A SUMMERE TRAINING PROJECT ON PUNJAB NATIONAL BANK “HOME LOAN”

Submitted to: Dr. B.R. Ambedkar University, Agra

In the partial fulfillment of the requirement for the degree Of Master of Business Administration
(Banking and Investment)
(2008-10)

Under the guidance of: Mr. R.K. Verma (Chief Manager)

Submitted by: Prashant Srivastava M.B.A. (B.I.) – IIIrdSemester Roll No. – 17

SETH PADAM CHAND JAIN INSTITUTE OF COMMERCE BUSINESS MANAGEMENT & ECONOMICS

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ACKNOWLEDGEMENT
T h i s r e p o rt b e a r s t he i m pr i nt of m any per sons, who have h e l p e d m e i n n u m e r o u s ways i n wr i t i ng t hi s r epor t . It gi ves m e g r e a t p l e a su r e i n pr esent i ng t hi s r eport t o t he Dr . B.R. Am b e d k a r Un i v er si t y , Agr a vi a S et h P ad am Ch an d Jain In st i t u t e o f Co m m e r c e Bu si n ess Man agem ent & Econ om i cs . I wo u l d l i k e t o t a k e thi s oppor t uni t y t o ext end m y hear tf ul g r a t i t u d e t o a l l t h o se who hel ped m e i n pr esent i ng thi s r epor t . T h e ir c o n t r i b ut i o n n o m at t er bi g or sm al l has cont r i but ed i m m e n se l y t o wa r d s c o m pl et i on of t hi s r epor t . I f a l l sh o r t o f wo r ds t o expr ess my gr at it ude t o al l t he r e sp o n d e n t s wh o g i v e s m e t heir val uabl e t i m e and unbi ased r e sp o n se s fo r m y q u est i onnai r e of t hi s pr oj ect r epor t . I a c k n o wl e d g e m y d e e p sense of gr at i t ude t o MR. R.K . Verm a ( Ch i ef M a n a g e r ) f o r hi s gener ous gui dance & advi ce bef or e & d u r i n g t h e c o u r se o f t hi s wor k & al so i n anal yzi ng the wo r k . I a m a l so e x t r e m e l y gr at ef ul t o m y f acul t y m em ber s Mr . P . N. Ag a r wa l , Ms. Gu n j an Di xi t and Ms. S wat i Mat hur , who e n c o u r a g e s m e f or c o m pl et i ng m y pr oj ect r epor t . I am equal l y t h a n k f u l t o Sr i . A. K. S a xena ( Co- or di nat or ) . My o v e r r i di n g d e bt i s t o m y par ent s and m y si bl i ngs wh o pr o v i d e m e wi t h t he m or al suppor t & i nspi r at i on needed t o p r e p a r e t h i s r e p o rt . PRASHANT SRIVASTAVA
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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 themselves are changing it is therefore a problem highly complex and ticklish. T h i s i n f or m a t i o n wi l l be asset t o m ar ket i ng m anager i n making e ff e c t i v e d e c i si ons. The r esear ches ar e used to a c q u i r e a n d a n a l y se i n f or m at i on and to m ake suggest i ons t o m a n a g e m e n t a s t o h o w m ar ket i ng pr obl em s shoul d be sol ved. T h e m a r k e t i n g re sear ch i s t he pr ocess whi ch li nks t o m a n u f a c t u r e r , d e a l e r s a nd i ndi vi dual s thr ough i nf or m at i on i n i m p o r t a n t p ar t o f c u rr i cul um of M.B.A. pr ogr am m e i s pr oj ect t a k e n b y th e st u d e n t s t o inst i t ut e under whi ch he or she i s st u d y i n g , p r o gr a m m e . T h e o b j e c t i v e o f t h i s pr oj ect i s t o enabl e t he st udent s t o u n d e r st a n d t h e a p p l i c at i on of t he academ i cs i n t he real b u si n e ss l if e . I a m f u l l y conf i dent t hat t hi s pr oj ect r epor t wi ll b e e x t r e m e l y u se f u l t o t he m anagem ent . af t e r c o m pl et i on of t hi r d sem est er of the

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TABLE OF CONTENTS Acknowledgement Preface CHAPTER 1: Overview of banking industry in India CHAPTER 2: A Saga of Banking Excellence in Banking (PUNJAB NATIONAL BANK) CHAPTER 3: Performance of the PNB CHAPTER 4: Organisational Structure CHAPTER 5: Home Loan CHAPTER 6: PNB Home Loan CHAPTER 7: Suggestions & Troubleshooting Tips CHAPTER 8: Bibliography

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• TYPES OF BANKS • BANKS IN INDIA

OVERVIEW OF BANKING INDUSTRY IN INDIA
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The major participants of the Indian financial system are the commercial banks, the financial institutions (FIs), encompassing termlending institutions, investment institutions, specialized financial institutions and the state-level development banks, Non-Bank Financial Companies (NBFCs) and other market intermediaries such as the stock brokers and money-lenders. The commercial banks and certain variants of NBFCs are among the oldest of the market participants. The FIs, on the other hand, are relatively new entities in the financial market place. Bank of Hindustan, set up in 1870, was the earliest Indian Bank . Banking in India on modern lines started with the establishment of three presidency banks under Presidency Bank's act 1876 i.e. Bank of Calcutta, Bank of Bombay and Bank of Madras. In 1921, all presidency banks were amalgamated to form the Imperial Bank of India. Imperial bank carried out limited central banking functions also prior to establishment of RBI. It engaged in all types of commercial banking business except dealing in foreign exchange. Reserve Bank of India Act was passed in 1934 & Reserve Bank of India (RBI) was constituted as an apex bank without major government ownership. Banking Regulations Act was passed in 1949. This regulation brought Reserve Bank of India under government control. Under the act, RBI got wide ranging powers for supervision & control of banks. The Act also vested licensing powers & the authority to conduct inspections in RBI In 1955, RBI acquired control of the Imperial Bank of India, which was renamed as State Bank of India. In 1959, SBI took over control of eight private banks floated in the erstwhile princely states, making them as its 100% subsidiaries. RBI was empowered in 1960, to force compulsory merger of weak banks with the strong ones. The total number of banks was thus reduced
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from 566 in 1951 to 85 in 1969. In July 1969, government nationalised 14 banks having deposits of Rs.50 crores & above. In 1980, government acquired 6 more banks with deposits of more than Rs.200 crores. Nationalisation of banks was to make them play the role of catalytic agents for economic growth. The Narsimham Committee report suggested wide ranging reforms for the banking sector in 1992 to introduce internationally accepted banking practices. The amendment of Banking Regulation Act in 1993 saw the entry of new private sector banks. Banking Segment in India functions under the umbrella of Reserve Bank of India - the regulatory, central bank. This segment broadly consists of: Commercial; Banks Co-operative Banks

