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Project Report Submitted Towards The Partial Fulfillment For Award Of The Degree Of Masters of Business Administration
Submitted To By
SHARMA Faculty Guide MBA-4
MATHURA ROAD, NEW DELHI
Chapter 1 – Introduction
Chapter 2 – Products
Chapter 3 – Objectives and Rationale of the Project
Chapter 4 – Review of Literature 4.1 Business Process 4.2 Types of Appraisal 4.3 Property Documentation 4.4 Know Your Customer Compliance 4.5 Repayment Track Record based lending
Chapter 5 – Research Methodology 5.1 Research Design
5.2 Sample Design 5.3 Research Tools and Questionnaire 5.4 Analysis a) Porter’s five forces model B) SWOT Analysis c) Comparative study of ICICI Bank Ltd and HDFC
Chapter 6 – Research Findings
Chapter 7 – Summary and Conclusion
I am obliged to all the people which includes my managers and mentors and my colleagues for co-operation during the internship. My increased spectrum of knowledge in this field is the result of their content supervision and direction that has helped me to absorb relevant and high quality information. I would like to thank my faculty guide Ms. sharma for her guidance and enriching my thoughts in this field from different perspectives. I would like to thank all my respondents without whose cooperation my study/project would not have been possible/complete. Last but not the least, I feel indebted to all those persons and organizations who/which have provided helped me directly or indirectly in successful completion of this study.
Against the milieu of rapid urbanization and a changing socio-economic scenario, the demand for housing has grown explosively. The importance of the housing sector in the economy can be illustrated by a few key statistics. According to the National Building Organization (NBO), the total demand for housing is estimated at 2 million units per year and the total housing shortfall is estimated to be 19.4 million units, of which 12.76 million units is from rural areas and 6.64 million units from urban areas. The housing industry is the second largest employment generator in the country. It is estimated that the budgeted 2 million units would lead to the creation of an additional 10 million manyears of direct employment and another 15 million man-years of indirect employment.
A year equates a century, knowledge compresses time and the information technology sweeps the world, gathering momentum with each new application, soaring towards fresh goal, rapidly opening vistas hitherto unknown. Here we are, in the 21st century….Years that catapults us towards new challenges at every stage of endeavor. It gives us good reason for aiming high.
Keeping the above philosophy in mind, this project is carried out with an objective to identify the basic needs of the applicants and the process of Home Loans in ICICI Bank Ltd. The various areas covered in the report are:
Business Process of Home loans Types of Appraisal Property Documentation Know your customer compliances Repayment Track Record lending
The final outcome of the report is to find out the number of the applicants who have applied for bank loans in the month of June and the analysis of the population applying for Home Loans through the sample size 40. The report includes the various products that are introduced by the bank such as Home Loans, Loan against property, Land Loan, Property OD, Lease Rental Discounting, Balance Transfer, etc. It consists of questionnaire which helped to analyze the final outcome of the report.
ICICI Bank is India’s No. 1 Home Loans Provider. At ICICI Bank Home Loans, it offers unbeatable benefits to ensure that the customers get the best deal without any hassles. And ICICI Bank makes it extremely easy for them by offering
• • • • •
Attractive loan interest rates Home loan amounts starting from Rs.2 lakhs Term loans up to 20 years Free Personal Accident Insurance Insurance options for your home loan at attractive premium
With varied offering of house loans and home finance, ICICI Bank Home Loans gives an opportunity to select the perfect loan as per the needs of the customers who can choose from:
• • • • • •
Adjustable Rate Home Loan Fixed Rate Home Loan Part fixed, Part Floating Rate Home Loan Smart fix Home Loan Money Saver Home Loan and also Balance Transfer of your existing home loan from other banks.
And the other categories that the customers can avail are : Land Loans Office Premises Loans Home Improvement Loan and Home Loan for NRI.Customers can also leverage their existing property to get
Loan against Property Property Overdraft or Lease Rental Discounting.
All of these are available on an adjustable rate or a fixed rate. Challenges in the growth path The housing finance industry is going to observe polarization of the players For survival, the Housing Finance Institution should have -: Good investment in people and system Should have strong Business Origination process in place Excellent Credit Appraisal Skills Monitoring the Systems in place Strong Collection mechanism in place HFI’s survival can be at stake
RCLG (Retail Customer Liability Group)
RAPG (Retail Assets Product Group)
RCLG deals in Accounts i.e., Current, savings and fixed. It looks after the liability side of the bank that constitutes the withdrawals and deposits of the customer.
COPS / CAM Credit department
Sales Manager Credit Manager DMA / DSA CPA (Credit (Direct marketing Processing Analyst Agency/ direct sales Agent)
Area Operations Manager Collection Customer Account Manager Manager DEO (Data Entry Operator)
Sales Department – It basically search the customer who is in need of loan and pitches the different kinds of customer accordingly.
Credit Department – It is responsible for Credit Documentation, Profile check, Legal and Technical reports of the customer and his property.
Operations Department – It is responsible for punching end to end. It does NDC according to the RBI norms and performs after sales services. It collects the Post Dated Cheques.
Collection Department – It functions at the time when any customer is in default.
19th February 1999………The launch of ICICI Bank Home Loans Scenario then New to the business Formidable competition End to End delivery of the product through the DMA being done for the first time Ambitious growth plans
Home loans – Highlights Customer base (as on march 2005): Year-to-Date……….276756 (Sanction cases) Life-to-Date………..687364 (Sanction cases) Book Size (as on March 2005) – Rs.33175.20 crores Disbursement (YTD)….Rs.18871.00 crores
Now – Year 2007 1000 + locations 845 + Direct marketing Agencies 10000 + FOS across the country Centralized Call Centers covering all major states and cities Leveraging corporate relationships Cross sell initiatives: leveraging customer centric data warehouse infrastructure.
Polarization – Future Scenario Weak HFI with high cost of funds & poor system would end up as DSA sourcing business in the market. HFIs with low cost of funds but poor system may turn out to be buyers of MBS HFI with good systems in place but with high cost of funds need to look at Securitization. HFIs with Low cost funds and good systems would be the major players.
Low margins & High delinquency can increase the lending rate to cover the cost of operations.
Can force the HFIs to re-look at its business model.
Products and Documentation
Products: We Offer:Products – Home Loan & XSELL 1. Home Loans (HL) & Variance MV Lending Smart Fixed Part Fixed & Part floating Fixed ROI with MMC EMI in under construction stage Max Money – SURF
2. Money Saver
3. Home Improvement Loan (HIL)
4. Land Loans (LL)
5. Office Premises Loan (OPL)
6. Balance Transfer (BT)
7. Top – Up Loan 13
8. Cross Sell to Auto loans
9. No Income Proof Loan (NIP)
Products – LAP / OD
Loan Against Property (LAP)
Property OD (Residential / Commercial)
Income Surrogate Banking Product
Lease Rental Discounting (LRD)
New product introduced on June 4, 2007
Lap on Land
Features :1. There must be a plot number. The plot must be properly demarcated by fencing or boundary wall.
2. There must be change in transaction within last 10 years. The title must be changed.
3. Land usage must be residential. Commercial, agricultural or industrialized land is not considered.
4. It should be DLA or Municipal approved.
5. The loan amount can be between 7- 50 lakhs Low Loan To Value i.e., 16.25 % ROI on 30 % LTV 16.50 % ROI on 35 % LTV
6. Minimum Plot Area must be 800 square feet Maximum can be 10000 square feet.
7. Tenure for repaying the loan would be 10 years.
8. Case can be made on Income Basis or Repayment Track Record (RTR) of all kinds of loans i.e., auto loans, medical equipment loans, personal loans.
9. LAP on Land can be given to all kinds of customers – Salaried, Self Employed Non Professional (SENP) & Self employed Professional (SEP).
Home Loans : Key Features
Purpose : To purchase, construct or extend new or existing flat / house Loan to value (LTV) ratio is 85 %. This includes stamp duty, registration charges and amenities. Amenities on Stamp paper : We can add Maximum of 20% of Agreement value. Maximum Tenor : 20 years (15 years for SENP retail & non – retail) Only for first sale builder properties. Loan amount : From Rs.2 lac to Rs. 3 Crore Validity of Loan Approvals : 6 months from the date of Sanction Letter.
