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Project on Study of Consumer Loan with reference to Bank of India CHAPTER 1 An Overview of Bank

1.1 HISTORY OF BANKING IN INDIA


In 1786 the General Bank of India was established for the first time as a joint stock bank. In 1806 another bank under the patronage of the Government was established. There after the East India Company which established the Bank of Bengal in 1809? Then other two presidency banks came in Mumbai and Chennai in the year of 1840 and 1843 respectively. The three presidency bank were amalgamated to form a new bank called Imperial Bank of India in 1921 (27 th January) and later this bank was re-christened as State Bank of India in 1955(1 st July) under the act of Indian Parliament. The Reserve Bank of India, as a banker of central as well as state Government, came into being in 1935 which proved to be a land mark in the history of the banking in India. Then a concept of social control over commercial bank in order to achieve the objective of a balanced growth of all sector of the economy this measure of social control was considered to be inadequate. In order to achieve the larger objective of sustained and planned growth of economy 14 major banks were nationalized on 19th July 1969; later on April 1980 six more banks were nationalized bringing the tally to the 20. Banking means the accepting for the purpose or lending or investment of deposits of money from the public, repayable on demand and withdrawal by cheque, draft or order.

WHAT IS NATIONALISATION
Nationalization is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being transferred to the public sector to be operated and owned by the state. The opposite of nationalization is usually privatization or denationalization, but may also be municipalization. A renationalization occurs when state-owned assets are privatized and later nationalized again. Nationalization has been used to refer to either direct state-ownership or management of an enterprise or to a government acquiring a large controlling share of a nominally private, publicly listed corporation.

1.2 STRUCTURE OF BANKING SYSTEM IN INDIA

RBI

1.3 FUNCTIONS OF BANKS IN INDIA


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The economic functions of banks include: 1. Issue of moneyIn the form of banknotes and current accounts subject to check or payment at the customers order these claims on banks can act as money because they are negotiable or repayable on demand, and hence valued at par. They are effectively transferable by mere delivery, in the case of banknotes, or by drawing a check that the payee may bank or cash. 2. Netting and settlement of payments Banks act as both collection and paying agents for customers, participating in interbank clearing and settlement systems to collect, present, be presented with, and pay payment instruments. This enables banks to economize on reserves held for settlement of payments, since inward and outward payments offset each other. It also enables the offsetting of payment flows between geographical areas, reducing the cost of settlement between them. 3. Credit intermediation Banks borrow and lend back-to-back on their own account as middle men. 4. Credit quality improvement Banks lend money to ordinary commercial and personal borrowers (ordinary credit quality), but are high quality borrowers. The improvement comes from diversification of the bank's assets and capital which provides a buffer to absorb losses without defaulting on its obligations. However, banknotes and deposits are generally unsecured; if the bank gets into difficulty and pledges assets as
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security, to rise the funding it needs to continue to operate, this puts the note holders and depositors in an economically subordinated position. Maturity transformation

5.

Banks borrow more on demand debt and short term debt, but provide more long term loans. In other words, they borrow short and lend long. With a stronger credit quality than most other borrowers, banks can do this by aggregating issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g. withdrawals and redemption of banknotes), maintaining reserves of cash, investing in marketable securities that can be readily converted to cash if needed, and raising replacement funding as needed from various sources (e.g. wholesale cash markets and securities markets). 6. Money creation Whenever a bank gives out a loan in a fractional-reserve banking system, a new sum of virtual money is created.

CHAPTER 2 Introduction to Bank of India

2.1 History of Bank of India

Bank of India was founded on 7th September, 1906 by a group of eminent businessmen from Mumbai. The Bank was under private ownership and control till July 1969 when it was nationalized along with 13 other banks.

Beginning with one office in Mumbai, with a paid-up capital of Rs.50 lakh and 50 employees, the Bank has made a rapid growth over the years and blossomed into a mighty institution with a strong national presence and sizable international operations. In business volume, the Bank occupies a premier position among the nationalized banks. The Bank has 3752 branches in India spread over all states/ union territories including specialized branches. These branches are controlled through 50 Zonal Offices. There are 29 branches/ offices

(including five representative offices) and 3 Subsidiaries and 1 joint venture abroad.

The Bank came out with its maiden public issue in 1997 and follow on Qualified Institutions Placement in February 2008. . Total number of shareholders as on 30/09/2009 is 2, 15,790.

While firmly adhering to a policy of prudence and caution, the Bank has been in the forefront of introducing various innovative services and systems. Business has been conducted with the successful blend of traditional values and ethics and the most modern infrastructure. The Bank has been the first among the nationalized banks to establish a fully computerized branch and ATM facility at the Mahalaxmi Branch at Mumbai way back in 1989. The Bank is also a Founder Member of SWIFT in India. It pioneered the introduction of the Health Code System in 1982, for evaluating/ rating its credit portfolio.

The Bank's association with the capital market goes back to 1921 when it entered into an agreement with the Bombay Stock Exchange (BSE) to manage the BSE Clearing House. It is an association that has blossomed into a joint venture with BSE, called the BOI Shareholding Ltd. to extend depository services to the stock broking community. Bank of India was the first Indian Bank to open a branch outside the country, at London, in 1946, and also the first to open a branch in Europe, Paris in 1974. The Bank has sizable presence abroad, with a network of 29 branches (including five representative offices) at key banking and financial centers viz. London, New York, Paris, Tokyo,

Hong-Kong and Singapore. The international business accounts for around 17.82% of Banks total business.