Commercial Banks
The commercial banking structure in India consists of:
• •

Scheduled Commercial Banks Unscheduled Banks Scheduled commercial Banks constitute those banks which have been

included in the Second Schedule of Reserve Bank of India(RBI) Act, 1934. RBI in turn includes only those banks in this schedule which satisfy the criteria laid down vide section 42 (60 of the Act. Some co-operative banks are scheduled commercial banks albeit not all co-operative banks are. Being a part of the second schedule confers some benefits to the bank in terms of access to accomodation by RBI during the times of liquidity constraints. At the same time, however, this status also subjects the bank certain conditions and obligation towards the reserve regulations of RBI. This sub sector can broadly be classified into: 1.
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Public sector
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2. 3.

Private sector Foreign banks.

CO-OPERATIVE BANKS
There are two main categories of the co-operative banks. (a) Short term lending oriented co-operative Banks - within this category there are three sub categories of banks viz state co-operative banks, District co-operative banks and Primary Agricultural cooperative societies. (b) Long term lending oriented co-operative Banks - within the second category there are land development banks at three levels state level, district level and village level. The co-operative banking structure in India is divided into following main 5 categories: (Visit us again for details of each category) 1. Primary Urban Co-op Banks: 2. Primary Agricultural Credit Societies: 3. District Central Co-op Banks: 4, State Co-operative Banks: 5. Land Development Banks:

BANKS IN INDIA
s S. N. Public Sector Banks
Private Sector Banks
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Foreign Banks

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11 12. 13. 14. 15. 16. 17. 18. 19. 20. 21.

Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab and Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank IDBI Bank

Bank of Punjab Ltd. Centurion Bank Ltd. Development Credit Bank Ltd. HDFC Bank Ltd. ICICI Bank Ltd. IndusInd Bank Ltd. Kotak Mahindra Bank Ltd. UTI Bank Ltd. Yes Bank Ltd Bank of Rajasthan Ltd. Dhanalakshmi Bank Ltd. Federal Bank Ltd ING Vysya Bank Ltd. Jammu and Kashmir Bank Ltd. Karnataka Bank Ltd Karur Vysya Bank Ltd Ratnakar Bank Ltd SBI Commercial and International Bank Ltd South Indian Bank Ltd United Western Bank Ltd

ABN-AMRO Bank N.V Abu Dhabi Commercial Bank Ltd American Express Bank Ltd. BNP Paribas Citibank N.A DBS Bank Ltd HSBC Ltd. Standard Chartered Bank

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• ABOUT PUNJAB NATIONAL BANK • HISTORY OF PNB • VISION & MISSION

A SAGA OF EXCELLENCE IN BANKING
Established in 1895 at Lahore, undivided India, Punjab National Bank (PNB) has the distinction of being the first Indian bank to have been started solely with Indian capital. The bank was nationalized in July 1969 along
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with 13 other banks. From its modest beginning, the bank has grown in size and stature to become a front-line banking institution in India at present A professionally managed bank with a successful track record of over 110 years. Largest branch network in India - 4668 Offices including 238 Extension Counters spread throughout the country. Strategic business area covers the large Indo-Genetic belt and the metropolitan centres. Ranked as 248th biggest bank in the world by Bankers Almanac, London. Strong correspondent banking relationships with more than 217 international banks of the world. More than 50 renowned international banks maintain their Rupee Accounts with PNB. Well equipped dealing rooms; 20 different foreign currency accounts are maintained at major centres all over the globe. Rupee drawing arrangements with M/s UAE Exchange Centre, UAE, M/s Al Fardan Exchange Co. Doha, Qatar, M/s Bahrain Exchange Co, Kuwait, M/s Bahrain Finance Co, Bahrain, M/s Thomas Cook Al Rostamani Exchange

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Co. Dubai, UAE, and M/s Musandam Exchange, Ruwi, Sultanate of Oman.

