Professional Documents
Culture Documents
Submitted by
P.Prajwala Devi
R.No.017-08-179
HYDERABAD - 500007
1
DECLARATION
declare that the work presented herein is genuine work done originally by me
and has not been published or submitted elsewhere for the requirement of any
Master Degree Programme. Any literature, data or works done by others and
cited within this dissertation has been given due acknowledgement and listed
_______________________
(Student's name & Signature)
_______________________
(Registration No.)
Date:__________________
2
A C K N O W L E D G E M E N T
profound gratitude sincere appreciation to each and every one of those who
Firstly I would like to thank the Staff of the SBI Branch for allowing me
guidance, cooperation and valuable suggestions to initiate and carry out the
study.
.
Date: -03-2010
3
CONTENTS
CHAPTER -1
1. INTRODUCTION.............................................................................................................. 7
1.1. ABSTRACT ............................................................................................................... 7
1.2. OBJECTIVES OF THE STUDY .............................................................................. 9
1.3. NEED OF THE STUDY .........................................................................................10
1.4. SCOPE OF THE STUDY .......................................................................................10
1.5. RESEARCH METHODOLOGY............................................................................11
1.6. TOOLS AND TECHNOLOGIES USED...............................................................11
1.7. LIMITATIONS OF THE STUDY..........................................................................12
CHAPTER -2
2. LITRTATURE SURVEY................................................................................................13
CHAPTER -3
8. RECOMMENDATIONS .................................................................................................90
9. UPDATE ON HOME LOANS .......................................................................................92
C O N C L U S I O N..........................................................................................................97
BIBLIOGRAPHY .....................................................................................................................98
APPENDIX ...............................................................................................................................99
QUESTIONNAIRE ..............................................................................................................99
4
LIST OF FIGURES
5
LIST OF TABLES
6
CHAPTER -1
1. INTRODUCTION
1.1. ABSTRACT
luxuries and above all gathering funds little by little to afford one‟s dream. Home is one of
the things that everyone one wants to own. Home is a shelter to person where he rests and
feels comfortable. Many banks providing home loans, whether commercial banks or financial
institutions, to the people who want to have a home. Many banks are providing home loans at
cheapest rate to attract consumers towards them. The more customer friendly attitude of these
banks, currently offer to consumers cheapest loan over homes. In view of acute housing
shortage in the country, and keeping in mind the social – economic role of commercial banks
RBI advised banks to encourage the flow of credit for housing finance. With the RBI
reducing bank rate, the home loan market rates nose-diving by 50 basis points. The ICICI
become the first player in this sector to announce a housing loan for a 20 years period. No
doubt it will enhance the end cost of the home but it will facilitate people to plan their house
over longer duration now, it has been made easy for a person to buy that dream house which
improvements to a residential property. You can get a loan from banks and registered housing
finance companies.
The Home loan sector in India is the pivotal role player in the growth of the real estate
scenario in India. With tax incentives given to the housing finance sector in the annual budget
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considerably and was much higher as compared to previous years. Since the new class of
buyers are relatively younger set of customers who are more aware about legal
documentation and approvals, buyers are now more 'end-users' rather than investors; the
property market in India undergoes transformation to align itself with global standards with
an increased emphasis on quality & cost control and documentation methods. In the current
economy of India, the real estate sector has the maximum propensity to generate income and
demand for materials, equipment and services. It can be said that housing finance companies
were formed for co-existing with buyer's requirements of housing loans for investing in
properties. Home loans are made available by financial institutions to both Indian and NRI
customers at floating and fixed rate of interest and also at attractive EMI options.
The realty boom in India has given a new dimension to the finance sector in India -
both in Home Loans and Home Insurance segments. This has not only given a competitive
edge to the finance companies to provide attractive options to customers but has also
contributed to the increased investments in the real estate sector. This has resulted in 13 new
institutions foraying into the housing finance business in the last three years.
8
1.2. OBJECTIVES OF THE STUDY
To study and learn the various systems and procedures used by the bank in
To identify the problems faced by the bank in attracting more customers to use its
To identify the problems faced by the bank at various stages of undertaking the
home loans.
To study the valuation of collateral security method followed by the bank while
To enhance its capacity to tap potential market in the home loan sector.
To enhance the recovery system in the bank giving the home loans.
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1.3. NEED OF THE STUDY
To study the roles of the staff and the decision making processes in lending to the
To calculate the risk involved and how the risk and uncertainty to be assessed and
The data and the information could be collected here has been taken from
the record books maintained by the branch and from the oral communication
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1.5. RESEARCH METHODOLOGY
1.5.1. Research Design
The study done is exploratory in nature.
The branch of the bank was selected by convenience and for the sake of access
to the qualitative information.
For the latest information and focus, the study is confined to the systems and
procedures in lending and the time period as said above.
The data and the information presented here have been collected mainly from
two kinds of resources:
1.5.2.1. Primary sources
♀ Direct and oral interaction with the Bank officials, particularly, the
branch manager via a Questionnaire, a copy of which is made available
in the APPENDIX.
♀ The Record books maintained at the branch office.
Several secondary resources have been referred for collecting first hand
information and literature on the subject that includes:
The Training and Guidance Material supplied to the staff of the Branch.
Annual Reports of RBI.
Online Annual Reports by Consultancy and Research companies.
Online Content of the Bank‟s Website.
The material supplied by the Faculty Guide.
Several websites on personal loans and
Daily News Papers like Economic Times of India and Business
Standard.
The details of which have been presented in Bibliography.
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1.7. LIMITATIONS OF THE STUDY
Some of the limitations of the project that were encountered during the study are:
time that the representative cannot disclose all the data because of certain reasons like
banks privacy policy etc. thus getting clear picture about the service provided is not
possible.
Due to paucity of time, only important factors have been analyzed and discussed.
To collect the data from various banks was quite difficult due to non-cooperation
attitude of respondents.
Lack of data was also the other limitation of the study as some of banks do not have
There was limitation of time to conduct such a big survey in limited available time.
Generally the data on the websites of the banks are not fully disclosed i.e. other than
the charges mentioned on the website there are many hidden charges which increases
Ignorance and reluctant attitude of customers was also a major limitation in this study.
I have tried a lot to overcome the above mentioned limitations as far as possible.
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CHAPTER -2
2. LITRTATURE SURVEY
After going through pervious studies of Home loans in India I came to conclude the
13
Figure 2: Demographics in Housing
14
Figure 4: Penetration of Housing Finance in the World
15
Figure 6: Market features
16
Figure 7: Issues in Affordable Housing in India
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2.2. LATEST TRENDS IN THE INDUSTRY
The ratio of mortgage to GDP in India has remained low at 7%, as against 12%
for china, 41% for Hong-Kong and more than 80%foor developed countries, thus
providing for further growth in the housing sector during the coming years. While the
housing finance companies (HFC), which are regulated by National housing Board (a
Over the past few years, banks too have started in increasing their exposure to real estate,
especially Home loans. This is evident from the fact that the market share of HFCs has
decreased from 65% if FYO1 to present 55%. Banks, on other hand have been constantly
2.2.2. Revival in real estate prices in the initial period of the year and low
interest rate
The correction in the real-estate prices in the initial period of the year and low
interest rate schemes announced by the banks/HFCs have resulted in significant surge
in volumes especially in the “Affordable housing segment”.