2.2 Objectives of Bank of India


1. To promote and develop in India sound and progressive banking principles, practices and conventions and to contribute to the developments of creative banking. 2. To render assistance and to provide various common services to Members and to the banking industry. (a) To develop and implement new ideas and innovations in banking services, operations and procedures. (b) To organize co-ordination and co-operation on procedural, legal, technical, administrative or professional problems and practices of banks and the banking industry. (c) To initiate advance planning for introduction of new systems or services in the banking industry. 3. To collect, classify and circulate statistical and other information on the structure and working of the banking system. 4. To act as a clearing house for dissemination and exchange of statistical data, information, views and opinions on the systems, procedures and practices, and organization and methods of banks and on the structure, working and operations of the banking system. 5. To explore, plan, co-ordinate and organize detailed surveys on
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banking,

business,

resources,

personnel

and

management

development programmes of banks and the banking industry. 6. To pool together talents and resources available with members and to organize exchange of expertise and experiences of members for simplifying forms and procedures, for reducing cost of operations, for increasing efficiency and productivity and for such other common purposes as may be necessary or relevant to banks and the banking industry. 7. To organize exchange of credit information and opinions, export information or information and views on any other aspects of interest to banks. 8. To promote education and knowledge of the law and practice of banking. 9. To issue periodical newsletters, bulletins or magazines and publish books, pamphlets or other literature on matters of interest to members and to the banking industry. 10. To project a good public image of banking as a service industry and develop good public relations. 11. To promote harmonious personnel relations in banking industry and to devise ways and means for involving banking personnel in the endeavors of banks for growth and development of banking and the economy of the country. 12. To organize, promote and afford facilities for indoor and outdoor games, any form of sports, recreation, sports competitions, events, cultural activities, social activities, fine arts, social meetings, entertainments and to organize meetings for the above purposes
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and to provide for purposes by purchasing, acquiring, taking on lease, own, hire or otherwise playing fields, grounds, buildings, pavilions and other facilities. 13. To give financial assistance to individuals or bodies, from out of its own funds, or by collection from its members, or from any other source, and for the purpose of such collection, to accept grants, donations, etc. in cash or kind from Government, its members, other organizations, members of the public, etc. and to collect subscriptions, membership and other fees and to levy fees or charges for the use of the facilities and to raise funds in any manner to strengthen the financial position of the Association, from time to time, for the purpose of providing education, training and facilities for imparting basic, advance knowledge and techniques in games, sports, cultural activities, social activities, fine arts, etc. and to give donations, technical and other assistance, sports equipments, sports facilities and expert guidance to organizers for this purpose whether its members or not and to conduct, organize, participate or to associate itself in State-Level, Nation, International Tournaments and competitions pertaining to sports, cultural activities, social activities, fine arts, etc., held in or outside India. 14. To maintain continuous communications with the representatives of bank employees, to conduct talks, discussions, and negotiations with them and to arrive at Settlements. 15. To provide assistance and guidance to members in interpretation and implementation of Awards, Settlements, etc. 16. To assist, advise and guide all members and the smaller members in particular on all their needs, difficulties and problems of growth,
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development and working. 17. To act as an agent or a representative of a member or members in respect of matters connected with any of their operations working or administration. 18. To maintain close co-ordination and liaison with Reserve Bank of India, All Financial Institutions, Chambers of Commerce, Organizations of Banking Industry, Management or Educational Institutes, Universities and such other Organizations for realizing the subject and purposes of the Association. 19. Generally to do all and any other thing that may be necessary or relevant for the realization of the objects and purposes of the Association directly or indirectly. 20. To carry on publicity for the purpose of educating public opinion with regard to the scope, importance and activities of the banking industry, for creative growth and development.

2.3 Mission and Vision


Mission To provide superior, proactive banking services to niche markets globally, while providing cost-effective, responsive services to others in our role as a development bank, and in so doing, meet the requirements of our stakeholders Vision To become the bank of choice for Corporates, medium businesses and upmarket retail customers and to provide cost-effective developmental banking for small business, mass market and rural
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markets

2.4 SWOT Analysis of Bank of India

1. Strength

A public sector undertaking. Thus, has government backing. Increasing profits over the years. Pan India presence with over 3400 branches. Founder of SWIFT (Society for Worldwide Inter Bank Financial Telecommunications.) Large employee base.

2. Weakness

Brand valued not as big as SBI. The branches are not modernized in many cities as compared to leading banks.

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3. Opportunity

Venturing into rural areas. Installations of more ATMs. Use of mobile banking, internet banking on a large scale.

4. Threats

New banking licenses. Foreign players. Disinvestments.

2.5 Indian View of Bank


In 1906 Bank of India founded with Head Office in Bombay

In 1921Bank of India entered into an agreement with the Bombay Stock Exchange to manage its clearing house.

2.6 Global View of Bank


In 1946 Bank of India opened a branch in London, the first Indian bank to do so. This was also the first overseas branch of any Indian bank. In 1950 Bank of India opened branches in Tokyo and Osaka. In 1951 Bank of India opened a branch in Singapore.

In 1953 Bank of India opened a branch in Kenya and another in Uganda.


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In 1953 or 54 Bank of India opened a branch in Aden. In 1955 Bank of India opened a branch in Tanganyika. In 1960 Bank of India opened a branch in Hong Kong. In 1962 Bank of India opened a branch in Nigeria In 1967 The Government of Tanzania nationalized Bank of India's operations in Tanzania and folded them into the governmentowned National Commercial Bank, together with those of Bank of Baroda and several other foreign banks. In 1969 the Government of India nationalized the 14 top banks, including BANK OF INDIA. In the same year, the People's Democratic Republic of Yemen nationalized Bank of India's branch in Aden, and the Nigerian and Ugandan governments forced Bank of India to incorporate its branches in those countries. In 1970 National Bank of Southern Yemen incorporated Bank of India's branch in Yemen, together with those of all the other banks in the country; this is now National Bank of Yemen. Bank of India was the only Indian bank in the country. In 1973Bank of India opened a rep in Jakarta. In 1974 Bank of India opened a branch in Paris. This was the first branch of an Indian bank in Europe. In 1976 The Nigerian government acquired 60% of the shares in Bank of India (Nigeria). In 1978 Bank of India opened a branch in New York. In 1970s Bank of India opened an agency in San Francisco. In 1980 BANK OF INDIA (Nigeria) Ltd, changed its name to Allied Bank of Nigeria. In 1986 Bank of India acquired Paravur Central Bank (Karur Central Bank or Parur Central Bank) in Kerala in a rescue.
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In 1987Bank of India took over the three UK branches of Central BANK OF INDIA (CBI). CBI had been caught up in the Sethia fraud and default and the Reserve BANK OF INDIA required it to transfer its branches In 2003 Bank of India opened a representative office in Shenzhen. In 2005Bank of India opened a representative office in Vietnam. In 2006Bank of India plans to upgrade the Shenzhen and Vietnam representative offices to branches, and to open representative offices in Beijing, Doha, and Johannesburg. In addition, Bank of India plans to establish a branch in Antwerp and a subsidiary in Dar-es-Salaam, marking its return to Tanzania after 37 years. In 2007 Bank of India acquired 76 percent of Indonesia-based PT Bank Swadesi.