ABOUT PUNJAB NATIONAL BANK
With over 38 million satisfied customers and 4668 offices, PNB has continued to retain its leadership position among the nationalized banks. The
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bank enjoys strong fundamentals, large franchise value and good brand image. Besides being ranked as one of India's top service brands, PNB has remained fully committed to its guiding principles of sound and prudent banking. Apart from offering banking products, the bank has also entered the credit card & debit card business; bullion business; life and non-life insurance business; Gold coins & asset management business, etc. Since its humble beginning in 1895 with the distinction of being the first Indian bank to have been started with Indian capital, PNB has achieved significant growth in business which at the end of March 2009 amounted to Rs 3, 64,463 crore. Today, with assets of more than Rs 2, 46,900 crore, PNB is ranked as the 3rd largest bank in the country (after SBI and ICICI Bank) and has the 2nd largest network of branches (4668 including 238 extension counters and 3 overseas offices).During the FY 2008-09, with 39% share of low cost deposits, the bank achieved a net profit of Rs 3,091 crore, maintaining its number ONE position amongst nationalized banks. Bank has a strong capital base with capital adequacy ratio as per Basel II at 14.03% with Tier I and Tier II capital ratio at 8.98% and 5.05% respectively as on March’09. As on March’09, the Bank has the Gross and Net NPA ratio of only 1.77% and 0.17% respectively. During the FY 2008-09, its’ ratio of priority sector credit to adjusted net bank credit at 41.53% & agriculture credit to adjusted net bank credit at 19.72% was also higher than the respective national goals of 40% & 18%. PNB has always looked at technology as a key facilitator to provide better customer service and ensured that its ‘IT strategy’ follows the ‘Business strategy’ so as to arrive at “Best Fit”. The bank has made rapid strides in this direction. Along with the achievement of 100% branch computerization, one of the major achievements of the Bank is covering all the branches of the
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Bank under Core Banking Solution (CBS), thus covering 100% of it’s business and providing ‘Anytime Anywhere’ banking facility to all customers including customers of more than 2000 rural branches. The bank has also been offering Internet banking services to the customers of CBS branches like booking of tickets, payment of bills of utilities, purchase of airline tickets etc. Towards developing a cost effective alternative channels of delivery, the bank with more than 2150 ATMs has the largest ATM network amongst Nationalised Banks. With the help of advanced technology, the Bank has been a frontrunner in the industry so far as the initiatives for Financial Inclusion is concerned. With it’s policy of inclusive growth in the Indo-Gangetic belt, the Bank’s mission is “Banking for card based technology enabled Financial Inclusion with the help of Business Correspondents/Business Facilitators (BC/BF) so as to reach out to the last mile customer. The BC/BF will address the outreach issue while technology will provide cost effective and transparent services. The Bank has started several innovative initiatives for marginal groups like rickshaw pullers, vegetable vendors, diary farmers, construction workers, etc. The Bank has already achieved 100% financial inclusion in 21,408 villages. Backed by strong domestic performance, the bank is planning to realize its global aspirations. In order to increase its international presence, the Bank continues its selective foray in international markets with presence in Hong Kong, Dubai, Kazakhstan, UK, Shanghai, Singapore, Kabul and Norway. A second branch in Hong Kong at Kowloon was opened in the first week of April’09. Bank is also in the process of establishing its presence in China, Bhutan, DIFC Dubai, Canada and Singapore. The bank also has a joint
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venture with Everest Bank Ltd. (EBL), Nepal. Under the long term vision, Bank proposes to start its operation in Fiji Island, Australia and Indonesia. Bank continues with its goal to become a household brand with global expertise. Amongst Top 1000 Banks in the World, ‘The Banker’ listed PNB at 250th place. Further, PNB is at the 1166th position among 48 Indian firms making it to a list of the world’s biggest companies compiled by the US magazine ‘Forbes’.

HISTORY OF PUNJAB NATIONAL BANK

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1895-

PNB established in Lahore by Lala Lajpat Rai. PNB established branches in Karachi and Peshawar. PNB acquired Bhagwan Dass Bank Limited. Partition of India and Pakistan at Independence. PNB lost its premises in Lahore, but continued to operate in Pakistan.

190419391947-

196019611963-

PNB amalgamated Indo-Commercial Bank Limited (established in 1933) in a rescue. PNB acquired Universal Bank of India. The Government of Burma nationalized PNB's branch in Rangoon (Yangon).

1965-

After the Indo-Pak war the government of Pakistan seized all the offices in Pakistan of Indian banks, including PNB's head office, which may have moved to Karachi. PNB also had branches in East Pakistan (Bangladesh).

1969-

The Government of India nationalized PNB and 13 other major banks on 19th July, 1969.

19781988-

PNB opened a branch in London. PNB acquired Hindustan Commercial Bank Limited in a rescue.

1993-

PNB acquired New Bank of India, which the Government of India had nationalized in 1980.

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19982003-

PNB set up a representative office in Almaty, Kazakhstan. PNB took over Nedungadi Bank (established the bank in 1899), the oldest private sector bank in Kerala. It was incorporated in 1913 and in 1965 had acquired selected assets and deposits of the Coimbatore National Bank. At the time of the merger with PNB, Nedungadi Bank's shares had zero value, with the result that its shareholders received no payment for their shares.

VISION

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"To be a Leading Global Bank with Pan India footprints and become a household brand in the Indo-Gangetic Plains providing entire range of financial products and services under one roof"

MISSION

"Banking for the unbanked

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• FINANCIAL PERFORMANCE OF PNB • AWARDS & RECOGNITION • PEST ANALYSIS • SWOT ANALYSIS

Financial Performance of the Bank

Punjab National Bank continues to maintain its frontline position retained its NUMBER ONE position among the nationalized banks in terms of number
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of branches, Deposit, Advances, total Business, operating and net profit in the year 2008-09. The impressive operational and financial performance has been brought about by Bank’s focus on customer based business with thrust on SME, Agriculture, more inclusive approach to banking; better asset liability management; improved margin management, thrust on recovery and increased efficiency in core operations of the Bank. The performance highlights of the bank in terms of business and profit are shown below:

Parameters Operating Profit* Net Profit* Deposit Advance Total Business (Rs.Crores)

Mar'07 3617 1540 139860 96597 236456

Mar'08 4006 2049 166457 119502 285959

Mar'09 5744 3091 209760 154703 364463

CRAR 26.02 41.67 22.47 26.55 24.15

• Respective figure for the corresponding financial year

AWARDS & RECOGNITIONS

"Best IT Team of the Year Award"At the IDRBT Banking Technology awards for the year 2005-06.
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SKOTCH Challenger AwardFor Change Management for the year 2005-06

Best IT User in Banking & Financial Services Industry – 2004 By NASSCOM in partnership with Economic Times.

Golden Peacock AwardFor Excellence in Corporate Governance - 2005 by Institute of Directors.

