverage has the potential to become
a vicious cycle of lower home prices due to
an accelerating rate of foreclosures.

6) In December 2002 Melissa B. Jacoby had


studied about the Home Ownership Risk
beyond a Sub prime Crisis: The Role of
Delinquency Management. They studied that
Public investment in and promotion of
homeownership and the home mortgage
market often relies on three justifications to
supplement shelter goals: to build household
wealth and economic self-sufficiency, to
generate positive social-psychological states,
and to develop stable neighborhoods and
communities. Homeownership and mortgage
obligations do not inherently further these
objectives, however, and sometimes

53
undermine them. The most visible triggers of
the recent surge in sub prime delinquency
have produced calls for emergency
foreclosure avoidance interventions (as well
as front-end regulatory fixes). Whatever their
merit, I contend that a system of mortgage
delinquency management should be an
enduring component of housing policy.
Furtherance of housing and household policy
objectives hinges in part on the conditions
under which homeownership is obtained,
maintained, leveraged, and - in some
situations - exited. Given that high leverage
or trigger events such as job loss and
medical problems play significant roles in
mortgage delinquency independent of loan
terms, better origination practices cannot
eliminate the need for delinquency
management. One function of this brief essay
is to identify an existing rough framework for
managing delinquency. Legal scholarship
should no longer discuss mortgage
enforcement primarily in terms of foreclosure
law and instead should include other debtor-
creditor laws such as bankruptcy, industry
loss mitigation efforts, and third-party
interventions such as delinquency housing
counseling. In terms of analyzing this

54
framework, it is tempting to focus on its
impact on mortgage credit cost and access or
on the absolute number of homes
temporarily saved, but my proposed analysis
is based on whether the system honors and
furthers the goals of wealth building, positive
social psychological states, and community
development. Because those ends are not
inexorably linked to ownership generally or
owning a particular home, a system of
delinquency management that honors these
objectives should strive to provide fair,
transparent, humane, and predictable
strategies for home exit as well as for home
retention. Although more empirical research
is needed, this essay starts the process of
analyzing mortgage delinquency
management tools in the proposed fashion.

7) In 1999 Yoko Moriizumi had studied about


the Current Wealth, Housing Purchase and
Private Housing Loan Demand in Japan.
Japanese households accumulate wealth for
down payments at a high rate. Therefore,
current wealth plays an important role in
home acquisition as public loans whose direct
mortgage lending is a strong support for
home purchasers. We estimate the wealth

55
effect on private mortgage debt as well as
housing consumption by applying a model
where mortgage debt demand is derived
from house purchase decisions and is
determined jointly with housing consumption.
We use a simultaneous equation Tobit
estimation method. Wealth effects on private
mortgage debt, likelihood of borrowing, and
housing consumption are not elastic. On the
other hand, a change in housing consumption
affects the likelihood of borrowing elastically
much more than the private mortgage
amount of borrowers. Housing and private
mortgage markets fluctuate very closely with
the number of participants in the mortgage
market. Therefore, the number of housing
starts is linked strongly to the private
mortgage market.

8) Robert B. Avery and Allen N. Berger had


studied about the Loan commitments and
bank risk exposure. They studied about the
Loan commitments increase a bank's risk by
obligating it to issue future loans under terms
that it might otherwise refuse. However,
moral hazard and adverse selection problems
potentially may result in these contracts
being rationed or sorted. Depending on the

56
relative risks of the borrowers who do and do
not receive commitments, commitment loans
could be safer or riskier on average than
other loans. the empirical results indicate
that commitment loans tend to have slightly
better than average performance, suggesting
that commitments generate little risk or that
this risk is offset by the selection of safer
borrowers.

9) Sumit Agarwal,Souphala Chomsisengphet


and John C. Driscoll had studied about the
Loan commitments and private firms. They
studied that, most loans are in the form of
credit lines. Empirical studies of line demand
have been complicated by their use of data
on publicly traded firms, which have a wide
menu of financing options. We avoid this
problem by using a unique proprietary data
set from a large financial institution of loan
commitments made to 712 privately-held
firms. We test Martin and Santomero's (1997)
model, in which lines give firms the speed
and flexibility to pursue investment
opportunities. Our findings are consistent
with their predictions. Firms facing higher
rates and fees have smaller credit lines.
Firms with higher growth commit to larger

57
lines of credit and have a higher rate of line
utilization. Firms experiencing more
uncertainty in their funding needs commit to
smaller credit lines. Almost all firms convert
unused credit line portions into spot loans
and take out new lines.

10) Faik Koray and Eric T. Hillebrand had


studied about the Interest Rate Volatility and
Home Mortgage Loans. They studied that The
U.S. economy has experienced substantial
fluctuations in real and nominal interest rates
since the 1970s. This paper investigates
empirically the relationship between home
mortgage loans and volatility in mortgage
rates for the period 1971:02 through
2003:03. Contrary to common wisdom, we
find a positive relationship between
mortgage rate volatility and home mortgage
loans. Further investigation indicates that this
is due to volatility in the bond market. In
times of high interest volatility, households
disinvest in government securities and invest
in real assets, which yield a positive
relationship between mortgage rate volatility
and home mortgage loans.

58
11) In november2000 Michelle J. White and
Emily Y. Lin had studied about the Bankruptcy
and the Market for Mortgage and Home
Improvement Loans. They studied that this
paper investigates the relationship between
bankruptcy exemptions and the availability of
credit for mortgage and home improvement
loans. We develop a combined model of
debtors' decisions to file for bankruptcy and
to default on their mortgages and show that
the theory predicts positive relationships
between both the homestead and personal
property exemption levels and the probability
of borrowers being denied mortgage
(secured) and home improvement loans. We
test these predictions empirically and find
strong and statistically significant support
when evidence from cross-state variation in
bankruptcy exemption levels is used.
Applicants for mortgages are 2 percentage
points more likely to be turned down for
mortgages and 5 percentage points more
likely to be turned down for home
improvement loans if they live in states with
unlimited rather than low homestead
exemptions. These relationships also hold
when we introduce state fixed effects into the
model.

59
12) In October 14, 2008 David P. Bernstein
had studied about the Home Equity Loans
and Private Mortgage Insurance: Recent
Trends & Potential Implications. They studied
about the impact of increased use of home
equity lines and decreased private mortgage
insurance (PMI) on mortgage markets. The
data confirms that in the years leading up to
the mortgage crisis home buyers and lenders
have aggressively used piggyback loans to
avoid taking out PMI on first mortgages.
Multiple-mortgage financing packages as a
percent of newly originated mortgages
(mortgages originated within the previous
five years) went from 14.8% in survey year
2001 to 21.5% in survey year 2007. The
multiple-mortgage percentage for seasoned
mortgages (mortgages originated more than
five years prior to the origination date) also
increased by a modest amount. Further
comparisons reveal a large decrease in the
proportion of mortgages with PMI with the
largest decreases in PMI coverage occurring
among newly originated multiple-lien
packages. Data from the SCF was used to
compare five financial characteristics (credit
card debt, installment loans, consumer

60
credit, home-owners equity, and liquid
assets) for multiple-lien versus single-lien
households. The comparisons suggest single-
lien households tend to have slightly stronger
financial variables than multiple-lien
households. The data does not support the
view that homeowners with multiple liens are
less risky and should therefore be allowed to
avoid PMI. The reduced use of PMI and the
increased use of home equity loans increased
mortgage holder risk in several different
ways and was a contributing factor to the
2008 mortgage and financial crisis. This
change in lending and borrowing behavior is
not a sub prime market problem.

13) In August 2007 Michael LaCour-Little had


studied about the Home Purchase Mortgage
Preferences of Low- and Moderate-Income
Households. Housing policy in the United
States has long supported homeownership,
yet variation persists across income groups.
This article employs recent mortgage
origination data to focus on the revealed
preferences of low- and moderate-income
(LMI) households in home purchase mortgage
choice. I identify the factors associated with
conventional conforming, FHA, nonprime and

61
specially targeted programs. Empirical results
show that individual credit characteristics
and financial factors, including pricing,
generally drive product choice, with some
variation evident when loans are originated
through brokers. Results also indicate that
targeted conventional programs effectively
compete with government-insured products
in the LMI segment.

14) In 24 October 2008 David C. Wheelock


had studied about the Government Response
to Home Mortgage Distress: Lessons from the
Great. They studied about the Great
Depression was the worst macroeconomic
collapse in U.S. history. Sharp declines in
household income and real estate values
resulted in soaring mortgage delinquency
rates. According to one estimate, as of
January 1, 1934, fully one-half of U.S. home
mortgages were delinquent and, on average,
some 1000 home loans were foreclosed
every business day. This paper documents
the increase in residential mortgage distress
during the Depression, and discusses actions
taken by state governments and the federal
government to reduce mortgage foreclosures
and restore the functioning of the mortgage

62
market. Many states imposed moratoria on
both farm and nonfarm residential mortgage
foreclosures. Although moratoria reduced
farm foreclosure rates in the short run, they
appear to have also reduced the supply of
loans and made credit more expensive for
subsequent borrowers. The federal
government took a number of steps to
relieve residential mortgage distress and to
promote the recovery and growth of the
national mortgage market. The Home Owners
Loan Corporation (HOLC) was created in 1933
to purchase and refinance delinquent home
loans as long-term, amortizing mortgages.
Between 1933 and 1936, the HOLC acquired
and refinanced one million delinquent loans
totaling $3.1 billion. The HOLC refinanced
loans on some 10 percent of all nonfarm,
owner-occupied dwellings in the United
States, and about 20 percent of those with an
outstanding mortgage. The Great Depression
experience suggests how foreclosures might
be reduced during the present crisis.

