SUMMER TRAINING REPORT ON RETAIL LOANS & CREDIT FACILITY AT THE BANK OF RAJASTHAN LTD.

Dissertation submitted In Partial fulfillment for the Post Graduate Diploma in Business Management

GUIDED BY:
MR.M.L. Patwa
(Asstt. Manager)

SUBMITTED BY:
Mamta Choudhary Roll No: AB077 Batch: 2008-2010

The Bank of Rajasthan Ltd.

NSB SCHOOL OF BUSINESS B-II/1, MCIE, Delhi-Mathura Road, New Delhi

SUMMER TRAINING PROJECT REPORT ON

RETAIL LOANS & CREDIT FACILITY
AT THE BANK OF RAJASTHAN LTD

SUBMITTED TO:
Prof. Alok Satsangi D.G.M. (Corporate Relations Cell) NSB School of Business New Delhi

SUBMITTED BY:
Mamta Choudhary Roll No: AB077 Batch: 2008-2010 NSB School Of Business

NSB SCHOOL OF BUSINESS B-II/1, MCIE, Delhi-Mathura Road, New Delhi

2

DECLARATION
I hereby declare that the report on “RETAIL LOANS AND CREDIT FACILITY” that has been submitted to NSB School of Business and The Bank Of Rajasthan Ltd, Parivahan Marg, Jaipur. Towards Partial Fulfillment of my Post Graduate Diploma in Business Management (PGDBM) Programme is my original and bonafide work

I also certify that to the best of knowledge and beliefs this work has not been worried out another person or group of person or an organization as a whole.

DATE: PLACE:

(MAMTA CHOUDHARY)

3

ACKNOWLEDGEMENT
To acknowledge all the persons who had helped for the fulfillment of the project is not possible for any researcher but in spite of all that it becomes the foremost responsibility of the researcher and also the part of research ethics to acknowledge those who had played a great role for the completion of the project.

So in the same sequence at very first, I would like to acknowledge my parents because of whom I got the existence in the world for the inception and the conception of this project. Later on I would like to confer the flower of acknowledgement to Mr. A. k. Shukla (Asstt. Vice President) and other faculty members who taught me that how to do project through appropriate tools and techniques. Because THE BANK OF RAJASTHAN LTD. has trusted me and given me a chance to do my integrated research study, I would like to give thanks to the organization and especially to Mr. M.L. Patwa and Mrs. Megha Kotecha from the depth of my heart. Rest all bank’s employees who helped me are not only matter of acknowledgment but also authorized for sharing my success. I also thank to Mr.Alok Satsangi, Manager (Corporate Relation Cell) of NSB School of Business who guided me about making the project report.

DATE: PLACE:

(MAMTA CHOUDHARY)

4

ABSTRACT
Decision making is a fundamental part of the research process. Decisions regarding that what you want to do, how you want to do, what tools and techniques must be used for the successful completion of the project. Business schools of today realize the importance of practical knowledge over the theoretical base. Hence, most of the business schools today have mid module as well as final projects incorporated as a part of their syllabus. The summer training undertaken at THE BANK OF RAJASTHAN LTD., Parivahan Marg, Jaipur is one such experience wherein the project aims to help the organization & try out a new possibility in the field of finance. It is a new platform of learning through practical experience, which incorporates survey and comparative analysis. A survey was conducted for the project in which I personally asked some questions to the bank employees to better know the different parameters of different banks. Information regarding home loan schemes was collected from various financial institutions to compare the home loan schemes of them with THE BANK OF RAJASTHAN LTD. If anywhere something is found not in tandem to the theme then you are welcome with your valuable suggestions.

5

TABLE OF CONTENTS
Contents
Declaration Acknowledgement Abstract 1. Executive summary of the project 2. Industry Introduction
2.1 Industry Introduction 2.2 Indian housing finance sector

Page No
2 3 4 8 9
10 17 22 23 23 24 25 25 26 27

2.3 Bank of Rajasthan: All about
2.3.1 Introduction 2.3.2 History 2.3.3 Logo 2.3.4 Management Team 2.3.5 Vision, Mission & Values 2.3.6 Landmarks 2.3.7 Products/ line of activity

6

2.3.8 Retail Loan 2.3.9 Internal processing 2.3.10 Work flows

27 28 29 31 32 33 34 35 37 48 49 51 63 66 74 75 78 81

3. Research Methodology
3.1 Objective of the study 3.2 Scope of the study 3.3 Sources of primary and secondary data 3.4 Statistical analysis 3.5 Comparative analysis on different parameters 3.6 Findings 3.7 Limitations of the project

4. Personal Banking 5. Credit Facility 6. Commercial Banking 7. Share Market Position 8. Observations and Recommendations Appendix 1: Questions- Answer Appendix 2: Bibliography

7

8

EXECUTIVE SUMMARY
Banking Industry which is basically my concern industry around which my project has to be revolved is really a very complex industry.

I am Mamta Choudhary. I did my summer training with The Bank of Rajasthan Ltd. (www.bankofrajasthan.com) from 15 April 2009 to 15 June 2009.

I was assigned the task of doing comparative analysis of different financial institutions in housing finance industry. I reported to deputy manager who acted as the delivery head of this project but somewhere an officer also was very closely involved.

This comparison pushed me to revisit the plans/ strategy thought out by me. This was of immense help in improving the quality of my inputs.

I learnt a lot during the project. Firstly it provided me much needed corporate exposure (working with team, business communication, prioritizing work). Though we are continuously given inputs on soft skills and business communication during our program; but there is no better place to hone these skills than the workplace.

9

10

INDUSTRY INTRODUCTION
What is Banking?
Banking in a traditional sense is the business of accepting deposits of money from public for the purpose of lending and investment. These deposits can have a distinct feature pf being withdrawn able by cheques, which no other financial institution can offer. In addition, banks also offer financial services, which include:  Issuing demand draft & travelers cheque.  Credit cards  Collection of cheques, bill of exchange.  Safe deposit lokers  Custodian services.  Investment and Insurance Services. The business of banking is highly regulated since banks deal with money offered to them by the public and ensuring the safety of this public money is one of the prime responsibilities of any bank. That is why banks are expected to be prudent in their leading and investment activities.

Every bank has a compliance department, which is responsible to ensure that all the services offered by the bank, and the processes followd are in compliance with the local regulations and the Bank’s corporate policy.

11

The major regulations and act govern the banking business are: Banking Regulation Act, 1949  Foreign Exchange Management Act,1999  Indian Contract Act  Negotiable Instruments Act, 1881

Bank lend money either for productive purposes to individual, firms, Corporate etc. of for buying house property, cars and other consumer durables and for investment purposes to individuals and the others. However, banks do mot finance any speculative activity. Lending is risk taking. The depositor of banks are also assured of safety of their money by deploying some percentage of deposit in statutory reserves like SLR & CLR.

12

BANKING INDUSTRY
Banking System
Banking system is an integral sub-system of the financial system. It represent an important channel of collecting small saving from the households and iending it to the corporate sector.

The Indian Banking system has the Reserve Bank of India(RBI) as the apex body for all matters relating to the banking system. It is the comucopia of Banks of India and bankers to all others banks as well.

Classification of Banks

1. Non-Schedule Banks These are banks, which are mot included in the second schedule of the Banking Regulations Act, 1965. It means they do mot satisfy the conditions laid down by that schedule. They are further classified as back:  Central co-operative banks and primary credit societies  Commercial Banks

13

2. Schedule Banks Must have paid-up capital and reserve of mot less than Rs. 50, 00,000. The must satisfy the RBI than its affairs are mot conducted in a manner detrimental to the interests of its depositors. These are further classified as follow:  State co-operative Banks  Commercial Banks

Banks are further sub-divided as:1. Indian Banks: These banks are companies registered in India under companies act, 1956, their place of origin is in India. These are further classified into.