FICCI's Rural Development AwardFor Excellence in Rural Development – 2005

Skotch Challenger Award for Exemplary use of Technology For becoming a pioneer in Public Banks – 2005 Golden Peacock National Training - 2004 & 2005 By Institute of Directors

National Award for Excellence in SSI Lending Ranked 2nd for 4 consecutive years - 2002, 2003, 2004 & 2005

Banking Technology Awards 2004 Runner up in 'Best IT Team of the Year Award 2005'
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Jointly Adjudged by IBA, Finacle & TFCI

Money Outlook Award - 2004 Runner up in 'Best Bank (public Sector) of the year Award' –2005 Niryat Bandhu Gold Trophy For excellence in export performance for 3 consecutive years 2001, 2002 & 2003 by Federation of Indian Exporters Organization (FIEO)

21st Amongst Top 500 Companies By the leading Financial Daily the Economic Times, June 2005

9th amongst India's Top 50 Most Trusted A.C Nielson Survey, The Economic Times Dec 2004 Service Brands 3rd Rank amongst Banking Sector in India 323rd Rank in the World The Bankers' Almanac, January 2006 368 amongst Top 1000 Global Banks The Banker, London July 2005

PEST ANALYSIS

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SWOT ANALYSIS

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Objective Analysis of PNB

Strengths • • Wide network Large no. of customers • Fast adaptability to technology • Brand recognition • Excellent Training • Home to home banking services • Diversification towards other field • Globalization

Weaknesses

Opportunities • Fast growing Indian economy • High growth in banking sector • Liberal markets • Micro financing Threats • Large no. of market players • Decentralized decision making • Awards & Incentives

• Providing better services • Building long term customer relationships

• • •

Fast Decision making Competitive edge Changing culture

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• STRUCTURE OF THE ORGANISATION • HIERARCHY • MANAGEMENT OF PNB

ABOUT M.D. & CHAIRMAN SINCE INCEPTION

ORGANISATIONAL STRUCTURE
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Bank has its Corporate Office at New Delhi and supervises 58 Circle Offices under which the branches function. The delegation of powers is decentralised upto the branch level to facilitate quick decision making. HEAD OFFICE
7, Bhikhaji Cama Place, New Delhi-110026

CGM OFFICES

CIRCLE OFFICES

BRANCHES

HIERARCHY
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Chairman

Executive Director(ED)

Chief General Managers (CGM)

General Managers (GM)

Deputy GM

Assistant GM

Chief Managers

Senior Managers

Managers

Officers

Clerical/ Subordinates

MANAGEMENT OF PNB

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Name M V Tanksale Nagesh pyadh Smt. Ravneet kaur L.M Fonseca S. R. Khurana P.K. Nair Mohan Lal Bagga Mushtaq A Antulay Gautam P. Kandelwal Vinod Kumar Mishra Tribhuwan Nath Chaturvedi Devinder Kumar Singla G R Sundaravadivel

Designation
Executive Director Executive Director Govt. of India Nominee Director RBI Nominee Director Director rep. C.A. Category Officer Employee Director Workmen employee Director Part –time non Official Director Part –time non Official Director Part –time non Official Director Share Holder Director Share Holder Director Share Holder Director

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NAMES OF CHAIRMAN & MANAGING DIRECTORS ALONG WITH THEIR TENURE SINCE THE INCEPTION OF PUNJAB NATIONAL BANK

Names of Chairman & Managing Director S/Shri Sardar Dyal Singh Majithia R.B. Lal Chand Bhagat Ishwar Dass R.B. Lal Chand R.B. Lala Sukh Dayal Bhagat Ishwar Dass Dr. Hira Lal Lala Dhanpat Rai Dr. Maharaj Krishna Kapur R.B. Dewan Badri Das Lala Yodh Raj Shriyans Prasad Jain Shanti Prasad Jain Ram Nath Goenka Kamalnayan Bajaj Somesh Chandra Trikha Prakash Tandon T.R. Tuli O.P. Gupta S.L. Chopra S.L. Baluja J.S. Varshneya Rashid Jilani

Period

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
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1895 - 1898 1898 – 1905 1905 – 1910 1911 – 1912 1912 - 1913 1913 - 1915 1917 – 1920 1921 – 1931 1931 – 1937 1938 - 1942 1943 – 1953 1953 – 1954 1954 – 1959 1960 – 1964 1964 – 1967 1968 – 1972 1972 – 1975 1975 – 1977 1977 – 1980 1980 – 1981 1981 – 1985 1985 – 1989 1990 - 2000
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S.S. Kohli S.C. Gupta Dr. K.C. Chakrabarty

2000 – 2005 2005 - 2007 2007 – 2009

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• FEATURES OF HOME LOAN • HOME LOAN INDIA • TYPES OF HOME LOAN • WHY TAKE A HOME LOAN • CHECK LIST FOR HOME LOAN • RBI DIRECTIVES FOR HOME LOAN

HOME LOAN
Home loans are provided based on the market value, mainly estimation given by banks or the registration value of the property. Availing various types of house loans to suit your individual needs at the lowest rates & easy financing can now fulfill the need for a house of your own. Home loan is not a one-time decision; do review the market periodically before availing them. Today there are unlimited numbers of banks in the
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country wanting to give out Home loans. Given this scenario, it may seem easy getting yourself a loan. But is it really?? Buyers tend to make mistakes while entering into deals, which may not be beneficial for them, so better compare all the variables before signing a loan agreement by different banks. However the loan agreement should be finalized only after reading the terms and conditions carefully. You can apply for a Home loan even before you select your property. The loan amount would be sanctioned or approved for you, based on your repayment capability.

Features of house loan: • Purpose: For purchase of house from builder / resale and construction / extension of existing house. • Loan amount: You can avail for Home loans need based depending on your eligibility, income and repayment capacity. • Security: Home loan is a secured loan wherein collateral are required.
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• Loan tenor: The maximum loan tenure is 25 years.