15) In March 2001 Tullio Jappelli and Maria


Concetta Chiuri had studied about the
Financial Market Imperfections and Home
Ownership: A Comparative Study. They

63
explore the determinants of the international
pattern of home ownership using the
Luxembourg Income Study (LIS), a collection
of microeconomic data on fourteen OECD
countries. In most, the cross-section is
repeated over time and includes several
demographic variables carefully matched
between the different surveys. This allows us
to construct a truly unique international
dataset, merging data on more than 400,000
households with aggregate panel data on
mortgage loans and down payment ratios.
After controlling for demographic
characteristics, country effects, cohort effects
and calendar time effects, we find strong
evidence that the availability of mortgage
finance - as measured by outstanding
mortgage loans and down payment ratios -
affects the age-profile of home ownership,
especially at the young end. The results have
important implications for the debate on the
relationship between saving and growth.

16) In 10 December 2007 Irina Paley and


Chau Do had studied about the Explaining
the Growth of Higher-Priced Loans in HMDA: A
Decomposition Approach. The period 2004-
2005 showed a significant increase in Home

64
Mortgage Disclosure Act (HMDA) rate spread
reporting. Following the Oaxaca (1973),
Blinder (1973), and Fairlie (2005)
decomposition techniques, this study
identifies the fraction of the increase due to
the flattening of the yield curve. Even after
controlling for changes in borrower risk
characteristics, the findings reveal that
during 2004-2006, the flattening of the yield
curve explains a significant amount of the
increase in rate spread reportable loans. This
is the case for both prime and sub prime
originations.

17) In Feb. 1 2009 Vincent W. Yao and Eric


Rosenblatt and Michael LaCour-Little had
studied about the unique paired loan dataset
containing information on multiple
conventional conforming mortgage loans of
households to examine home equity
extraction decisions over the period 2000-
2006. The main question addressed is how
much households borrow when refinancing
their current mortgage debt in a cash-out
transaction. We also provide estimates of the
marginal effect of certain borrower
characteristics. Results contribute both to the
literature on refinancing behavior and the

65
role of house price appreciation in providing
funds that may be used for consumer
spending or other purposes.

18) In august2004 Mark Carey and Greg Nini


had studied about the Corporate Loan
Market Globally Integrated? A Pricing Puzzle.
We offer evidence that interest rate spreads
on syndicated loans to corporate borrowers
are economically significantly smaller in
Europe than in the U.S., other things equal.
Differences in borrower, loan and lender
characteristics associated with equilibrium
mechanisms suggested in the literature do
not appear to explain the phenomenon.
Borrowers overwhelmingly issue in their
natural home market and bank portfolios
display significant home "bias." This may
explain why pricing discrepancies are not
competed away, but the fundamental causes
of the discrepancies remain a puzzle. Thus,
important determinants of loan origination
market outcomes remain to be identified,
home "bias" appears to be material for
pricing, and corporate financing costs differ
in Europe and the U.S.

66
19) In July 2005 Gwilym B.J. Pryce and Patric
H. Hendershott had studied about the
Sensitivity of Homeowner Leverage to the
Deductibility of Home Mortgage Interest.
Mortgage interest tax deductibility is needed
to treat debt and equity financing of homes
equally. Countries that limit deductibility
create a debt tax penalty that presumably
leads households to shift from debt toward
equity financing. The greater the shift, the
less is the tax revenue raised by the
limitation and smaller is its negative impact
on housing demand. Measuring the financing
response to a legislative change is
complicated by the fact that lenders restrict
mortgage debt to the value of the house (or
slightly less) being financed. Taking this
restriction into account reduces the
estimated financing response by 20 percent
(a 32 percent decline in debt vs. a 40 percent
decline). The estimation is based on 86,000
newly originated UK loans from the late
1990s.

20) In 1 NOVEMBER 2007 Marsha Courchane


studied about The Pricing of Home Mortgage
Loans to Minority Borrowers: How Much of
the APR Differential. The public releases of

67
the 2004 and 2005 HMDA data have
engendered a lively debate over the pricing
of mortgage credit and its implications
regarding the treatment of minority
mortgage borrowers. We provide a unique
empirical assessment of this issue by using
aggregated proprietary data provided to us
by lenders and an endogenous switching
regression model to estimate the probability
of taking out a sub prime mortgage, and
annual percentage rate ("APR") conditional
on getting either a sub prime or prime
mortgage. We find that up to 90 percent of
the African American APR gap, and 85
percent of the Hispanic APR gap, is
attributable to observable differences in
underwriting, costing and market factors that
appropriately explain mortgage pricing
differentials. Although any potential
discrimination is problematic and should be
addressed, our analysis suggests that little of
the aggregate differences in APRs paid by
minority and non-minority borrowers are
appropriately attributed to differential
treatment.

21) In 1991 Susan M. Wachter and Paul S.


Calemhad studied about the Community

68
Reinvestment and Credit Risk: Evidence from
an Affordable Home Loan Program. This study
examines the performance of home purchase
loans originated by a major depository
institution in Philadelphia under a flexible
lending program between 1988 and 1994. We
examine long-term delinquency in relation to
neighborhood housing market conditions,
borrower credit history scores, and other
factors. We find that likelihood of delinquency
declines with the level of neighborhood
housing market activity. Also, likelihood of
delinquency is greater for borrowers with low
credit history scores and those with high
ratios of housing expense to income, and
when the property is unusually expensive for
the neighborhood where it is located.

Chapter- 3
OBJECTIVE OF THE STUDY:

The main objective of the study is to find out


the tariff changes charges by other
banks in comparison to HDFC bank.

69
The aim of the study is to help HDFC to know
where it lacks in loans and how for the
performance of other banks is better so
that HDFC figure out the common
problems being faced by the customers
while dealing in the loan department so
that further HDFC can improve its
services and schemes offered by them
to their customers.

PROFITABLE PROPOSITION

The overall demand in residential sector has


grown by about 7-8% in the past few months
as compared to the same period last year.
The growth is on account of two main factors:

One, income tax exemption.


Two, with no similar rebates available
for individuals in the high income group,
they are creating a second asset.

Add to this the stable property prices over


the last year and plunging interest rates,
planning for dream,] home could not have
been better timed. Rock-bottom interest
rates, standardization of periodicity of
interest calculation across lenders (which

70
make it easier to compare loans), lower
interest charges, waiver of loan application
processing fee and a customer friendly
attitude is reason enough to celebrate the
ascension of the home loan consumer as the
king.

In response, private players like ICICI Bank,


IDBI Bank, Standard Chartered Bank and few
others too lowered their rates.

Market leader HDFC also brought down its


interest rate to 8.75% very recently, to
participate in the interest rate war. If one is
still not satisfied with the lowered loan rates
theres more. Some industry watchers
believe that the floating home loan rate will
slip to 8% for long term loans another two or
three years.

Most banks have changed the way the


interest is calculated from annual rest to
monthly rests. Under the annual rest method,
the EMIs (equal monthly installment) one
pay through a year, are factored in as part-
repayment of the principal component only
at the end of each year. In other words one
has to pay interest even on the installments

71
one has paid until they are reduced from the
principal at the end of each year. Under
monthly rests, the principal is lowered by the
appropriate amount each month. The thumb
rule being that the more frequently interest is
calculated, the better for the creditor.

HDFC added monthly rests on its fixed


interest loans apart from annul rests. As a
result the fall in the EMIs on fixed interest
loans (where the interest rate is constant for
the entire tenure of the loan, irrespective of
the changes in the lending rates) is more
pronounced than on floating rate loans
(where the loan interest rate varies with the
changes in the interest rate). For example,
the EMI on a fifteen year fixed interest loan
for Rs. 15 lakh has come down by Rs. 15 lakh
has come down by Rs. 840, the
corresponding fall in the EMI on a floating
rate loan is only 4165. apart from lowering
the cost of ones loan, the switchover to
monthly rests has another advantage : it
makes it easier to compare loans.