Due to the sluggish credit demand (up 10.1% yoy for the fortnight ended November
20, 2009), banks have been diverting their funds towards housing loans. According to the
figures revealed by RBI, the non-food credit growth during April-august 2009 has remained
muted at 0.8%. On the other hand, lending to the home loan segment during this period
increased 2.8%. Since February 2009, banks have been aggressively pricing interest rates on
home loans (including both floating and fixed rates). Subsidies have also been provided to the
form of reduced processing fees and minimal/no penalty on early re-payments. SBIs s home
loan book has increased by rs117bn or ar2.5% CQGR in the last four quarters. With credit
demand to revive in coming period, banks are likely to divert their funds to high yielding
assets thereby reducing their exposure to the housing sector.
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2.2.4. HFCs continue to do business as usual
HFCs foresee the increasing share of banks exposure towards home loan
segment as a temporary phenomenon. In our view, banks are likely to face asset-liability
miss-match as these loans have a long gestation period. Further, these loans are a zero -sum
game in the initial period due to lower interest rate offered. HFCs, on the other hand typically
raise money that match their requirements and thus minimize their ALM mismatch
While the discounted / special scheme rates are offered to new home loans,
existing customers continue to ply higher rate of interest. The Indian Bank‟s Association
has planned to introduce a uniform rate for all borrowers.
In India, the borrower contributes a higher share of his own funds (24-46% of
house value) at the time of purchasing a house.
The loan installments too eat away a smaller portion of the borrowers‟ income.
The installment to income ratio-ranged between 34% and 40%, in India is lower
than some countries in the West.
This is based on an analysis by rating agency Fitch of the home loan asset pool
that it rates.
This is because borrowers‟ income has kept pace with rise in property prices.
The extent of second houses purchased is also limited and most borrowers stick
to their repurchase schedules.
The figures computed by Fitch based on the asset pool that it rates implies that
on an average, the borrower funds up to 30% of the house value through his own
capital
This among other things increases the borrower‟s willingness to repay.
Some bankers say the black money component is also high in the Indian realty
market, resulting in higher borrower equity.
Another notable factor is that delinquencies have remained range-bound in the
last 33 months, according to residential mortgage index launched by the ratings
firm.
The index which tracks home loans that have not repaid for over 90 days has
moved in a narrow range between 0.90% and 1.07%.
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CHAPTER -3
3. COMPANY PROFILE
3.1. Introduction:
State Bank of India (SBI) has history of more than 200 years of existence. SBI is the largest
commercial bank in India and accounts for approximately 18% of the total Indian banking
business and the group account for 25% of the total Indian banking business. The central bank,
Reserve Bank of India (RBI) is the largest shareholder in the bank with 59.7% stake followed
by overseas investors including GDRs with 19.78% shareholding as on September 06. RBIs
SBI has the largest distribution network in India spread across every nook and corner of
India. As on September 06, the bank has 14,061 branches which include 4,755 branches of its
associated banks. The bank also has the largest network of 5,624 ATMs. Since the last 5 years
the bank has showed continued growth in its core business. The total asset size of the bank
reported a CAGR of 9.4% during the period FY01 –FY06 and stood at Rs. 4,938.69 bn as of
September 2006. In HIFY07, the bank reported net interest income (NII) of Rs. 182.14bn,
representing a growth of 2.74% over HIFY06 while the bank reported a net profit of
Rs.19.8bn, registering a decline of 18.67% during the same period. Credit off take of the bank
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
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
20
by an act of Parliament as successor to the Imperial Bank of India.
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.
If one measures by the number of branch offices and employees, SBI is the
largest bank in the world. Established in 1806 as Bank of Calcutta, it is the oldest commercial
bank in the Indian subcontinent. SBI provides various domestic, international and NRI
products and services, through its vast network in India and overseas. With an asset base of
$126 billion and its reach, it is a regional banking behemoth. The government nationalized
the bank in 1955, with the Reserve Bank of India taking a 60% ownership stake.
1), reducing its huge staff through Golden handshake schemes known as the
Voluntary Retirement Scheme, which saw many of its best and brightest defects to the private
sector,
3), changing the attitude of its employees (through an ambitious programme aptly
named 'Parivartan' which means change) as a large number of employees are very rude to
customers.
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3.2 Roots:
The State Bank of India traces its roots to the first decade of 19th century, when
the Bank of Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806. The
government amalgamated Bank of Bengal and two other Presidency banks, namely, the Bank
of Bombay (incorporated on 15 April 1840) and the Bank of Madras on 27 January 1921, and
named the reorganized banking entity the Imperial Bank of India. All these Presidency banks
had been incorporated as joint stock companies, and were the result of the royal charters. The
Imperial Bank of India continued as a joint stock company. Until the establishment of a
central bank in India the Imperial Bank and its early predecessors served as India's central
bank, at least in terms of issuing the currency. The State Bank of India Act 1955, enacted by
the Parliament of India, authorized the Reserve Bank of India, which is the central banking
organization of India, to acquire a controlling interest in the Imperial Bank of India, which
3.3 Timeline:
January 27, 1921: all three banks amalgamated to form Imperial Bank of India.
July 1, 1955: State Bank of India formed; becomes the first Indian bank to be nationalized.
1959: State Bank of India (Subsidiary Banks) Act passed, enabling the State Bank of India to
1980s When Bank of Cochin in Kerala faced a financial crisis, the government merged it with
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June 29, 2007: The Government of India today acquired the entire Reserve Bank of India
(RBI) shareholding in State Bank of India (SBI), consisting of over 314 million equity shares
There are seven other associate banks that fall under SBI. They all use the "State
Bank of" name followed by the regional headquarters' name. These were originally banks
belonging to princely states before the government nationalized them in 1959. In tune with
the first Five Year Plan, emphasizing the development of rural India, the government
integrated these banks with the State Bank of India to expand its rural outreach. The State
Bank group refers to the seven associates and the parent bank. All the banks use the same
logo of a blue keyhole. Currently, the group is merging all the associate banks into SBI,
which will create a "mega bank", and one hopes, streamline operations and unlock value.
State Bank of India is present in 32 countries, where it has 84 offices serving the
international needs of the bank's foreign customers, and in some cases conducts retail
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3.6 Growth:
State Bank of India has often acted as guarantor to the Indian Government, most
notably during Chandra Shekhar's tenure as Prime Minister of India. With more than 9400
branches and a further 4000+ associate bank branches, the SBI has extensive coverage.
Following its arch-rival ICICI Bank, State Bank of India has electronically networked most
of its metropolitan, urban and semi-urban branches under its Core Banking System (CBS),
with over 4500 branches being incorporated so far. The bank has the largest ATM network in
the country having more than 5600 ATMs [1]. The State Bank of India has had steady growth
over its history, though the Harshad Mehta scam in 1992 marred its image. In recent years,
the bank has sought to expand its overseas operations by buying foreign banks. It is the only
Indian bank to feature in the top 100 world banks in the Fortune Global 500 rating and
various other rankings. According to the Forbes 2000 listing it tops all Indian companies.
SBI debuted in the Fortune Global 500[2] at 498 in 2006. In 2007 it moved up to 495.
As per fortune 500-2007 following are the data for SBI in $ million. Revenues
15,119.4. Profits 1,407.3. Assets 187,547.1. Stockholders' Equity 9,786.2
"THE MOST PREFERRED HOME LOAN PROVIDER" voted in AWAAZ
Consumer Awards
The MOST PREFERRED BANK AWARD in a survey conducted by TV 18 in
association with AC Nielsen-ORG Marg in 21 cities across India.