Planning to avail a home loan, you must adhere underneath points: Firstly, take your own time and evaluate your expenses and do a market survey about the property buying process. Buying a house, which is way beyond your range, could affect you financially; banks help in financing your dream home via home loans.

1. Eligibility Banks determine your eligibility based on your repayment capacity and discuss about the loan amount up front. The eligibility for acquiring a home loan is augmented by clubbing income of your father/spouse/mother/son, by clearing your outstanding debts, by stretching your loan tenure, Salaried individuals can increase their eligibility by showing their performance linked income or bonus earned.

Secondly, Do your own analysis and check the impact of your repayment of home loan on your monthly expenditure, as a thumb rule, it’s recommended to make sure the EMI of your home loan do not exceed more than 50% of your gross monthly income.

2. Interest rates

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An important factor that goes into your EMI calculations is the interest rates, which may vary from bank to bank, so do compare them. Also do a complete and detailed analysis of the various options like the interest rates i.e. fixed and floating rate of interest. Thirdly, if two banks give you the same amount of loan but at different interest rates do your math and work out what's best for you. a) Fixed interest loans Charge an interest, which remains the same through out the tenure of the loan. This means that the consumer is immune to market risk or the possible upward movement in the interest rates. Hence, fixed rate is a good option when the interest rates are expected to move up in the future.

b) Floating rate loans A consumer is exposed to market risk and his gain or loss depends on the interest rate condition prevailing in the market. Floating rate is beneficial if the interest rate falls in the future. A floating rate is considered nontransparent and is also known as 'adjustable rate'. Fourthly, if you decide to opt for a fixed rate loan, you can still switch to a floating rate loan in the future and vice versa as and when rates go in your favour and if you do decide to switch, you should take into account the cost of doing so and the interest rate benefits of switching.
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For a given interest rate, loan with a daily or monthly reducing balance is better than an annual reducing balance loan. Interest rates vary depending on the tenure of the loan, the amount of the loan and your personal profile. 3. Insurance covers (an added cost) Also, many banks may insist on getting your home insured to safeguard their interest. There are various kinds of insurance covers available for you. Apart from getting the mandatory ones you should try to get insurance as per your circumstances. You also have a choice of getting insured from another company without any objection from your bank.

4. Other costs The interest rates and EMIs are not the only cost factor. Rs. 1350/ documentation charges and 0.90% + service tax. Processing fees, administration fees, valuation fee, legal fee, is to be paid when you apply for a loan and other fees paid at closing. Make sure you work out as to how much these other costs add up to. So even though the interest rate may be lower, it usually adds up to being expensive. If the EMIs may come out a lot more than what you can afford on a monthly basis; try to redo the math with changes in the tenure and loan amount (if possible). 5. Advance EMI Advanced EMI is the number of equated monthly installments in the form of post dated cheques, paid out in advance at the time of disbursement of loan.
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6. Document required Most importantly, all deals and offers agreed upon are supported by relevant papers. Self employed and salaried require different documents to support the deal. So make sure you always ask for a letter on the banks letterhead mentioning the likes of, exact rate of interest, processing fees, pre-payment charges along with interest-schedule. Before signing the documents, make sure you recheck all terms and conditions. Do make sure you understand and agree with each of the clauses in the documents. Do not sign any blank documents. Even if it takes you a few hours to fill-up the form, please do so. Do not leave anything for the executive to fill-up. It's always better to get a legal opinion from someone on your loan papers. Do not under any circumstance give any false information. This may amount to fraud and could land you in trouble.

7. Penalties Once you have received the loan do your best to pay it back as quickly as possible. But this early payment might invite a pre-payment clause. Banks make their money off the interest they charge and the sooner you pay back a loan the less money you will have to pay in interest. When it comes
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to Home loans, penalties are binding, like if you chose to pay up your entire money before the tenure, a Pre-payment penalty is charged. So you should know about such penalties beforehand to avoid future misunderstanding between you and the bank.

8. Home loan glossary Confused in the Home Loan jargon? Our glossary will help you in understanding the basic home loan related terms. Browse through the glossary or search for a term through the menu to resolve any doubts. Glossary of Home Loan terms A B C D E F G H I J K L M

N O P Q R S T U V W X Y Z

9. Acceptance Letter Acceptance letter is the letter that a borrower or applicant provides on reading the terms of the issue; and communicate his willingness to accept the loan by way of an acceptance letter within a particular time frame which varies between 1-3 months from the date of the sanction letter and also pay the requisite administrative fee.

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HOME LOAN IN INDIA

It is definitely one of the major things that you can board on in your lifetime. The bad news is: however is that not everyone in this globe is like you, loaded enough (financially, of course) to be able to build a house as soon as he wants to. Whether you are Non Resident Indian or Resident of India, and you are thinking to start your journey of buying a new house, looking to move to a new house, investing in property or are looking forward to refinance, Consider answering these questions to yourself:

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• • • •

Which type of home loan should I prefer? Will it be the best scheme that will be fitting my budget? Can any insurance plan cover for an unpaid monthly due? Is there a fine or penalty or even some reward as well if the whole amount of loan is paid ahead of the due date?

These are just a dash of the questions to be answered when considering taking the plunge…into the loan journey. The different home loan types are hereby presented to you to make your journey that more smoother or step by step, safer and comfortable. Yet, Got a fix on fixed rate or variable rates, offset accounts, lines of credit or bridging loans!! And we have covered the basics of your journey here. Going back to you future house owner, have you got the answers to your questions? Start answering them now and take the plunge! With so many real estates sites coming up in Indian market, finding an ideal house isn't that big a issue nowadays, when you can virtually see all across the home you need to purchase by the various real estate simulation programs and videos available, but you still need to purchase it, right? - To really say "own" it. A home loan, also popularly identified as a mortgage, is an easier financial option to own a house. Once you've decided to endeavor on a home loan, there are so many things that you need to be informed with. Not only is it going to be an emotional experience, it is also going to be a very informative monetary journey, as you will be dealing with the whole caboodle of the mortgage process along the way. There are thousands of home loan companies waiting to provide you with your financial needs. Part of the success of this whole financial move is
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partly in your hands, the greater part relies on the efficiency of your chosen mortgage company.