72
Chapter- 4

RESEARCH MYTHODOLOGY

Research methodology is an important part


of every project. Because it helps in knowing
how to select the representative sample from
the world or the general population, the right
research tools and techniques to complete
the research.
The study of the consumer behavior is
important because he is the king. The
research process is based upon survey
73
method, so in order we go to service provider
and services user which is the customers.
The research involves the following steps:

Define the problem and research


objective: The problem and objective is
to assess the services offered by the
various service providers and what the
customer wants.
Developing the research plan: The
second stage of the research
methodology is to develop a research
plan. The research plan designed to take
the decision on the data sources,
research approaches, research
instruments, sampling plan and contact
methods.
Survey research: It was a descriptive
research.
Research instrument: The use of an
effective research instrument is very
important because through this
instrument we collect data in this
project through observations and
personal interview were conducted.
Personal interview: as we were doing
direct selling we interacted with my
customers and asked about their views

74
in selecting a service and what are their
wants and expectations from a service
provider.
Sampling plan: After finalizing the
research approach and instruments a
sampling must be designed.
Sampling unit: Data have been
collected from banks.
Sampling size: It has been collected
from four banks.
Sampling procedure: what process
should be used to collect the sample.
So, representation sample, convenience
sampling is used.
Collect the information: After
completing all the steps, the data are
collected from different sources.
Analyze the information: After the
data is collected they are analyzed to
know the findings. The data is then
tabulated to develop the frequency
distribution.
Present the findings: As the last step,
the findings are presented that are
relevant to the major marketing
decisions.

75
Chapter- 5

ANALYSIS OF DATA

The home loans provided by the banks are


more or less same at the basic level. The
banks generally try to go ahead of other
banks in terms of attracting number of
customers to their countries. For this they are
trying to offer some unique services as per
the unique requirements of the unique
important customers.

COMPARITIVE STATEMENT OF HOME


LOAN

PARTICULARS HDFC ICICI PNB SBI

76
ROI(FIXED) 14% 1 -5 Yrs. Up to 5yrs- Year 1 -
-16% 9.25% (up to 8%
5 - 10 20 lakh) Year 2 & 3
Yrs. - 16 & - 9%
% 10 -15 10% (above
Yrs. - 20 lakh)
16%
5 to 10yrs-
15
10%
-20Yrs-
(up to 20
13.75%
lakh)
&
10.25%
(above 20 lakh
)

10 to 20 yrs-
10.50% (up to
20 lakh)
&
10.75%
(above 20
lakh)
ROI(FLOATING) Up to 30lakh- 1 - 5 Up to 5yrs- Year 4
8.75% Yrs.- 16 8.75% (up to onwards -
30 lakh-50lakh- % 20 lakh)
9% 5 - 10 &
Above50lakh- Yrs.- 9.50% (above up to 50
9.25% 11.25 % 20 lakh) lakh-

77
10 - 15 9.25%
Yrs.-16
% over 50
15 - 20 5 to10yrs-9% lakhs-
Yrs- 16 9.75%
(up to 20
% lakh)
&
9.50%(above
20 lakh )

10 to20yrs-
9.25% (up to
20 lakh)
&
9.75% (above
20 lakh)

PROCESSING FEE 0.5% 0.5% 0.5% 0.5%


PENALTY 2% 2% 2% 2%
TENURE 25 years 15 years 20 years 25 years
MINIMUM AGE 21 25 25 25
MAXIMUM AGE 60 55 55 55

78
COMPARISON OF MAJOR PLAYERS

The markets for home loans have been


sizzling in India. The spurt in growth in recent
years and the prospect of continued
buoyancy in demand have attracted many
players to the industry which till a couple of
years back had two major players- HDFC and
LIC Housing Finance. The result is cut-throat
competition, which has benefited the loan
seekers. The home loan market has grown at
a compounded rate of over 40% over the last
four years. And from what industry experts
believe that there is a little chance that there
will be any significant decline in the growth
rates going forward. So what have been the
key factors in triggering of this high growth
period?
There are several reasons for the same on
the demand side:-

79
Faster rise income as compared to
property prices, thus making housing
more affordable.
Decline interest rates, which have
greatly reduced the cost of borrowing
(both o0n interest and capital).

Then there are factors on the supply side too


which have supported this growth:-

More competition in the housing finance


sector resulted in companies charging
lower interest rates, sometimes even at
the cost of spread (i.e. profit margin)
The fee for getting the home loan has
reduced dramatically over the last
couple of years. From over 2% of the
loan amount to as long as 0.25% (some
companies are known to wave of the fee
entirely). Housing Finance Companies
have introduced several new products
to meet the needs of wide variety of
customers. One such scheme, the Step
up Loan, where EMIs increases as the
income of the individual increases has
been a big hit with the individuals just
starting off with their careers.

80
One other factor is increasing
collaboration between Housing Finance
Companies and builders. Such
partnership minimizes the service and
funding related issues significantly thus
making it easier to buy property.

One innovation in the housing finance sector


has been the introduction of floating rate
home loan simply put the cost of such home
loan or the interest rate not fixed during the
tenure of the loan. Instead interest rate is
benchmarked against some index/ indicator.
So as the benchmark rate moves up or down,
the cost of your loan too changes, at some
predetermined frequency (usually once a
quarter).

Ideally loan seekers should opt for a floating


rate home loan when it is expected that the
interest rate will decline going forward. Fixed
rate loans should be preferred when the
interest rates are expected to rise.

But is the choice that simple? In todays


environment when there is a lot of talk about
rising interest rate, should investor shun
floating rate home loan. Altogether is there

81
still some merit in this instrument? In the
last one year, there was a trend of floating
rate home loans being more popular as
compared to the fixed rate loan. As of now,
this trend is continuing says Mr. Suresh
Menon , GM (Mumbai region), HDFC Limited.

There are three important issues which one


needs to consider before opting for one type
of a loan over the other:-
First, an important determinant of what
you go in for should be the long term
expectation of interest rate. For
example if you (or the experts) expects
the rates to rise for the next one year,
but then decline gradually over the next
several years a floating rate product
may be preferable. The other option for
going in for a fixed rate product and
then switching at the end of the year
will entail costs (there could be penalty
of 1%-2% of the outstanding loan
amount) and may not make financial
sense. Moreover floating rate home
loans do not change the rate of interest
every quarter (even though they review
the rate every quarter). Mr. Menon
points out The attraction of a floating

82
rate home loan is that it does not attract
a part prepayment charge. This could
appeal to individuals who get lump sum
bonuses which they can use to reduce
their loan exposure.
Second, the issue whether fixed rate
home loan are actually fixed rate.
When considering a fixed rate home
loan over floating rate of home loan a
strong selling point is that if interest
rate were to rise dramatically you will
be protected. Apparently the reality is
some what different. It seems that
companies that have given out fixed
rate home loans can revise their rates
upwards in exceptional circumstances
(significant rise in interest rate for one)
so if you think interest rate will remain
rage bound over the near term and
decline over the long term, you are still
better off with the floating rate product.
Third, a fixed rate loan is generally
priced higher as compared to the
floating rate product. This holds true in
the current environment where the fixed
rate loan is at a higher interest rate as
compared to the floating rate loan. The
difference is currently about 0.25% to

83
21%. So if you expect that interest rate
are likely to move up, but only to the
extent of this differential, then you
should ideally be in different between
the two types of loan. The deciding
factors then should be when you think
the rates will increase and also the long
term expectations of interest rates.

As always there is no one answer to whether


you should go in for floating or a fixed rate
home loan. If you are a person with very
little appetite for risk or negative surprises,
opt for fixed rate home loan. But in case you
can take on some risk a floating rate home
loan is worth a look.

Five steps to take a right loan:-

1) Gather data on interest rate. Get


interest rate information from more than
one source and get the same
information from each so you can
compare the offers.
2) Get information on fees. Find out about
processing fees, administration charges
and other costs that may be involved in
taking the home loan. A written

84
statement of all the fees from the
housing finance companies will ensure
that there will be no surprises later on.
Use the lowest amount of fees to
negotiate with the other lenders.
3) Get pre-approval letter. This gives you
substantial leverage as you are then
seen as serious buyer by the seller of
the property. Also, having the letter in
your hand will set a limit to the amount
of money you can commit to the
property. This will help in identifying the
right property.
4) Bargain for a lower rate of interest.
Housing finance will reduce their rack
rates for customers with the good credit
record. A bargain deal will easily fixed a
home loan at significantly lower rates
(at times you can get a discount of as
high as 0.50 percent). Here again get a
confirmation of the rate (and for how
long it will remain fixed) via a letter.

5) Watch out for a predatory lending.


Dont include false information on your
home loan application to get quick

85
approval. Also do not borrow more
money than you need or can afford.

A floating interest rate allows customer to


take advantage of interest rate movements.
They get immunity from adverse movements
and read the benefits of any fall in interest
rate but a floating rate loan makes sense
only when interest rate are high so that they
can take advantage of possible fall. But
predicting interest rate movement could
confound even seasoned market watchers.

If they are looking for a home loan, be


prepared to cough up a pretty sum as down
payment. The RBI, in a recent meeting with
the bankers cautioned banks against lending
100% of the property value. That is because
of increasing competition in home loan some
banks have been funding even 110% of the
agreement value. This means your loan not
only pay for the property, it helps with the
stamp duty and registration charges and
even furnishing. Its being sweet deal so for,
as borrower not only need have no access to
other funds, they also get tax breaks.

86
The RBIs position is that lending such sums
will remain additional risk for the bank. In
case of default, the bank may not have
sufficient collateral security to recover dues
and may have to write off the additional
borrowings. However, the bankers do not
seen unduly worried. Nonperforming assets
in the housing segment are quite low below
1% and that, say bankers, is due to the
higher asset quality.