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CHAPTER 3 Theoretical Framework

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3.1 Introduction of Loan


Any amount borrowed or lend is called loan. If money is borrowed it is debt of business and if loan is given, it is receivable for the business. Loan is a method of lending under which bank gives credit to a borrowed for a fixed period and for a specific purpose. Loan are promises for future payment, they have to be repaid in period beyond a year and are, therefore long term liabilities. Banks make loans and advances to traders, businessman and industrialist against the security of some assets or on the basis of the personal security of the borrower. In either case, the banks run the risk of default in repayment. Therefore, banks have to follow a cautions policy and sound lending principles in the matter of lending. Bank in India have to consider the national interest along with the own interest while determining the lending policy. Many a time a borrower need fund for fixed assets or nonrespective type of activities and thus seeks money from the bank that is withdrawn in one lump sum. The loan amount is normally repaid in instalments. Loan may be short-term, medium-term or long-term.

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3.2 Classification of Loan


The loans and advances granted by banks are broadly classified into two categories: Secured Loan Unsecured Loan

According to section 5 (a) of Banking Regulation Act,1949, a secured loan or advance means a loan or advances made on the security of assets, the market value of which not at any time less than the amount of such loan or advances not so secured. Thus unsecured loan or advance means a loan or advances are as follows; the distinguished features of a secured loan or advance are as follows. 1. The loan must be made on the security of tangible assets like

goods and commodities, land and building, gold and silver, corporate and government securities, etc. A charge of any such assets offered as security must be created in favour of the banker. 2. The market value of such securities must not be less than the amount of the loan at any time till the loan is repaid. If the former falls below the latter because of decline in the market prices, the loan is considered as partly secured.

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The distinction between secured and unsecured loans is made on the basis of legal title or charges created in favour of the lender. Under the traditional principles of lending, the borrowing capacity of a person is judged on the basis of tangible assets in the possession of the borrower, i.e., the larger is the creditworthiness of a borrower, if lager is the value of his tangible asset. However, it should not be understood that unsecured loans, also called clean loans and advances, are granted person without observing the above mentioned criterion of credit worthiness. In fact unsecured loans are also granted to the person of sufficient means, possessing tangible assets and with sound finance position, but no charges or right is created on any such cases the security happens to be the personal obligation of the borrower which is something supported by a guarantee given by a third party regarding the repayment of the loan. Clean advances are obviously granted to the parties enjoying high reputation and sound financial position. Unsecured advances are granted with the caution and within certain limits only because in case of default by the borrower the banker stands at par with other unsecured creditors. In case of secured advances, the legal status of the banker is that of a secured creditor, he gets the first and absolute right to recover his dues out of sale proceeds of the assets over which a charge is created in favour of the banker. Where money is advanced on security, including personal guarantee the granting of instalments (for the repayment of loan) is ruled out because that would frustrate the very purpose of talking security. There are various modes of creating such charges, which will be secured discussed in the next chapter.
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3.3 Loan System:


Under the loan system credit is given for a definite purpose and for predetermined period. Normally, these loans are repayable in instalments. Funds are required for single nonrepetitive transactions and are withdrawn only once. If the borrower needs funds again or wants renewal of an existing loan, a fresh request is made to the bank. Thus, a borrower is required to negotiate every time he is taking a new loan or renewing an existing loan. Banker is at liberty to grant or refuse such a request depending upon his own cash resources and the credit policy of the central bank

Types of Loan

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Short Term Loans


Short Term Loans are granted to meet the working capital needs of the borrowers. These loans are granted against the security of tangible assets mainly the moveable assets like goods and commodities, shares, debentures, etc Since April, 1995 Reserve Bank of India has made it mandatory for the bank to grant a portion of bank credit to big customers in the form of loans, which may be for various maturities. The Reserve Bank has also permitted the banks to roll over such loans, i.e. to extend the loan for another period at the expiry of tenure of the first loan.

Medium and Long Term Loans

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Medium and long term loans are usually called Term Loans. These loans are granted for more than a year and are meant for purchase of capital assets for the establishment of new units and for expansion of diversification of existing unit. Banks usually grant such loans together with specialized financial institutions like Industrial Finance Corporation of India, Industrial Credit and Investment Corporation etc. Such loans constitute a part of the project finance which industrial enterprises are required to rise from different sources. These loans are usually secured by the tangible assets like land, buildings, plant and machinery, etc. In recent years, Reserve Bank of India has encouraged banks to lend for projects as well. Exposure limits have been laid down at Rs. 200 crores for each bank lending to a project and Rs. 500 crores is the overall exposure limit for all banks to a announce separate prime term lending rate for term loans of 3 years and above. In April, 1999, Reserve Bank of India permitted the banks to operate different prime lending rates for different maturities, provided transparency uniformity of treatment in maintained. Reserve Bank also permitted the banks to offer fix rate loans to borrowers requiring project finance. It means that the interest rate on term loans will remain unchanged throughout the period of the term loan in spite of change in the interest rates on new loans.