A. State Bank of India and its Subsidiaies:

This group comprises of the State Bank of India (SBI) and its seven

subsidiaries

viz., State Bank of patiala, State Bank of Hyderabad, State Bank of Travancore, State Bank of Bikaner & jaipur State Bank of Indore.

B. Other Nationalized Banks: This group consists of private sector bank that were national. The Government of India Nationalized 14 private banks in 1969 and another 6 in the year 1980.

14

C. Regional Rural Banks: The RBI established these in the year 1975 of Banking Commission. It was established to operate exclusively in rural areas to provide credit and other facilities to small and marginal armers, agricultural alboras, artisans and small entrepreneurs.

D. Old private Sector Banks: This group consists of Banks that were established by the privy states, community organization or by a group of professionals for the cause of economic betterment in their area of operations. Initially their branches slowly speard throughout the national as they grew.

E. New Private Sector Banks: These banks were started as profit oriented companies after the RBI opened the banking sector to the private sector, these banks are monthly technology driven and betterment in their branches slowly spead throughout the nation as they grew.

3. Foreign Banks:

There are banks that were registered outside India and had origiented in a foreign country.

15

Industry Introduction :
The Indian Banking industry, which is governed by the Banking Regulation Act of India, 1949 can be broadly classified into two major categories, non-scheduled banks and scheduled banks. Scheduled banks comprise commercial banks and the co-operative banks. In terms of ownership, commercial banks can be further grouped into nationalized banks, the State Bank of India and its group banks, regional rural banks and private sector banks (the old/ new domestic and foreign). These banks have over 67,000 branches spread across the country in every city and villages of all nook and corners of the land.

The first phase of financial reforms resulted in the nationalization of 14 major banks in 1969 and resulted in a shift from Class banking to Mass banking. This in turn resulted in a significant growth in the geographical coverage of banks. Every bank had to earmark a minimum percentage of their loan portfolio to sectors identified as “priority sectors”. The manufacturing sector also grew during the 1970s in protected environs and the banking sector was a critical source. The next wave of reforms saw the nationalization of 6 more commercial banks in 1980. Since then the number of scheduled commercial banks increased four-fold and the number of bank branches increased eight-fold. And that was not the limit of growth.

16

After the second phase of financial sector reforms and liberalization of the sector in the early nineties, the Public Sector Banks (PSBs) found it extremely difficult to compete with the new private sector banks and the foreign banks. The new private sector banks first made their appearance after the guidelines permitting them were issued in January 1993. Eight new private sector banks are presently in operation. These banks due to their late start have access to state-of-the-art technology, which in turn helps them to save on manpower costs.

During the year 2000, the State Bank of India (SBI) and its 7 associates accounted for a 25 percent share in deposits and 28.1 percent share in credit. The 20 nationalized banks accounted for 53.2 percent of the deposits and 47.5 percent of credit during the same period. The share of foreign banks (numbering 42), regional rural banks and other scheduled commercial banks accounted for 5.7 percent, 3.9 percent and 12.2 percent respectively in deposits and 8.41 percent, 3.14 percent and 12.85 percent respectively in credit during the year 2000.about the detail of the current scenario we will go through the trends in modern economy of the country.

Current Scenario:
The industry is currently in a transition phase. On the one hand, the PSBs, which are the mainstay of the Indian Banking System, are in the process of shedding their flab in terms of excessive manpower, excessive non Performing Assets (NPAs) and excessive

17

governmental equity, while on the other hand the private sector banks are consolidating themselves through mergers and acquisitions.

PSBs, which currently account for more than 78 percent of total banking industry assets are saddled with NPAs (a mind-boggling Rs 830 billion in 2000), falling revenues from traditional sources, lack of modern technology and a massive workforce while the new private sector banks are forging ahead and rewriting the traditional banking business model by way of their sheer innovation and service. he PSBs are of course currently working out challenging strategies even as 20 percent of their massive employee strength has dwindled in the wake of the successful Voluntary Retirement Schemes (VRS) schemes.

The private players however cannot match the PSB’s great reach, great size and access to low cost deposits. Therefore one of the means for them to combat the PSBs has been through the merger and acquisition (M& A) route. Over the last two years, the industry has witnessed several such instances. For instance, HDFC Bank’s merger with Times Bank, ICICI Bank’s acquisition of ITC Classic, Anagram Finance and Bank of Madurai.

Private sector Banks have pioneered internet banking, phone banking, anywhere banking, mobile banking, debit cards, Automatic Teller Machines (ATMs) and combined various other services and integrated them into the mainstream banking arena, while the PSBs are still grappling with disgruntled employees in the aftermath of successful VRS schemes.

18

Interest Rate Scene:
The two years, post the East Asian crises in 1997-98 saw a climb in the global interest rates. It was only in the later half of FY01 that the US Fed cut interest rates. India has however remained more or less insulated. The past 2 years in our country was characterized by a mounting intention of the Reserve Bank of India (RBI) to steadily reduce interest rates resulting in a narrowing differential between global and domestic rates.

The RBI has been affecting bank rate and CRR cuts at regular intervals to improve liquidity and reduce rates. The only exception was in July 2000 when the RBI increased the Cash Reserve Ratio (CRR) to stem the fall in the rupee against the dollar. The steady fall in the interest rates resulted in squeezed margins for the banks in general.

19

INDIAN HOUSING FINANCE SECTOR
Growth trends:
The Indian housing finance industry has grown by leaps and bounds in past few years. Total home loan disbursements by banks and housing finance companies (HFCs) has risen from Rs. 29359.29 crores in 2001-02 to Rs. 51672.7 crores in 2002-03 witnessing a phenomenal growth of 76% during this period.

Table: Home loan disbursements (in Rs. Crores) Year HFCs Banks
9911.35 9787.24 14744.85 33840.53

Total
19723.38 22425.09 29359.29 51672.7

Growth Over Previous Year (%)
13.70 30.92 76.00

1999-2000 9812.03 2000-01 12637.85 2001-02 14614.44 2002-03 17832.17* * Provisional figure

Source – National Housing Bank (NHB)

The robust growth experienced by the industry in the last few years has been triggered by a number of factors, some of which are listed below:  Tax rebates on housing loans announced in the recent budgets.  Lowering of real estate prices to affordable levels

20

 Slashing of interest rate on home loans. Fixed interest rate calculated on an

annual rest basis for a loan of Rs. 5 lakhs and tenure of 15 years has fallen from 16% in 1997-98 to 11.4% in 2002-03. This declining trend is expected to continue in the years to come with industry experts expecting fixed rates and floating rates to fall by another 150 basis points in 2004.

The impact that lower interest rates have had on home loan disbursements can be seen from the graph given below:

Home Loan Disbursements vs Interest rate
60000 14.25 Home Loan Disbursements ( in Crores) 50000 40000 30000 20000 10000 0 1999-2000 2000-01 Year 2001-02 2002-03 19723.38 13.25 29359.29 22425.09 12.5 13 12.5 12 11.45 11.5 11 51672.7 14 13.5 Interest Rate 14.5

Note: Interest rates plotted in the above graph are fixed interest rates calculated on an annual rest basis for a loan of Rs. 5 lakhs and tenure of 15 years

21

Increasing share of Banks:
Banks despite being a late entrant have overtaken the HFCs in the home loan market. The share of banks in total home loan disbursements has risen from 43.6% in the year 2000-01 to 65.5% in 2002-03.

Share in total home loan disbursements in 2000-01

Share of Banks, 43.60% Share of HFCs, 56.40%

Share in total home loan disbursements in 2002-03

Share of HF Cs, 34.50%

Share of Banks, 65.50%

Changing age profile of borrowers:
22

The Indian home loan market has witnessed a distinct shift in the age profile of borrowers. Two to three years back, a large number of borrowers used to be in their late 30s and early 40s but today greater number of borrowers is in their mid 30s. This is because loans today are more affordable and are available at better terms.

Housing finance companies and banks are introducing various schemes to attract this new segment of borrowers. Free home insurance, lower rates for purchase of consumer durables, household goods, personal computers, cars, two wheelers for existing home loan customers, refinance option being some of them.