In case of Resale : A) If COP = MV, Loan Amount = 85% of COP (LTV 85%) B) If COP > MV, Loan Amount = 85% of MV (LTV 85%) Example : COP : Rs.25 Lacs & MV : Rs.20 lacs Loan Amount : Rs.17 lacs C) If COP < MV, Loan Amount = 80% of MV subject to 100% of COP Example : COP : Rs.20 lacs & MV : Rs.25 lacs Loan Amount : Rs.20 lacs
LTV Norms > Rs.100 lacs Cap based on COP For Property value > Rs.100 lacs & <=Rs.200 lacs, the max LTV will be 80 %. Property value > Rs.200 lacs, the max LTV will be 75%
Cap based on MV For Property value > Rs.100 lacs & <= Rs.200 lacs, the max LTV will be 75% Property value > Rs.200 lacs, the max LTV will be 70%
Also Valuation will be mandatory for all cases > Rs. 100 lacs.
MV Lending LTV Norms
MV Lending To bridge customers requirements between circle rates specified by sub-registrar and transaction value. For example transaction in certain sectors are as given below
Location Delhi Banglore
% of MV 25 – 40 % 60 – 65 %
LTV Based on the lower of the two : In case of purchase in ready / resale cases 1.Lower of the TWO 1. 80 % of the Market Valuation if the property is valued up to Rs.50 lacs 65 % of the Market Valuation if the property is valued at more than Rs.50 lacs (Lower of 2 valuations done will determine market valuation). 2.100 % of agreement value / sale deed (with stamp duty paid) + stamp duty + registration + society transfer charges + state electricity board connection charges + amenities agreement (without stamp duty )
The cost of Amenities should not exceed 200 % of (Agreement Value / Sale Deed + Stamp Duty + Registration charges).
If Amenities Agreement is not on stamp paper, then that component of the loan amount would be done as Top Up loan with norms of Home Loans.
However, the overall restriction of 80 % / 65 % or 100 %, as mentioned, would apply.
03 Years Fixed – Smart Fixed
03 Years fixed gives option to customer to look at fixed rate for the first 03 years and subsequently the product moves into floating reference rates Fixed from the first date of disbursement based on weighted average rate of interst. At the end of 03 years it will move to FRR on immediate reset date which could be 03 years to 03 years and 03 months.
Products : Home Loan & BT + Top-up & MV lending possible Margins for FRR set at the time of Sanction.
Part Fixed & Part Floating
Customer can opt for combination of them. 02 separate tranches would be given on the same date. Amount under each category decided at the time of sanction itsef. Combination of two should be minimum of Rs.1 lac and each tranch should be of Rs.50000/ Products : HL / LL / NRI / OPL / HIL / LAP (R&C)
Not applicable to MV Lending or all loans with two tranches.
Process 02 separate application forms 02 LAN numbers for the loans Common Sanction Letter Common HLD Common I/T certificate on cross linking of files. Prepayment on each tranche possible but foreclosure on completion of both the loans.
Eligibility Based on the combination of the loan EMI for the other loan would be considered as FOIR for calculation purpose.
Fixed with MMC A new product variant for Home Loans with a variation in Fixed rate of interest with Money Market Conditions (Fixed MMC) Salient features : Fixed MMC rates can be offered for Home Loans & Balance Transfer of Home Loans only. Fixed MMC rates can be offered only to Resident Indians. Thus, Home Loans with Fixed MMC rate cannot be offered to NRIs The Fixed MMC rate can be offered only for new sanctions. Conversion from fixed ROI to Fixed MMC rate and vice versa would not be allowed. All Fixed MMC rate loans would be booked under the following scheme Finnone/ APS : a) Individual Home Loan with Fixed MMC b) BT of HL with Fixed MMC New format of the sanction letter for Home loans with Fixed MMC A new Home Loan Document (agreement) with the following mentioned on the top cover “With Money Market Condition Clause for Fixed Rate of Interest.”
EMI Under Construction
Purpose : Commence EMI in under Construction Project.
Target Segment : Home Loans to Resident Indian
Features : Offered to APF Projects. Customers pay EMI from the first disbursement on total sanctioned amount. EMI remains constant with term changing Disbursed amount keeps changing Disbursed amount not more than Sanctioned amount. Subsequent disbursement would be at the end of the month.
EMI Under Construction : Example
Sanctioned amount ROI Tenor EMI 1st Disbursement Reduced Tenure Principal O/s At the end of 03 months 2nd Disbursement after 03 months Balance Tenure
Rs. 10.00 lacs 7.5 % 240 months Rs.8056/Rs.5 lacs 79 months Rs.485114.00 Rs.2 lacs 240 – 3 = 237
O/s principal = Rs. 485114.00 + 200000.00 = 685114/-
EMI Revised Tenure Full & Final after 03 months Balance Principal O/s Revised Tenure Maximum Tenure
Rs.8056.00 124 months 673721 + 300000 = 973721/233 months 240 – 6 = 234
Step – Up Repayment Facility (SURF)
Concept – SURF The tenor is divided in three parts ; viz.
a) Primary b) Secondary c) Tertiary The installments will increase beginning from the least in Primary & the highest in Tertiary. Installment in Primary period to cover interest, in the current rate scenario – Rs.625/-per lacs
Types of SURF Category I Category II
Category I Monthly Income > Rs.25000/Applicant is employee of Select Corporate (i.e., Category 0 and Category 1 worksite list) Should NOT be employee of Pvt. Ltd Companies, Prop. Concerns, Trusts. Should NOT be a Self Employed Non- Professional.
Category II Monthly Income > 15000/Should NOT be employee of Pvt. Ltd Companies, Prop. Concerns, Trusts. Should NOT be a Self Employed Non- Professional
Enhanced Eligibility Opting for SURF could raise the eligibility by up to 30% above the eligibility in a normal repayment pattern. Ex. Term – 20 yrs , ROI – 7.5% , Income pm – 25000/- , Normal eligibility – Rs.17.07 lacs , Enhanced Eligibilty – Rs.22.14 lacs & Increase in Eligibility 30%.
Easy Installments in Primary period, lower strain on cash flows.
Features : SURF Eligible Entities (Only Individuals) a) Salaried b) Self Employed Professional
Eligible not Eligible Products: a) Only Home Loans (Top Ups not permitted) b) BT of Home Loans shall also not be permitted SURF
Term possible – 15-20 years (both terms included) Not Eligible : a) Self Employed Non Professional b) Employees of Pvt. Ltd Companies, Prop. Concerns, Trusts.
Rate of Interest – Only Adjustable Rate Loans Deviations / Re – schedulements a) No Deviations permitted b) No Re – Schedulements permitted.
Documents – SURF Sanction Letter – Automated Sanction Letter capable of generating SURF letter. Agreements a) Normal loan Agreement b) Amendatory Agreement
Income Tax Benefits IT Certificate to show both ; Interest payable & Actual Interest paid. In case if Negative Amortization : a) No IT benefit available on capitalized interest – Sec 24 (b) b) No IT benefit available on re-payment on capitalized interest – sec 80C Part Pre-Payments – Adjustments will be made first towards the capitalized portion.
Land Loans : Key Features
Purpose : To acquire a site / plot of land for residential use
Maximum Tenor : 20 years (15 years for SENP retail & 10 years for SENP non-retail)
LTV Ratio : 85% of the cost, if allotment is directly from Development Authority 75%of the cost, if purchase from Development / Resale / Society
Fee : Same as Home Loan
Amount of Loan : Rs.2 lacs to 50 lacs
In HUB & Spoke Locations
Land Loans + Construction LTV would be 85% of Land + Estimated Construcction Provided land has been purchased in last one year OR 100% of estimated construction based on technical report which is lower.
In Spoke Loactions
Only land loan would not be financed. Land Loan + Construction would be considered. First disbursement would happen only after the construction has reached plinth level.
75% of land cost can be given provided land has been purchased in the last 01 year.
In HUB locations for Land + Construction
Disbursement for land would be done. Case would be Pre EMI In case the applicant avoids construction the scheme ID should be changed To avoid giving I/T benefits certificate on the case
Office Premises Loan : Key Features
Purpose : To purchase / construct office premises
Maximum Tenor : Resident Indian SENP Retail = 15 years.
SENP Non Retail = 10 years.
LTV Ratio : 85% of the cost of property for doctors. 60% of the cost of property for others.
Fee : Processing and Administrative fee of 0.5% each
Amount of Loan : From 2 lacs to 1 crore.
Eligible Entities : Professionally Qualified Self Employed Individuals & only Qualified Chemist NRIs
Other Norms : Minimum 3 years Experience as Practicing Professional Loan available for improvement of office premises
Maximum of 30% of the cost of the property.
LAP / Home Equity Loan
Loan Against Property : Key Features
Purpose : For Marriage, Business, Education, Medical Treatment, Purchase of Property, etc.