Bridge Loans
Bridge loans are essential short term loans which are granted to industrial undertakings to meet their urgent and essential needs during the period when formalities for availing of
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the term loans sanction by financial institution are being fulfilled or necessary steps are being taken to raise the funds from the capital market. These loans are granted by banks or by financial institution themselves and are automatically repaid out of amount of the term loan or the funds rose in the capital market. In April, 1995, R.B.I banned the bridge loans granted by banks and financial institution to all companies. But in October, 1995, R.B.I permitted the banks to sanction bridge loans/interim finance against commitment by a financial institution or another bank where the lending institution faces temporary liquidity constraint subject to the following condition;

1. The prior consent of the other banks/financial institution which has sanctioned a term loans must be obtained. 2. The term lending bank/financial institution must give commitment to remit the amount of the term loans to the bank concerned. 3. The period of such bridge loans should not exceed four months. 4. No extension of the time for repayment of bridge loan will be allowed. 5. To ensure that bridge loan sanction is utilized for the purpose for which the term loan has been sanctioned.

In November, 1997, R.B.I permitted the banks to grant bridge loans to companies (other than non-banking finance companies) against public issue of equity in India or abroad. The

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guidelines for sanction of such loans are to be laid down by each bank and should include the following aspects. Security to be obtained for the loan. The quantum of outstanding bridge loan (or the limit sanctioned whichever is higher) during the year. Compliance with individual/group exposure norms. Ensuring end use of bridge loan. The maximum period of the bridge loan to be one year.

Composite Loans
When a loan is granted both for buying assets and for working capital; purpose, it is called a composite loan. Such loans are usually granted to small borrowers, such as artisans, farmers, small industries, etc

Consumption Loans
Though normally banks provide loans for productive purpose only but as an exception loans are also granted on limited scales to meet the medical needs or the education expenses or expenses relating to marriage and other social ceremonies etc. of the needy persons such loans are called consumption loans.

3.4 Types of Loans Provided by Bank of India:-

(a) Personal Loans. (b) Commercial Loans.

Personal Loans

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Star Mitra Mahila Gold Loan

Star Mitra Pension Loan

Star Mitra Education Loan

Star Home Loan

Star Holiday loan Scheme

Car loan scheme

Personal Loan BANK OF INDIA STAR HOME LOANS


Objective/purpose of loan: 1. Provides loans to purchase a Plot for construction of a House, to purchase/construct house/flat, as well as for renovation/ repair/alteration/addition to house/flat, furnishing of house. 2. Maximum loan amount is Rs.500 lacs and repayment ranges up to 20 years, with reasonable margin and nominal processing charges. No commitment /administrative charges. 3. The loan is available at very competitive rates of interest, currently available in the industry. 4. Option for different EMI amounts for different periods during tenure of loan to suit customers repayment capacity. 5. Prepayment of Loan permitted.
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6. Interest is calculated on daily balance basis which is of great advantage to customer as it results in lower interest amount. 7. Loan to NRIs as well as Persons of Indian Origin. 8. Simplified application form/procedures for convenience of customers, and speedy approvals. 9. Free Personal Accident Insurance cover. 10. Life Insurance Cover to borrowers for Loan Protection (optional).

Details of Loan Eligibility Purpose Salaried employees, Professionals, Self-employed persons. Requests are also considered from NRIs, Prop. Firm, Partnership firms and corporate. To purchase/construct house/flat. To renovate/extend/repair existing house/flat. To purchase a plot of land for construction of house. To acquire household articles along with the house/flat-for furnishing the house/flat. For construction/purchase of a house/flat-Rs.300lacs(Rs.500 lacs in major metros viz. Mumbai, Kolkata, New Delhi and Chennai) Repairs/renovation/extension to house/flat Rs.50 lacs Purchase of a plot - Rs.100 lacs Purchase/acquire household articles for furnishing the house/flat - Rs.5.00 lacs. (15% of Home Loan amount)
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Quantum of Loan

Minimum Home Loan :- For Metro/Urban Centres :-Rs. 1 Lac Processing FOR INDIVIDUALS charges / Other Loan Limit- Charges- One Time expenses Up to Rs.25 Lacs - @0.50% of loan amount Min.Rs.4, 000 and Max. Rs.10,000 >Rs.25 to Rs.75 Lacs- Flat Rs.20,000 >Rs.75 to 300 Lacs -Flat Rs.25,000 >Rs.300 Lacs -Flat Rs.50,000 For Partnership firms & Corporate Borrowers Processing charges will be double that of individuals For Rural areas Processing charges will be 75% that of applicable to individuals in respect of loans availed by borrowers from rural areas from the Rural Branches. Legal Expenses/Valuation Charges/Stamp Paper Charges etc., Margin (For For Loan up to Rs.20 Lacs-20% 1st House ) Over Rs.20 to Rs.50 Lacs -25% Over Rs.50 Lacs -30% Margin is subject to RBI stipulated of Max. 90% for loans up to Rs.20.00 lacs and LTV of Max.80% for loans above Rs.20.00 lacs on pure cost of the house/flat, i.e. excluding stamp duty ,registration, stamp duty, etc. Repayment(can Highly flexible - maximum 20 yrs. including moratorium be customized) period of 18 months (max.) in monthly instalments. Extended repayment up to 25 years permitted in Banks approved projects. Loan to be normally repaid before date of retirement in case of salaried persons and before attaining 65 years of age in case of others. Eligible Calculation of quantum of loan is related to Quantum of Income/repayment capacity of proponent/borrower. Loan/ EMI Salaried Employees: 72 times of gross monthly salary or 6times of gross annual income based on I-T Returns. Self-employed/ Professionals etc.: 6 times of Gross annual income based on I-T Returns HUF/Proprietorship /Partnership Firm/ Company: 6 times of cash accruals (PAT+ Depreciation) as per Balance Sheet/P&L Account In case of Individuals: Net take home pay/income (net of all deductions
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Security

Attractive Features

including EMI of Proposed loan) should not be less than 40% of the gross monthly salary/income of applicant(s) In case of HUF/Proprietorship/ Partnership firm/Company: DSCR should be minimum 1.5. Mortgage/Equitable Mortgage (1st charge) on land/flat/house. Third Party guarantee (if mortgage could not be created at the time of disbursement). Interest on Daily Reducing Balance Basis No Pre-Payment Charges on Floating Rate Loans Repayment allowed up to 70 years in select cases Facility for step up/ step down EMIs Inclusion of notional rental income in case of 2nd House and also Employees staying in Staff Quarters; Inclusion of Income of Close relatives for enhanced loan Tax Benefit on Interest and Instalments repaid in Home Loans Facility for 100% loan irrespective of stage of construction OR Bridge Loan subject to conditions; Interest subvention from GOI in the 1st Year subject to conditions

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Star Mitra Mahila Gold Loan:Purpose of Loan Target Group For purchase of Gold ornaments, preferably hallmarked, from reputed Jewellers and/or Gold coins of Bank of India. Resident Indian Women Working Women : Women permanently employed in Central/State Govt./ Scheduled Banks/Teachers of Govt. Aided Institutions; and include professionals like Doctors/ C.As/Chartered Engineers etc., Non Working Women : Not having income proof. Spouse/other close relative who satisfy income criteria to join as co-borrower.