Survey highlights:
With the objective of assessing the performance of the Indian housing finance industry and the future growth potential of this industry, FICCI undertook an extensive survey. The 42 respondents comprised of Housing Finance Companies (HFCs) and banks that have forayed into this sector.

Size of home loan
In spite of the fact that companies today offer home loans for as much as Rs 1 crore, the survey reveals that the size of the home loans taken by individuals continues to be small .
 59 per cent of the respondents say that maximum numbers of loans are of a size less

than Rs 5 lakh.

 36 per cent of the respondents reveal that most of the housing loans are in the range 23

of Rs 5-10 lakhs.
 5 per cent of the respondents reveal that most of the housing loans are in the range of

Rs 10-15 lakhs

Tenure of home loan
 The repayment period for majority of home loans taken by individuals is 10-15 years as indicated by 82% of the respondents.
 9% of the respondents believed that repayment period for most of the home loans is

5-10 years.
 9% of the respondents believed that repayment period for most of the home loans is

15-20 years.

Default Rate
The default rate stands at a low of 1.47 per cent in case of home loans

24

BANK OF RAJASTHAN: ALL ABOUT
25

2.3.1 Introduction:
Bank is an establishment for the custody of money which it pays out on a customer’s order. Bank of Rajasthan, a leading Private Sector Bank, having branches all over India with prominent presence in Rajasthan and specialized forex, Industrial finance branches.

The Bank is committed to the highest level of customer satisfaction though personalized, customer friendly and efficient services.

Bank of Rajasthan, with its stronghold in the state of Rajasthan, has a nationwide presence, serving its customers with a mission of “together we prosper” engaging actively in commercial banking, Merchant Banking, Auxiliary services, consumer banking, deposit & money placement services, international banking, priority sector banking, Depository.

2.3.2 History:
The Bank of Rajasthan ltd. was established at Udaipur, the city of lakes in Rajasthan on the auspicious day of Akshya Tritiya on May 8, 1943 and the credit goes to the then finance minister of Mewar Government, late Shri Rai Bahadur P.C. Chatterji.The Mansingka
brothers of Bhilwara for establishing a joint stock bank with its registered office atUdaipur.

26

The bank was established with an initial capital of Rs. 10.00 lacs. Late Seth Shri Govind Ram Seksaria, an eminent Industrialist of the country, was the founder Chairman. The first
Broad of Directors comprised such men of eminence as Shri Rai Bahadur Seth Rameshwarlal Ji Duduwala, Seth Shri Subhhag Mal Ji Lodha besides the Mansighka brothers, Seth Shri Pusa Lalji Mansighka and Seth Shri Damodar Lal ji Mansighka. The other members of the board were Major Rajadhiraj Amar Singhji of Banera and the then Accountant General of Mewar, Rai Bahadur lala Sukhdayalji.

The promoters being very clear in their vision expressed their view that the word Rajasthan will be more advantageous in future for expanding activities in other princely states was expected under one Umbrella. As now is history, the individual princely states were merged under the final name for state – Rajasthan. The naming of the bank, the bank of Rajasthan ltd., glaringly reflected the foresight of the promoters.

2.3.3 Logo:

27

The logo consists of the historic Victory Tower of Chittorgarh (Rajasthan) the rising sun and sand-dunes in a circular shape of coin.

The Victory Tower, a symbol of warrior land of Rajasthan, where the Bank was founded. The Tower denotes the supremacy, the splendor and being outstanding.

The rising Sun symbolizes hopes, unlimited scope for progress and growth. The Sand Dunes represent the state of Rajasthan where the Bank came into being.

2.3.4 Organization Structure/ Management Team:
Shri P.L. Ahuja – Managing Director & C.E.O. Shri Deepak Saruparia – Dy. Managing Director Shri K.K. Sharma - Executive Director Shri Om Prakash Gupta – Addl. Vice President (Retail loans) Shri Narendra Kumar Agarwal – Addl. Vice President (Credit) Shri Surendra Chelawat – Addl. Vice President (Central Office, Jaipur) Shri Rajneesh Kumar Agarwal – (Addl. Vice President)Company Secretary

28

2.3.5 Vision, Mission And Values:
VISION
Technologically Strong Financially Sound All India presence Personalized Services Value Maximization Employee Satisfaction Skill Maximization

MISSION
Be the most preferred Bank leveralizing Technology and develop Lifelong Relationship with Customers and create Value for Employees and Stakeholders.

VALUES
Together we prosper

29

2.3.6 Landmarks:
 In the year 1948, the bank was included in the second schedule by the reserve bank of India.  In 1955, the bank was given license under section 22 of banking regulation act, 1949 by the reserve bank of India.  The bank received license to deal in foreign exchange in 1973 from the RBI.  In 1993, the bank received authority to deal as class – I merchant Banker.  The currency chest of the bank was also started in the year 1993.
 Bank’s 1st, 100th, 200th, 300th & 400th branches were opened in the year 1943, 1973,

1980, 1997 and 2006 at Bhilwara, Barmer, Jodhpur(Sardarpura), Cochin and Jaipur( Nirman Nagar) respectively.
 The Bank achieved a unique distinction when its c-scheme, Jaipur branch qualified

for ISO-9002:94 certification (Quality system certified) by DOT NORSKE VERITAS (DNV) LONDON U.K. in 1997.
 The Bank started its first ATM services in the series of Quality services to its

customers at C-Scheme Jaipur Branch from 1st July 1998.

30

The bank has made rapid strides in introduction of information technology at branch, regional and central offices levels for various operations.

At present all 463 branches are operating in on-line computerized environment. Administrative offices at Central Office, all Regional Offices and important branches are linked with e-mail facility.

2.3.7 Products/ Line of Activity:
The Bank’s line of activity is, of course, banking. It deals in various banking like Personal banking which includes accounts & deposits, loans & credit facilities, auxiliary services, Commercial banking which includes loans, Gold Card Scheme, Credit facilities to SMEs, DRS SME Scheme etc NRI banking

Internet banking.
31

The bank deals in many products like Credit card, Demat services, Foreign exchange, Stamp franking, Mutual funds, Cash management services, NEFT, RTGS, e-payment, Western union money transfer, International debit cum ATM card, Banc assurance, Mobile Banking.

2.3.8 Retail Loan:
The bank has variety of credit schemes especially suitable to individuals based on the needs, personal repayment capacity. Variety of credit schemes also include retail loan.

Retail banking refers to banking in which banking institutions execute transactions directly with consumers, rather than corporations or other banks, so as retail loan meant by. Retail loan only meant for individuals (customers). It consists of four types of loans i.e. Home loan, Mortgage loan, Vehicle loan that includes car loan and two-wheeler loan, Personal loan.

2.3.9 Internal Processing At The Bank Of Rajasthan Ltd.:
In today’s era, life moves very fast. There is very less time with people to go with process of tedious work. The Bank of Rajasthan ltd. is one of the best financial institutions, which enables the customer to get the hassle free loan at the less time.

32

The Bank of Rajasthan ltd. process of sanction up of loan is very systematic and professional.

The customer flow begins with Credit Manager, at the branch. Where in the customer has the first interface with the organization.

There are two types of customers. First, who are new while others are existing ones. This customers/applicant can come to The Bank of Rajasthan ltd. through three ways:Branch Walk In’s Direct sales agents (DSAs)

2.3.10 Work Flows:
 Regional office delegation  All Proposals

33

34

35

36

RESEARCH METHODOLOGY
3.1 Objective Of Study :
Project study which is being conducted by me for the last two month is not only a formality for the fulfillment of the two year full time Post Graduate Diploma in Business Management. But being a management student and a good employee I tried my best to extract best of the information available in the market for the use of society and people. The objectives have been classified by me in this project form personal to professional, but here I am not disclosing my personal objective which has been achieved by me while doing the project. Only professional objectives which are being covered by me in this project are as following The foremost objective of this study is by making the comparison between different financial institutions I wanted to come out with a fine essence for the success behind an organization

 The objective of making the comparative analysis with different financial institution is to find out the major competitors in home loan sector

37

 The primary objective of this project is to find out the lacunas in different products

and how the bank of Rajasthan ltd. has to work ion these fields to overcome these drawbacks.
 To find out the basis of negotiation in home loans in contemporary market situation.  One of the most important objective is that I have made the comparison between

different financial institutions because of views, queries and, perception of customers that what they find good in any organization.