SWOT ANALYSIS OF HOUSING


FINANCE INDUSTRY

STRENGTHS

87
1) The industry has been witnessing very
fast growth rate, which is 6% growth in
the first
2) Quarter of 2002-2003 as against 3-5%
growth recorded in the first quarter of
2001-2002
3) The market faces a high demand curve,
thoroughly mismatched by a low supply
curve
4) Investment is based in assets that are
securities & those that have historically
appreciate rapidly.
5) Tax benefit & other facilities provided
on loan repayments.

WEEKNESSES
1) The foreclosure rules of court of law
such as provision regarding the
ownership of not more than one house
(in Delhi) binds the industry.
2) The healthy of an HFC depend upon its
ability to mob up low cost funds.
3) AN HFC is unable to tap the rural market
due to lack of proper retrieval
procedures so whilst
4) The rural market offers a higher rate of
return; it has a higher risk & default
rate.

88
5) Many legal impendent exist, deferring
purchase of certain types of property
beyond a
6) Certain extent thereby negatively
impacting weak mortgage laws,
resulting in an increase in risk compo
ending this.

OPPORTUNITIES

1) The housing industry faces a severe


shortage of houses. The total demand
for houses is Expected to touch around
19.40 million units by the year 2003 of
these 12.8 million
2) Dwelling units (65-98%) would be in
rural areas & 6.6 millions dwelling units
(34.02%) in urban areas.
3) While the loan facility is backed by the
security of property this sector
represent a low margin But on the low
margin but on the same line low risk
segment. The address this
4) Market the ones lies on the HFCS to
device bold & innovative alternatives
like mortgage Based securities use of
method such as door to door collection
of installments assessing the

89
Creditworthiness of the prospective
client and providing for group securities.
5) The roles of NHB in refinancing &
providing regulation of housing finance
system.
6) The governments initiatives to promote
the sector & its contribution in uplifting
the sector.

THREATS
The industry faces increased competition as
more & more foreign backs & Housing
Finance Companies are providing loan facility.

SWOT ANALYSIS OF HDFC HOME


FINANACE

STRENGTH

1) Save substantial interest.


2) Prepay whenever the customer.
3) Reduce their loan outstanding.
4) Access the surplus finds anytime.
5) Use surplus funds to invest when the right
opportunities arises.

WEAKNESS

90
Product is very good but it is mainly suitable
for higher income group & is not suitable for
the Middle income group

OPPORTUNITIES

There is ample scope for financing flats &


apartments for the salaried class in the
higher income Group.

THREATS

1) Nationalized banks like SBI, Union Bank,


PNB.
2) Private Banks likes HDFC & standard
chartered & Citi Bank with its home credit
scheme.

ICICI HOME FINANACE COMPANY


LTD

Consumer friendly housing finance


company

91
HISTORY

ICICI home finance company ltd was


incorporated on May 28, 1999 as 100%
subsidiary of ICICI Personal Financial Services
Limited (ICICI PFS). ICICI finance company Ltd
was set up with objective of providing long
term housing loan to individual and
corporate. The company was registered on
March 302000 with National Housing Act,
1987 in terms of Housing Financing
Companies (NHB) direction, 1989 with effect
from May 3, 2002, ICICI home finance has
become a 100% subsidiary of ICICI bank Ltd.

OVERVIEW

ICICI home loans are at present available to


customer in 150 cities/towns across the
country. Loans are offered for the purchase of
new homes. Purchase of resale homes and

92
home improvement. Besides the companies
also offers loans for commercial property and
loans against existing property. The loans are
offers foe tenors up to 30 years. The
company has also introduced several
customers friendly services such as door
step services, know your loan on phone
facility and ICICI home search free property
brokerage services. ICICI Personal Financial
Services Limited (ICICI PFS) formerly ICICI
credit was one of the first four companies to
obtain registration as non banking financial
banking companies(NFBc) from the reserve
bank of India (RBI)on sep 10, 1997 under the
new section 45 I A of the RBI act ,1939.

During the year 1998-1999, there was a


significant shift in the companys operations
from leasing and hire purchase to distribution
and servicing the all the retail products for
ICICI, including two auto loans, consumer
durable finance & another financial products.
The company has become a critical part of
ICICIs retail strategy aims at offering a
comprehensive range of products &services
to retail customers. In view of this
reorientation of the business, the name of
the company was changed from ICICI

93
Corporation Limited to (ICICI PFS) effective
march 22, 1999.

ICICI commenced its custodial services


business in 1992 & played a pioneering role
in the business when it accepted the
custodian role for the first ever GDR issue by
an Indian corporate (reliance industry Ltd).
ICICI has a major market share in the
segment act as custodian of 41 ADR/GDR
issues & in the process, has established the
relationship will all the major overseas
institutional investors including foreign
institutional investors (FIIs) & as on the June
30,1999, the value of asset held in our
custody exceeded us 2 billion. At present,
ICICI offers a full range of custodial services
for primary and secondary market operation
pertaining to debt, equity, money market
instruments GDR/EURO issues conversion &
GDR arbitrage to:
1) Overseas institutional investors like

a) FIIS
b) OCBS
c) OFFSHORE FUNDS
d) VENTURE FUNDS
2) Overseas government agencies.

94
3) Institutional looking for proprietary
investment.
4) Mutual funds
5) Private investment companies
6) Large corporate
7) High net worth individual

As a value added services ICICI custodial


services division assist the client in
preparation, submission & follow up for
various applications by FIIS/OCB with
SEBI/RBI

APPLICATION PROCESS OF YOUR HOME


LOAN

Your search for the


perfect home loan ends here at ICICI Bank
Home Loans, even before your have found
the perfect property.

The moment you decide to buy a home, you


can put in your application for a home loan.
Yes, you can apply for a home loan even
before you have selected the property.

The property need not even be in the same


city where you are residing. The only

95
condition being that ICICI Bank has Home
Loans operations in both the cities.

Should there be a change in your financial


status or plans, you can withdraw your
sanction within 6 months of approval of your
home loan.

However, we are always ready to assist our


customers in the event of legitimate
problems. And, we might reconsider this if we
find that there are satisfactory reasons for
the delay.
And, neither would we charge you extra for
this delay.

If it is refinancing you are interested in, it is


possible within 6 months from the date of
purchase of property.

PERSONAL BANKING

At ICICI bank they are committed to making


banking a pleasure. This commitment is
manifested in services they offer a wide
range of account, investment scheme &
facilities. Each services offer their customer

96
security, flexibility of operations & maximum
returns.
The various services provided under this is as
follow:
1) Maximum cash-saving account
2) Quantum fixed deposits
3) Quantum optima value added saving
account
4) Money plus-current act
5) ATM
6) Treasure chest cocker facility
7) Power pay roll
8) Retail treasury instruments

CORPORATE BANKING

MOBILE COMMERSE
ICICI bank now brings back account & ICICI
credit card to customers fingertips .with
mobile commerce customer can perform a
wide range of query based transaction from
their orange tm (Mumbai) & Airtel (DELHI)
mobile phone , without even making a call.

1) Access multiple accounts


2) Balance inquiry to the linked account
3) Cheque book request

97
4) Mini statement listing of last three
transactions5) Request for account
statements (by mail or fax)

ICICI

1) Attractive IR
2) Door step service from enquiry stage till
the final disbursement.
3) No guarantor required.
4) Can transfer your existing high interest
rate loan.
5) Special 100% funding for special
properties.

FACTORS AFFECTING YOUR LOAN


AMOUNT

With ICICI Bank Home Loans, you can get


a home loan suited to your needs. The
home loan amount depends on your
repayment capability and is restricted to a
maximum of 80% of the cost of the property
or the cost of construction as applicable. A
number of factors are taken into account
when assessing your repayment capacity.
Repayment capacity takes into consideration
factors such as income, age, qualifications,
number of dependants, spouse's income,
98
assets, liabilities, stability, continuity of
occupation and savings history.
However, there are ways by which you can
enhance your eligibility.

If your spouse is earning, put him/her as a


co-applicant. The additional income shall be
included to enhance your loan amount. In
case of any co-owners they must necessarily
be co-applicants.

The final amount to be sanctioned will


depend on your repayment capacity.
However, what you ultimately are entitled to
will have to conform within the limits fixed for
each loan.

Also, when the company looks at the total


cost, registration charges, transfer charges
and stamp duty costs are included.

Documents required for Home Loan


Sanction

99
ICICI Bank Home Loans, Indias leading
Home Loans Provider, offers attractive
interest rates and unbeatable benefits to
ensure that you get the best deal. Keeping
your convenience in consideration, we ask
you for minimal mandatory documents for
the sanctioning of your home loan, to keep
the process totally hassle-free.