Age Rating Exercise Type of Advance Quantum of Advance

18- 60 years Applicant should get minimum 20 marks, under banks rating exercise, to be eligible for loan under the scheme. Demand/ Term Loan Working/Non-working women : 10 times of monthly net emoluments (take home salary of self/spouse, in case of non working women) Professional : 50% of Gross Annual Income as per latest Income Tax Return Minimum Rs. 50000/- Maximum Rs.2 lacs. 20% of the cost of Jewellery/Gold. 3% above Base Rate -13.50%.

Margin Interest Rate (Floating, p.a. at monthly rests) Penal Interest Repayment

To be levied as per prevailing guidelines in this regard from time to time Maximum 60 EMIs .However, repayment period not to exceed the age of 65 or retirement age of the borrower, whichever is earlier. Repayment through salary deduction /post dated cheques. Min. 50% of the gross income of the applicant/ spouse, in the case of non-working women. For Loan over Rs.50, 000/- liquid securities for the amount exceeding Rs.50, 000/-. By DD/ Pay Order favouring the seller (with the name of the Bank and Account Number). Stamped Receipt/ Invoice for the total cost of jewellery (i.e. Loan Amount plus Margin) to be obtained. Performa invoice required for a loan amount of Rs. 1 lac and over. One time @ 2% of loan amount Min. Rs.500/- and Max. Rs.2,000/Stamp charges for documents at actual. Loan Agreement copy charges as applicable.
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Net take home pay (net of EMI ) Security Disbursement

Processing Charge Other Charges

Star Mitra Pension Loan:Purpose of loan: 1. It is unsecured and clean type of loan. 2. It is used to(a) Meet marriage expenses, medical expense, education of self, spouse, children, near relatives. (b) Repairs/renovation/extension of existing house/flat(where Equitable Mortgage charge over the property cannot be created in favor of bank and the proponent has not raise loan against such property from any Bank/NBFC, etc (c) Any other personal expenses of bonafide nature. 3. In case of secured advances(a) Repayment of existing housing loan from other

banks/financial institutions etc. (b) Purchase of consumer durables/computers/Professional

equipments, etc. (In case of clean/unsecured loan, an undertaking to be obtained from the borrower stating that the loan has been utilized for the purpose declared. In case of secured advances appropriate proof/bills receipts for expenses incurred to be obtained.)

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BOI star pensioner Loan schemes


Target Customers (Eligibility Type of Advance Net take home Pension Repayment -- Regular pensioners or family pensioners drawing regular monthly pension through the branch. -- Retired employees (other than dismissed/compulsorily retired) Demand Loan/Term Loan/Overdraft (reducible as per repayment schedule)/ Overdraft (3 months Pension Max. Rs.15000/-) The net take home pension after deduction of loan instalment should be at least 40% of the pension amount For Clean/unsecured Secured Advance advance Max.36 EMIs w .e. f. one Max. 60 EMIs w. e. f. month after first one month after 1st disbursement. disbursement 60 EMIs in exceptional cases. Fully Secured Advances: @ 3.75% above Base Rate, Clean/Unsecured Advances:@4.25% above Base Rate, For Senior Citizens (for loans up to Rs.50000/-) at 3.00%above Base Rate, (Aged 60 years and above) a. No processing charge for Senior Citizens (60 years & above) b. For others one time @ 2% of loan amount, Min. Rs.500/- and
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Rate of Interest (Floating, p.a. at monthly rests)

Processing/ Handling Charges

Max.Rs.2000/-. C. Stamp Paper charges: At actual. Loan Agreement Copy charges .- As Applicable

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Star Mitra Education Loan:Introduction The Star Educational Loan Scheme aims at providing financial support from the bank to deserving/ meritorious students for pursuing higher education in India and abroad. The main emphasis is that every meritorious student is provided with an opportunity to pursue education with the financial support to get the loan.
Highlights Course Loan type Loan Purpose STUDY ABROAD Graduation Term Loan Graduation: For job oriented professional/technical courses offered by reputed universities Post Graduation: MCA, MBA, MS, etc. Courses conducted by CIMA - London, CPA in USA, etc. STUDY INDIA Graduation Term Loan The loan is provided for Professional courses : Engineering, Medical, Agriculture, Veterinary, Law, Dental, management Computer, etc Courses conducted by IIM, IIT, IISc, XLRI, NIFT, NID and other Institutes set up by Central/State Govt. Min. - Rs 50000 Max. - Rs 1000000 Up to Rs.4 lakh : Nil Above Rs.4 lakh : 5% Min - 1 Yrs. Max. - 10 Yrs. Up to Rs.7.50 lacs 3% above Base Rate, 13% Above Rs.7.50 lacs 2.50% Above Rs.7.50 lacs above Base Rate, 13% 7 Days
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Loan Amount Margin Money Tenure Min. -

Min. - Rs 50000 Max. - Rs 2000000 Up to Rs.4 lakh : Nil Above Rs.4 lakh : 15% Min- 1 Yrs Max. - 10 Yrs. Up to Rs.7.50 lacs 3% above Base Rate, 13.50% Above Rs.7.50 lacs 2.50% above Base Rate, 13%

Interest Rate

Time to Process Loan

7 Days

Eligibility
Age Documents Required: ID Proof Age Proof Residence Proof Income Proof Telephone Photograph Bank Statement Signature Proof Study Abroad Min 16 years: Yes Yes Yes Yes Yes Yes Yes Yes Study India Min 55 years: Yes Yes Yes Yes Yes Yes Yes Yes

Fees and Charges:Study Abroad 1% processing/upfront change of institution: Charges : Rs. 1000 Rs. 250/Refundable on availing Loan Change of Institution : Rs. 500 Study Indian 1% change of institution: Rs 250/-

Pre Payment Charges Comment on Charges

Security: Up to Rs. 4 lakh: No security Above Rs.4 lakh &up to Rs.7.5 lakh: Collateral security in the form of a suitable third party guarantee. Above Rs.7.5 lakh: Co-obligation of Parents together with tangible Collateral security of suitable value along with the assignment of future income of the student for payment of instalments. Terms & Conditions.....