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3.9 The main activities of SBI are into -
Personal Banking.
NRI Services.
Agriculture.
International.
Corporate.
SME.
Domestic Treasury.
3.10 State Bank of India offers the following services to its customers –
Domestic Treasury.
SBI Vishwa Yatra Foreign Travel Card.
Broking Services
Revised Service Charge.
ATM Services.
Internet Banking.
E-Pay.
E-Rail.
RBIEFT.
Safe Deposit Lockers.
Gift Cheques.
MICR Codes.
Foreign Inward Remittances.
Moreover, State Bank of India has Colleges/Institutes/Training Centers that are the seats
of learning and research and development. It caters not only to the employees of State Bank
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3.11 Performance:
SBI Bank India had Total Income of Rs 68376.83 cr for the financial year 2006 -07.
State Bank of India has posted Net Income to the tune of Rs 6364.38 crore or the
3.12 Organization:
3.13 The Bank stands for Best Practices as it claims itself as under:
Place
SBI branch of your choice will service your loan account. You can
always meet our employees face to face.
Complete transparency.
Price
Interest charged on the daily reducing balance.
Prepayment charges
No penalty for prepayments made, out of bonafide savings or windfall
gains for which evidence is produced.
Costs hidden in fine
print No hidden costs
Transparency
Complete transparency. All the features of our product, including
interest rates, are in the public domain.
Table 4: Best Practices in SBI
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3.15. Unique features of SBI Home Loan Products:
Option to club income of your spouse and children to compute eligible loan amount.
Provision to finance cost of furnishing and consumer durables as part of project cost.
premium).
27
CHAPTER - 4
4. HOME LOAN PRODUCTS OFFERED BY SBI
Or
Processing
Loan Amount
Fee(Revised)
Upto Rs.5 Lac Rs.1000/-
Table 6: Processing fee
Getting your dream home has become easier with SBI Easy Home Loan. With low interest
rates for home loan under Rs. 50 lakhs category, SBI Easy ensures that you are not burdened
with high interest for your home loan. Plus with over 12000 SBI branches nationwide you
can get your Home Loan account parked at a branch nearest to your present or proposed
residence.
Interest Rate:
Interest rate during the first year (i.e. till first anniversary date from the date of first
28
Interest rate during next two years is fixed at 8.5% p. a
Interest rate after three years may be Fixed or Floating as per the borrower‟s choice made at
the time of sanction. If floating rate option is chosen, then the rate will be 2.75% below
SBAR. If fixed rate option is chosen, then the rate will be 1.25% below SBAR prevailing on
the third anniversary date from the date of first disbursement, and shall have a reset frequency
of 5 years from the third anniversary date of the loan. Fixed interest rate shall be subject to
force-majeure clause.
Processing Fee:
The revised processing fee structure (including service tax) from 9th November 2009 is as
under:
Processing
Loan Amount
Fee(Revised)
Upto Rs.5 Lac Rs.1000/-
Above Rs.5 Lac and upto Rs.10 Lac Rs.2000/-
Above Rs.10 Lac and upto Rs.20
Rs.5000/-
Lac
Above Rs.20 Lac and upto Rs.50
Rs.7,000/-
Lac
Table 7: loan amount in SBI easy home loan
SBI Advantage Home Loan with competitive rates of interest is available for home loans
above Rs.50 lakhs. Plus with over 12000 SBI branches nationwide you can get your Home
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Interest Rate:
Interest rate during the first year (i.e. till first anniversary date from the date of first
Interest rate after three years may be Fixed or Floating as per the borrower‟s choice made at
the time of sanction. If floating rate option is chosen, then the rate will be 1.75% below
SBAR. If fixed rate option is chosen, then the rate will be 0.75% below SBAR prevailing on
the third anniversary date from the date of first disbursement, and shall have a reset frequency
of 5 years from the third anniversary date of the loan. Fixed interest rate shall be subject to
force-major clause.
Processing Fee
The revised processing fee structure (including service tax) from 9th November 2009 is as
under:
your savings and minimize interest burden on Home Loans, with no extra cost.
The loan is granted as an Overdraft facility with the added flexibility for you to operate your
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The product serves to minimize your interest cost by enabling you to park your surplus funds
in „SBI-Maxgain‟ (with the benefit to withdraw the surplus funds whenever you require),
specially in the wake of low yields from other deposit/ investment avenues.
finance for a property they want to invest in without mortgaging the same. All you have to do
is pledge any financial security that you have and you will get a Home Loan for your dream
home.
A must-take for those who do not want to pay stamp duty for mortgage of their property or go
You also have an option to take the loan by way of mortgage of the property and pledge
Repayment is highly customized, giving you the option to repay through regular EMIs or
A unique product if you are on the lookout for a loan to purchase a plot of land for house
construction. The loan is available for a maximum amount of Rs.1 crore* and with a
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Customers are also eligible to avail another Housing Loan for construction of house on the
plot financed above with the benefit of running both the loans concurrently.
(House construction should commence within 2 years from the date of availment of „SBI-
RATES
Home Loans with an option to choose a combination of floating interest rate and fixed
A customized product designed to enable borrowers to hedge their Home Loan against
unfavourable movement in interest rates. The product gives you a onetime irrevocable option
to choose one of the three customized combinations of fixed and floating interest rates and
also to choose the order in which the fixed and floating rate will be availed.
Eligibility
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Loan Amount
The loan amount is to be determined on the basis of repayment capacity taking into account
income, age, assets and liabilities, qualifications, stability of occupation, and employment
criteria as applicable to regular Home Loans scheme for Resident Indian customers, which is
40% for Net Annual Income (NAI) upto Rs.2 Lac, 50% for NAI above Rs..2 Lac and upto
Innovative and value added products extended to existing Home loan borrowers with a
satisfactory repayment record of 3 years and whose loan is Standard Asset, with a view to
reinforce the customer loyalty and to maintain long term relationship with the borrowers. In
case of take-over of Home Loans from other Banks/HFCs, the borrower should have fulfilled
'SBI-Tribal Plus' Home Loans, a Special Scheme designed for Hill/Tribal areas for extending
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b. Purchase of an existing (old) house / flat which is not more than 10 years old (In such
cases, valuation report from our empanelled valuer and a certificate on the condition of the
The Scheme covers all rural and sEMI-urban centres. “Rural Area” for the purpose of the
Scheme is the area comprised in any village including the area comprised in any town, the
population of which does not exceed 50000 as per 2001 census.The scheme seeks to provide
home loans to farming and poorest of the poor in rural areas for the purpose of purchase or
construction of a house, repairs and renovation, purchase of plot for the purpose of
The Sahyog Niwas scheme has been instituted to finance the self help groups with a good
track of payment record for 2 years, for on lending to members for housing in rural areas,
i) For the purchase or construction of a house exclusively or including the housing needs of
activities carried by them. (Dairy shed, tailoring shed/shop, grocery stores etc.)
iii) For the purchase of a plot of land for the purpose of house construction.
iv) For the extension of existing house / work space to existing house / shed.