TYPES OF HOME LOAN

Owning a piece of land or property is a lifetime dream for every individual. There are many home loans provider in the market to make your dream come true. But before you opt for any home loan provider, you need to consider certain factors related to property that you are interested in buying and also about the salient features offered by a home loan provider and also study some Home Loans and Home Insurance FAQs which helps in applying a Home Loan in India.

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And the most important thing is you should know about each and every term related with Home Loans before applying for a Loan. It is always advisable to consult a home loan expert or consultant before applying for a home loan or purchasing a property. You can take different types of home loans like Bridge Loans, Home construction Loans, Home Equity Loans, Home Extension Loans, Home Improvement Loans, Land Purchase Loans etc for different schemes available in the market. There are different types of home loans tailored to meet your needs.

Home Purchase Loans: These are the basic forms of home loans used for purchasing of a new home. Home Improvement Loans: These loans are given for implementing repair works, healing and renovations in a home that has already been purchased.

Home Construction Loans: These loans are available for the construction of a new home. Home Extension Loans: These loans are given for expanding or extending an existing home. For e.g.: addition of an extra room etc.

Home Conversion Loans: These loans are available for those who have financed the present home with a home loan and wish to purchase and move to another home for which some extra funds are required. Through home conversion loan, the existing loan is

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transferred to the new home including the extra amount required, eliminating the need of pre-payment of the previous loan.

Land Purchase Loans: These loans are available for purchasing land for both construction and investment purposes.

Bridge Loans: Bridge loans are designed for people who wish to sell the existing home and purchase another one. The bridge loans help finance the new home, until a buyer is found for the home.

Why take a Home Loan?
What's an average middle class Indian's most cherished dream? A date in world trips in islands with Aishwarya Rai in complete solitude. This would seem to be the answer from the maximum number of episodes of Kaun Banega Crorepati (KBC), despite recently of course, when she has decided to change her fortunes first with Abhishek! Jokes apart, purchasing and moving into a dream house would generally rank among the top three things on the wish list of most people. After all it’s what been proved by Maslow’s Law of Hierarchy as well. That entire house hunting every few years, grumpy landlords, killing rents would be a thing of

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the past. Hey, you even get to use nails to hang your favorite paintings and pictures. Don’t you??? Taking a home loan nowadays has become very simpler. The RBI has been regularly slashing interest rates, with the result that housing finance loans that came at an interest rate of 16.5% to 18% four years ago are now available at 11.5% to 13% or lower. Each year the Finance Minister's generosity during the Budget seems to be solely concentrated for the housing sector and construction sector. The Budget 2000's allowed interest payment up to Rs 1 lakh and principal payment of Rs 20,000 to be exempted from income tax. To top it all, the Housing Finance Companies (HFCs) are aggressively wooing customers. Now, when the sun shines, it’s the best time to make hay. Isn’t it?

Check list for Home Loans
If you have arrived here by the help of search engine, we pre assume that you are seeking some home loans to purchase a home or on the look out for some information related to Home loans or Home Loan Types or you must read some Home Loan Articles. Hereby, we present to you the home loan documents checklist that you need to ensure is with you, before you apply for a home loan. A basic checklist for home buyers like proper and clear title and correct proposition will help you make a safe and informed purchase. There are other home loan tools like calculators suitably devised to assist you.
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Confirmation of Income

If you are a salaried person, please provide two recent consecutive pay slips or a copy of your employment contract or a letter from your employer. If you are self-employed, please provide copies of your last two Financial Accounts as prepared by your accountant. Appointment Letter Salary Certificate Retainer ship Agreement, if appointed as a consultant FORM 16 issued by the employer in your name. Last three years income tax returns duly filed and certified by the Income Tax Authorities Similar Document -separately for each co-applicant.

• • • • •

Employment Proof
• •

Identity card issued by your employer Visiting card

Age Proof
• • • • • •

Passport Voter's ID card PAN card Ration card Employer's Identity card School leaving certificate
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Birth certificate

Residence Proof
• • • • • •

Ration card Passport PAN card Rent agreement, if you are staying currently on rent Bank Pass book Allotment letter from your company if you are residing in company quarters.

Name Change Proof (If Applicable) A copy of the official gazette b. A copy of a newspaper advertisement publicizing the name change c. Marriage certificate

Investment Proof (If Applicable)

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 selfemployed. Any other photocopies of investments held, if required by the Bank

Property Title Proof

Original Sale agreement with Builder/Developer duly registered, Registration receipt

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• •

Tripartite agreement from builder/developer Land documents indicating ownership, e.g.- Photocopies of title deeds, if applicable A certificate by the legal advisor of the builder to the effect that the builder has a good reputation and it is free from encumbrance and other charges. A certificate from builder's Chartered Accountant certifying that the builder has not mortgaged the property anywhere else. Certified true copy of approved plan. Copies of receipts of payments made to builder/developer. Allotment letter Possession letter Lease agreement, if applicable (Property bought from a development authority) Mortgage deed if the Bank opts for a registered mortgage. No Objection Certificate from the developer, society or development authority as applicable Personal Guarantees, if 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 Post dated cheques for the EMIs.

• • • • •

• •

• •

Confirmation of Rental Income Copy of the existing tenancy agreement, or a rental appraisal, from a local real estate agent signed by branch manager, or rental manager.
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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 the last six months.

Sale and Purchase Agreement

If you are planning to buy a property, please provide a copy of the successful sale and purchase agreement signed by both you and the vendor. If you are planning to sell or have already sold your existing property, please provide a copy of that property's sales and purchase agreement.

New Customer to the banks of India

If you are refinancing from another bank please provide copies of your loan statements covering the last six months. Please provide copies of your account statements covering the last six months from your current bank. Please provide copies of your identification and if you have arrived in the country within the last 5 years, please provide a copy of your passport.