Maximum Tenor : 15 years (10 years for SENP)
LTV Ratio : 45% for commercial and 60% for Residential
LTV + FOIR (Non retail) : Subject to maximum of 120% for residential and 105% for commercial with no LTV deviation. FOIR for Salaried : 50% & SENP Retail : 55% Amount of Loan : From Rs. 5 lacs to 100 lacs Eligible Entities : Salaried, SEP & SENP Minimum value of property : Rs. 7 Lacs across all cities. Other norms : Loan can be availed only against the self occupied property.
Balance Transfer : Key Features
Purpose : Take over of housing loans taken from other HFC / Bank at a higher rate than current rate.
Tenor : Maximum term not to exceed as applicable under product category OR Residual age of property as determined by the site engineer
LTV : 85%
Fee : Same as Home Loan
Amount of Loan : Outstanding principal amount of the existing loan + prepayment charges + fee payable to ICICI HFC subject to applicable LTV norm, calculated on the cost of property. Disbursal to be in favor of HFCs / Banks whose loan is being prepaid. Repayment track record for the last twelve months to be verified.
Documents Required : Pre Sanction
Outstanding Principal statement from existing HFC / Bank Declaration-cum-Undertaking of legal documents submitted with earlier HFC / Bank
Legal verification Letter to the builder / society / DA as per letter drafted by ICICI HFC
Documents Required : Pre Disbursal Letter of Authority & Power of Attorney in favor of ICICI representative to collect original docs & mortgage release letter from HFC / Bank. Cases Pending with Sub Registar : BT applications where property title documents are pending will not be accepted.
Documents Required : Post Disbursal Original receipt required from HFC / Bank for the amount disbursed Mortgage release letter & No dues letter required. Original title deeds as per list provided. Acknowledged copy of notice sent by the legal agency of ICICI to the landowner.
BT OF EMPLOYER LOAN WOULD BE RESTRICTED TO CENTRAL % STATE GOVERNMENT.
Top Up Loan
Purpose : To purchase of Consumer Durable, Vehicle, Furnishing of Home, Family Vacation, Daughter’s Marriage, Child’s Education Or any other personal requirement of the borrower. Maximum Tenor : as per individual product norms
Fee : Same as Home Loan
Amount of Loan : Rs.50000 to 20 lacs
Validity of loan approval : 3 months from date of sanction.
Entitled Borrowers : Borrowers for the Top up loan must be the same as the existing ICICI loan
Security of Loan : Extension of mortgage on the property financed. Top Up Loan is offered on following products : Home loan Balance Transfer – Home Loans Balance Transfer – NRP NRP
(Loan available on fully disbursed cases & NIL post disbursement pending documents)
Home Improvement Loan
Purpose : Improvement of residential premises.
Maximum Tenor : 15 years
LTV Ratio : 70% of the estimate subject to 45% of the market valuation of property prior to fianancing
Fee : Same as Home Loan
Amount of Loan : From Rs.1 lac to 50 lacs
Eligible Entities : Salaried SEP SENP
Eligible Improvements : Being completed within 12 months from the date of first disbursement Property has to be occupied by at least 1 applicant to the loan.
Lease Rental Discounting
Purpose : Enable the consumer to raise funds (and increase liquidity) against future expected funds from property leased out by him.
Maximum Tenor : 9 years (subject to balance lease period)
LTV Ratio : 50% of market valuation subject to 85% of the NPV of furure expected rentals discounted at the applicable ROI ( net of TDS)
Eligible Entities : Salaried SEP SENP (Non – Retail)
Amount of Loan : From Rs.10 lacs to 1 crore
No Income Proof Loan
Purpose : To purchase, construct or extend new or existing flat / house
Eligible Entities : Self Employed Individuals only
Fee : Admin fee of 0.5% & proc fee of 0.5%
Amount of Loan : from Rs.2 lac to 50 lacs
LTV Ratio : For loan amount > Rs.25 lacs, LTV 60% of COP or 65% of MV (whichever is lower) For loan amount < Rs.25 lacs,
Method MV (%) COP (%) Documentation :
I 40 75
II 50 70
III 60 65
IV 65 60
Proof of continuity of business – 05 years Bank Statements – 6 months (verification required) a) Current Account b) Savings Account
Out Cheque returns – not more than 06 in 06 months. Stop Payment returns – 02 in least 06 months
Maximum number of transactions 10 per month EMI not to exceed 10% of the average monthly bank credits for the last 06 months
Average balance on 10th, 20th & 30th for last 06 months should be greater than 02 times EMI.
Client / Supplier References -2 Copy of title document RTR of 12 months – if EMI of existing loan is more than 25% of the proposed EMI
OCR : By Cheque prior to disbursement & No PDD No deviations permitted.
Income Surrogate Banking Product
Purpose : Surrogate product for Home Equity Loan Target customers with good banking record.
Lap – Income Surrogate Banking Product 1. Approved Borrower Entities – Resident Indians (SEP & SENP) 2. Loan Amount Min. – Rs.5 lacs Max. – Rs.30 lacs
3. Term – Max.10 years (Term should not exceed property’s residual age) 4. Loan type – Fixed and Floating. 5. Min Property Value – Rs. 15 lacs (as per technical valuation)across all cities. 6. LTV i) ii) Residential property – 35% Commercial property – 25%
7. Bank Statement i) Photocopies of updated bank statements for the last one year – from current a/c of the firm / company. ii) Photocopies of updated bank statements for the last one year – from current a/c / savings a/c of the individual applicants and coapplicants. 8. Client reference required 3 large creditors.
9. Business to have continuity for the last 3 years. 10. Personal discussion is mandatory. 11. CC accounts – EMI to be less than or equal to 10% of the inward flow into the bank a/c in last 6 months. 12. Other accounts – EMI to be less than or equal to 15% of the inward flow into the bank a/c and average balance to be more than 1.5times the EMI in the last 6 months.
Adjustable Rate Home Loan
Purpose : Facility of variable ROI
Eligible Entities : Existing and new customers
Eligible Products : Home loan Land Loan NRI OPL LAP BT Top Up
Max. term of Loan : 20 years for Salaried and SEP 15 years for SENP
Date of change : 1st day of each quarter (as per calendar year)
EMI shall remain constant, except in the following three instances :
1. Negative amortization 2. Term of loan exceeding : 30 yrs for salaried & self employed 20 yrs for SENP 3. Term of loan exceeding : Retirement age for salaried. 65 years for self employed applicants whose income is considered for eligibility.
Switching of Rates Between Switch fees ICICI Bank Portfolio Fixed to fixed Fixed to floating Floating to fixed Floating to floating Change in ROI on account of change in Tenor Fixed to fixed 1.75% 1.75% 1.75% 0.5% 1.75%
Others 1.75% 1.75% 1.75% 1.75% 1.75%
THIRD PARTY PRODUCT
Icici Home Finance – Loan Shield with ICICI Lombard
Loan Shield – For Resident Indian Loan Shield for a period of 05 years. Loan care Insurance Property Insurance offered free – one year in case of commercial property.
Maximum Cover : Rs.1050000 Minimum Age : 20 years Maximum Age : 50 years ( loan cover ends at 55 years) Loan Care is maximum of 05 years Property Insurance : Same Tenure & cover commences after completion of work Feature : Based on Medical declaration no medical check up.
Loan Shield Loan Care Features : Salaried & Self Employed 1. Default due to Death : Principal o/s paid 2. Permanent disability due to accident : Principal o/s repaid 3. Critical illness leading to hospitalization and loss of income In case of Salaried only 12 EMIs would be covered
Unemployment due to retrenchment 1. Closure of unit due to financial health or M&A 2. Closure due to action by Public Authority.
3. Termination from job due to ill health. Any illness pre-existing or repoted within 90 days or loss of job within 90 days not covered. Salaried employees would be paid maximum of 03 monthly EMIs in case of default. Policy ends on attaining at the age of 55 years Policy ends with closure of loan account. No refund of premium on part prepayment Part Premium refund in case of full closure Claim settlement in 21 days.
Home Assure – Prudential (Group Policy)
Customer Segment : Individuals opting for Single premium Age Group : 18 to 60 years ( Maximum on attaining 70 yrs) Sum Assured : Rs. 25000/-To Home Loan scheme Product Feature No medical examination upto Rs.15 lakhs Death Cover : principal o/s as per the sanction letter Part / Under Construction : Cover can take 0/1/2 + tenure of the loan.
Joint Cover Possible provided both are earning Cover would cease on Full closure or BT Surrender Value : 70% of single Premium ( Balance Term / Policy Term) Exclusions : No claim within 45 days No claim due to suicide within 01 year
OBJECTIVES AND RATIONALE OF THE PROJECT
Main objective: To find out the utility of Home Loans in general public and analyze the number of customers applying for Home Loans in ICICI. To learn the process of Home Loans.