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x) SBI Happy Home Loans
The SBI Happy Home Loans scheme enables the genuine needy buyers to buy dwelling units
by freezing interest rate at 8% p.a. for a period of one year from the date of disbursement on
State Bank of India has adopted a Green Banking Policy with an objective of contributing
towards the fight against the adverse climate change. One of the initiatives approved by the
Board for this purpose is incentivizing customers who go in for Green Projects, i.e. those
projects which reduce Carbon Emissions and promote Renewable Energy. “Green Housing”
or “Green Home” is one of the types of projects identified for this purpose.
At present State Bank of India is the only Bank in the country supporting the cause of Green
waiver of processing fees, on the existing home loan products to customers who go in for
Green Projects.
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5. HOME LOAN TOP-UP PRODUCTS
SBI Home Line Special Personal Loans come with inbuilt provision to sanction personal
loans to home loans borrowers with a satisfactory repayment record of 3 years. The rate of
interest charged on these personal loans is only 50 bps above the Home Loan interest rate
applicable to the repayment tenure opted by the borrower (floating rates only), prevailing as
SBI Home plus is scheme is launched for granting personal loans to the banks home loans
customers against the security of their house property. All home loans customers with a
satisfactory repayment record of at least one year and who maintain a Savings bank or current
The loan can be used for any purpose, viz. extension/repair of house, purchase of car/
consumer durables, education / medical expenses of family members, personal expenses, etc.
There will be no need to obtain documentary evidence for the end-use of funds. However a
certificate from the customer in the application to the effect that the loan will not be used for
State Bank Of India launched the SBI Life Style Loans to help home loan customers meet
any short term expenditure, (Vacation travel, purchase of Gold, Lifestyle goods) except
speculative investments, which adds comfort to the life style of the borrower with satisfactory
repayment record. SBI has tie up with various reputed travel houses, lifestyle product
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6. RELATED HOME LOAN PRODUCTS
Many Government agencies, like Urban Development Authorities and Housing Boards,
periodically come out with schemes for sale of plots/houses, wherein applicants have to
submit 10-20% of the cost of plot/house as Earnest Money Deposit (EMD) and allotments are
The SBI EMD scheme is designed for financing against earnest money for allotment of a
house/plot. Individuals above 21 years of age and with a steady source of income are eligible
SBI Reverse Mortgage Loan Enables house-owning Senior Citizens having inadequate
income to meet their financial needs for renovation/repairs to house, medical & other
personal purposes. There is no compulsion for the borrower to repay a RML during his or her
The borrower continues to retain ownership of the house. Also, the borrower will have the
option to prepay the loan at any time during the loan tenure and there will be no pre-payment
penalty.
7) Other schemes:
The bank offers loans schemes known as 'Prashasan Plus', 'Teacher Plus' and 'Oil
companies etc at consessional rates. These „plus‟ schemes offer concessional interest
rate of 0.25% below the applicable interest rates on Home Loans to niche client
companies and so on
37
CHAPTER -5
one can apply for a home loan. If a person has decided to buy a property in the near future,
he/she can apply for a loan before even selecting the property. Once the maximum amount to
put into the property has been decided, the Housing Finance Institutions or Banks will let the
customer know that how much he/she is eligible for and this helps to plan out the budget.
All Housing Finance Institutions lay down conditions on who can be co-applicants. All co-
owners of the property need to be co-applicants to the loan necessarily. These institutions do
not permit minors to join in as either co-owner or as co-applicants because a minor is not
eligible to enter into a contact as per law. They do not permit even friends or relatives who
are not blood relatives to take a property jointly. However, Income of co -applicants can be
clubbed together to get higher loan eligibility. Given below is a Table that throws light on
Maximum age: limit for a Home Loan borrower is fixed at 70 years, i.e. the age by which
the loan should be fully repaid, subject to availability of sufficient, regular and continuous
38
Eligibility Criteria & Documentation required for Individuals:
5.2. DOCUMENTS
39
(2) ENGINEER Check List:
(Kindly take the Engineer Telephone Nos from the bank to co-ordinate with him for
In case of completed projects, a letter from the builder stating that the
Letter from the builder/seller the property is not mortgaged to any bank/
bank/institution.
Due diligence on Builders and Seller KYC Norms : Proof of Identity (PAN
copy) & Residence proof (Telephone/electricity bill - both self attested and
originals verified & attested by the bank) along with the duly filled in KYC
Receipts for the total amount of the project issued by builder/seller to the
purchaser/bank/institution.
40
(5) PERSONAL DOCUMENTS Check List
7) Photograph - 2 nos.
8) Application Form
Confirmation of Income
If you are a salaried person, please provide two recent consecutive pay slips or a co py
If you are self-employed, please provide copies of your last two Financial Accounts as
Appointment Letter
Salary Certificate
Last three years income tax returns duly filed and certified by the Income Tax
Authorities
41
Similar Document -separately for each co-applicant.
Employment Proof
Visiting card
Age Proof
Passport
Voter's ID card
PAN card
Ration card
Birth certificate
Residence Proof
Ration card
Passport
PAN card
Allotment letter from your company if you are residing in company quarters.
42
Name Change Proof (If Applicable)
a. A copy of the official gazette
c. Marriage certificate
Bank statement for the last six months of all operating and salary accounts
Bank statements for the last six months of all current accounts, if self-employed.
A certificate by the legal advisor of the builder to the effect that the builder has a good
A certificate from builder's Chartered Accountant certifying that the builder has not
Allotment letter
Possession letter
43
No Objection Certificate from the developer, society or development authority as
applicable
In case of alternate or additional security, documents for the same depending upon the
security details.
For self-construction: Approved plans and clearance certificates along with estimates
Copy of the existing tenancy agreement, or a rental appraisal, from a local real estate agent
Deposit or Investments
Evidence of your deposit or investment funds, i.e. a bank statement or term deposit
receipt.
For low equity loans (5-19% deposit), copy of your savings account statements over
If you are planning to buy a property, please provide a copy of the successful sale and
If you are planning to sell or have already sold your existing property, please provide
44
New Customer to the banks of India
If you are refinancing from another bank please provide copies of your loan
Please provide copies of your account statements covering the last six months from
Please provide copies of your identification and if you have arrived in the country
age and value indicated in conjunction with the amount required to borrow, the Bank may
5.3. PURPOSE
The bank offers home loans for purchase and/or construction of house property as
cost
Companies
45
5.4. QUANTUM OF LOAN
Actual loan amount will be determined taking into consideration such factors as
applicant‟s income and repaying capacity, age, assets and liabilities, cost of the proposed
house/flat etc.
Applicants aged between 18 and 45 years, can get 60 times Net Monthly Income
(NMI) or 5 times Net Annual Income (NAI) and for applicants aged over 45 years of age,
capacity, it is first necessary to classify customers into salaried and self employed
individuals.
46
a) The income of the salaried individual is considered in the following manner:
Less:- Any non regular variable income appearing on the salary slip (including overtime, etc.)
Add: - 50 per cent of the average variable income of the last six months.
Add: - Any fixed cash/voucher payments for which proof can be submitted.
Add: - 50 per cent of the average variable cash/voucher payments with proof like traveling
reimbursement etc.
Add: - HRA receivable if not being received already in the salary slip.
The above income calculated for the calculation of eligibility using IIR and FOIR
norms. For calculation of FOIR, the installments of all the loans that one has availed
of currently for which repayment is being made is taken into account as well. The
Take 55% of this for total loan EMI provision i.e. 55,000/-
Subtract all existing loan EMI‟s being paid now: (other loans) 15,000/ -
47
b) To consider income of Self-employed individuals we further classify them into
For calculation of eligibility of professional's income is computed by most HFIs using the
gross professional receipts instead of the Net profit as in the case of self-employed non-
professionals.