3.2 Scope of the Study:
Each and every project study along with its certain objectives also has scope for future. And this scope in future gives to new researches a new need to research a new project with a new scope. Scope of the study not only consist one or two future business plan but sometime it also gives idea about a new business which becomes much more profitable for the researches then the older one.

Scope of the study could give the projected scenario for a new successful strategy with a proper implementation plan. Whatever scope I observed in my project are not exactly having all the features of the scope which I described above but also not lacking all the features –

38

 Research study could give an idea of network expansion for capturing more market and customer with better services and lower cost, with out compromising with quality.  In future customer requirements could be added with the product and services for getting an edge over competitors.
 Different parameter could also be used for the purpose of launching a new product

with extra benefits which are required by customers.  Factors which are responsible for the performance for bank can also be used for the modification of the strategy and product for being more profitable.

These all could also be interchanged with each other for each other in banks strategies for making a final business plan to affect the market with a positive way without disturbing a lot to market, customers and competitors with disturbance in market shares.

3.3 SOURCES OF PRIMARY AND SECONDARY DATA:
For the purpose of project data is very much required which works as a food for process which will ultimately give output in the form of information. So before mentioning the source of data for the project I would like to mention that what type of data I have collected for the purpose of project and what it is exactly.

39

Primary Data:
Primary data is basically the live data which I collected on field while talking with the employees and I shown them list of question for which I had required their responses. In some cases I got no response form their side and than on the basis of my previous experiences I filled those fields.

Source: Main source for the primary data for the project was my face-to-face conversation
which I got by the employees or some times filled myself on the basis of discussion with the employees.

Secondary Data:
Secondary data for the base of the project I collected from intranet of the Bank and from internet.

3.4 STATISTICAL ANALYSIS
In this segment I will show my findings in the form of graphs and charts. All the data which I got from the market will not be disclosed over here but extract of that in the form of information will definitely be here.

40

Detail:
Sample Size of Data Area Type of Data Industry Respondent : Five major players* : 34 : Retail Loan : 1. Primary : Banking : Bank Employees 2. Secondary

*Five major players have been selected for the purpose • The Bank of Rajasthan ltd. (BoR) • Punjab National Bank (PNB) • Industrial Development Bank of India (IDBI) • Axis Bank

Housing Development Finance Corporation (HDFC)

41

42

COMAPARATIVE ANALYSIS
“Poor firms ignore their competitors Average firms copy their competitors Leading firms lead their competitors.” 3.5 COMPARATIVE ANALYSIS:
Owning a piece of land or property is a lifetime dream for every individual. There are many home loans provider in the market to make your dream come true. But before you opt for any home loan provider, you need to consider certain factors related to property that you are interested in buying and also about the salient features offered by a home loan provider and also study some Home Loans and Home Insurance FAQs which helps in applying a Home Loan in India.

And the most important thing is you should know about each and every term related with Home Loans before applying for a Loan.

Any one can take different types of home loans like Bridge Loans, Home construction Loans, Home Equity Loans, Home Extension Loans, Home Improvement Loans, Land

43

Purchase Loans etc for different schemes available in the market. There are different types of home loans tailored to meet your needs. Various banks and housing finance companies have their own set of offerings as far as the best possible housing loan interest rates in India are concerned. There are a variety of housing loans available in India which includes: a) Home purchase loan b) Home construction loan c) Home extension loan d) Existing home improvement loan e) Land purchase loan On would be entitled for home loans in the range of Rs 5 lakh to a maximum of Rs. 1 crore, based on the repayment capacity, previous credit history and the cost of the property. The bank may provide a maximum of 85% of the cost of the property or the cost of construction as applicable and 75% of the cost of land in case of purchase of land. The repayment capacity is calculated taking into account factors such as: a) Age b) Income / Salary c) Qualifications d) Dependant/(s) e) Assets / Liabilities f) Credit History g) Stability / continuity of your employment/business

44

Table: PRODUCTS COMPARISON BETWEEN DIFFERENT FINANCIAL INSTITUTIONS

Banks Products
HOME LOANS FLAT PURCHASE FLAT PURCHASE IN ONGOING CONSTRUCTION BUILDING LAND PURCHASE CONSTRUCTION HOME IMPROVEMENT / RENOVATION HOME EXTENSION

BoR

PNB

IDBI

AXIS

HDFC

YES YES

YES YES

YES YES

YES YES

YES YES

YES

YES

??

??

??

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

SHIFTING / TAKE OVER OF LOAN YES TOP UP LOAN YES

YES NO

NO YES

NO YES

YES YES

Table: RATE OF INTEREST FOR DIFFERENT FINANCIAL INSTITUTIONS
45

BASIS

RATE OF INTEREST FIXED
UP TO 30.00 LACS ABOVE 30.00 LACS

FLOATING
UP TO 30.00 LACS ABOVE 30.00 LACS

Up to 5 years

12.50

13.00

9.75 (AT RPLR) 10.00 (RPLR + 0.25) 10.75 (RPLR + 1.00) 11.25 (RPLR + 1.50) UP TO 20.00 LACS

11.75 (RPLR + 2.00) 12.25 (RPLR + 2.50)

0 above 5 up to 10 years

12.75

13.50

BOR
Above 10 up to 15 years 13.00 14.00 12.75 (RPLR + 3.00)

Above 15 up to 20 years

13.50

14.50

13.25 (RPLR + 3.50)

PNB

UP TO 20.00 LACS Up to 15 years Above 15 up to 20 years 13.00

ABOVE 20.00 LACS

ABOVE 20.00 LACS

13.00

*9.50

10.50

13.00 FIXED FOR 3 YEARS

13.00 FIXED FOR 5 YEARS 11.50%

9.75 UPTO 20 LACS 9.25% (BPLR – 3.75)

10.50 ABOVE 20 LACS 9.75% (BPLR – 3.25)

IDBI
From 1 Year to Up to 25 Years

11.25%

46

AXIS

IRRESPECTIVE OF THE LOAN AMOUNT 14.00 % IRRESPECTIVE OF THE LOAN AMOUNT 14.25 %

UP TO 30.00 LACS 9.00 % UP TO 30.00 LACS 9.50 %

ABOVE 30.00 LACS 9.50% ABOVE 30.00 LACS 10.50 %

HDFC

REMARKS: Rates of Interest:

At The Bank of Rajasthan ltd., the fixed rate of interest remain constant for …………… years and variable cost depends on RPLR i.e. change with changes in RPLR. • RPLR = 9.75%

 At PNB, rate of interests remain fixed for 3 years and variable rates are available. • In case of self-employed businessman, a minimum rate of 9.75% shall be applicable irrespective of the loan amount and tenure of the loan.

47

At IDBI, the fixed rate of interest remains constant for a period of 3 years after which the rate of interest can be altered or can b kept constant depending on the sole discretion of IDBI. And floating rate of interest depends on the BPLR.

 At AXIS bank, fixed rate of interest is same for any amount & floating rate of interest depends on the amount.  At HDFC, fixed rate of interest is same for any amount & floating rate of interest depends on the amount.