Government Valuation and rating System A copy of the latest Government or Ratings Valuation is to be provided. Depending on the age and value indicated in conjunction with the amount
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required to borrow, the Bank may require a Registered Valuation and your Banker will advise you

New RBI Directive for Home Loans
The Reserve Bank of India (RBI) has in the latest directive asked the Indian banks to be more "fair and transparent" while signing their agreements with the consumers. This has come following complaints from various consumer sections regarding home loans. • It has emphasized on the fact that while giving a home loan, the banks should not tie their loans with their own prime lending rates (PLR) which often results in pro-bank and against consumer interest.

Households should get credit counseling before signing any loan agreement. In such case, banks should give credit counseling to customer before giving a loan. Any non-governmental organization can also give independent credit counseling to small borrowers.

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Consumers often complain of not receiving benefits of falling interest rates as banks tie their floating rate loans with its PLR and even when rates fall, the banks kept the PLR unchanged. But when interest rates are hiked, the banks increase the benchmark rate, thus making customers pay a higher rate and consequently increase the number of EMIs too. The RBI has asked the banks to mend rules for the same.

Individual borrowers should ask for the exact tenure and EMI while taking a fixed rate loan. The RBI has also resolved to look into all consumer complaints if it is bought to the regulator's notice.

The IRDA (insurance regulator) has powers to take action against banks if a customer feels cheated while buying an insurance product. On its regulatory role, the RBI is trying to maintain a balance between the extent of freedom granted to the banks and the objectives of governance.

RBI has made it mandatory for all banks - including private and foreign banks - to offer a passbook to their customers with the address and telephone number of the nearest branch.

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Customers have often been harassed by banks' call centers where there is no accountability of the query made. The "do not call" registry has also been flouted by banks as customers are bombarded with unnecessary product offerings. The RBI has directed the Indian Banks' Association to come out with a single "do not call" registry or when a customer adds his name to a single bank registry it should then stop unsolicited calls from all banks.

On rising credit card frauds and wrong statements given by the banks, the RBI has asked the customers to approach the ombudsman to redress their problems. This way the RBI feels would inculcate more consumer friendly practices among Indian banks.

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Choosing the right home loan
If you are planning to buy home, you need to know about home loans processes, troubleshooting and how to choose the right home loan for house that falls within your budget. There are various types of home loans offered by different financial institutions. You need to figure out which type of home loan is beneficial for you. Types of Home Loans Available:
• • • • • •

Home Equity Loans Home Extension Loans Home Improvement Loans Home Purchase Loans Land Purchase Loans Mortgage Loans

Many banks and financial companies offer home loans. But before choosing any home loan option, consider few points as mentioned below.

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Property Types: You should know more about type of property in lieu of which you seek loan. There are loans offered by banks to Resident Indians and NRIs for ready property, under construction property, self-construction and home improvement. Loan Tenure: The loans provided by financial institution are offered in tenures or period of years. You should check out the tenure for loans available in the market. There are loan tenures available for upto 25 years. Repayment Options - You need to choose between fixed and floating rate home loans. Many banks and financial institutions will provide you with the option of switching from a floating rate home loan to a fixed rate home loan once a year at no extra cost. But you need to check out the facts first with the loan providing firm. No Penalty option - There are also no penalty option offered by few finance companies. In this mode, you can opt to pre-pay up to 25% of your loan every year. Pre-payment is permitted after a minimum of 6 months following loan disbursal. Tax Benefits - You should know the right of your tax benefits on home loans. Resident Indians are eligible for certain tax benefits on principal and interest components of a housing loan under the Income Tax Act, 1961.## List of Premium Banks Offering Home Loans:
• • •

ICICI Bank - ICICI Bank Home Loan HDFC Bank - Adjustable Rate Home Loan Bank of India - Star Home Scheme
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• • • •

Standard Chartered - Home Assist State Bank of India - SBI Unique Housing Scheme Bank of Baroda - Housing Offer Citibank- Building & Renovation of House

Always check with a financial home loan expert or financing company to understand home loan processes and to avail the best bargain on your home purchase.

• ELIGIBILITY
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• DOCUMENTATION • EXTENT OF LOAN • RATE OF INTEREST • REPAYMENT & SECURITY • FEATURES & CONDITIONS OF PNB HOME LOAN PNB HOME LOAN
Punjab National Bank provides its customers with various Home loan policies and features at highly competitive rates. They know the needs of the Indian customers that they have to deal with, on a regular basis, and provide the policies accordingly. The PNB Home Loan cater mainly to the requirement of the middle class individuals of India, as Pnb itself is one of the leading public –sector banks of the nation. The PNB Home loans are very easily available, and have an even easier process of repayment that is given over a prearranged time period. This period of time is determined, when the PNB Home loans are being finalized and along with the loans, the buyers get the opportunity of having a life insurance covered against him. The basic grounds on which the PNB Home loans are provided are:

Extending, repairing, modification and even renovating of an already existing building or flat.

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Purchase or building of a new house or flat.

The basic interest of the PNB Home loans may be around 9.5%, and the time period may vary from a minimum of 5 years to a maximum of 25 years. However there is a certain limitation of the loan amount that an individual may take from the bank. The maximum amount of the loan amount sanctioned under PNB Home loans is need based. It generally takes around 7 days to process the PNB Home loans, from the day it has been finalized with the bank. Apart from all these details, the PNB Home loans also enable us to choose between fixed and floating rates that may be applicable from time to time, and keep varying from one time period to another. As far as the eligibility is concerned, a person between the age group of 18 to 60 years may be qualified to apply for the PNB Home loans. Along with this, it has also to be noted that the annual income of the individual, who is applying for the loan, must be greater than or equal to 1.2 Lac INR.

Eligibility

Age of the applicant must be less than 60 years. account is regular and no IR irregularity persist.