Average of the net profits of last 2 years as it appears in the profit and loss
account (Returns need to be filed for the same. They should be filed regularly before
Less: - Any income, which is unusual and non-recurring in nature like sale of some asset, etc
Add: - Any expense that is unusual and non-recurring in nature like repairs and maintenance
Add: - 50 per cent of the average depreciation of the last two years. The above income is
calculated for the calculation of eligibility using IIR and FOIR norms.
For calculation of FOIR the installments of all the loans that one has availed of
currently for which repayment is being made is taken into account and the eligibility is
worked out. The lower of the two eligibilities is considered as the maximum repayment
capacity.
48
To enhance loan eligibility you have option to add:
1) Income of your spouse/ your son/ daughter living with you, provided they
have a steady income and his/ her salary account is maintained with SBI.
2) Expected rent accruals (less taxes, cess, etc.) if the house/ flat being
The staff at the selected Branch did not want to reveal the actual method adopted by
SBI as they used to have a computer software Application for the purpose that looks just
as below:
120 1367793.6
Duration Months Total Interest: Rs.
Interest Rate 8
%
Calculate Reset
49
However, the actual calculation model for EMI could be as follows:
2) The way EMI is calculated can be broadly categorized under two heads:
The rate of interest on the loan amount is calculated over the full duration of the loan,
the principal and the interest is divided over the number of installments and the value arrived
A flat rate loan is the most expensive as in this case the interest is calculated on the entire
loan amount and no principal deduction is taken into account. Thus the effective rate o f
50
Reducing balance system:
The interest is charged on the outstanding balance of the loan, which goes on
reducing. Hence the cost of the same loan amount on an annual reducing balance method
works out to 29% and 35% on a monthly reducing balance method. Again in case of
calculated on it. If you have taken a loan of Rs.1, 00,000/- at 21% interest for 3 years and
you pay Rs.3, 760/- on Jan 10, the lender will consider total outstanding principal as
Rs.96, 240/- from Jan 11. The interest will be calculated on Rs.1,00,000/- from Jan 1 to
Jan 10 and from Jan 11, interest will be calculated on Rs.96,240/-. With a lower
outstanding principal, the total interest paid out reduces and so does the EMI.
Here, the principal component is deducted at the end of every month and then the interest
is calculated on this new outstanding reduced principal. The above table gives the cash
outflow on a loan of Rs.1, 00,000/- at 21% interest for 3 years, when interest is calculated
51
Annual reducing balance method
Here the principal component of EMI though reduced every month, is summated
annually. Therefore, the interest is calculated on the original loan amount for the
entire year. At the end of the year, the accumulated principal component is deducted
from the original loan amount and the interest for the next year is on this reduced loan
amount. If you have taken a loan of Rs.1,00,000/- at 21% interest for 3 years, the EMI
will be Rs.4,018/-.
Paying the EMI at the beginning of the month (EMI in advance) means that
you lock your money for the month; while paying in arrears, (i.e. at the end of the
month) gives you an extra month before the payout. The effective rate of interest on
the loan also goes up when you pay the EMI at the beginning of the month. Hence if
two schemes offer the same EMI, choose the one, which allows payment in arrears.
In advance EMI schemes a certain number of EMIs are collected from the
borrower in advance. The number of EMIs that have to be paid out in advance varies
with the interest charged on the loan. The more you pay in advance the lesser should
Also in 100% financed loans, some EMIs have to be paid upfront as advance.
This effectively reduces the loan amount and in real terms the financier has not given
you 100% finance but charges interest on the entire cost of the asset.
52
Deposit linked plan
Here, the financier offers a lower rate of interest, provided the borrower
invests 20% to 25% of the asset cost as a fixed deposit with the financier. The interest
on this deposit is usually lower than the interest charged on the loan. Here again you
must consider the cost of parking your funds in the deposit as the returns on it may
not weigh favorably with the low interest charged on the loan.
In the end, the thumb rule of EMI to remember: EMI is lowest, when interest
is calculated on a daily reducing basis. The reason why EMI varies for the same loan
amount, tenure and interest rate is the difference in the compounding frequency of
interest rates.
We can remember that one liner joke - “Why sharks never take lenders?” The
Pre-EMI:
only on the disbursement amount. This interest is payable monthly till the final
GM
(or)
3 lacs
53
5.7. TOTAL PROJECT COST
Insurance premium
5.8. MARGIN
The SBI home loan borrower should pay 20% of the cost of home for loans up to Rs 1
54
5.9. SECURITIZATION
In most cases, the property to be purchased itself becomes the security and is
(or) Other tangible security of adequate value like NSCs, Life Insurance policies
The revised processing fee structure (including service tax) from 9th November
2009 is as under:
55
Processing Fee: 0.50% of loan amount or Max.Rs.10,000/-
cases:
survey report.
legal/valuation reports.
In cases where applications are sanctioned or rejected after complete loan processing,
report.
(iii) Govt. Stamp duty : 0.25% of loan amount as stamp duty at the time of equitable
(iv) Approx Govt. Stamp papers of Rs.1500/-(approx) for execution of loan documents at
form to the bank. Govt Stamp duty of 0.25 %( prevailing now) of the loan amount and Rs750/- approx
to be paid at the time of documentation of loan. Insurance will be done after the registration of the
property.)
56
(iii) Valuation Charges:
Loans (i.e. Sanctioned limits) above Rs.30 Lacs and upto Rs.75 Lacs
Loan Upto 5 Yrs Above 5 Yrs Above 15 Yrs
Tenure -> & upto 15 & upto 25
Yrs Yrs
Above Rs.30 lacs and Linkage 2.00% below 1.75% below 1.50% below
upto Rs.75 Lacs w.e.f. with SBAR SBAR SBAR SBAR
29.06.2009
Effective 9.75%p.a. 10.00% p.a. 10.25% p.a.
rate
c) Loans for deposit of earnest money for allotment of a plot / house / flat
(Floating rates only)- w.e.f. 29.06.2009 - 1% above SBAR, Min. 12.75% p.a.
Note: - Interest rate after three years may be Fixed or Floating as per the
58
5.12. MORATORIUM
period)
5.13. GUARANTOR :
of the bank.
(takeover amount).
the agreement is on the joint names (maximum three persons), then the
Sale deed also should be on the joint names and the loan also will be
on the joint names. The same is also applicable for take over loans.
i.e. Joint Owners then Joint name in the loan application / Single
Owner then Single name in the loan application.
59
5.14. TAX BENEFITS
Both principal as well as interest of home loans attract tax benefits. With effect from
1st April 2005 (i.e. assessment year 2005-07) under section 80C of the Income Tax
Act 1965:
Principal amount of repayment of loan along with other savings such as PF, PPF,
Interest paid on loan after completion of construction will be deductible from income
from property
For self occupied - Income will be treated as nil and interest payment will be treated
Complimentary SBI Classic/ International Credit Card with waiver of joining and
Concessional package under 'Credit Khazana' for prospective car loan borrowers
outstation cheques.