Table:

DIFFERENT

PARAETERS

REGARDING

LOANS

FROM

FINANCIAL

INSTITUIONS

Banks ParaMeters

BoR

PNB

IDBI

AXIS

HDFC

Max. 200.00 lacs for all QUANTUM OF products except LOAN 10.00 lacs for repairs or renovation LCR 80%

Min. 50,000 & Max. depends Min. on lac repaymen t capacity of the borrower. 85% 90% 60 in

Min. 50,000 & Min. 1.00 lac max. 3.50 & Max. 50.00 depends lacs on repaymen t capacity of the borrower 85% 85% (Up to 90%)

AGE LIMIT

Min. yrs. Max. years

Max. years service 21 class & Max. 70 years case self

Min. 24 years & Up to 60 & Up to 65 65 years Max. 65 years in years * of 48

employed Personal guarantee GUARANTERS implied, third party’s not mandatory Personal guarantee implied, Guaranters in case not mortgage compulsory cannot be created

Guaranters not cumpulsory

Not compulso ry

COAPPLICANT PROCESSING FEES (Of sanctioned loan amount)

Not must

Not must

Must

Not must

Not must

0.50% up to 2.00 lacs & 1.00% above 2.00 lacs

0.90%

0.50%

1% + Service tax as applicable

< 3.00 lacs – 1% & > 3.00 lacs – 0.50%

SECURITY

Equitable mortgage

Equitable mortgage

Equitable mortgage

Equitable mortgage

Equitable mortgage

COLLATERAL SECURITY Yes

Yes

Yes Max. 25 years if employed & 15 years if self employed for resident India and 15 years for NRI.

Yes

Yes

REPAYMENT PERIOD

Max. 20 yrs. in all cases except max. Max. 20 9 yrs. in years case of repairs or renovation From any branch where there is CBS* system

Max. 20 years in all cases except 10 years in Max. 20 case of years renovation or extension.

FACILITY TO DEPOSIT EMIs Anywhere Banking

Within the city, any branch 49

Within the city, any branch

“Be anywhere Buy anywhere Pay anywhere

” MODE OF REPAYMENT Advance Cheques Cash Standing Payment instructions PDCs ECS 2% of the prepaymen t amount if loan take over by other bank but no charges if pay from own sources PDCs PDCs Cash payment PDCs ECS DAS

FORECLOSUR E CHARGES/ PREPAYMENT CHARGES

2%

2% if transferred to another bank but no charges if pay from own sources after 6 months of commence ment of EMI.

NIL

No charges if less than 25% of outstandin g amount is prepaid else 2% charges levied

RECOVERY/ DEFAULT COVENANTS

Rs. 250 for first time & Rs. 350 for subsequent dishonour 20% upto 20.00 lacs & 25% above 20.00 lacs

Rs. 100 Rs. 276 per per dishonour dishonour 20% of the total cost of project

Rs. 500 + taxes per cheque bounce

Rs. 100 per dishonour

MARGIN

-

20% in case of home loans & 25% in case of improvement or renovation Min. Rs. 5000 or 1% of the outstanding amount whichever is higher. 0.5% at the first time of conversio n, 25% thereafter

SWITCH OVER COST

1% of 2% of the outstanding current amount outstandi ng loan amount 12, 6 & 3 months in case of constructio 6 months n, purchase of house & repairs respectively

No charges

MORATORIU M PERIOD

50

.

CAN THE PROPERTY OUTSIDE THE CITY IS FINANCED FROM A BRANCH WITHIN THE CITY?

Yes

Yes

No

No

Yes

REMARKS:
 The Loan Credit Ratio (LCR) refers to the maximum percent of the value of the

property, which can be financed by that particular organization.
 The Maximum and minimum age limit between that the loan can be given

depends on the customer profile and on the discretion of the concerned organization. * At AXIS Bank, in case of salaried individuals, max. age is the age of superannuation
 Personal guarantee of borrower is implied and be obtained. Third party guarantee

is not mandatory. The sanctioning authority is authorized to take decision in this regard on case to case basis.
 The Processing fee is charged on the entire sanctioned loan value as upfront fee and

is to be calculated at the time of acceptance of application.
 The term collateral security refers to the additional security, which is required to be

provided by the customer if the title of the property, on which he wants loan, is not clear. For e.g. it can be personal as well as assignable security such as LIC, NSC, etc. KVP

51

 Repayments can be made with the help of advance cheques, standing instructions (Opening up of account in that particular bank), Electronic Clearing Service (ECS). [PDC = Post dated cheques, DAS = Direct at source]

 The term foreclosure means closing of account before actual date, and for that some

charges have to be paid of the as a percentage of prepaid amount.
 A charge will be levied in case of dishonour of the cheque i.e. recovery or default

covenants.  Margin = Cost of Asset
 Switching from the fixed rate to floating rate and vice versa will attract switch over

Cost of Asset – Loan Amount * 100%

cost of the outstanding amount.

Table: SOME OTHER PARAMETERS FOR LOAN FROM FINANCIAL INSTITUTIONS

Banks ParaMeters
ROI NEGOTIATION FEE NEGOTIATION DOWN PAYMENT 100%FINANCE

BoR

PNB

IDBI

AXIS

HDFC

YES

YES

NO

YES

YES

YES NO

YES NO

YES NO

YES NO

YES NO

NO

NO 52

NO

NO

NO

EASE OF YES CREDIT DOCUMENTATI ON

YES

YES

YES

YES

PROCESSING TIME

5-7 Days

3-5 Days

7 Days

5-7 Days

5-7 Days

REMARKS:
 Financial institutions do provide interest rates on negotiated terms, which may range from 0 - 0.50% lower than the prevalent terms, depending upon the fulfillment of certain criterion. For e.g., At The Bank of Rajasthan ltd. , waiver of .5% can be allowed.

 The fees or charges may include processing and administration fees, stamp duty,

service tax and education chess. It may vary up to .5%. For e.g., At The Bank of Rajasthan ltd. , waiver of .5% can be allowed.

 In general, the maximum limit of 85% of the valuation of the property can be financed by any NBFC. However, certain exceptions do exist. For e.g., HDFC provides 100% finance for home improvement for its existing customers.

53

 The processing time includes two stages: One, up to the sanction of loan

And second, up to the actual disbursement. For e.g. At The Bank of Rajasthan ltd., in Retail Hub normal processing time is 5-7 days whereas from taking proposal in branch to disbursement takes 20 days. But again it differs from customer to customer.

FINDINGS
1.

Among these 5 banks and all financial institutions, like some of the top most banks, Bank of Rajasthan also give each type of home loans while some of the banks doesn’t provide top up loan, loan for purchasing flat in ongoing construction building.

2.

Among above taking banks, Bank of Rajasthan ltd. has an advantage in its rate of interest, which is priority for most of the person while availing loan, which includes 16 different rates for different combinations of tenure and loan amount. So that each individual get benefited according to his/her requirement.

54

3. a)

POSITIVITY OF BOR FOR DIFFERENT PARAMETERS
Age limit in BOR is quite different from others which provide great range for individuals.

b)

Bank has given opportunity of depositing EMIs at anywhere because it follows “ANYWHERE BANKING”.

c)

Foreclosure charges are optimal and prevent customers to go for another financial institution.

d)

Moratorium period is different for different cases which provide flexibility and consider situation of individuals.

4.

NEGATIVITY OF BOR FOR DIFFERENT PARAMETERS
In case of processing fees, it must be either more flexible or vice versa of present norm i.e. more for less amount because most of the loans are greater than 2.00 lacs, in the favour of customers.

a)

b)

Repayment period’s range should be high in both cases.

55

LIMITATIONS OF THE PROJECT
 The sample size taking for making a comparative analysis between different players of housing finance industry is only five, which may fails to represent the actual scenario of housing finance industry.

 Some data’s like how much loan amount is granted, how much is the recovery, how much loan amount has been repaid or what is the market share of each financial institution in housing finance industry are few confidential data’s which I was unable to retrieve or find from these financial institutions.

 The rate of interest may vary according to the market environment.

56

57

PERSONAL BANKING
4.1 Deposit scheme Tax Savings Scheme

58

Features of BOR Tax Savings Term Deposit Account – 2006 (BTSTD account – 2006)

Name of Account

"BOR Tax Savings Term Deposit Account - 2006 (BTSTD account 2006)" Individuals - Singly or jointly (Jointly by two adults or one adult and one minor payable only to either or survivor)/ Hindu Undivided Family (HUF) for domestic as well as NRO accounts.