The basic necessity of general public is food, clothing and SHELTER. So , for the fulfillment of the last need ICICI has introduced many products according to the status of the applicant.
Economic Growth of the country is predicted by its Infrastructure and Real Estate. Therefore, ICICI has made easy by granting loans by easy methods and normal rates.
Home loans are of big amounts therefore, it comprises of many important documents and deeds which have to be studied with due importance.
Government is concentrating on one important aspect that every person should have his/ her own house through home loans which facilitates deduction in Income Tax.
All the NBFCs are interested in granting Home Loans because it is of large amount .
It is the only type of loan which is coordinated and continued from the time of money lenders to NBFCs.
Personal Objective :
I choose this project in order to have the detailed study of the topic Home Loans as it comprises of many formalities and legal deeds.
To have the practical knowledge because in future every second person will be in need of Home Loans
ICICI Bank specializes in Home Loans so to gain knowledge regarding career prospects.
It helps in calculating Income and eligibility of the customer, Study of ITRs, Legal and Technical study of any property and even profile check.
REVIEW OF LITERATURE THE BUSINESS PROCESS – THE ICICI WAY
ICICI HFC currently functions through four sales channels : a) DMA Network b) Counselor Teams c) Relationship Managers d) ICICI bank Branches All channels function independently of each other Processing and appraisals are done in house and on-site to reduce TAT’s
Role of the DMA / DME / COUNSELOR
The face of ICICI Bank Home Loans Representing everything that ICICI HFC promises a) Superior service b) Excellent products c) End to end solutions The person who has to ensure that we fulfill every promise that we make to the customer A consultant and guide to the customer
Risk Containment Unit (RCU) Process
Purpose – Control frauds entering the system
a) Pre-Sanction Stage b) Pre-Disbursement Stage Pre sanction stage verifies files based on triggers. The files are either
a) Screened – No triggers found. Allowing credit process to continue b) Sampled – Implying verification required with source of document c) Credit Referred – Based on Credit Manager request Pre – Disbursement Stage verifies property document.
Field Investigation (FI) Process
Purpose – Collection process of ensuring customer verification
a) Residence FI b) Employment FI c) Tele FI of both residence and office Property verification
This FI Shoot is done of all the applicants and co-applicants. The office FI is done of all the co applicants who’s income is considered.
b) NDC Check c) Data Entry in Finnone d) Storage of sanctioned files Disbursement Process
a) NDC Check b) Date Entry in Finnone c) Preparation of Cheque d) Storage of Dockets
Normally, it would take 4-7 days for the sanction process from the date of receipt of all the documents at IHFC The customer calls the bank Bank’s representative visits the customer and explains the loan product Now customer provides the bank with Income and Personal documents as listed in the brochure Again the representative visits the customer to validate information Documents are credit appraised and decision taken on the sanction of the loan Bank delivers the offer letter along with a list of legal documents required.
DMA/COUNSELLOR BSM RO FIRE FI
RECEIVES FI BCM
Normally, it would take 4-7 days for the disbursement process from the date of receipt of all the documents at IHFC The customer calls the bank for disbursement Bank’s representative visits the customer and collects the Legal Documents. Loan Documents and PDC’s from the customer. An IHFC lawyer vets the legal documents. An IHFC Site Engineer visits the property to verify stage of construction. Disbursement cheque is prepared. The disbursement cheque is delivered to the customer.
BCM Fires and Receive Legal and Technical
Firstly, starts the work of Relationship Officer Purpose : To provide Single Point contact to the customer and handhold him through the process of Enrolment, Sanction and Disbursement. Enrolment Ensure entry of new DME leads and updation of existing leads in CMS Make Welcome Call to customers for all new logins Ensure Welcome Letter is sent to all new customers at the time of login.
Sanction Resolve with customer all enquiries raised by CPA / BCM on the Sanction file Make Sanction Call to all customersand inform them regarding all disbursement documents required and take DID. Attach Annexure containing list of disbursement documents with all Sancction Letters
Disbursement Ask the customer regarding Express Disbursement during Welcome Call Inform customer about the pending documents, if any, as per the legal report and set DME appointment. Make a Disbursement call to customer to inform him that the disbursement cheque is ready Introduce Call Centre to the customer during the disbursement call
Next is Branch Credit Manager
Purpose : To provide credit decision for snction and disbursement in order that the
commitment to the customer on turnaround time is fulfilled Sanction Check the Sanction file for Credit compliance and eligibility norms and authorize sanction Coordinate with the higher authority for the cases that require approval
Disbursement Scrutinize complete docket and DM and authorize disbursement Ensure completion and clearing of dockets put on hold by branch operations Coordinate with the outsourced agency for collection of PDDs Impart training to Back office and DMEs regarding policy and process changes
What is Contact Management System ?
It is a Lead Management System. It appointments the Scheduler. Records all touch points with customer. Acts as a reminder for all follow –ups.
Flowchart Add Contact
Leads With DMA Fix Appointment Remainder for Customer Update Diary Take a Print of Schedule NO DME Meets The Customer YES NO Customer Interested YES Close DME Collects Documents and Returns the DSR to the Back Office NO
All Documents Collected YES Sanction Process
Benefits of CMS Availability of Information Structured Planning Ensures no loss of leads Online feedback to Call Center and Marketing Manager Increase in Productivity Better service to the customer.
Introduction to Credit Why is Credit essential ? It is important to evaluate cases for credit so as to have a quality portfolio, remove frauds, have control checks to see the performance of the portfolio
Whom do we want to fund ? Anyone who will Repay all the installments Repay installments on time
Things to look at in credit
Ability to Pay
Intention to Pay
How do we judge it ? Income received by the customer Disposable Income Other sources of income Possibility of Cash income Petrol pump owners, doctors, etc.
Industry Trends Background of Individual Previous Repayments a) Car loans b) Housing loans c) Credit cards loans
d) Cellular repayments
Income can always be window dressed
Income Document Analysis
In case of salaried look at Fixed & Variable Income Compare Gross Income and Net Income Savings in Social Security Funds
b) Mandatory contribution c) Additional Contribution d) Withdrawals in Social Security Funds Contribution towards other savings Deduction or payment of all obligations Look at Form – 16 for Annual benefits & any obligations too.
In case of Self Employed / Non Proffesional Comprehensive look at ITRs of last 3 years Computation of Income Balance Sheet and P& L certified by C.A
Stability of Income In case of Salaried Look at the Organization employed with The Industry in which it operates Skill set and Educational Qualification No. of years in the Organization / Industry
In case of Self Employed Family business or start-up Business volume vis a vis Industry Standard Understanding of industry structure/ Forces operating
Health of Bank Statement Verification of Bank Statement In salary case, number of credits to be checked – Fixed & Variable In business case, check the average balance for liquidity Large credit or debit entries Recurring debits on account of loan repayment
b) Inward Cheque bounces c) Outward Cheque bounces d) Verify with debtors or creditors list to know e) The impact on business Stop Payment Instruction Minimum Balance charges
Family Background Family No. of dependents Age of dependents to understand the expenses Additional earnings of family members – cash flow Dependence of parents / family members staying in hometown Any ancestral or self owned property Family dependent on salary income or diversified income i.e., rental, agriculture, business, small savings Family reference / Business reference As per the norms maximum should be 5 Applicants Lifestyles – match between Income & Savings & Expenses Habits like excessive drinking – Reference check Family members with medical history
b) Claims made under various Income Tax Benefit c) Any banking transaction showing payments d) Information provided by FOS / FI / Personal Visit Appreciation of Insurance
a) Family medical cover is a good indication b) Life Insurance – Planning for the Future of the family
Geographical Restrictions Customer Residence / Property not in Negative Area. Customer does not belong to Negative Profile category. Customer Residence / Property not beyond Geographical limits. In case customer working outside Geo limit Property to be purchased should be within Goe limits Immediate family member to be within Geo limit & to be taken as co- applicant PDC to be issued from Bank Account to be in Geo limit Waiver of FI subject to positive office tele – check & residence FI of family member (within Geo limit
Customer Profile Where applicant and co-applicants income are combined, the minimum income per applicant should be Rs.4000/- pm Work site is further classified as : Category 0 & Category 1 Employees working with Trust should be approved & noted by the Policy & Risk. Employees working with Private Ltd.Companies AGE a) Minimum Age – 21 years b) Maximum Age – 65 years OR retirement, whichever is Earlier.(The maximum age at the time of completion of loan) There will be cases where the co-applicant who is the owner of the property does not fit into the above categories. In these situations the age criteria is relaxed as follows: a) Min Age – 18 years (At Loan origination ) b) Max Age – 70 years at application or 80 yrs (at loan maturity )
Income not below 7K in other cities. Income not below 9K in Metro town. (Banglore, Delhi, Chennai, Mumbai)
Age Proof Passport Driving license Life Insurance Policy Birth Certificate Election ID School leaving certificate Employee ID (only for PSU / Govt.employees) PAN Card SSC / HSC Admit Card SSC / HSC Mark Sheet
School / College passing Certificate (printed format with personal details of the applicant handwritten are acceptable)
Salary slip (if date of birth is mentioned) Domicile certificate
Age proof is waived for all applicants whose income is not considered for eligibility. However, age proof is mandatory for applicants below 20 years age & above 65 years, even if his/her income is not considered for eligibility.