60
5.16. INSURANCE COVER
Compulsory insurance of property. Optional life cover from SBI Life & free
accident insurance cover for borrower available. The house/flat to be insured against
and the bank for the actual project cost after netting off the cost of land, stamp duty
an registration charges.
People seeking home loan often encounter such worries like what if anything
happens to them in that case what would happen to the home loan? Naturally, their
main concern is that should something happen to them their folks would have to
encounter the problem of facing the impact of repaying the loan debt. Home loan
This type of insurance covers the amount of home loan you owe to the bank.
This doesn't include the amount you have already paid but the amount still to be paid
and evidently your family members will not face the problem of paying the amount
being owed to the bank but the insurance provider will bear the brunt of the same.
The insurance companies are not very impending about how much amount is to be
paid as part of the insurance premium as the premium amount varies depending on
the case.
The premium amount broadly relies on conditions like - age of the person
availing the loan (the younger the person, the lower the premium amount); loan
amount (the lesser the loan amount, the lower the premium); period of the loan (the
more the loan repayment period, more is the premium); another important factor is
the health of the loan taker (the premium amount would be low in case of good
health of the individual). SBI offers mortgage life insurance policy to the SBI home
loan applicants thereby consolidating the insurance premium along with the EMIs.
61
The State Bank of India offers a free personal accident insurance cover to their clients
availing home loan so that the client's family doesn't have to face any problem if he/she meets
The existing valuation policy was reviewed, and ECCB approved the following
valuation and re valuation policy w.e.f. 01.04.08 for individual home loans (IHLS):
Construction of new dwelling unit For loans unto rs 2 laces at rural /semi-urban
branches, the sanctioning authority may waive
valuation as above and my assess the valuation
based on market prices by enquiry and a
certificate by the contractor/engineer involved
in construction.
Valuation report obtained from the empanelled
Purchase of second sale plot architect/engineer/valuer irrespective of the
/dwelling units
loan amount and age of the property.
For loans up to rs 20 lacks, reasonableness of
the price mentioned in the underlying sale
did/agreement to sale etc.ascertained by the
62
(2) Asset Revaluation Policy for IHLs:
Loans above rs.1 crore are given up to an LTV ratio of 75% only, and as such
will not attract the higher CRW (Credit Ratio Weight).
Loans of Rs 1 crore and below were given up to a LTV of 85 %( now reduced to
80%), which attract higher CRW of 100%.
However, for a regular loan, a part of the principal gets repaid, and over a period
of about 2.5 years from commencement of repayment, the LTV ratio comes
down to 75%.
Therefore,higher CRW would be applicable only during this period.
There could also be appreciation in value of the property during this initial
repayment period of 2.5 years, which could bring down the LTV ratio below
75%.
To have the benefit of lower CRW, the appreciation through a proper
revaluation of the property.
The revaluation is to be carried in such cases by the Asst/Dy.manager
(advances)/appraisal officer at the branch/RACPC. The process need not be as
detailed as n the case of a fresh loan sanction.
In case of all home loans with out standings above Rs 1 crore that are standard
assets, the underlying properties should be revalued once after the expiry of
The first revaluation, in terms of this policy is due in January 2009 for loans
(standard assets having an LTV ratio of more than 75%) sanctioned during last
weights on home loans based on loan to value ratio (LTV) as per the Basel 2
63
CHAPTER - 6
How
STAFF
Stage Operations/Considerations many days
MEMBER(S)
it takes
Advertisements in Print Media MAs
Promotion
Demos at Home Fairs Builders
Guidance to Demos at Home Fairs Field Officers
1
prospective
At Home Fairs
Application submission
To the Field Officers at Branch
Document verification Field Officer
Inspections
Bank's Field Investigation 2
Documents sent to RACPC.
Credit Customer‟s worthiness is evaluated. Branch
2-3
Pre- appraisal Manager/RACPC
Sanction The title deed investigation An advocate from As per the
Process Legal Search report may be required from Bank‟s External visit of
Sanctions Registry office Panel legal
advisor
Estimation of market value of the An Engineer from
Valuation 2-3
property or construction the Bank‟s Panel
Loan sanction Branch
Manager/RACPC
Sanction Offer Letter to the customer 1
Eligibility Certificate to the
customer.
Property/Construction inspections
Post-Sanction Process Signing of Agreements
4-5
Submitting post-dated cheques .
64
6.2. PROMOTION AND DISTRIBUTION OF THE PRODUCTS
(a) PROMOTION:
(b) DISTRIBUTION:
State Bank of India supplies and sells its home loan products through its over
65
6.3. PROCESS UNDERTAKEN
The home loan application form of SBI is rather lengthy compared to the
Otherwise they would make a surge report, which can consume some time. I
The Field Officers hold Personal Discussion with the prospect customer regarding
Interest Rate, Eligibility, EMI and all the terms and conditions
The prospect customer’s options and acceptance are ascertained and recorded.
Pre-Inspection Sheet is maintained along with the documents to record inspection by the
All the documents are sent to Retail Assets Central Processing Cell (RACPC) for credit
All the terms are conditions including Loan amount, interest rate, tenure, EMI etc are
determined.
The RACPC would submit its credit appraisal report on the customer to the branch.
66
Legal Opinion:
Empanelled Lawyer(s) does submit the Title Deed verification and the
The legal clearances/ opinion of the flat/property which you are buying /
The search report reveals encumbrance on the property based on which the
grant of loan can be avoided and the prospect borrower may be asked to
rectify it.
Valuation check:
The Engineer‟s valuation of the property and estimate for the construction to
In case of takeover loans, two panel engineer valuation is required and the
least value between them should be more than the takeover amount.
PRECAUTIONS TO BE TAKEN :
The authenticity of salary slip, form 16 return, and proof of identification, address
sanctioning authority is satisfied about the quantum and uninterrupted flow thereof
The decision is informed to the prospect customer the decision so taken via Field
Officer.
If the decision is “sanctioned”, the Field Officer would issue Offer letter to the prospect.
SBI insists on all the margin money contributions to have been made to the seller and
the money receipts to be handed over to them prior to the loan disbursement.
The customer needs to submit the cash amount for various stamps, mortgage fee etc.
You can link your SBI savings a/c to have standing instruction to deduct EMI.
Normally, almost all home purchase transactions will entail payment of an advance to
the seller and on the day of registration, the remaining contribution from the buyer and the
loan amount from the bank are exchanged with the property documents. Not with SBI.
And once the registration is done, the loan applicant needs to get the latest
Encumberance Certificate (EC) from the Registrar‟s Office and submit it to SBI. Subsequent
to this process, SBI will create an equitable mortgage on the property in favour of the bank as
collateral. This entails a fee of Rs 7000 (I understand that this is a percentage of the registered
value of the property) to the loan applicant. Only after all this is done, will the process be
complete. I never saw this equitable mortgage fee being mentioned anywhere in the high
68
6.3.5. DISBURSEMENT
The disbursement is made in phases correlating to the actual progress made in the
construction.
By BC/DD crossed A/c Payee only incorporating the builder‟s/seller‟s A/c No. and
Property inspection is carried out and recorded in the Inspection Register at each stage
The installments are disbursed in different proportions in different phases as per the
6.3.7. REPAYMENT
SBI lays down certain rules and regulations pertaining to the repayment of
loans.
The loan applicants can repay the amount in the form of equated monthly
installments.
The repayment is allowed up to the age of 70 years.