Eligibility

Minimum Maximum Amount Interest Rate

& Minimum Rs. 100/- or multiple thereof subject to a Maximum of Rs. Deposit 1.00 lacs per year. These Deposits will carry interest @ 7.75% p.a. w.e.f. 03.08.2009 . The change in interest rate of these deposits will be advised separately alongwith the change in interest rates on normal deposits. Benefit of additional interest to staff members and Senior Citizens will be allowed as in existing scheme. Thus present interest rate for staff will be 8.75%and for Senior Citizen 8.25%. Interest may be paid either on maturity or on quarterly/monthly basis as per option given by the depositor.

Payment of Interest

The deposit will be accepted for a fixed term of 5 years commencing from the date of the receipt. Period of Deposit Note: In the event of death of the depositor/ joint depositors the nominee will be entitled to encash the Term Deposit at any time before or after the maturity. Deposit will be treated as an investment U/s 80(C) within an overall limit for investment of Rs. 1.00 lacs p.a. and will be available to the first named person in case of deposits in joint names. TDS will be deducted as in case of other term deposit accounts Nomination facility will be available as in case of normal deposit accounts. However, no nomination shall be made in respect a term deposit held by or on behalf of a minor.
59

Tax Benefit

TDS

Nomination facility

The term deposit shall not be pledged for securing a loan or overdraft or as security for any other asset or as primary or collateral security.
1. The term deposit receipt shall bear the name, address, permanent

Special Condition

account number and signature of the assesses depositor. 2. The term deposit can be transferred from one branch to another branch of the bank but it can not be transferred to another bank.
3. In case no instruction for renewal on maturity are given by the

depositor/assesses the renewal will be done treating the deposit as a normal Term Deposit.

Recurring Saving Deposit (RSD) Accounts
Most suitable for the customers who desire to invest their monthly surplus funds of a fixed of a funds for a fixed period and reinvest the accured / earned interest thereon at an attractive rates of interest. The depositors can set the target for maturity amount, period & enjoy the benefit of quarterly compounding of interest.

60

FIXED DEPOSIT SCHEME
This scheme is suitable for the depositors to invest their funds at attractive rates of interest for a fixed period.

Eligibility Amount Period Interest Tax Deduction Source Nomination Transferability Option at

Individuals Singly/Jointly, Firms, Corporate bodies, Associations etc. can open the account under the scheme. Rs. 100/In days : In months : 03 to 120 months 15 to 364 days

Applicable as per term deposits rates table & payable on quarterly basis. Applicable Accepted Deposit can be transferred from one branch to another branch of the Bank at any other city. Loan or overdraft against the deposit is available. Premature payment is permissible.

Other facilities

61

CERIFICATE OF DEPOSITS
Scheme for deploying surplus funds at market driven rates of interest.

Eligibility

All individuals Singly/Jointly, Firms, Corporate bodies, Associations etc. Non-resident Indian may also subscribe only on re-partriable, and non-transferable basis in the secondary market Min. Rs. 5.00 lacs & further in multiples of Rs. 1.00 lacs. Issued at discounted price. 3 months to 12 months Mutually agreed rates of interest.

Amount Period Interest

Tax Deduction at Source Not Applicable Transferability Option Other facilities Tranferable by endorsement & delivery after 15 days of issue. Loan / premature payment is not allowed. Stamp duty borne by the bank.

ARAVALI DEPOSIT SCHEME
62

This is a reinvestment plan and has been designed to facilitate maximum return to the depositors by way of reinvesting the amount of interest earned at the same rates at which the deposit was initially accepted.

Eligibility

Individuals Singly/Jointly, Firms, Corporate bodies, Associations etc. can open the account under the scheme. Minimum Rs. 1000/- in Rural and Semi Urban branches. Minimum Rs. 2000/- in Urban and Metro branches. Additional amount in multiples of Rs. 100/-. Any number of days with a minimum period of 6 months & maximum of 10 Years. Applicable as per term deposits rates table & compounded on quarterly basis. Maturity value is payable on contracted due dates. Applicable

Amount

Period Interest

Tax Deduction at Source Nomination Transferability Option Other facilities Accepted Deposit can be transferred from one branch to another branch of the Bank at any other city. Loan or overdraft against the deposit is available. Premature payment is permissible.

JAN HITESHI DEPOSIT SCHEME
63

This scheme is designed specially for those persons who want to earn regular monthly income by way of interest. The principal amount remains intact.

Eligibility Amount

Individuals Singly/Jointly, Firms, Corporate bodies, Associations etc. can open the account under the scheme. Minimum Rs. 2500/- in Rural and Semi Urban Branches. Minimum Rs. 5000/- in Urban and Metro Branches. Additional amount in multiples of Rs. 100/Minimum 12 months (in multiples of three months) & maximum 120 months Applicable as per term deposits rates table. Interest on Deposit is payable monthly. Applicable

Period Interest Tax Deduction at Source Nomination Transferability Option

Accepted Deposit can be transferred from one branch to another branch of the Bank at any other city. Loan or overdraft against the deposit is available. Premature payment is permissible.

Other facilities

NIDHI SANCHAY YOJANA
64

(Automatic Renewal Scheme) Suitable for depositors to park deposits for short term maturities (presently, as minimum as 15 days) and convenience of automatic renewal (on due dates). The depositor is not required to visit the bank time and again for renewal since the deposit renewed automatically in the cycle of 15 days along with interest.

Eligibility

Individuals Singly/Jointly, Firms, Corporate bodies, Associations etc. can open the account under the scheme. Minimum Rs. 1,000/- & multiples of Rs. 1000/-

Amount 15 days Period Applicable as per term deposits rates table. Interest Applicable Tax Deduction at Source Accepted Nomination Available within Bank's Branches Transferability Option Other facilities Loan or overdraft against the deposit is available. Premature payment is permissible.

SUGAM JAMA YOJANA (SJY)
65

The scheme (Flexible Deposit Scheme) offers dual advantage of high rates of interest along with the facility of part withdrawal in case of need. The amount remaining with the Bank continues to earn interest at contracted rates without loose of interest no total deposit.

Eligibility

Individuals Singly/Jointly, Firms, Corporate bodies, Associations etc. can open the account under the scheme. Minimum Rs. 10,000/- & multiples of 10 units of Rs. 100/- each. Minimum 03 months (in multiples of three months) & maximum 120 months Applicable as per term deposits rates table.

Amount Period

Interest Applicable Tax Deduction at Source Accepted Nomination Available within Bank's Branches Transferability Option Other facilities Withdrawal in multiples of 10 units of Rs. 100 each is available.

SUVIDHA BACHAT YOJANA
A Scheme to save at convinces and earns higher interest.
66

Eligibility

Individuals Singly/Jointly, Firms, Corporate bodies, Associations etc. can open the account under the scheme. Minimum Rs. 100/- & maximum Rs. 25,000/- per month (in multiples of Rs. 100/-). Variable monthly instalments Rs. 100/- or above with a maximum of 10 times the initial deposit or Rs. 25,000 which ever is less is accepted. Minimum 12 months & maximum 120 months with quarterly interval. Applicable as per term deposits rates table.

Amount

Period Interest

Applicable Tax Deduction at Source Accepted Nomination Available within Bank's Branches. Transferability Option Other facilities Loan or overdraft against the deposit is available. Premature payment is permissible.