Negative Profile Daily wage laborers / Mathadi Workers Drivers and conductors of SRTC/ Taxi drivers/ Auto Rickshaw Drivers/ Commercial Vehicles Drivers HUF Anti Social Elements Politicians Mine and Quarry workers Firma engaged in parcel movement Plantation / Time Share Companies Employees of Chit fund/ Stock Broking/ Investment Companies Class 4 employees
Garment Exporters Employees of BIFR Companies Watchmen Security Services- Companies and their Employees Stock Brokers Real estate agents Tour Operators Cable Operators Employees of NBFC’s below AA rating Film stars Employees of Dot Com Companies Bar Owners Builders
Additional Documentation for Specific Cases Cash salary – One Additional Proof required Form 16/ ITR/ PF Statement / Appointment Letter / Increment Letter Job confirmation proof for applicants less than 23 years If Existing Loans are not being considered – proof for the same. Annual benefits - Form 16 / Appointment Letter / Increment Letter / Employer certificate.
Documents Required Salaried Application Form with photo 6 months Bank statements ( 3 months for work site ) Not more than 02 or 01 cheque bounces in case of normal and worksite cases respectively KYC Documentation (Address / Identity / Signature) Age Proof Latest Salary Slip / Certificate – 4 salary slips for variable salary Form16 Processing Fee Cheque
Mode of Repayment EMI Post Dated Cheques Auto Debit ECS Deduction at Source (only for salaried)
Pre EMI Post Dated Cheques Auto Debit
Payment Cycle 1st and 10th of every month
Now the work starts in Operations Department:
The file logins from the Credit Department to Operations Department with 2 types of documents a) Customer related documents b) Bank related Documents / Mandatory Documents
Customer Documents consist of his Bank Statements, latest ITRs, Financial Statements, PAN No., Id Proof, DOB Proof, etc.
Bank related documents are a) Application form – In Application Form all compulsory fields should be filled up by the customer with no overwriting. All the data entry should be done by the DEO. b) Dedup – It is a software which has all the past data of all the customers who have applied for home loans previously which helps trace any defaulter. c) FI / TVR – This is done by the bank to verify the residence and telephone number of the applicant in order to avoid any fraud beforehand.
NDC is done by the DEO as per the NDC checklist. Final NDC is done by CAM If there is any discrepancy the file is sent to Credit Department for re-credit with reasons of hold.
Publishing of hold cases is done in MIS at the end of every day. If the file is clear and there is no discrepancy, then the data is entered in finnone by DEO.(Finnone is a software based on oracle which is the master of storing all the entries and transactions done on daily bases)
Now, CAM authorizes the transaction i.e., Maker – Checker which means the CAM will check the transactions and authorize them finally.
Finally when the case is clear, a Loan Account Number (LAN) is generated which is the primary key to identify the case for the bank.
Now, at the end of the day the files are dispatched to Regional Operations.
After sales services performed by Operations Department: Request of Statement of Accounts. Request for Repayment Schedule. Swap of Cheques. Conversion (condition change in agreement) Foreclosure Part Payment 71
NOC + Document Collection
At the time of Sanction: When the file reaches the Regional Operations it is login at two places: a) Processing Cell b) Storage Cell In processing cell a) Firstly, the processing cheque is pulled out. b) Banking of Cheque is done c) Finally the cheque is released. If the cheque is clear, entry is done in the account otherwise, the case is rejected.
In Storage Cell, the papers are divided in two types a) Customer papers which are retained till the term of loan is completed. b) Bank papers are shedded after some time i.e.,3 years or so.
Now the sanction is clear and processing fee is released.
At the time of Disbursement: The docket is login from Credit to Operations Department. Docket is an important envelop containing different papers.
Types of Disbursement: a) Full & Final Disbursement - Eg. Applicant sanctioned loan of amount 5
lacs and disbursement is done as and when the PF cheque is released. b) First & Subsequent Disbursement – Eg. Applicant first Sanctions for purchase and then subsequently for construction so, the amount is granted in installments. c) Enhancement / Reduction – Eg. Applicant if in future decides to increase or decrease the amount of loan sanctioned, then again the file of increased amount has to be sanctioned. And in case of reduction the amount id directly deducted. d) Back to Back Disbursement – Eg. It is done in the case of High Net Individual (HNI) who takes loan more than 20 lacs. In this type of Disbursement the file and docket both are done side by side.
Contents of Docket : Loan Agreement – There are 2 copies of loan agreement, one for the abnk and the second for the customer (including the stamp papers with stamp duty as per respective State Stamp Act. Disbursement Memo – It captures the entry of all financial details & entry is done in Finnone. Legal & Technical Deviation Sheet – This is signed by the person who takes all the liabilities regarding the loan granted.
Cheque Submission Form – It is for the acknowledgment taken from the customer as per how many cheques have been issued and received and the entries are done so as to avoid any future misunderstanding between the bank and the customer.
Disbursement Request Form – It is necessary as to know on whose name the loan is applied and granted. And where to pay.
Pop Sheet – It contains all the contents of the docket to avoid misplacement of any important paper. And entry is done again.
Over The Counter Sheet (OTC) – It is to exchange the deed with the cheque. PDC Pouch / Pre EMI Pouch – It contains all the entries of cheque details. Cheque Acknowlegement – Its purpose is to take cheque acknowledgement from the customers.
Legal Report – It consists of Non Encumbrance Certificate (NEC) + record of 13 years of the property which is mortgaged.
Technical Report – It shows the valuation of the property and the estimate taken by the architecture.
Punching Process: Financial details are entered by Disbursement Memo. Property Details are entered with the help of Legal Report. Technical Details by Technical Report, And all other contents are checked, verified and entered with the help of Pop Sheet. Finally the cheque is cut and directly handover to the customer or through Over
the counter (OTC) And the Docket is dispatched to Regional Operations (RO) / Central Operations (CO).
Post Disbursal Documents: Banking of Cheques Realization of Cheques.
Types of Appraisals
There are basic two types of appraisals done to investigate about the cases that are logged into the bank:
Construction Structure Load Bearing Wall Structure Entire Load on Walls Cost of Construction Lower Prevalent in Small Towns
RCC Frame Structure – Reinforced Concrete Cement Entire Load on Columns and Beams Construction of Commercial and Residential Complex High Usage of Equipment
Mixed Structure An Overview
Methods of Valuation Approach for Valuation 76
Market Income Cost
Methods of Valuation Method of Comparison Income Approach to Valuation Summation or Cost Method Residual Method
Method of Comparison Property Rate is worked out on other similar properties that have been sold in near past. Circle Rates are compared. Broker Feedback is compared. No Standard Formula to work out value of property. Factors vary from locality to locality.
Things to Observe while visiting a site: Distance from Bus Stop and Railway Station Accessibility of Site, Infrastructure Facility Availability of Municipal Transport. Development of Surrounding Area. Building wise details of Construction. Look out for Deviations. Check Quality of Construction & Structural soundness. Verify Amenities & Assess their True Value through Materials at site.
How Do We Fund ? Structure Base a) Load Bearing or RCC b) Bungalow or Flat Builder a) Track Record b) Projects Completed c) Category A,B,C (Matrix) Lending a) Stage of Construction b) Cost Involved c) Security 78
Adherence to Process
Technical Executive Check on the progress of the work. Check on activity levels – on or Not Arrive at cost incurred by Seeing Completed Structures. Amenities in and around the Site. Quality of Construction Accessibility Negative Area Plan Validation a) Check Frauds b) Set Back Check – measure from Plinth (Has to measure) c) Check whether it Confirm Building Plans Authentic Valuation of the property (to be dealt in details) What is to be checked at the Site and From whom Building Rules – Critical Rules (please provide hand outs of the critical building rules)
APF Process Revised APF Process Sourcing DMA / BSM Technical Manager Fire Legal Fire Technical
APF Process – Advantages
Entire legal and technical due diligence is done in one single stroke. Monitoring is on project wise unlike unit wise. It is a win win situation for the developer – customer – bank. Retrieval of project details is easy. Total Value of the property and amount of constructed area coming up in the market is known.