Repayment period:
Maximum 25 years (or) Up to the age of 70 years (the age by which the loan
69
MAXIMUM REPAYMENT PERIOD:
6.3.8. PRE-CLOSURE
Pre-closure is allowed by the Bank at any time after the complete disbursal and before
If the loan is pre-closed from own resources for which proof is submitted by the
customer, penalty is not levied irrespective of period for which the a/c has run.
Pre-closure Penalty:
No penalty if the loan is pre-closed from own savings/windfall gains for which
In case, such proof is not produced by the borrower, penalty @2% on the amount
prepaid in excess of normal EMI dues shall be levied if the loan is pre closed within 3
The main business of a bank is through loans and advances section the bank
accept deposits from the public and certain amount they keep it as reserve balance and
the rest of it they lend it to the needed customers who require it in the form of loans
and advances. The customer who deposits the money they get interest and the person
who takes the loan pays interest and the difference between is the profit of the bank.
70
Suppose the customer who took loan could not pay back the loan amount or
the installment money which consist of the interest amount and the principal amount
continuously for some specific period of time they are then converted to probable
NPA and then comes the role of recovery team which put their maximum effort to get
back the amount back which they have given as a loan or advances and at the end if
they fail to get back the money then finally the amount is converted as Non
Performing Assets.
If the installment is overdue or pending for more then 90 days then a bank can convert
the loan amount to probable NPA and
If it could not be recovered by the recovery management team then it is converted into
NPA.
An asset becomes non-performing when it ceases to generate income for the Bank.
As from 31st March 2006, a non-performing Asset (NPA) is an advance
Where:
(i) Interest and/or installment of principal remain „overdue‟ for a period of more than
90 days in respect of a Term Loan,
(ii) The account remains „out of order‟ for a period of more than 90 days, in respect of
an Overdraft/Cash Credit (OD/CC),
(iii) The bill remains „overdue‟ for a period of more than 90 days in the case of bills
purchased and discounted,
(iv) Any amount to be received remains „overdue‟ for a period of more than 90 days
in respect of other accounts.
(v) A loan granted for short duration crops is treated as NPA, if the installment of
principal or interest thereon remains overdue for two crop seasons and a loan granted for long
duration crops is treated as NPA, if installment of principal or interest thereon remains
overdue for one crop season.
vi) An account would be classified as NPA only if the interest charged during any
quarter is not serviced fully within 90 days from the end of the quarter.
71
6.3.10. RECOVERY MECHANISM
The following debt collection practices will be applied to all debts (rates and
sundry debtors) over $200 that is not in dispute which have been outstanding for 90 days:
arrangement.
Where no response has been received a letter of demand for payment within
7 days will be forwarded. The letter will state that failure to make payment
legal action.
State Bank of India adopts various recovery procedures to recover the debt from its
defaulters.
fund, short fall in investment, will fall default etc. So a credit manager should take
Demand Notice:
When a defaulter does not repays loan a demand notice is issued to him that he
When a defaulter does not respond to the demand notice a direct notice is
issued to him that if he does not repay the loan action would be taken against him
SBI home loan customer care services can be accessed from everywhere and at any
time using the toll-free helpline numbers or the Internet. The bank has extensively covered
all major cities of the country while at the same time not overlooking the customer care
requirements of people residing in rural and semi-urban areas. You can get instant solutions
to all your home loans related queries the moment you get in touch with the staff working
State Bank of India is undoubtedly the largest financial institution among all the
public and private sector banks operational in India. As a result, it receives an extremely
large number of requests seeking home loans and other types of financial assistance. With
an extensive customer base spanning all across the country and also at some locations
abroad, SBI has emerged as the largest provider of home loans in India. Thus it is not
uncommon to see an SBI branch at a remotely located rural or semi-urban area, no matter
The customers can talk to SBI executives in a friendly environment and obtain
information regarding the types of home loans, current interest rates, repayment options,
maximum loan terms, EMI calculation and so on. Moreover, you can use SBI home loan
73
customer care service for registering your complaints and grievances, which ensure a swift
remedial action by the concerned authority of the bank. Furthermore, it is also possible to
meet an SBI senior official directly through a special service known as Public Grievance
Cell Facility and get solutions instantly. This facility is available at all SBI branches across
the nation and to avail the same you need not take prior appointment or permission.
You can access SBI home loan customer care service through toll-free numbers and
also through Internet. Though the customer care toll free numbers are different for each
city, the services provided there remain the same, comprehensive, instant and bearing the
Ahmedabad: helpline.lhoahm@sbi.co.in
Bangalore: sbihelpline.lhoblr@vsnl.net
Bhopal: mysbi@sbi.co.in
Chennai: helpline.lhoche@sbi.co.in
Delhi: helpline.lhodel@sbi.co.in
Guwahati: luithelp@sify.com
Hyderabad: helpline.lhohyd@sbi.co.in
Kolkata: sbihelpline.lhokol@sbi.co.in
Lucknow: sbihelp@sancharnet.in
Mumbai: helpline.lhomum@sbi.co.in
74
CHAPTER -7
7. PERFORMANCE EVALUATION
7.1. COMPETITORS
Interpretation:
Majority of the competitors for the bank are from private sector in region.
The closest competitor for the bank is HDFC .Virtually; there was an “ad war” with
Others include the local player Andhra bank and the private giant ICICI.
Interpretation:
The biggest strength of the bank has been its large distribution network and able
workforce.
The weakest elements of the institution are the long processing times and the
shortage of staff.
75
7.3. DEMAND TREND:
70
65
60 60
50 48
Demand
40 40
30
20
10
0
2006-07 2007-08 2008-09 2009-10
Interpretation:
There has been instability in the demand for home loans in the region.
Back in 2006-07, there were enquiries for the home loan from 65 individuals at the
branch.
Later on, the figure came down slightly to 40 and then rose to 60 in the next year.
76
7.4. CUSTOMER CAPACITY
Interpretation:
The repayment capacity of all of the existing customers was just below Rs.2 lacs p.a.
There were no customers with repayment capacity more than Rs.2 lacs p.a.
7.5. SANCTIONS-DISBURSEMENTS
Number of Applications
80
65
60
60 53 50 48
45
40 38
40 32
20
There has been an increase in the Approvals to Enquiries Ratio from the year 2006 -
07(81.5%) to the year 2008-09 (95%) and a slight decrease in the next year to 83.3%.
One can understand the trend in terms of transforming the stringent system to hassle-
free system.
78
Interpretation:
There is no housing finance to the normal individuals and the weaker sections.
17%
First Home
Renovation
83%
Interpretation:
Most of the existing customers have availed the loans for construction/purchasing
I was told that the branch is not interested in approving the loans for
79
7.8. QUANTUM OF LOAN
<5 lacs
5-10 lacs
10-20 lacs
52%
40%
Interpretation:
More than half of the existing customers are sanctioned loan amount not exceeding
Rs. 5 lacs.
The second majority of the customers are sanctioned loan amount above Rs.5 lacs to
Rs. 10 lacs.
The low repayment capacity of the customers in the region could be the main reason
This implies that there was a demand for the lower weight products like SBI HI-
80
7.9. SIZE OF HOME LOAN BOOK
6
Amount(Crores)
5
4
Book Size of
3
Home loan
2
1
0
2006-07 2007-08 2008-09
Financial Year
Interpretation:
There has been steady increase in the home loan book size of the branch.