67

FLEXI FIXED DEPOSIT SCHEME

Eligibility

Any resident individual singly or jointly, including a minor through his guardian can open the account. The customer must have one operative Saving Bank / Current Account which is to be linked with Flexi Deposit

68

Amount

1] Minimum balance in Flexi Deposit A/C: Saving Bank A/C holder may open Flexi Deposit A/C with Rs. 10,000/- and Current Account holder may open Flexi Deposit A/C with Rs. 20,000/- as minimum initial deposit , future deposits in the account will be in multiples of Rs. 5,000/2] In case of Saving Bank A/C minimum balance will be Rs.10,000/- whereas in case of Current Deposit A/C minimum balance of Rs.25,000/- shall have to be maintained. The account in multiples of Rs.5,000/above the prescribe minimum balance in respective account shall be transferred to Flexi Deposit A/c before completion of Day end activity. Penalty for not maintaining minimum balance : Penalty at the rate of Rs.100/- per quarter shall be leived in case minimum quarterly average balance is not maintained in the connected saving Bank/Current Deposit A/C.This penalty shall be in addition to the amount of penalty to be levied in various types of accounts for not maintaining stipulated minimum balance. Note: No change in penalty on non-maintenance of minimum balance of Rs.5,000/- in FFD linked Saving Bank A/C

Period

The Flexi Deposit account can be opened for 15 days to 91 days (in days)as per the standing instructions of the customer.

Interest

The Flexi Deposit account is a term deposit and the rate applicable on term deposit as per rules will be paid. Senior Citizens will also get additional benefit as per rules. The facilty of nomination is also available in the Flexi Fixed Deposit Scheme.

Nomination

69

Other facilities

1] FACILITY OF REVERSE SWEEP: The scheme has inbuilt option of reverse sweep also that means when a cheque / withdrawal is presented for payment in linked Saving Bank/Current Account, number of units in multiples of Rs. 1,000/- will be paid before maturity. The premature payment of units will be made on last in first out method. 2] FACILITY OF AUTOMATIC RENEWAL: As per instructions of the customer the deposit matured can be renewed automatically on the due date.

70

LOAN/CREDIT FACILITY
Credit Facilities:
71

The Bank has variety of credit schemes specially suitable to individuals based on the needs, personal repayment capacity (illustrative only, conditions apply).

To Individual etc apart from credit facility to trade, industry, export and priority sector:

Housing Finance:
It is provided to an individual singly/jointly for the purpose of construction of house/ purchase of ready built house/land / extension of existing house/ repair of house. The amount of finance depends upon the repayment capacity of the applicant.

Car Finance:
It is provided to an individual singly/jointly, firms etc. for the purchase of new brand car for the purpose of personal/ professional/ business needs. The amount of finance depends upon the repayment capacity of the applicant.

72

Loan for Consumer Durables:
It is provided to an individual singly/jointly, firms etc. for the purchase of consumer durables such as TV, Fridge, Air Conditioner, Computer etc. for personal needs. The amount of finance depends upon the repayment capacity of the applicant.

Loan against NSC's /LIC policies etc.:
It is provided for the purpose of meeting any contingency/ personal needs. The amount of finance depends upon the repayment capacity of the applicant.

Loan against Shares:
It is provided to an individual singly/jointly, firms etc. against the shares of companies.

Loan against Deposits:
It is provided against the Term deposit of the bank.

Educational loan:
It is provided for higher study. Note: On all above loans, the interest is charged on reducing balance method.

73

74

COMMERCIAL BANKING
Loans:
To trade and industry: To meet different needs of the customer, the Bank provides various services (illustrative only, conditions apply).

Fund Based
75

• • • • • • • •

Overdrafts in Current Accounts (O.D.) Cash Credits (C.C.) Loans Bills purchase (BP) and Usance Bills Discounted (UBD) Packing Credit Loans (PCL) Foreign Bills purchase and Discounted (FBD/FUBD) Import/Export Loans Credit Facility to SMEs Sector

Non-Fund Based
• • •

Letter of Guarantee (L.G.) Letters of Credit (L.C.)
Deferred Payment Guarantees (DPG)

Gold Card Scheme for Exporters:
Rajbank Exporters Gold Card Scheme

1. Objective of the scheme:

76

To boost exports by offering export credit at competitive terms and conditions and better and efficient services, for exporters having good track record and emphasis on small and medium sector exporters.

2.Eligibility Criteria: Exporters with credit worthiness and good track record. Exporters whose accounts have

been classified as `Standard' continuously for a period of 3 years and there are no irregularities/ adverse features in the conduct of the accounts.

Exporters in the medium and small sectors, who satisfy the above conditions, will also be eligible.

Exporters who are blacklisted by ECGC of India Ltd. or included in RBI's defaulter's list/ caution list or making losses for the past 3 years or having overdue export bills in excess of 10 percent of the current year's turnover, will not be eligible under Gold Card Scheme.

3. Sanction of Credit Limits : The time frame for disposal of applications received for sanction of credit under the Gold Card Scheme would be as under: a) Fresh applications 25 days b) Renewal of limits 15 days c) Sanction of adhoc limits 07 days
77

The `in-principle' limits will be sanctioned for a period of 3 years, subject to review on annual basis and limits would be renewed subject to fulfillment of the terms and conditions and satisfactory conduct of the account.

The need-based finance would be determined taking into account the anticipated export turnover and track record of the exporter besides other aspects of credit appraisal.

A stand by limit of 20 percent of the assessed limit will be made available to facilitate urgent credit needs.

Preference would be given to exporters for granting export credit in foreign currency.

4. Rate of Interest: Rate of interest reduced up to 25 basis points on Rupee Export Credit. Rate of interest not exceeding LIBOR plus 75 basis points on Export Credit in Foreign Currency.

5. Additional Benefits:
78

Concessions in commission, refinement in exchange rates, concessions in other charges etc. International Debit Card/ ATM Card, Anywhere Banking facility, De-Mat Accounts, Waiver of commission on sale of Travellers cheques etc.

6. Tenure: The tenure of the Gold Card would be 3 year and will be automatically renewed for a further period of 3 years unless there are adverse features/ irregularities in the account. In case of any misuse of the card or observance of any violation of the terms and conditions, the Bank will have the right to recall the Card at any time.

Credit Facilities to SMEs
1.

SME Includes:
Tiny Industries:- having investment in plant and machinery up to Rs. 25.00 lac.
79

Small Scale Industry:- having investment in plant and machinery up to Rs. 100.00 lac and Rs. 500.00 lac in certain specified items under hosiery, hand tools, drugs, pharmaceuticals and stationary items and sports goods or any other as may be notified by the Central Govt. from time to time as eligibility criterion for SSIs.

Medium Enterprises:- having investment above SSI ceiling (i.e. Rs. 100.00 or Rs. 500.00 lac as above) and up to Rs. 1000.00 lac in plant and machinery.

Small Service & Business Enterprises:- Industries related service and business enterprises with investment up to Rs. 10.00 lac in fixed assets excluding land and building are eligible for benefits of SSI Sector.

2. Processing of Application:

Application received in the prescribed format (complete in all respect) will be disposed off as under.

• Up to loan of Rs. 25000.00 ------ Within One Week. • Above Rs. 25000.00 and up to Rs, 50000.00 -- Within Two Weeks
• Above Rs. 50000.00 ---- Within Three Weeks.

80

3. Collateral Security: Loans up to Rs. 5.00 lac can be considered without collateral security provided the applicant has good track record and financial position. 4. Composite Loan: Composite Loan can be sanctioned up to Rs. 100.00 lac for SSI units. 5. Rate of Interest: 1. Up to Rs. 2.00 lac. -- 11.00% 2. Above Rs. 2.00 lac to Rs. 10.00 lac -- 11.50%
3. Above Rs. 10.00 lac to Rs. 100.00 lac-- In the range from BPLR ( w.e.f. 01.05.2009 @ 15% ) to BPLR + 2% (As per Credit rating of borrower as per rules of Bank)

Note: - Rate of interest is subjected to change from time to time.

DRS SME SCHEME
Debt Restructuring Mechanism: Small and Medium Enterprise (SMEs) SME Includes:
81

Tiny Industries, Small Scale Industries (SSI), Medium Industries (ME) and Small Service & Business Enterprises. 2. Eligibility Criterion: Following viable or potentially viable SMEs are eligible • All non-corporate SMEs irrespective of the level of dues to bank.