Market Share of ICICI and project wise market share can be evaluated. Tracking of property prices becomes easier Exposure level per project can be evaluated. Double funding on the project can be reduced Better control Better TAT Generating huge database of property rates across India.
Turn Around Time / Amenities Valuation
For Normal Technical Report – 24 hours For APF reports – 05 days Communication should be perfect, in case plans not received. No site visits without building plans No amenities valuation unless actually verified at the site. Valuation not to include Stamp Duty and Registration Charges or Water and Electricity Charges.
Appraisal for Home Finance
Appraisal Process for Home Finance has two distinct stages: Sanction Stage Relates to Credit Appraisal for the individuals.
Disbursement Stage Legal appraisal of the property financed
Technical appraisal of the property financed.
Transfer of Property Living person conveys his interest , right or title to one or more person(s) Person includes Individual, Association of persons, Partnership, Company or Trust. Transfer of property must be done by a written registered document. Sale for a value exceeding Rs.100/- requires registration.
Transfer of Property may happen by Inheritance Gift Government Allotment Purchase Exchange Partition Release
Transfer of Tiltle Deed Sale Deed
Agreement for Sale Allotment letter Lease deed Gift Deed Probated Will Develop Agreement Deed of Exchange Deed of partition Release Deed
Concept of Contract There has to be an offer and acceptance Creation of an agreement To be valid contract there should be NO coercion, undue influence, fraud, misrepresentation or mistake.
Competence to Contract The person should not be a minor. He should be of sound mind. Minor to be represented by Guardian and can transfer property with the permission of Court.
Property Documentation Classification into two parts: 1. Types of Transactions 2. Classification of Documents
Transaction type Builder Society Development Boards / Authorities Self Construction Resale Transaction
Classification of Documents Land Related Documents Government Land Records Plans and Permissions Individual Title Documents
Situation : Purchase from Builder Land Related Documents Sale Deed / Partnership Deed / Development Agreement, POA Government Land Records Extracts from Registrars office, Mutation Entries Plans And Permissions Approved Plans and Permission, ULCA permission, Tax receipts, Commencement certificate, Occupation certificate, Land use certificate, Building permission. Individual Title Documents Agreement for Sale, RR, Letter to Sub Registrar, NOC to mortgage, OCR
Situation : Allotment from Development Authority Land Related Documents NA Government Land Records NA Plans & Permission NA Individual Title Documents Allotment Letter, OCR, NOC / PTM from DA, Unit Layout, Sale Deed / Lease Deed
Situation : Purchase from Society Land Related Documents Sale / Lease Deed in favor of Society, Bye Laws, Society Registration Certificate. Government Land Records Extracts from Registrars office Mutation Entries Plans & Permission Approved plans, NA permission, ULCA permission, Tax Receipts, CC, OC, Land use certificate, Building permission. Individual Title Documents Allotment Letter, agreement for Sale, RR, Letter to Sub registrar, NOC from Society, OCR, Share Certificate.
Situation : Self Construction Land Related Documents Government Land Records Plans & Permission
Individual Title Documents
Same as individual title documents Extracts from Registrars office Mutation Entries Approved plans, NA permission, ULCA permission, Tax Receipts, Commencement Certificate, Occupation Certificate, Land use certificate, Building permission, Possession Certificate, Location Certificate. Sale Deed of the land, RR, Letter to Sub registrar previous title documents, Land Layout.
Situation : Purchase on Resale Land Related Documents As per the applicable transaction Government Land Records Extracts from Registrars office Mutation Entries Plans & Permission As per the applicable transaction Individual Title Documents Sale Deed , RR, Letter to the Sub registrar, Prior Deeds, NOC to Mortgage, OCR, Share Certificate.
Know Your Customer (KYC) compliance (A) The matrix of the documents that are required to be collected for resident
individual borrowers is as below, any one document from each of the document category would be required : Document Category Residence Address Proof Salaried SEP & SENP Passport Passport Driving license Driving license Election Id card Election Id card Utility bill (not more than 3 Utility bill (not more than months old) 3 months old) Latest (not more than 3 Latest (not more than 3 months old)statement of months old)statement of account / passbook account / passbook maintained with any maintained with any scheduled bank, duly scheduled bank, duly certified by the bank certified by the bank confirming the address confirming the address Letter from the existing Letter from the existing Banker (scheduled Banker (scheduled commercial bank) in commercial bank) in original verifying the name original verifying the and address on the bank’s name and address on the letterhead. bank’s letterhead. Copy of registered lease / Copy of registered lease / leave and license leave and license agreement which are not agreement which are not expired along with the expired along with the utility bill in the name of utility bill in the name of the landlord / owner the landlord / owner confirming address. confirming address. Residential Certificate Residential Certificate issued by Municipal issued by Municipal corporation / local self corporation / local self government bodies government bodies confirming address. confirming address. Latest premium receipt of Latest premium receipt of general/ life insurance general/ life insurance company (not more than 12 company (not more than months old in case of 12 months old in case of annual premium receipt) annual premium receipt) True Copy of Gas True Copy of Gas 88
connection book. Certificate issued by Ward Officer maintaining election roll certifying address of the applicant. Letter from employer certifying residential address. Name and Designation of the issuing authority must be clearly mentioned.
connection book. Certificate issued by Ward Officer maintaining election roll certifying address of the applicant.
@ The passport $ driving license as above should be current i.e., the same should not be expired. Clarification : A single document can be accepted provided it serves the requirement for multiple proofs and the current residential address is same as on the proof submitted for individuals. Thus, the preferred document for the Photo Id, Residence Address & Age Proofs is Passport / Election Id / Driving License. For reference the list of documents accepted as Age Proof is given below Age Proof Salaried SEP SENP Passport Passport Passport Driving license Driving license Driving license Election ID Election ID Election ID PAN Card PAN Card PAN Card Life Insurance Life Insurance Life Insurance Policy Policy Policy Birth Certificate Birth Certificate Birth Certificate School leaving School leaving School leaving certificate certificate certificate Employee Id Employee Id Employee Id (only for PSU / (only for PSU / (only for PSU / Govt. employees Govt. employees Govt. employees SSC / HSC Admit SSC / HSC Admit SSC / HSC Admit Card Card Card SSC / HSC Mark SSC / HSC Mark SSC / HSC Mark Sheet Sheet Sheet School / college School / college School / college passing certificate passing certificate passing certificate (Printed format with (Printed format with (Printed format with
personal details of the applicant handwritten are acceptable) Salary Slip (if date of birth is mentioned) Domicile certificate Ration Card
personal details of the applicant handwritten are acceptable) Salary Slip (if date of birth is mentioned) Domicile certificate Ration Card
personal details of the applicant handwritten are acceptable) Salary Slip (if date of birth is mentioned) Domicile certificate Ration Card
(B) Documents required for individual NRI / PIO borrowers Document category Identity Proof In case the customer is a NRI – a. Photocopy of the relevant pages of the passport where the customer’s name, address, date of birth, date & place of issue, expiry date, photograph, signature & stamp regarding stay outside India appear. b. Photocopy of valid work permit / employment visa. In case of expired visas, duly acknowledged petitions made to the Visa Authorities for renewal of Visas will be accepted as a valid document. In case the customer is a PIO – a. Copy of the relevant pages of his current passport. b. Copy of his PIO card Or Copy of past Indian passport of self / parent / grand-parent along with a self declaration as ICICI format duly notarized and stamped for requisite value. Adress Proof A copy of at least one of the following Address proog outside or within India : a. Utility Bill b. Driving license c. Residential Permit (Government Issued Identity Card) d. Credit Card Bills e. Rent Receipt f. Overseas / Indian bank Statement 90
The address proof must match with the communication address mentioned on the application form.
(C) Documents required for non – individual borrowers : Document category ID proof Partnership Firm – Partnership Deed Company – Articles of Association, Memorandum of Association, Certificate of Incorporation. Office Address Proof Any one of the following documents: Latest (not more than 3 months old) Utility Bill like Telephone Bill, Electricity Bill confirming address. Letter from the existing Banker (scheduled commercial bank) in original. Existing banker must verify the name and address of the entity on the bank’s letterhead Latest (not more than 3 months old) statement of account / passbook maintained with any scheduled commercial bank, duly certified by the bank confirming the address. Copy of registered lease / leave and license agreement which are not expired along with the utility bill in the name of the landlord / owner confirming address. Certificate issued by Municipal Corporation / local self government bodies confirming address. Latest available Income Tax Assessment order confirming address. Latest available Wealth tax Assessment order confirming address. Sales Tax registration certificate confirming address. Valid Shops and Establishment Certificate confirming address. Factory registration certificate confirming address. Latest Premium receipt of general / life insurance company (not more than 12 months old in case of annual premium receipt) In case of non – individual applicants, KYC will also be required for the partners / directors / promoters who would be required as the co – applicants and also all authorized signatories.