We require the following documents to


sanction your home loan:

Sanction Documents Completed


application form
Photograph
Fee Cheque
Photo Identity Proof
Age Proof
Signature Verification Proof
Residence Address Proof
Document for the Salaried
Last 3 months Salary Slip
Form 16
Bank Statement for the last 6 months from
Salary Account
Repayment Track record of existing loans /
Loan closure letter

Document for the Self-employed


Income Tax Return / Computation of Total
Income / Auditors Report / Balance Sheet /

100
Profit & Loss Account certified by Chartered
Accountant for last 2 years (3 years for Home
Equity) (both for business and personal of
partners/directors)
Bank statement for the last 6 months from
operating account
Repayment Track record of existing loans /
Loan closure letter
Board Resolution in case of a company
Proof of existence
Office Address Proof

Photo Identity Proof, Residence Address


Proof, Signature Verification Statement
for all the main partners / directors.

HOME LOAN

1) Customer must be at 21 year of age when


the loan is sanctioned.
2) The loan must terminate before or when
you twin 65 year of age or before retirement,
Whichever is earlier.
3) Customer must be employed or self
employed with regular source of income

LOAN AMOUNT

101
A number of factors are taken into
account when assessing repayment
capacity.
Customer income, age, number of
dependents, qualification, asset
&liabilities, stability and continuity of
customer employment. Business is one
of them. However there are ways by
which you can enhance your eligibility.
If the customer spouse is earning put
he/she as a co-applicant. the additional
income shall be included to enhance the
loan amount. Incidentally, if there are
any co owners they must necessarily be
co-applicant customer fiances income
can also be considered sanctioning the
loan on your combined
Income .the disbursement of the loan,
however will be done only after the
submit proof of Marriage. Providing
additional security like bonds, fixed
deposits & LIC policies may also help to
enhance Eligibility.
While there is no need for guarantor, it
could be that having one might enhance
your credibility with us. If so, our loan
officer would provide customer with
positive necessary details.

102
The final act to be sanctioned will
depend on your repayment capacity.
However, what customers ultimately are
entitled to will have to conform within
the limits fixed for each loan.
Also when the company looks at the
total cost, registration charges, stamp
duty, transfer charges are also included.

HOMELOAN

We at ICICI bank understand the value of


owing your house. Our affordable home loans
can make all the difference to their dreams of
owing home.

FIND THE RIGHT HOME

Provide facility for search of free online


property. A one stop shop for all their
Real Estate needs.

WHAT YOU GET

0% brokerage on first sale properties access


the entire market under our roof site visits to
the properties short listed by you. Help in

103
negotiating the best price. Help the legal
documentation.
LISTINGS BELOW ARE THE STEP
INVOLVED IN AVAILING OF A HOMELOAN

A person applies for a home loan


The executive meets the applicant &
briefs him the entire loan process,
requirements & the various options
available.
The applicant chooses a housing finance
company (HFC) & handover the income
Document to the executive are the
income documents are headed over to
the HFC for eligibility & approval.
The HFC verifies the documents &
checks the repaying capacity, saving
habits, tenure of services etc. of the
applicant & approves the loan amount.
After approval an offer letter is given to
the applicant by the HFC, along with list
of original title documents that have to
hand over to the HFC.
The applicant gives the original property
title document to the HFC
The HFC scrutinizes the legal & the
technical aspects of the original title
document.

104
If the HFC is satisfy as to the legal &
technical aspect of the document then
the applicant is called to sign the loan
agreement
The loan disbursement schedule is
decided by the HFC according to the
stage of construction (If property under
construction) or a onetime payment is
made if property is ready for Possession.
The applicant gets possession of the
property depending upon the level of
completion of the property.
The applicant can start paying the EMIs.

DISBURSEMENT

Customer loan will be disbursed after you


identify & select the property or the home
that customer are purchasing and on their
submission of the requisite legal documents.
While the customer may be under impression
that the list of documents asked for it is
rather extensive. Each and every single
document asked for will be verified & check
to ensure their safety. This may take some
time but the banks want to ensure a clear
title and will complete all the legal &

105
technical verification to ensure that they
have full right to their home.
The 230 a clearance of the sellers or 371
clearance from the appropriate income tax
authorities (if applicable) is also needed on
satisfactory completion of above, on
registration of conveyance deed and on the
investment of your own contribution, the loan
amount (as warranted by the stage of
construction) will be disbursed by ICICI.
The disbursement will be in favor of the
builder/seller.

At ICICI Bank Home Loans, we disburse the


loan amount after you identify and select the
property or home that you are purchasing
and submit the requisite legal documents.
While you may be under the impression that
the list of documents asked for is rather
extensive, please note that it is for your own
good. Each and every single document asked
for will be verified and checked to ensure
your safety.
This may take some time but we want to
ensure a clear title and will complete all the
legal and technical verifications to ensure
that you have full rights to your home.

106
Your loan will be disbursed after you identify
and select the property or home that you are
purchasing and on your submission of the
requisite legal documents.

The 230 A Clearance of the seller and / or 37I


clearance from the appropriate income tax
authorities (if applicable) is also needed.
On satisfactory completion of the above, on
registration of the conveyance deed and on
the investment of your own contribution, the
loan amount (as warranted by the stage of
construction) will be disbursed by ICICI Bank.

Disbursement Documents

Property documents (as per P&D for


respective states and as asked by
empanelled lawyers for individual cases)
Facility Agreement
Disbursal Request Form
Cheque Submission Form for Pre EMI and
EMI cheques
ECS or Auto Debit for ICICI Bank account
holders or Post Dated Cheques for EMI / Pre
EMI
Personal Guarantors Documents (PG Form,

107
Photograph, Identity Proof, Address Proof,
Signature Verification and Income
documents, if applicable)

In case of property is owned by a company


Memorandum of Entry
Form 8
NOC

AMOUNT

This largely depend on a no. of facts like ones


age ,profession, salary, the city one reside is
among other such factors. it varies between
2.1lakh to 1crore depending on the lender- as
the rule of the thumb, depending on HFC one
have to cough up 15% - 20% of the loan
amount as the down payment. For smaller
amount, this may not be much. But for figure
remaining into lakh this could make loads of
difference. For e.g. an apartment of costing
Rs 10 lakh may get 85% financing, so one
will have to arrange for remaining Rs 15 lakh.
If one takes this into amount the additional
thousands will definitely put a strain on ones
finances.

TENURE

108
Generally the maximum tenure of home
loans is 15 years, with a few lenders offering
tenure of 20 years or more. ICICI offers 15
year loan. The longer the tenure, the more
one pay in total interest but ones monthly
payment will be less. So depending ones
earning potential & bank balance one can
choose an appropriate tenure. An important
requirement of most of the banks/ HFCs is
that one pays up the entire loan before one
retires. One can always prepay ones entire
loan amount before it is due. There is a trend
to do away with the pre-payment penalty
being imposed by some lenders. So its best
one checks on this as well.

INTEREST RATE

Without doubt the most important parameter


to factor into ones calculations. The interest
rates may vary from institution to institution.
Repayment is in the form of EMIs (equated
monthly installment). The longer the tenure,
the more one pays in interest, but ones
monthly payment will be less. The interest
rate of ICICI is

109
Tenure Interest Type Interest Rate

.15 -20 Fixed 13.75 %


10 -15 Fixed 16 %
5 - 10 Fixed 16 %
1-5 Fixed 16 %
1-5 Floating 16 %
5 - 10 Floating 11.25 %
10 - 15 Floating 16 %
15 - 20 Floating 16 %

REFINANCE

This is concept that is yet to catch on in the


home loan market but is bound to be a major
service in the months to come. Under this
facility, one can take a new loan from
another bank/HFC to pay back another loan
before its natural tenure. It gives one the
opportunity of prepaying ones high cost debt
and get a lower cost one. In todays falling
interest rate scenario one should use this
vehicle to lower ones debt payment as much
as possible. The lender facilitates the shift by
paying the outstanding and transferring the
asset to other portfolio.

MISCELLANEOUS CHARGES

The interest rates and EMIs are not only the


cost factor. Never underestimate how much

110
the processing fee and administration fees
amount to. A 0.5% administration fees and
0.5% processing fee on say, a Rs.500000
loan would be Rs.5000. other timesit could
be just one fee (either administration or
processing but could yet work out to be much
more if it is considerably higher at, say, 2.5%
or 3%. The various other fees, which one is
required to pay along with the margin
amount are:

INTEREST TAX:

This is tax payable on the interest paid on a


home loan and not the principal. This is
sometimes included in the interest rate of the
loan, or may be charged separately as
interest tax.

PROCESSING CHARGE

It is the fee payable to the lender on applying


for a loan. It is either a fixed amount not
linked to the loan or may be a percent of the
loan amount. The loan amount received by
you can be less than processing fee.

PREPAYMENT PENALTIES

111
When the loan is paid back before the nd of
the agreed duration a penality is charged by
some banks or companies, which is usually
between 1% and 2% of the amount being
prepaid.

OTHERS

It is quite possible that some lends may levy


a documentation or consultant charge.

ICICI BANK ANNOUNCES ITS BASE


RATE, VALID FROM JULY 1, 2010

ICICI Bank has announced a shift in the


existing benchmark rate from Floating
Reference Rate (FRR)/ I-BAR the Base Rate (I-
Base). The same will be effective for all its
mortgage products from July 1, 2010.
The ICICI Bank Base Rate (I-Base) has been
fixed at 7.50%. This is the minimum rate that
ICICI Bank will charge to its new customers.