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Repayment holiday/Moratorium: Course period + 1 year or 6 months after getting job, whichever is earlier.

Car Loan:Eligibility for BOI Car Loans: Salaried employees, Professionals, Self-employed, individuals with high net worth, People engaged in trade/commerce/ business, Directors of Companies, Senior Citizens, Pensioners, Farmers, Staff Members, Retired employees (other than dismissed/compulsorily retired) of our Bank. Non-Resident Indians in India advance to be granted jointly with Resident Indians (close relative) Companies, Partnership Firms, Proprietary concern and other types of corporate entities. HUFs not permitted.

Interest Rates of Bank of India Car Loan: Fully Secured Loans: a) New Vehicles Repayment up to 3 years@1.75% over BR 12.50% b) New Vehicles Repayment over 3 years@2.25% over BR 13.00% c) Second Hand Vehicles@2.25% over BR 13.00 Repayment :

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A) For Individuals for new vehicles 4 wheelers imported vehicles-Max. 7 years. 4 wheelers Indian vehicles 6 years 2 wheelers max. 5 years. B) For Corporates/Firms, etc. Max. 5 years. C) For second hand vehicles Max. 3 years. D) Processing Charges: a) Loans up to Rs.25,000/- one time Rs.1,000/b) Loans above Rs.25, 000/- up to Rs.25 lacs one time 1.10% of loan amount Min.Rs.1,500/-& Max Rs.5, 000/c) Loans above Rs.25 lacs one time 0.25% of the loan amount Max.15, 000/E) Service Tax as applicable. F) Processing charges waived for Senior Citizens, staff members & retired employees of the Bank & Pensioners drawing pension from the Bank.

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Star Holiday Loan Scheme

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Eligibility

Type of Advance Quantum of advance

Salaried employees/Professionals/Selfemployed /People engaged in business/Individuals with high net worth/Agriculturists/Pensioners/Staff members Demand Loan Max Rs 2.00 lacs Minimum size of loan:At Metro and Urban Centres: Rs.10, 000/At Rural and Semi Urban centres: No minimum size of loan. To meet the expenses (like airfare/Train/Bus charges, expenses for accommodation, sightseeing, etc.) for going for pilgrimage/tours/excursions etc. undertaken/to be undertaken by Self/spouse/children/ parents/family members/close relatives of proponent within India or abroad. No specific margin. Loan amount not to exceed proposed expenditure/requirement. Maximum in 24 EMIs (Equated monthly instalments) one month after first disbursement from loan account. In special/exceptional case, up to 36 EMIs. Fully Secured Advances:3.00% Partly Secured Advances:3.50% Clean/Unsecured Advances: 4.25% For senior citizens /pensioners: 3.00% One time @ 2% of the loan amount. Minimum Rs. 1000/-, Maximum Rs.10000/-. Pensioners : One time @ Rs. 2% of loan amount Min. Rs.500/- Maximum Rs 2000/No processing charges for Senior Citizens (60 years & above)
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Purpose

Margin Repayment

Rate of Interest (Floating, p.a. at monthly rests) Processing Charges

1. 2. 3. 4.

(B) Commercial Loans:


Commercial Loans

Star mortgage loan scheme Foreign Currency Loan

Channel Credit

Facility

a. Drawee Bill Finance for Suppliers b. Drawee Bill Finance or Overdraft facility for Dealers. Eligibility a. Facilities to Suppliers and Dealers would be criteria extended based on the referral of the Sponsoring Corporate. b. Exposure to each Dealer to be based on the referral of the Sponsoring Corporate. Financial Sponsoring Corporates referral letter to state that their criteria past dealings with the Supplier/Dealer are satisfactory. No prior period of association to be prescribed. Margin Nil Tenor of Maximum 90 days exclusive of Free Period offered, if the facility any Grace Grace period of 03 days to Dealers only in cases period where Post Dated Cheques are not obtained Rate of Suppliers: 1% below PLR, Min 10.25% pa. Zonal interest Managers shall have the discretion to approve a concession of 0.25% (10% floating). Further concession to be approved at HO level. Penal rate 2% over the contracted rate Processing No processing charges for the suppliers.1% of limit charges fixed for each dealer payable up front at the time of sanction of limit to dealer.

Channels Credit:

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Star mortgage loan scheme: Purpose of loan:a. To meet the credit needs of trade, commercial activity, other general business, Profession as also for their bonafide requirements. b. To meet marriage or medical or educational expenses of family members including near relatives. c. To undertake repairs/renovation/extension to the residence/commercial property. d. Purchase of consumer durables. e. To purchase/construct house/flat, purchase of plot. f. To purchase 2/4 wheeler vehicles. g. For going on pilgrimage/tours/excursions, etc. h. Repayment of existing loans from other Banks/FIs.