Repayment Track Record Based lending
Auto loans Introduction of RTR based product Capitalize on Repayment History of applicant Focused on Auto Loan Customers Auto Loan Customers of a) ICICI Bank b) Other lenders Product Highlights Opportunities to give home loans to approved list of auto loan customers Should have serviced for a minimum period of 12 months Or RTR should not have been closed before 12 months back Product can be offered for a) Home loans b) Home premises only for doctors c) HL for SEP & SENP Minimum – Maximum Loan : Rs.5 – Rs.25 lacs Product Features RTR of commercial vehicles not acceptable a) Scorpio / Qualis b) Sumo / Tata Indicab Multiple lending on same RTR not acceptable Lending to Directors / Partners a) Based on RTR of the firm / Pvt Ltd. company b) Director / Partner > 76% should come as Co-applicant / Guarantor c) Stake to be verified by CA / CS or Returns of ROC Loan To Value as per product norms All other norms as per the product category Customer Segment Resident Indian 1. Salaried 2. Self Employed Professionals 3. Self Employed Non Professional Transporters / Taxi fleet Operators Not acceptable
Self Employed Professional / Non Profesional
Already having Auto Loans with ICICI Bank and other Institutions
Product Working Eligibility 1. Minimum Seasoning 2. Seasoning >12 months >18 months Parameters 1. EMI in arrears (current) 2. Defaults RTR Health For 12 months RTR For 24 months RTR For 36 months RTR Loan Amount based on RTR working Loan Amount in lacs Example 1 Mr. Rakesh has Accent loan paying EMI Loan Amount in lacs Auto loan EMI *1.25/ EMI factor per lac for the loan tenure Rs.15000/15000*1.25 / 927 = Rs.20.22 lacs 12 months EMI Multiplier 1 times of the current EMI for Auto loan 1.25 times of the current EMI for Auto loan Nil Peak not more than 30 days 0 Cheque bounces in 12 months Maximum 02 cheque bounces Maximum 03 cheque bounces
PROCESS OF RTR
Completely filled in Home Loan form. Bank statement considered for RTR. Repayment Track for the applicable repayment period. Age Proof / Signature Proof Processing Fee Cheque Proof of existence in case of SEP / SENP Field Investigation Office address proof.
LAP: 03 years continuity of business Proof of Existence Client Reference – 02 large suppliers / customers.
PROCESS Waiver Income Documents – Salary Slip, cash salary, second income proof / annual benefits. Form No. 16 Job confirmation proof. Income Proof for SEP / SENP.
Research Design: The Research Design can be grouped under 2 sectors i.e., Primary source and secondary sources. Research Design
Interviews with customers / DMAs Questionnaire
Websites and Intranet of ICICI Bank Ltd.
Other than these primary and secondary sources the study of various cases of the applicants by going through the files guided to make an analysis and findings regarding the status of Home Loans in the current scenario. Even by assisting the Credit Processing Analyst, the analysis and findings were approved by them. Sample Design: The data collected from the questionnaire is of sample size 40. The questionnaires have been filled by the customers through Direct Marketing Agencies of ICICI Bank Ltd. and their Direct Sales Agent. The questionnaires were distributed equally among 4 DMAs equally and the response collected through them was of great use.
Research Tools and Questionnaire:
QUESTIONAIRE: 1. NAME OF THE APPLICANT: 2. PROFESSION: 3. LOAN AMOUNT: 4. TENURE: 5. PRODUCT APPLIED FOR: 6. MODES OF PAYMENT: (a) ECS (b) PDCs (c) DAS 7. PROPERTY MORTGAGED: 8. ANY OTHER LOAN TAKEN ON SAME PROPERTY: 9. PREFFERED BANK FOR HOME LOANS: (a) ICICI (b) HDFC (c) SBI (d) PNB (e) Allahabad Bank 10. LOAN TAKEN FROM ANY OTHER BANK, IF YES WHICH BANK AND FOR WHAT PURPOSE: 11. SOURCES OF INFORMATION FOR THE VARIOUS HOME LOANS PLANS: (a) NEWSPAPER (b) BANK (c) DIRECT MARKETING AGENCY / DSA 12. ARE U SATISFIED WITH THE SERVICES PROVIDED BY ICICI? (a) YES (b) NO AGE:
(e) Any other
In last 10 years the rate of growth in the number of applicants have been at a faster pace because the individuals have vast knowledge about the benefits of Home Loans. Year No. of Applicants 2002-03 7,73,562 2003-04 9,65,291 2004-05 13,42,097 2005-06 15,27,945 2006-07 17,95,048 2007-08 19,84,164 (These figures are of a particular state)
Secondly, the applicants applying for Home Loans were of young age as compared to past 10 years. Then the applicants ranging above 45 years were more in number applying but now there are applicants of even 25-30 years. The tenure to repay the loan has also decreased because of the increase in Income Obligation ratio. But since last 1-2 years there is a stable percentage of individuals applying for it because of the increase in the rate of interest and strict norms of RBI. They are as follows: a) Rate of Interest will be less for people in minority. b) Applicants applying for more than 50 lacs who are High Net Individuals (HNI) are provided with some percentage of rebate. c) Applicants taking loan for the second time for Home loans are under strict supervision and verification. This is done because the customers take loans for investing money by taking HL and enjoying the redemption and deductions. Bank has even introduced Know Your Customer (KYC) documents which constitutes of all the personal and professional details of the applicants and the co-applicants applying for home loans which helps the bank to get the information about the customers and judge the purpose of applying for HL.
FIVE FORCES OF PORTER’S MODEL OF ICICI
BARRIERS TO ENTRY
THREAT OF SUBSTITUES
DEGREE OF RIVALRY
Increased Dependence on IPOs There is a growing dependence of corporates on broking houses with the rising number of IPO’s coming to the market.
Lack of Expertise Curtails Bargaining Power Retail investors often lack the knowledge and expertise in the financial sector that calls them to approach the broking houses. Low Product Differentiation Proves Beneficial The retail broking services provided by the various companies is homogeneous with very low product differentiation. This allows customers to enjoy a greater bargaining power.
Degree of Rivalry
Move towards consolidation Lot of brokerage companies are moving towards consolidation with the smaller ones becoming either franchisees for the larger brokers or closing operations. Increased Focus of Banks in Retail Broking Various foreign banks like ABN Amro and others are planning to enter the Indian retail brokerage industry. Online Trading Competes with Traditional Brokerage There is an increasing demand for online trading due to consumer’s growing preference for internet as compared to approaching the brokers.
Barriers to Entry
Entry of Foreign Players New forms of trading including T+2 settlement system, dematerialization etc are strengthening the retail brokerage market and attracting foreign companies to enter the Indian industry.
Threat of Substitutes
Alternative Investment Options Various alternative forms of investment including fixed deposits with banks and post offices etc act as substitutes to retail broking products and services.
Strength Advanced Technology Providing innovative products and technology Leverage technology to satisfy customer demands. Add value to share holders. Weakness: Too many subsidiaries High cost of funds Opportunities: Higher capital base First mover advantages Threats: Competition from other industry rivals like HDFC. Concern over NPA despite provisioning Thus, ICICI has been able to use technology to provide value – added service to its customers during the last few years. For ICICI, technology is an integral part of their business. However, their overall progress could have been smoother but for certain internal and extraneous factors and also a pressure on spreads due to a competitive market.