BENEFITS
Some of our key benefits are:
Guidance through out the process

112
Home loan amounts suited to your
needs
Home Loan tenure upto 20 years
Simplified documentation
Doorstep delivery of home loan papers
Sanction approval without having
selected a property.
Free Personal Accident Insurance (Terms
& Conditions)
Insurance options for your home loan at
attractive premium

PUNJAB NATIONAL BANK

INTRODUCTION

PNB has over 4500 branches and offices


bringing the Punjab National Bank to your

113
doorstep. Around 2400 offices come under
the network of Centralized Banking Solution
or CBS. A need for centralized banking
system prompted PNB to go computerized
and what followed was the establishment of
CBS in Punjab National Bank branches in all
the leading cities like Delhi, Pune, Chennai,
Mumbai, Ahmedabad, Chandigarh, Gurgaon,
Hyderabad, Jalandhar, Kolkata, Ludhiana,
Nodal and Bangalore. Internet Banking
Services are provided to all customers in the
CBS branches. A branch and ATM locator is
also available on the official website of
Punjab National Bank. For an overview of the
annual report or the bank profile, the site can
be resourceful. The website also provides info
on the careers and recruitments at PNB and
the exam results. The careers at nationalized
banks like PNB are the most sought after one
and candidates are selected on the basis of
their exam result. PNB topped the Best
Paying Commercial Bank category with an
overall rating of 87.45% as evaluated by the
SSS Retirement, Death & Funeral Benefits
Program.

PROFILE OF PNB

114
The profile of the PNB shows superior
banking services in corporate, personal
and international banking, industrial and
agricultural finance and finance of trade.
Punjab National Bank boasts of a varied
clientele consisting of small and medium
industrial units, exporters, multi-national
companies, Indian conglomerates and NRI.
The Bank is changing outdated front and
back end processes to modern customer
friendly processes to help improve the total
customer experience. With about 8500 of its
own 10000 branches and another 5100
branches of its Associate Banks already
networked, today it offers the largest banking
network to the Indian customer. The Bank is
also in the process of providing complete
payment solution to its clientele with its over
8500 ATMs, and other electronic channels
such as Internet banking, debit cards, mobile
banking, etc.The objectives of the Company
are in line with objectives laid down by RBI
for the Primary Dealers:

Strengthen the infrastructure in the


government securities market in order to
make it vibrant, liquid and broad based.

115
Ensure the development of underwriting
and market making capabilities for
Government Securities
Improve secondary market trading system,
which would contribute to price discovery,
enhance liquidity and turnover and
encourage voluntary holding of Government
securities amongst a wider investor base
Become an effective conduit for
conducting open market operations.

PNB HISTORY

Punjab National Bank of India was


established by Lala Lajpat Rai in the pre-
independence India in 1895 in Punjab, with
Lahore as its head office. Today it is the
second largest public sector bank in India. It
was nationalized in 1969 along with 13 other
major commercial banks. The privatization
started in 1989 when 30 per cent of its
shares were offered to the public and it was
listed on the stock exchange.In 1992, PNB
became the first Philippine bank to reach
P100 billion in assets. Later that year,
privatization continued with a second public
offering of its shares. In August 2005, PNB

116
was fully privatized. The joint sale by the
Philippine government and the Lucio Tan
Group of the 67% stake in PNB was
completed within the third quarter of 2005.
The Lucio Tan Group exercised its right to
match the P 43.77 per share bid offered by a
competitor and purchased the shares owned
by the government. The completion of sale is
expected to speed up the development of
PNBs franchise and operational
competitiveness.

Today, State Bank of India (SBI) has spread


its arms around the world and has a network
of branches spanning all time zones. SBI's
International Banking Group delivers the full
range of cross-border finance solutions
through its four wings - the Domestic
division, the Foreign Offices division, the
Foreign Department and the International
Services division.

PNB RECENT ACHIEVEMENTS AND


MILESTONES

117
Punjab National Bank (PNB), has announced
that it has completed 100% core banking
implementation at all its 4604 branches and
extension counters through the Finical
Universal Banking Solution from Infosys, on
Sun infrastructure and the Oracle Database
setting a significant milestone for themselves
and a new benchmark for the Indian banking
industry. Completed in November 2008, 4
months ahead of schedule, the bank
implemented industry-leading Finacle core
banking solution from Infosys across its
operations running a flexible, and scalable
database platform from Oracle and
innovative servers from Sun Microsystems
With an increasingly dynamic business and
regulatory environment, PNB sought to not
only achieve automation, but also centralize
operations, standardize branch processes,
achieve high scalability for future business
growth, provide flexibility of creating
innovative banking products to its lines of
business, and at the same time, reduce
overall costs. The visionary zeal and the
futuristic view of the Banks top management
in the year 2007-2008 incubated the idea of
introduction of a Centralised Banking
solution. The bold and innovative thought

118
culminated into the CBS architecture with
Finacle application on Oracle Database and
Sun hardware platform with Solaris Operating
System. With Finacles agile and future proof
technology, the bank today has over 22,500
concurrent users. The solutions scalability
has also enabled the banks scalability to be
the best in the country with the number of
peak transactions at 3.5 million. Finacle core
banking platform also provides the bank with
exceptional agility for product innovation and
improved flexibility of operations. With
seamless integration of delivery channels
such as ATM and internet banking solutions,
PNB is able to provide 24X7 services to
customers at a reduced transaction cost.
PNBs choice of the Oracle Database has
provided the banks IT infrastructure with
robustness, management features, security
and scalability as well as performance
requirements to service 3.5 million
transactions and 22500 concurrent users a
significant achievement in the Indian banking
industry. In addition, the Oracle Database will
help PNB take control of its enterprise
information, gain better business insight, and
quickly and confidently adapt to an

119
increasingly changing competitive
environment.20

With secure, highly available and scalable


grids of low-cost servers and storage, Oracle
customers can tackle the most demanding
transaction processing, data warehousing,
business intelligence and content
management applications. The 100%
implementation of Finacle Core Banking
Solution shall enable PNB to further reduce
operational costs and revenue leakage while
improving productivity of branches,
introduction of new and innovative products
and visibility of business. The anywhere
anytime banking facility will enable the bank
to offer products for every segment of the
customer. PNB long-standing and progressive
partnership also highlights Finacles
leadership in large scale banking
transformation, the solutions future proof
technology and powerful capabilities. India is
a strategic market for Finacle and we look
forward to closely collaborating with Punjab
National Bank for their future growth plans.

120
REGULAR HOUSING FINANCE
SCHEME FOR PUBLIC

PNB reaches out to you with fast, friendly and


most convenient home loans for:

Construction or purchase of house/ flat.


Purchase of house/ flat on First Power of
Attorney basis from the original allottee
Carrying out repairs/ renovations/
additions/ alterations to existing house/
flat
Special Feature- To cover the loan
outstanding, life Insurance cover is also
available on payment of one time
premium which can also be financed by
the Bank.

PRODUCTS

PNB Apna Ghar Yojana home loans are meant


for construction or for acquisition/purchase of
house/flats. The minimum loan amount would
be Rs.50000 and maximum loan amount
depends on the repayment capacity of the
borrower. In case of joint application, income
of borrowers /co-borrowers is clubbed
together for calculation of loan eligibility. The

121
loan repayment is in Equated Monthly
Installments (EMI) over a maximum period of
20 years.
PNB Ghar Sudhar Yojana home loans are
offered for up gradation, renovation or repair
of house/flat. It includes among others,
internal and external repairs, water proofing,
roofing, flooring, electrical, woodwork etc.
The loan amount ranges from a minimum of
Rs 50,000 to a maximum of Rs. 1000000.
Borrower's minimum contribution will be 25%
of the estimated cost of repairs/renovations

INDIVIDUAL
For construction/purchase of house/flat: -
75% of the cost of construction of house or
purchase of house/flat. Cost of car parking up
to the maximum extent of 5% of the cost of
flat/house can also be included in the cost of
the project. For carrying out repairs/
renovations/ additions/ alterations: - 75% of
the estimated cost subject to maximum of
Rs. 20 lacs.

Loan is available up to Rs. 20 lacs for


purchase of Land/ Plot. Loan is available
maximum up to Rs. 2 lacs for furnishing

122
PRODUCT RANGE OF
COMPANY/INDUSTRY:

The products and services provided by the


PNB are in various fields, such as:

NRI services
International banking
Corporate banking
Agricultural banking
International banking

ELIGIBILITY

Age of the applicant must be less than 60


years.
Existing home loan borrower can also apply
provided their loan account is regular and no
IR irregularity persist.

DOCUMENTS NEEDED

1. Proof of identity
2. Proof of income
3. Proof of residence

123
4. Bank statement or Pass Book where salary
or income is credited.
5. Education Certificate
6. Photos
7. Salary slips & form 16
8. Income tax return last 3 years along with
balance sheets.
9. Assets liabilities statements.
10. Documents of property.
11. Estimate of construction.
12. Guarantor

FREEHOLD AND LEASEHOLD


PROPERTY

The loan can be granted both for freehold


and leasehold property.