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Product Target customers (Eligibility)

Type of advance Quantum of advance

Margin

Rate of Interest w.e.f.28.07.2011 Repayment

Security

Processing Fees

Equitable Mortgage Fee

BOI Star Mortgage Loan Scheme People engaged in trade, commerce and business, Professionals, Self-employed, Prop. Firms, partnership firms, HUFs (excluding NBFC, Trade, partnership firms where HUF is a partner), companies, NRIs, individuals with high net worth, salaried people, agriculturists, staff members. Demand/Term Loan/Overdraft (reducible as per repayment schedule). Overdraft facility (Rs. in lacs) Min. Max. a. For agriculturists 0.50 2.00 b. For Others : Individuals/Prop. Firm/ 1.00 50.00 Partnership firm/ Company : Prop./Partnership 1.00 100.00 firm/company 1.00 100.00 Salaried Employees 30% * Others 50% * *On value of property [Lower of Market Value /Distress Sale value/Registration Value as on date of valuation] assessed by Bank's approved value. Repayment upto3 years 4.00% above Base Rate 14.75% p.a. Repayment over 3 years 4.50% above Base Rate 15.25% p.a. Interest concession for woman beneficiaries 0.25% p.a. In accounts where regular Overdraft facility is not proposed. Within a period of eight years by way of EMIs. The repayment shall commence from the month subsequent to the month in which final disbursement is made or 6 months from the first disbursement, Whichever is earlier. In case of agriculturists: The repayment will be related to the generation of farm income from crops and other subsidiary activities. Equitable/Legal Mortgage charge over property in the name of applicant or his/her spouse or parents or third party. The person in whose name the property to be mortgaged stands should either be a borrower/co-borrower or a guarantor. 1. Accounts repayable as per Stipulated instalments:- One time @ 1% of Loan amount. Min.Rs.3,000/- and max. Rs30000/-. 2. Overdraft Limit (not reducible as per repayment schedule): - 0.25% of the sanctioned limit, Min. Rs.3, 000/- and Max. Rs.10, 000/- on annual basis. - Documents charges, advocate fee, architect fee etc. on actual basis. Loan agreement copy charges : As applicable General: i. Limits exceeding Rs.25 lacs up to Rs.50 lacs - Rs.6, 000/ii. Limits exceeding Rs.50 lacsRs.100 lacs - Rs.15, 000/43

Foreign Currency Loan


Eligible borrowers 1. Export earning units and other customers with AA credit rating. 2. Customers with credit rating 'A', having natural Purpose hedge. 1. Working Capital. 2. Demand Loan for purchase of new plant and Quantum machinery, acquisition of equipments and other assets. Minimum US Dollars 100,000/-. Lending only in US Dollars. Tenor Rate of Interest Commitment Fee Working Capital - Min. 3 months, Max. 18 months. Demand Loans - Min. 12 months, Max. 36 months Interest rate linked to LIBOR + applicable spread based on credit rating, payable at quarterly intervals. In case the sanction is requested to be revalidated, revalidation fee @ 0.25% of the entire sanctioned amount (maximum USD 5000/-) is applicable. Rs. 145/- per lakh or part thereof, Maximum Rs.1, Processing Charges 45,000/-. In case of conversion of existing facilities, no additional processing charges are recovered. Transaction cost ranging from Rs.15, 000/- to Rs.25, 000/- is levied at the time of conversion. Rate of interest and other terms are subject to change from time to time as per Bank's Corporate Policy

3.5 LOAN PROCEDURE


1. Application
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2. Shakh Report 3. Loan Report 4. Inspection 5. Committee Approval 6. Letter of Condition 7. Documentation

1. APPLICATION
A customer required any advances from a bank have to apply for the same. Bank that the applicant must be the member or share holder. In the application form bank need primary information about borrower and guarantor. Income proof also required.

2. SHAKH REPORT
It is a confidential report prepared by bank for the members who want to take a loan. In the shakh report loanees financial position and also guarantors financial position are mentioned. In the case of industries loan turn over report will required.

3. LOAN REPORT
After the shakh report approves, customers application go for the loan report. Bank analyses the application throughout. And report will go to next stage. 4. INSPECTION For knowing correct picture banks officers are make an inspection of property of customers. But it is done in case of totally new and doubtful customers application. For regular customers it is not required.

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5. COMMITTEE APPROVAL After completing everything and if application found correct than loan report should to come along with committee. Bank is divided into different committee for sectioning different amount of advances. If committee members feel that the file of applicant for advances is correct and there is not any problem in granting loan than they sanction the loan. If an amount of a loan is less than the actual application amount and if a customer wants the amount which is mentioned in application to sanction the full amount. After the second application committee think over the new application and if they feel satisfied than they sanctioned full amount of application. 6. LETTER OF CONDITION In the letter of condition bank includes the rate of interest, instalments, deposits and other primary rules. Steps taken by the bank if customer is not able to repay the loan are also mentioned. 7. DOCUMENTATION Document means any matter expressed or described upon any substance by means of letters, figures, or marks or by more than one of those means intended to be used or which may be used for the purpose of recording that matter. At BANK OF INDIA different documents are required for different Loans / Advances like promissory note, letter of guarantee, equitable mortgage and Hypothecation of vehicle etc.

CHAPTER 4
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DATA Collection and Analysis

For the preparation of the project both types of data are used. Primary Data
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Secondary Data

4.1 Primary Data:Primary data was collected from existing customers to know about their experience with the loan process with Bank of India. The loan manager of bank was also asked questions by researcher. The following is customer survey done by researcher:1. Since how long you deal with BOI? Less than 1 year

1 to 5 years

More than 5 Years

2. Besides loan, what are the other facilities you are enjoying with BOI?
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Savings bank Account

Fixed deposit

Recurring deposit

Current Account

None

3. Which type of loan do you prefer? Vehicle loan Education loan


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Star mortgage loan

Star home loan

Star Mitra Mahila gold loan

4. What do you feel about the documentation requirements for loan processing in BOI? Very Heavy Easy
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Difficult

Normal

5. What do you feel about the speed of processing the loan application?

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Very fast

Normal

Fast

Slow

6. What do you feel about the interest rate and processing charge?

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Heavy

Normal

High

Low

7. What do you feel about the interest rate and processing charge?

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Heavy

Normal

High

Low

8. Are you satisfied with information that you get from loan manager?

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0%-25%

25%-50%

50%-75%

75%-100%

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9. Does your bank give you the updates of upcoming of new facilities and new loan schemes?