Comparative study of ICICI Bank Ltd. and HDFC Bank
Even their offices reflect their attitudes. ICICI Bank's headquarters in suburban Mumbai is a huge,
imposing edifice in glass and granite. HDFC Bank's office in central Mumbai is comparatively smaller and more sedately furnished. The two banks have carried forward their style statement in their approach to business. ICICI Bank thinks big, is all for growth and hungry for market share. HDFC Bank is more conservative and cautious, grows at a measured pace, without taking any undue risks. ICICI Bank's assets in the retail space stand at Rs 56,000 crore (Rs 560 billion). In comparison, the tally for HDFC Bank is Rs 18,000 crore (Rs 180 billion). ICICI Bank also leads HDFC Bank in almost every segment they are present in. But that's just the current update. The DNA of the strategy ICICI Bank began its retail banking venture in mid-1999. By January 2000, it had moved on to introducing home loans, car loans, personal loans and credit cards. Realising the need for a bigger retail deposit base, the bank started building a branch and an ATM network. The acquisition of Bank of Madura in March 2001 added 263 branches, many of them in cities where ICICI Bank did not have a presence. The merger of the erstwhile financial institution ICICI Limited with the bank in April 2002, gave it a ready-made corporate clientele. The flip side was that ICICI Bank had Rs 10,000 crore (Rs 100 billion) of restructured assets for which it had to make provisions. On the other hand, HDFC Bank kick started its operations in 1995 with a focus on corporate banking, targeting the top-end of the market.HDFC Bank ventured into retail lending in 1998, a year before ICICI Bank. But in products like credit cards, it was slow to get off the mark. For instance, its credit cards were launched only two years ago. By then ICICI Bank had been present in the credit card business for nearly three years. However, HDFC Bank was handicapped because it could not sell home loans (because its parent HDFC was in the business), though it has been originating them in the past one-and-a-half years. For ICICI Bank, home loans are 46 per cent of its retail assets. A banking consultant observes that ICICI Bank is far more aggressive. Though ICICI executives do not admit it, industry sources observe that ICICI's pricing has been far more competitive, which probably brought it more customers. According to some industry experts, growth for ICICI Bank may have come at the cost of quality. ICICI Bank denies this. Calling the customer Both players targeted the same customer -- the upper-middle class. The marketing channels used by both, including direct sales agents (DSAs), were the same. Yet, there was a difference. In the past two years, the bank has spent less than Rs 100 crore (Rs 1 billion) on advertising and publicity (In comparison, ICICI has spent Rs 185 crore). HDFC Bank says that its spends have always focused on other channels such as direct sales and phone banking rather than mainstream advertising.
Better pick-up The numbers tell the story. ICICI Bank's retail deposits are nudging Rs 60,000 crore (Rs 600 billion) and in FY06, it grew its deposits by 47 per cent compared with the industry deposit growth of 14 per cent. HDFC Bank's retail deposits are about Rs 23,000 crore (Rs 230 billion). Even in home loans, ICICI Bank commands 30 per cent of the market, having eaten into housing finance pioneer, HDFC's share.
Share of the wallet
Mar-05 Branches ATMs Cities Retail assets (Rs crore) Deposits (Rs crore) Car loans (Rs crore) Credit cards (Mn) Retail customers (Mn) Cost of deposits (%) Net interest margin (%) Net NPLs (%) HDFC Bank 467 1,147 211 18,000 38,000 2,500 1.3 6.4 3.2 3.2 0.2 ICICI Bank 565 2,000 371 56,000 99,800 11,500 3 13.7 4.5 2.4 2
Even in the number of customers ICICI Bank leads by a distance (See table: Share of the wallet). Nearly 14 million customers bank with ICICI Bank, while the number for HDFC Bank is less than half (6.4 million). ICICI Bank has issued 3 million credit cards -- that is more than twice the number of HDFC Bank's credit card users. However, industry observers point out that ICICI Bank's effective users for credit cards may not be high. Nonetheless, they concede that even with a discounted customer base, the numbers will still be strong. Even in businesses like online trading where the risks are relatively low, ICICI Bank commands a two-thirds marketshare. 'Tell all' street The stock market has always valued HDFC Bank at a huge premium -- at the current price of Rs 585, HDFC Bank is valued at 3.5 times price to forward book (valuation based on estimated book value in FY 06 of Rs 165). The multiple for ICICI Bank that quotes at Rs 415, is just 2.1 (estimated book value Rs 194). The reason: the impeccable quality of HDFC Bank's balance sheet. With NPLs of less than 0.2 per cent, compared with 2 per cent for ICICI Bank, its books are definitely in far better shape. HDFC Bank's operations are also more profitable -- its net interest margin at 3.2 per cent is way higher than that of ICICI Bank's 2.4 per cent. Also, it is able to access deposits at a lower cost. On an average, it pays an interest of 3.2 per cent while ICICI Bank shells out 4.5 per cent. But round one of the banking sweepstakes has clearly gone to ICICI Bank.
The data collected through questionnaires with the help of Direct Sales Agent and Direct Marketing Agencies has been of great importance to analyze many details regarding all the captions that are there in the questionnaire of sample size 40. They are as follows: • Age: The applicants ranging between the age of 30 - 45 years are the ones who have applied for Home Loans large in number, it is because they are financially stable and sound. But now a days customers ranging between 25 – 30 are even applying for Home Loans because they are aware of the benefits that can be availed by applying for Home Loans. Profession: Mostly, the Self Employed Non Professionals i.e., business persons who are involved in their family business apply for Home Loans. Salaried are less in number. Tenure & Loan Amount: The tenure which the bank and the customer finally arrives at is according to the eligibility of the applicant in consideration to his a) Age – As the bank itself assumes that is the person capable enough physically and financially that he’ll be able to repay the loan in the fixed tenure. b) Profession – either the person is salaried which shows he has a fixed income per month and thus the installments will be on time, if the applicant is SEP or SENP then there can be any gain or loss and so the tenure and amount of loan is fixed accordingly. Product applied for: The most preferred products in Home Loans are: Home Loan – It is specially for the purpose of construction and purchase. Benefits of Home loans Cheaper Rates – RBI has given a margin of 0.75% which deducts from the current prevailing rates. Easily granted. Amount of loan granted – 50% of the salary in case of salaried class. Rebate / deduction in Income Tax. Land Loan – It is normally given for the purpose of purchase of land for Investment for future. Benefits of Land Loans Normal rates – As it is granted for the purpose of investment so RBI has not given any deduction of margin because it is not beneficial for the government and is merely for the personal benefit of the customer.
There is no rebate in Income Tax.
LAP (Loan Against Property) – It is given for different purposes against any property which is mortgaged with the bank and is released when the loan is over. Benefits of LAP Rates at which the loan is granted is above margin It is also known as Mortgage Loan.
Modes of Payment: After the whole analysis, the final conclusion is that more than 60% of the applicants repay the loan through PDCs. Property Mortgaged: Applicants can mortgaged any free property which they own. Free property includes: Residential ( commercial and non-commercial) Commercial Any other loan taken for the same property: Out of sample size 40, mostly have not applied for any other loan simultaneously but through Credit Information Bureau of (India) limited (CIBIL) and DEDUP records show that at time of applying for HL customers itself take a check that they have already repaid their dues of other loans. Preferred bank for Home Loans: According to the survey through questionnaire shows that ICICI Bank Ltd. is the most preferred bank but this is because questionnaires have been filled by the applicants applying in ICICI. Otherwise, HDFC is second market leader in Home Loans. Loan from any other bank: Out of sample size of 40 customers mostly have not applied in any other bank but some number of applicants are customers of any other bank. Sources of information for the various home loan plans: Features launched by the bank in different plans of HL is outsourced through Direct Sales agents and agencies. And even some customers or can say general public prefers bank as the most reluctant source of availing information. 99% of the applicants in sample size are satisfied by the services provided by ICICI Bank Ltd.
SUMMARY AND CONCLUSION:
The report made on ICICI Home Loans concludes by findings of various benefits to the customer, government, builders and HFCs / Banks. There is a growing tendency of investing at a younger age, increase in NRI demand in real estate, increased urbanization, owning property now more economical than renting. Government committed to simplifying Mortgaged Backed Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002. There is tax benefit to the customers and rationalization of stamp duty. Builders are now a days focusing on end users rather than Investors and there is improvement in quality of constructions. The final outcome of the report gives the following data: JUNE 2008 FILES LOGIN 100( Ist Disbursement) FILES CLEAR 46 ( Ist Disbursement) 49 ( Sub Disbursement) 52 ( Final Disbursement) 26 ( Sub Disbursement) 47 ( Final Disbursement)
The graphs below shows the market leadership of ICICI as compared to HDFC and SBI. Market leadership
Sanctions (in Rs.Crore)
30000 25000 20000 15000 10000 5000 0 2004 2005 2006 2007 ICICI HDFC SBI
Disbursement (in Rs.Crore)
20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 2004 2005 2006 2007
ICICI HDFC SBI
Market share of ICICI Year 2003 – 04: 25000 crore Year 2004 – 05: 41000 crore Year 2005 – 06: 53000 crore Year 2006 – 07: 65000 crore Year 2007 – 08: 85000 crore ( projected)
2007 2006 SBI OTHER PSBs LIC OTHER HFCs FBs Pvt Bks HDFC ICICI StanChart 50% 100% Citi
2006 2005 0%
Pandey I.M., Financial Management Chandra P., Financial Management Khan & Jain, Financial Management V.Sharan, Financial Institution & Services Induction program book of ICICI Bank Ltd. www.ICICIBank.com www.homeloans.com
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