All non-corporate SMEs, which are enjoying credit facilities from a single bank, irrespective of the level of dues to bank.

• All corporate SMEs, which have funded and non-funded outstanding up to Rs.10 crores under multiple / consortium banking arrangement. Accounts involving fraud and malfeasance and / or classified, as “Loss Assets” will not be eligible for restructuring under these guidelines. 3. Viability Criteria: The unit should become viable in 7 years and the repayment period for restructured debt shall not exceed 10 years.

Restructuring Parameters: • Minimum ROCE (Return on Capital Employed) equivalent to 5 years G. Sec. + 3%.
82

• Minimum Average DSCR (Debt Service Coverage Ratio) should be more than 1.25 and in every year it should be more than 1. • Benchmark gap between IRR (Internal Rate of Return) and COF (Average Cost of Funds) should be at least 1%. 5. Implementation Period: 60 days from date of receipt of request / reference. 6. Extent of Relief / Concession / Sacrifice: Interest not below the ceilings mentioned as under: • Working Capital: Interest 1.5% below the contracted rate. • Funded Interest Term Loan: Interest Free. • Working Capital Term Loan: Interest 1.5% below the contracted rate. • Term Loan: Concession in Interest not more than 2% (not more than 3% in case of tiny / decentralized sector units) below the contracted rate. • Additional Loan / Contingency Loan Assistance: Interest not below 1.5% from BPLR of Bank i.e. presently 15%. In no case sacrifice in principal and simple interest shall be considered.

Note:- Rate of interest is subjected to change on review of company's performance and the prevailing interest rate scenario after every 3 years from the date of sanction.
83

Charter for “Small Scale Industries”
1. Acknowledgement for receipt of loan application by branch by affixing date

stamp.

2. Time Norms for disposal of loan applications: • Upto Rs.25,000/- within a fortnight • Over Rs.25,000/- within 8-9 weeks. 3. No collateral security for advances upto Rs.5 lacs. No collateral for advances over Rs.5 lacs and upto Rs.15 lacs based on good track record and financial position. 4. Composite loan upto Rs.25 lacs is sanctioned to SSI Units. 5. Financing to SSI is available under following scheme: • TUFS of SIDBI

NEF (National Equity Fund)

• KVIC (Khadi and Village Industries Commission) • Cash Credit/ and other working capital facilities. • Term Loans 6. Loan quantum: Minimum 20% of projected annual sales turnover (Nayak Committee norms).

7. Margin (Stake of borrowers)
84

• Upto Rs. 25,000/- Nil • Over Rs. 25,000/- upto Rs. 5 lacs 20% • Over Rs. 5 lacs 25% 8. Simple Loan application form as per Kapoor Committee recommendations introduced. 9. The ceiling of advances per housing unit extended to Housing Finance Companies / Institutions for onward lending to individuals should be kept at par with that provided by Commercial Banks directly to the individuals which is presently Rs.15.00 lacs. .

85

Share Market Position
BANK OF RAJASTHAN (BKRAJ)
86

Price (Rs) 58.75 % Change 1.73

Live BSE Quotes Open (Rs) 58.15 Volume 271,666

Aug 3, 2009 12:36:00 PM High (Rs) Low (Rs) 59.25 57.55 Value (Rs) 52-Week H/L 15,960,378 76.36 / 30.35

Live NSE Quotes Price (Rs) 58.65 % Change 1.73

Open (Rs) 58.15 Volume 437,803

Aug 3, 2009 12:34:49 PM High (Rs) Low (Rs) 59.40 57.60 Value (Rs) 52-Week H/L 25,563,317 76.19 / 30.75

Market Cap P/BV (x) (Rs m) 1.01 9,479.31 *Trailing 12 months earnings, excluding extraordinary / exceptional items.

Valuation EPS (Rs)* 6.44

P/E Ratio (x) 9.12

87

Observations and Recommendations
88

OBSERVATIONS:
 By making the comparison between different financial institutions, I can come out with a fine essence for the success behind any organization.  After seeing the procedure of bank to sanction a loan, I can say that it is very safe and secured because to sanction a loan, it requires lot of approval from different levels so that risk of NPAs & debt become lesser.  The study of the project includes the major competitors in home loan sector.  To find the lacunas in products of different financial institutions.  How Bank of Rajasthan ltd. in products of different financial institutions.  Found out the basis of negotiation in home loans in contemporary market situation.

RECOMMENDATIONS:

89

 To further increase in market share Bank of Rajasthan ltd. should provide loan even

to retired person on the basis of their income profile.  To get advantage over other banks, it can consider of down payment and 100% finance in some deserving cases.
 Bank of Rajasthan should give all the necessary information regarding loan inne

brochure.  Bank of Rajasthan should start one HINDI WEBSITE for convenience of its customers and it should start toll free number so that customer can frequently take a step while applying for loan.

90

QUESTION-ANSWER
1. What is an EMI?
91

EMI (Equated Monthly Installment) is the amount payable to the lending institution every month, till the loan is paid back in full. It consists of a portion of the interest as well as the principal. 2. How is an EMI calculated? EMI Formula: l x r [(1+r)n /(1+r)n-1 ] x 1/12 l = loan amount r = rate of interest n = term of the loan 3. What are the incentives offered by lending institutions? a) Some of the lending institutions sanction the loan without requiring you to identify property as a prerequisite for eligibility b) Free accident insurance c) Discounts d) Waiving of pre payment penalty e) Waiving of processing fee f) Free property insurance

4. What are the eligibility conditions for a home loan? To qualify for a home loan, most of the lending institutions in India require you to be: a) An Indian resident or NRI b) Above 21 years of age at the commencement of the loan
92

c) Below 65 when the loan matures d) Either salaried or self employed 5. What is the best way to select the cheapest home loan? Keep the loan period constant and calculate the total amount paid for the home through the different loan options available. 6. What is a fixed rate of interest? Some institutions have a fixed rate of interest, which means the rate of interest remains unchanged for the entire duration of the loan. This means you do not benefit, even if rates of interest drop in the market. 7. What is a floating rate? This is the rate of interest that fluctuates according to the market lending rate. This means you stand the risk of paying more than you budgeted for in case the lending rate goes up.

8. What are the other costs that usually accompany a home loan? Home loans are usually accompanied by the following extra costs:

a) Processing Charge
93

b) Pre-payment Penalties c) Commitment Fees d) Miscellaneous Costs e) Registration of mortgage deed.

9. How do HFCs decide on the loan amount? Usually, most companies give up to a maximum of 85% of the cost of the house. The 15%, sometimes called 'seed money', will have to be provided by the loan applicant. The amount, for which the applicant is eligible, is determined by the age, income, no. of dependents, monthly outgoing and repayment capacity. This varies from case to case.

10. Are securities required for home loans? In most cases, the property to be purchased itself becomes the security and is mortgaged to the lending institution till the entire loan is repaid. Some institutions may ask for additional security such as life insurance policies, FD receipts and share or savings certificates.

11. What are the tax benefits of home loans? Both principal as well as interest of home loans attract tax benefits. With effect from 1st April 2005 (i.e. assessment year 2005-07) under section 80C of the Income Tax Act 1965:

94

Principal amount of repayment of loan along with other savings such as PF, PPF, Life Insurance premium etc up to a maximum of Rs 1,00,000/- will be eligible for deduction from gross income.

95

BIBLIOGRAPHY
i. ii. Arthur J. Keown, John D. Martin, J. William Petty, David F. Scott, Jr. ,“ Financial Management” William G. Zikmund, “ Research Methodology” 96

iii. iv. v. vi. vii. viii. ix.

Bank of Rajasthan’s intranet and annual report. http://google.com http://www.hdfc.com http://www.idbi.com http://www.pnb.com http://www.axisbank.com http://www.guide2homeloan.com

97

98

Sign up to vote on this title
UsefulNot useful