In case of leasehold, loan can be granted on


the basis of power of attorney basis from
original allotee where DDA/PUDA/HUDA
permit conversion of leasehold into freehold
property otherwise advance is not permitted
against plot purchased on Power of Attorney
basis.

EXTENT OF LOAN

124
For construction/purchased of house/flat 75%
of the cost of construction or purchase of
house/flat. For carrying out
repairs/renovation/additions/alternation: -
75% of the estimated cost subject to
maximum of Rs. 20 lacs. Loan up to Rs. 20
lacs for purchase of land/plot
Loan is available maximum up to Rs. 2 lacs
for furnishing

CHARGES

Pre payment charges 2%

Balance Transfer Charges 2%


(incase of refinance)
Part-payment Charges Nil

Switching Charges Nil


(Fixed to Floating or vice-a-versa)

SPEED OF SANCTION OF LOAN

The loan will be sanctioned within 7 working


days.

TENURE:

125
You can repay the loan over a maximum
period of 25 years under both FRHL and
ARHL in SBI . Repayment will not ordinarily
extend beyond your age of retirement (if you
are employed) or on your reaching 65 years
of age, whichever is earlier.

RATE OF INTEREST

Fixed Fixed Floating Floating


For Option Option Option Option
repaym for for for for
ent loans(U loans(Ab loans(U loans(Ab
period pto 20 ove 20 pto 20 ove 20
lac) lac) lac) lac)
i) Upto
9.25 10.00 8.75 9.50
5 years
ii)
Above 5
& upto 10.00 10.25 9.00 9.50
10
years
iii)
Above
10.75
10 & 10.50 9.25 9.75
upto 20
years
iv) 10.75 11.00 9.50 10.00
Above

126
20 yrs
& upto
25 yrs.

The interest rate can be fixed or floating


Option can be changed from fixed to floating
and vice versa with flat charges of 2% fee on
balance outstanding.
Fixed interest rate be reset after a block of 5
year in respect of loans disbursed on or after
1.08.2006

DOCUMENTATION CHARGES
Rs. 1350 + Service Tax

UPFRONT FEE
For loans up to Rs. 300 lacs = 0.50% of the
loan amount with a cap of Rs. 20,000/-
For loans above Rs. 300 lacs =0.90% of the
loan amount

REPAYMENT
1. Loan is to be repaid in equated monthly
installments within a period of 25 years or
before the borrower attains the age of 65
years.

127
2. Repayment of loan for repair/ renovation/
addition/alteration has, however been
restricted to 10 years. Father/Mother can also
be made co-borrower in cases property is in
single name of his /her son and also clubbing
of their income is permitted for determining
eligibility criteria. Minimum 24 advance
cheque should be obtained as and when, 6
cheques remain, fresh lot to be obtained out
of 24, 23 cheques should be of the amount
equal to the balance. Loan is to be repaid in
EMI within a period of 25 years or before the
borrower attains the age of 65 years.

SECURITY

Mortgage of property for which finance is


being given
In case of purchase of house/ flat from
housing board/ society where mortgage
cannot be created immediately, a tripartite
agreement shall be executed amongst the
housing board/ society, borrower and the
Bank
In case of purchase of house/ flat on first
power of attorney, additional security equal

128
to 125% of the loan amount by way of
mortgage of some other property or pledge
of bank's FDR/ LIC policy/ Govt. Securities,
NSCs, KVPs, IVPs, / PSU Bonds etc. has to be
provided

FEATURES

Loan can be sanctioned by branch/hub near


to the present place of work/posting
/residence of the borrower.
Loan can be sanctioned even if property is in
the name of wife/parents provided that the
owner is made co-borrower.
Loan can be granted for 2nd house in the
same city.
Loan can be granted for purchase of house
for rental purpose
For take over, permission of higher authority
is not required.

IMPORTANT CONDITIONS LOAN


CANNOT BE GRANTED:

For construction in Un-authorized


colonies.
If property is to be used for commercial
purpose.

129
Without approved Map.
PRE- PAYMENT CHARGES

Nil- In cases where the loans are


prepaid by the borrower from their
own sources
Nil- In cases where the borrower
shifts to other bank within 30 days
from the date of issuance of
circular for upward revision in the
rate of interest to be charged in his
account or change in other terms of
sanction.
2 % - In cases where the account is
taken over by some other Bank/
Financial institutions by way of a ailment
of loan from such bank/ financial Inst

DISBURSEMENT FOR HOME LOAN

a. For outright purchase of house/flat, the


loan amount will be paid in lump sum to
the vendor.
b. For house/flat under construction, the
loan amount will be dispersed in stages
as per progress of construction/demand
by selling agency.

130
STATE BANK OF INDIA

INTRODUCTION

State Bank of India (SBI) is India's largest


commercial bank. SBI has a vast domestic
network of over 9000 branches
(approximately 14% of all bank branches)
and commands one-fifth of deposits and
loans of all scheduled commercial banks in
India. The State Bank Group includes a
network of eight banking subsidiaries and
several non-banking subsidiaries offering
merchant banking services, fund
management, factoring services, primary
dealership in government securities, credit
cards and insurance. The eight banking
subsidiaries are: State Bank of Bikaner and

131
Jaipur (SBBJ),State Bank of Hyderabad
(SBH).State Bank of India (SBI),State Bank of
13 Indore (SBIR),State Bank of Mysore
(SBM),State Bank of Patiala (SBP),State Bank
of Saurashtra (SBS) and State Bank of
Travancore (SBT). Today, State Bank of India
(SBI) has spread its arms around the world
and has a network of branches spanning all
time zones. SBI's International Banking Group
delivers the full range of cross-border finance
solutions through its four wings - the
Domestic division, the Foreign Offices
division, the Foreign Department and the
International Services division.

PROFILE

The SBIs powerful corporate banking


formation deploys multiple channels to
deliver integrated solutions for all financial
challenges faced by the corporate universe.
The Corporate Banking Group and the
National Banking Group are the primary
delivery channels for corporate banking
products.

132
The Corporate Banking Group consists of
dedicated Strategic Business Units that cater
exclusively to specific client groups or
specialize in particular product clusters.
Foremost among these a specialized group is
the Corporate Accounts Group (CAG),
focusing on the prime corporate and
institutional clients of the countrys biggest
business centers. The others are the Project
Finance unit and the Leasing unit. The
National Banking Group also delivers the
entire spectrum of corporate banking
products to other corporate clients, on a
nationwide platform. The bank is also looking
at opportunities to grow in size in India as
well as internationally. It presently has 82
foreign offices in 32 countries across the
globe. It has also 7 Subsidiaries in India SBI
Capital Markets, SBICAP Securities, SBI DFHI,
SBI Factors, SBI Life and SBI Cards - forming a
formidable group in the Indian Banking
scenario. It is in the process of raising capital
for its growth and also consolidating its
various holdings. Throughout all this change,
the Bank is also attempting to change old
mindsets, attitudes and take all employees
together on this exciting road to
Transformation. In a recently concluded mass

133
internal communication programme termed
Parivartan the Bank rolled out over 3300
two day workshops across the country and
covered over 130,000 employees in a period
of 100 days using about 400 Trainers, to
drive home the message of Change and
inclusiveness. The workshops fired the
imagination of the employees with some
other banks in India as well as other Public
Sector Organizations seeking to emulate the
programme.

HISTORY

The origins of State Bank of India date back


to 1806 when the Bank of Calcutta (later
called the Bank of Bengal) was established.
In 1921, the Bank of Bengal and two other
Presidency banks (Bank of Madras and Bank
of Bombay) were amalgamated to form the
Imperial Bank of India. In 1955, the
controlling interest in the Imperial Bank of
India was acquired by the Reserve Bank of
India and the State Bank of India (SBI) came
into existence by an act of Parliament as
successor to the Imperial Bank of India.

134
Today, State Bank of India (SBI) has spread
its arms around the world and has a network
of branches spanning all time zones. SBI's
International Banking Group delivers the full
range of cross-border finance solutions
through its four wings - the Domestic
division, the Foreign Offices division, the
Foreign Department and the International
Services division.

SBI RECENT ACHIVEMENTS AND


MILESTONES:
AWARDS:
SBI has been the proud recipient of the ICRA
Online Award - 8 times, CNBC TV 18, Crisil
Award 2006 - 4 Awards, The Lipper Award
(Year 2005-2006) and most recently with the
CNBC TV - 18 Crisil Mutual Fund of the Year
Award 2007 and 5 Awards for our schemes.

SBI Card reaches three million


milestones:

SBI Card, a joint venture between State Bank


of India and GE Money, announced yet
another landmark achievement of crossing
the three million cardholders-marks. Roopam
Asthana, CEO-SBI Card, said, "This milestone

135
is even more remarkable as we have added
one million cardholders in just ten months.
Our objective is to accelerate the pace of
growth by extending the benefits to a
broader range of consumers in Tier II cities,
along with improved value propositions for
the urban affluent customers." SBI Card
recently signed up Indian cricketer Yuvraj
Singh as its brand ambassador.