0%-25%

25%-50%

50%-75%

75%-100%

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10.Are you satisfied with response you get when you E-mail or call for some work? 0%-25% 25%-50%

50%-75%

75%-100%

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11. Will you recommend BOI to any of your friends / relatives for loans?

Yes

No

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4.2 Interview of manager


1. Which type of loan does a customer prefer more? Vehicle loan Star mortgage loan Star Mitra Mahila gold loan Education loan Star home loan

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2. What are the different types of documents needed for a loan approval? Each lender has their own requirements for the set of documents to be submitted with loan application. Some of the documents generally required by various lenders are as follows:

Completed Loan Application Passport size photographs Proof of Identity: PAN Card/ Voters ID/ Passport/ Driving License etc.

Proof of Residence: Recent Telephone Bill/ Electricity Bill/ Property tax receipt/ Passport/ Voters ID etc.

Statements of Bank Account/ Pass Book for last 6 months to 1 year Statements of any investments showing financial background of borrower (fixed deposits, shares, fixed assets such as land etc.)

Sale Deed Agreement for Sale Copy of the approved plan for the proposed construction / extension / addition

Detailed cost estimate / valuation report from Bank's Panel Chartered Engineer / Architect

Allotment letter of Co-operative Housing Society / Apartment Owners' Association / Housing Board / NOC from the Society / Association / Builders / Housing Board

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Legal Scrutiny Report, EC for the past 13 years, Property Tax paid receipt, Khata and permission for mortgage, wherever necessary Additional Documents for Salaried Persons

Salary Certificate & Form No. 16 Recent Salary Slips with all deductions Additional Documents for Non-Salaried Persons

IT Returns filed for last several (2 or 3 typically) years Proof of business address Document describing nature of business, year of establishment, type of organization etc.

Balance Sheet and Profit & Loss Statements for the past several (2 or 3 typically) years

3. What is EMI? EMI stands for Equated Monthly Installments and represents the amount of money you have to pay each month in order to repay your loan. EMI remains the same throughout the loan period (assuming the interest rate remains the same and there are no prepayments of the loan). The EMI is applied towards paying off the principal (or loan amount) as well the interest on the loan. EMI is computed based on the loan amount, the interest rate and the loan period. EMI is an important aspect of loan search process.

4. What are the fees I would pay when I apply for a loan? Fees are essentially costs to be borne by you in addition to the
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interest on the loan. The fees may be one-time fees or periodic fees and may depend on the loan amount. Fees maybe under different names such as Processing Fees, Administrative Fees, Prepayment Fees/Penalty etc. Your total cost of the loan is basically the interest paid + any fees you incur during the loan period.

Processing Fees: Typically related to the loan application process and is charged when a loan is processed. Processing fees may be refundable and maybe charged even if the loan itself is not approved. It can typically be between 0.5%-1percent of the loan amount and could have certain minimum and maximum amount restrictions. For example, a lender could have a processing fee of 0.5 of loan amount with a minimum of Rs. 1000 and a maximum of Rs. 10000. Processing fees could also vary based on the actual loan amount also.

Administrative Fees: Some lenders have fees to maintain the loan which are charged periodically (such as quarterly or per annum).

Documentation Fees: Some lenders may charge fees for preparing documents etc.

Commitment Fees: Some lenders may charge a fee in case the approved loan is not availed by you within a certain stipulated time period.

Prepayment Fees or Penalty: Some lenders charge some penalty or fees when you prepay part of the loan amount. This can sometimes depend on the percentage of outstanding loan amount prepaid. Typically this prepayment fees can be up to 2% of the prepayment amount. Some lenders may not have any prepayment
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penalty at all. This maybe an important consideration if you plan to prepay part of the loan before the agreed loan period.

Delayed Payment Fees: If your monthly payment gets delayed for any reason, some lenders may charge this fee.

5. What strategies you would prefer while implementing new scheme in market? Advertisement Sales promotion Customers need or demand 6. How can I choose the cheapest or best loan option? The cheapest loan option is one where the total interest paid + the total fees paid over the loan duration are the smallest amount. We provide you the details of the total interest + total fees paid over the loan duration for you to make an informed decision. 7. How much time does it take for a loan to get approved? It depends on the lenders, but typical times maybe between 2-3 weeks once all required documentation is provided to the lender. Outdoor media others

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CHAPTER 5 Suggestions and Conclusion

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Suggestions
To increase more customers, the bank should provide more loan schemes most probably to retired customers and also provide guidance regarding sanctioning of loan and its procedure especially to customers who are illiterate. The bank should use easy procedures, or say, less lengthy procedure for sanctioning loan to customer. There should be less legal formalities, in case this exists, and then, these should be completed in less time. This will be helpful in attracting more customers.

Conclusion
The loan market in India has grown at a rapid and alarming rate from last few years. Bank of India has introduced several loan products in order to meet the needs of a wide variety of customers. The various Bank of India loan schemes have their different interest rates in the market. The customer can choose those which he feels are good for him and have the capacity to repay it on that specified time period. Most of the people are availing loan facility from Bank of India. People are relating with Bank of India because it satisfy with the interest rate as compare to other banks. Processing of Bank of India is fast & after all loan services is also good. Peoples related with Bank of India are more satisfied with the Employee behavior People are more satisfied by Bank of India for time taken for sanctioning the loan. From all this I conclude that Bank of India provide good loan services and many people are very satisfied from Bank of India.

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BIBLIOGRAPHY

BOOKS 1) Innovations in Banking, Romeo S. Mascarenhas 2) Indian Economy, S. Chand publishing, 2007 3) Banking strategy, Katuri Nageswara Rao, 2002 4) Banking System in India, Reforms & Perform Evolution, S.M. Jawed Akhtar & M.D. Shabbir Alam.

WEBSITES http://en.wikipedia.org/wiki/Bank_of_India http://www.bankofindia.co.in/english/home.aspx http://www.rbi.org.in/home.aspx http://www.successcds.net/Educationloan/Bank_India_education_loan http://www.deal4loans.com/loans/banks/sbi-state-bank-of-india-loan/ http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/b ankofindia/BOI

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