In the year 2008-09, the size had grown to 5.25 cr from 2.50 cr in the year 2006-07,
81
7.10. CREDIT GROWTH TREND
44.9
44.8
44.8
44.7
44.6
2007-08 2008-09
Growth Rate 44.8 45.02
Financial Year
Interpretation:
There has been a slight growth trend seen from the year 2007-08 to 2008-09.
The growth rate of 44.8 of the year 2007-08 was almost sustained in the year 2008-
09.
The trend can be attributed to the reflection of decrease in demand and the impact of
82
7.11. SHARE OF HOME LOANS in retail portfolio
home loans
10%
others
90%
Figure 17: share of home loan segment in the retail portfolio
Interpretation:
The home loan segment had got a very small i.e., 10% share in the total retail
The other retail advances like car loans, educational loans, personal loans etc got the
83
7.12. TAKE OVERS
Interpretation:
There was less demand for the take over of advances from other banks in the region
It was found from the collected complaints from the customers that the Bank itself
follows stringent mechanisms to entertain the take over requests of the customers of
other banks in the rest of the regions and that, may be the reason for the low level
The branch could entertain the transfer of only six such accounts from Dewan
84
7.13. OUTSTANDINGS
150%
100%
50%
0%
2006-09 2009-10
Outstanding 10% 100%
Recovered 90% 0%
Financial Year
Interpretation:
90% of the short-term loans lent during the period 2006-09 have been recovered
leaving rest of 10% yet to be recovered or repaid by the customers in installments i.e.,
94 accounts.
Of Course, all the advances lent in the current year have been pending i.e.,
85
7.14. QUALITY OF ASSETS
NPAs
1%
Standard
Assets
99%
Interpretation:
Advances amounting to Rs.52.25 lacs went default out of the total advances in the
year 2008-09.
That implies the ratio of NPAs to total Advances is 1%, Of course well within the
limits.
86
7.15. INCOME GENERATED
Net Interest Income generated Total Net Interest Income % of Total Net Income
on Home Loans
3.31 lacs 8.34 lacs 39.7
Table 36: income generated
from Home
from other loans
advances 45%
55%
Interpretation:
The branch could generate 45% of its interest income for the year 2008-09 from
87
7.16. CUSTOMER SERVICE
Number of
Nature of Complaints
Complaints
Tedious Procedures 11
Delays in Processing 14
Transparency 10
Negligence by staff 9
Lack of/improper guidance 5
Insurance cover 2
Teasing interest rates 8
Hidden charges 3
On Take-overs 5
Table 37: customer complaints
tedious procedures
delays 8% 17%
transperancy 13%
negligent staff 3%
improper guidance 8% 21%
insurance cover
teasing rates 14%
16%
take overs
Majority of the customers are very much concern about the unreasonable delays in
processing.
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7.17. AWARDS AND REWARDS
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CHAPTER -8
8. RECOMMENDATIONS
On the basis of the collected data and the analysis along with detailed discussion made in
conclusion of this report, some suggestions can be made to the bank which will be helpful to
lending process would definitely give an edge to the bank in fighting competition and
for Title/Deed verification, which will ensure that no two borrowers in the
country will be able to raise institutional loans against the same asset. This
The Bank should make sufficient provisioning for bad loans and in this regard, the
To increase their customers, the bank should provide specialized services in this
sector. These services can be such as proper guidance to the customer regarding the
To satisfy their customers and for good dealings in future, the bank should make
prompt disbursement of loan amount to the customers so that they can buy or
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The Bank should use easy procedure, or say, less lengthy procedure for the
sanctioning of loan to the customer. There should be less number of legal formalities,
in case this exists, then, these should be completed in less time. This will be helpful in
Although the interest rates on specific norms, yet customers seek uniform interest rate
The bank should improve their overall services to increase the number of customers
for home loans. They should recruit professionals to provide such services and to
Although SBI Bank is a market leader in 'home loans' sector but they should innovate
their services, viewing the- increasing competitions from other banks such as HDFC.
The Bank should drop its tease rates as early as possible as their customers face
As the banks provide loan according to the repaying capacity of the customer and
his/her eligibility. Due to which, some customers are not able to get amount of loan
needed by them. So, the banks should soften their norms regarding the loan amount.
The Banks should try to provide proper knowledge regarding their home loan
schemes, even to people who don't know about such schemes and their benefits
especially in rural areas. So they should provide knowledge to the ignorant customers,
So, above are the main suggestions provided to the banks. By considering these
suggestions, the banks can strengthen their customer base in home loans sector.
They should improve their services and reduce legal proceedings and should be
The bank needs to take serious and sincere steps in reducing the processing times by
taking certain measures like using Information Technology to process the documents.
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9. UPDATE ON HOME LOANS
News Paper Clippings from Economic Times of India and Business Standard:
25-3-10:
20-3-10:
16-03-10:
10-3-10:
92
5-3-10:
93
3-3-2010:
24-02-10:
94
23-02-10:
10-02-10:
95
09-02-10:
06-02-10:
12-01-10
96
CONCLUSION
against 12% for china, 41% for Hong-Kong and more than 80%foor
sector during the coming years. Hence, the banks shall have more
Companies.
While the discounted / special scheme rates are offered to new home
carry the same spirit and the move is in the right direction is certainly
expected from all the banks. We need to watch how banks / HFCs
Last, but not the least, you may be the ‘King’ in the Market, but, the
be moulded.
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BIBLIOGRAPHY
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APPENDIX
QUESTIONNAIRE
1) How many Home Loan Products that your Bank is offering to the prospect
customers?
Interest Quantum of
S.No. Product/Scheme Customer Segment Tenure
rate Amount
1
2
3
4
5
6
:
7) Who are your main competitors and what‟s the level of competition you face from
them?
S.No. Competitor Severity of Competition
(Low/Medium/High)?
1
2
3
4
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8) How are you promoting your products?
Medium used Proportion of Any additional Info
use(low/medium/high)
Print Media
TV Advertisement
Personal Selling
Campaigns
Road-Side Hoardings
11) How do you see the performance of Marketing Associates and their role in bringing
sales?
12) How many sales you have made from Marketing Associates?
Number of Sales from MAs
Total Sales
% of Total Sales
100
13) What are the various standard formats (Proforma Sheets) that you use at various
stages?
Title of the Sheet Primary Contents Purpose Who Maintains it
27) What was the purpose of home loans towards which disbursements have been made?
Purpose Number of Amount(Rs.)
Accounts
To Pay for First homes
To Purchase second homes
To Improve/renovate existing homes
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29) Loan Amount Disbursals:
Loan Amount No. of Borrowers
Upto Rs.5 Lac
Above Rs.5 Lac and upto Rs.10 Lac
Above Rs.10 Lac and upto Rs.20 Lac
Above Rs.20 Lac and upto Rs.50 Lac
Above Rs.50 Lac and upto Rs.1 Cr
Above Rs.1 Cr and upto Rs.5 Cr
Above Rs.5 Cr
30) Size Of Home Loan Book for the last 3 financial years:
33) How many Home Loans have been Taken Over from other Banks:
36) How are you mitigating risk factors in lending to the segment?
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37) What is Net Income Generated on the segment?
Net Interest Income Total Net Interest Income % of Total Net Income
generated on Home Loans
40) How many complaints have been reached at Banking Ombudsman‟s Office?
Total Complaints Share of Home Loans % of total
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