SBI joins Chinese bank to touch


10,000 branches:

Public sector State Bank of India on Sunday


became only the second bank in the world to
have 10,000 branches when Union Finance
Minister P Chidambaram inaugurated its
latest branch here. Speaking on the occasion,
Chidambaram said China's ICBC Bank was
the other bank to have 10,000 branches.
Opening 10,000 branches was a great feat.
"It is not an easy milestone though the SBI
was the bank of the government and Indian
people even before other banks were
nationalised," he said. People all over the
world, including the Chinese, would now
know about this small village where the
10000th branch of the SBI had been opened,

136
he said adding they would be amazed by the
bank's growth. The bank should be proud of
the achievement he said and wished that the
bank opened one lakh branches. The Minister
said out of the over 100 crore people,
seventy 75 per cent did not have any type of
insurance. Similarly, 50 per cent of the 11
crore farmers did not have bank account.
Banks should go to the people and enroll
them as account holders. 'That is what
economists say is financial inclusion,' he said.

Main SBI Home Loan Schemes

SBI Realty : Purchase of plot of land


SBI Optima : Loan to existing home
loan borrowers
SBI Green Home Loan : For homes
that fight against the adverse climate
change, SBI offers 0.25% concession in
interest rate and waiver of processing
fees
SBI Flexi : Combination of floating and
fixed interest rate, in a pre determined
ratio
NRI Home Loans : Loans for NRIs and
PIOs

137
SBI Freedom : Pledging other financial
security than mortgaging the house
SBI Max Gain : Operate your home
loan account like your SB or Current
Account

PRODUCT RANGE OF
COMPANY/INDUSTRY:

The products and services provided by the


SBI are in various fields, such as:
Banking services
NRI services
International banking
Corporate banking
Agricultural banking
International banking

SBI HOUSING LOAN


Features
SBI Home Loan provides no cap on
maximum loan amount for the
purchase/construction of house/flat.
There is an option to club the income of
the applicant's spouse and children to
compute the eligible loan amount.
The bank provides free personal
accident insurance cover.

138
A complimentary international ATM cum
Debit card is also provided by SBI.
On the spot "in principle" approval is a
special provision for the applicant.
If all the required documents are
submitted by the applicant, SBI Home
Loan is sanctioned within 6 days of the
date of submission.
The applicant can also consider SBI's
Home Loan as a Term Loan or as an
Overdraft facility, in case he/she wants
to save on interest and maximize gains.
SBI Home Loan also provides free
personal accident insurance cover up to
Rs 40 Lakhs.
Repayment is permitted up to 70 years
of age, which is an added advantage of
SBI Home Loan.

SCHEMES PROVIDED BY SBI

The Most Preferred Home Loan provider SBI


Bank offers a Home Loan with Attractive
Interest Rates with Latest Schemes and
Benefits. SBI also provides a Housing loan
with different schemes. Schemes Are:-

1. SBI Easy Home Loan

139
2. SBI Advantage Home Loan
3. SBI Housing Finance Scheme
4. SBI Happy Home Loans
5. SBI Life Style Loan
6. SBI Green Home Loan
7. SBI Home Plus
8. SBI Home Line
9. SBI MY HOME CAMPAIGN

PRODUCTS

'SBI-Flexi' Home Loans are designed to


enable borrowers to hedge their Home Loan
against unfavorable movement in interest
rates and gives the customers a one time
irrevocable option to choose one of the three
customized combinations of fixed and
floating interest rates.
'SBI-Freedom' Home Loans are customized
for high net worth individuals and offer
benefits such as 100 per cent finance of the
project and no mortgage of the property,
provided the individual could show liquid
securities such as LIC policies or NSCs.

ELIGIBILITY

140
The minimum age of the applicant is 18
years, on the date of the sanction of the loan.
The maximum age limit for a Home Loan
applicant is 70 years. It is the maximum age
limit, within which the loan should be fully
repaid. The applicant should consist of
sufficient, regular and continuous source of
income for repaying the loan.

DOCUMENTS

Completed Application Form with one


Passport Size Photograph
Identity Proof - the applicant can make use of
his/her PAN Card/Voter ID/ Passport/Driving
License, for the purpose.
Residence Proof - the applicant can make use
of his/her Recent Telephone Bill/ Electricity
Bill/Property tax receipt/Passport/Voters ID
Proof of business address in respect of
businesspersons/ industrialists
Sale Deed, Agreement of Sale, Letter of
Allotment, Non Encumbrance Certificate,
Land/Building Tax paid receipt etc.
Copy of Approved Plan and approval from the
Local Body
Statement of Bank Account/ Pass Book for
last 6 months

141
INTEREST RATE (SBAR is currently
11.75%)

Year 1 - 8% fixed
Year 2 & 3 - 9% fixed
Year 4 onwards - For loans up to 50 lakhs,
9.25% floating.
For loan amount over 50
lakhs, 9.75% floating

Eligibility Criteria & Documentation


required for SBI Home Loan

Salaried Self employed


21years to 21years to
Age
60years 70years
Rs.1,20,000 Rs.2,00,000
Income
(p.a.) (p.a.)
Loan Amount 5,00,000 - 5,00,000 -
Offered 1,00,00000 2,00,00000
5years-
Tenure 5years-20years
20years
Current
2years 3years
Experience
Documentati 1) Application 1) Application
on form with form with
photograph photograph
2) Identity & 2) Identity &
residence residence proof
proof 3) Education
142
qualifications
3) Last 3 certificate &
months proof of business
salary slip existence
4) Form 16 4) Business
5) Last 6 profile,
months bank 5) Last 3 years
salaried profit/loss &
credit balance sheet
statements 6) Last 6 months
6) Processing bank statements
fee cheque 7) Processing fee
cheque

Other Products from SBI (State


bank of India)

1) SBI Personal Loan


2) SBI Card
3) SBI Home Loan
4) SBI Housing Loan

LOAN TENURE

You can repay the loan over a maximum


period of 25 years under both FRHL and
ARHL in SBI . Repayment will not ordinarily

143
extend beyond your age of retirement (if you
are employed) or on your reaching 65 years
of age, whichever is earlier.

PROCESSING FEE

Amount (Rs.) Fees (Rs.)


Upto 5,00,000 1,000
5,00,000 to 10,00,000 2,000
10,00,000 to 20,00,000 5,000
20,00,000 to 50,00,000 7,000
50,00,000 to 1,00,00,000 8,000
1,00,00,000 to 5,00,00,000 10,000
Above 5,00,00,000 20,000

PREPAYMENT CHARGES

If paid from own source- Nil,


In other cases- 2% on principal amount
prepaid

LATE PAYMENT CHARGES

If paid from own source- Nil,


In other cases- 2% on principal amount
prepaid

144
Chapter- 6

FINDINGS AND RECOMMENDATION

OF THE STUDY

To broaden the customer base the vast


middle income strata should be fully
exploited.
Simplify the procedure, reduce service
charges & demand only the basic
essential proof.
Most banks are reluctant to advance
loan to the service class. E.g. law years,

145
police officers etc. this aspect must be
exploited.
Adoption of flexible & more lenient
penalty should the
Customer fails to deposit the payment
on time. The penalty should be case to
case basis rather than the same for the
entire customer base.
Restriction to be reduced to bare
minimum for loan advances & for
repayment. For e.g. offers Long term
repayment facilities & have no age
restriction to choosing repayment. The
maximum age for repayment could be
increase to 65-70 years of age. Such
facility will grow fast retail segment of
the bank.
Offer multiple repayment loans services.
Class to be exploited by offering special
reduced
Rates & linking the repayment from the
source where the pay cheque to the
employee is issued. This need to
undergo special contract with
government organization to ensure
implementation.

146
Chapter- 7

CONCLUSION

The Indian customer has come a long way


from purchasing to fulfilling their needs from
buying a house customers now grab
everything that comes their way but they do
their own survey of optimum loans; same is
the case with banks & housing loans. With
innumerable choices before him, the
customer is needed then king. It is therefore
imperative that if the bank has to succeed in
competitive world, it should be technological
starry. Customer centric progressive driven
by highest standard of cooperative
governance & guided by sound ethical values
& above all should have personalized
customer services. There is scope of
exploiting the vast middle income group by
releasing loans with special interest rate,
which would be beneficial to both parties.

147
BIBLIOGRAPHY

REFERENCES BOOKS

M Y Khan P K Jain Financial


Management 4th edition Tata McGraw
Hill.
R.S.N. Pillai V. Bagavathi Management
Accounting S Chand & Co.
Martand Telsang Industrial Engineering
& Production Management S Chand &
Co.
R. Paneerselvam Operations Research
Prentice hall Of India Private Ltd.
B.M. Lall Nigam I.C. Jain Cost
Accounting Prentice hall Of India
Private Ltd.
S.P. Iyengar Cost & Management
Accounting Sultan Chand & Sons.

WEB SITES

148
https://www.sbi.co.in
www.hdfc.com/loans/home-loan
www.icicibank.com/Personal-
Banking/loans/home-loan
https://www.pnbindia.in/En/ui/PNBFlexi
bleHousingLoan
www.bankbazaar.com Loans
www.policybazaar.com/home-
loans/home-loans-india.
www.allbankingsolutions.com/Lowest-
Interest-Rates-for-Home-Loans.htm

149

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