• Existing home loan borrower can also apply provided their loan

Documents Needed

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1. Proof of identity 2. Proof of income 3. Proof of residence 4. Bank statement or Pass Book where salary or income is credited. 5. Education Certificate 6. Photos 7. Salary slip & 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
1. The loan can be granted both for freehold and leasehold property. 2. 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
• 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.
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• Loan upto Rs. 20 lacs for purchase of land/plot • Loan is available maximum upto Rs. 2 lacs for furnishing.

Margin
Land/Plot Construction/repair/addition 40% 25%

Rate of Interest
(Effective from 1st May 2009 – BPLR 11.00%)

Housing finance to Individuals including NRI’S /Flexible Housing Scheme

Fixed option for loans

Floating option for loans

Upto 20 Lacs. (i) upto 5 years (ii) Above 5 years & upto 10 years (iii) Above 10 years & upto 20 years (iv) Above 20 years & upto 25 years
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Above 20 Lacs. 10.00% 10.25% 10.75% 11.00%

Upto 20 lacs. 8.75% 9.00% 9.25% 9.50%

Above 20 Lacs. 9.50% 9.50% 9.75% 10.00%

9.25% 10.00% 10.50% 10.75%

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• 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
0.90% of the loan amount + Service Tax& Education Cess

Repayment
• Maximum 25 years. • Installment can be fixed upto maximum age of 65 years. • The income of spouse and earning children can be taken into account provided they are made co-borrower. • 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.
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• Loan is to be repaid in EMI within a period of 25 years or before the borrower attains the age of 65 years.

Security
• Equitable/Registered mortgage of immovable property. • Tripartite agreement be executed amongst Housing Board/ Dev Authority / Coop Society / Builder the borrower and the bank where mortgage cannot be created immediately.

Equitable mortgage of other immovable property or pledge of NSC etc. upto 125% of loan amount if property is being purchased from 1st P/A holder and where there is delay in the execution of Tripartite agreement.

• Verification of security is required once in 2 years.

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:
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• For construction in Un-authorized colonies. • If property is to be used for commercial purpose. • Without approved Map.

• SUGGESTIONS & RECOMMENDATIONS

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• TROUBLESHOOTING TIPS FOR WOULD BE HOME LOAN BUYERS

SUGGETIONS & RECOMMENDATIONS
There are some suggestions, which I would like to give the private banks, which I noticed in my project. This areo Banks should improve the quality of their products (Specially Home loan). o Most of the private banks and public banks are much aggressive about home loan than PNB. So, PNB should also be focus and aggressive about its home loan products. o In my project period I notice that many of the hidden costs are accumulate with the services, which are not informed to the customers at the first time, and then customers suffer many of the problems. So, banks should disclose all the fee structure, terms & conditions regarding the product before making sale. o In the bank premises front office executives are not co-operative with the customers. So, higher authority should keep control over theses types of activities.

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o Most the banks believe in large sales force than the quality sales force, which are more competitive. So, banks should improve their quality sales force, which include the competitive sales personnel.

Troubleshooting Tips for Would Be Home Buyers
Past few years have witnessed a paradigm shift in the scenario for home loan seekers. However, things for the consumers were fairly good till mid-2004. Property prices have been steady and the interest rates were at historic lows. Undoubtedly, the picture has much changed now. Real estate in India is going through its own boom, with property prices going higher and higher as there is no tomorrow. Also, there is no sign that this rise in underlying property prices is going to slow down soon. This has widened the gap between have and have not for a home loan consumer. Though, there has been a great progress in the financial status of different income groups but there are many other hassles along the way to add to the woes of an interested home buyer. With an increase in loan interest rates, it has been noticed that a consumer gives away a major portion of his increased income as the down payment and later as EMI. This is a story with every next typical consumer in a metropolitan city. No wonder that the dream for owning a home is on the verge of turning into a mirage for most middle class.

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So what are the options left with a prospective home loan consumer?

If you are planning to purchase a home for the purpose of your own residence, then don't make your search a wild goose chase by trying and wasting time in the market. If your dream house requires you to hunt a treasure to buy it, you may consider a smaller property in the same area. But, if you are deciding to buy a house with the intention of selling it for quick profits, then never fasten the process. Wait for the overheated property market to cool. Meanwhile, work out your budget and advantages before treating the property as an investment.

Let's view the top four problems faced by home loan consumers during the pre-disbursement process as well as troubleshooting tips: Problem I: Most times, the desired home loan amount is not available or if available, then getting a fixed rate of interest is just like striving for impossible. Moreover, there are a few financial institutions that provide the home loan consumers with a promising interest rate. - Get a promise that if you don't receive the home loan amount offered you can press for a refund of your processing fee. Don't rely on words but take it in writing or by mail. Problem II: Generally, there is no guarantee that you will get your processing fee back if the loan is not sanctioned or if the loan is sanctioned then the individual does not want it. -The situation seems a little complex unless promised in writing or in advance.
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Problem III: At times, loan amount gets restricted after being sanctioned due to lower valuation of the property by the bank. - You may ask your lender to get a valuation done before the sanction of the loan so that this does not come as a surprise afterwards. Else, the bank will evaluate it at one figure and you will be purchasing it at another. For that reason, it is always recommend buying a property from a well known builder. Problem IV: Non availability of title documents and/ or NOCs in the format desired by the bank. Or, problems with any other legal/ title document. - Most banks go through your legal documents with a discerning eye if they are submitted along with a home loan application form. You are required to check with the concerned builder/ society/ authority about the format of the NOC that plays a critical role in the procedure. If they have a different format, get that cleared from the bank to avoid messy disputes and headaches later.

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BIBLIOGRAPHY

BANKING LAW AND PRACTICE INDIAN CASES IN MARKETING

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P.N. VARSHNEY NEELAMEGHAM , S.

WEB SITES: www.pnbindia.com www.guide2homeloan.com www.google.com

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