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ii
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k.
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Functioning of a Bank
Functioning of a Bank is among the more complicated of corporate operations.
Since
Banking involves dealing directly with money, governments in most countries
regulate this sector rather stringently. In India, the regulation traditionally has
been
very strict and in the opinion of certain quarters, responsible for the present
condition
of banks, where NPAs are of a very high order. The process of financial reforms,
which started in 1991, has cleared the cobwebs somewhat but a lot remains to be
done. The multiplicity of policy and regulations that a Bank has to work with
makes
its operations even more complicated, sometimes bordering on illogical. This
section,
which is also intended for banking professional, attempts to give an overview of
the
functions in as simple manner as possible.
Banking Regulation Act of India, 1949 defines Banking as "accepting, for the
purpose
of lending or investment of deposits of money from the public, repayable on
demand
or otherwise and withdrawal by cheques, draft, order or
otherwise."
Deriving from this definition and viewed solely from the point of view of the
customers, Banks essentially perform the following
functions, 1. Accepting Deposits from public/others (Deposits).
2. Lending Money to public (Loans).
3. Transferring money from one place to another.
4. Acting as trustees.
5. Keeping valuables in safe custody.
6. Government business.
Forms of Advances
Advances by commercial banks are made in different forms such as loans, cash
credit,
overdrafts, bills purchased, bills discounted etc. These are generally short- term
advances. Commercial banks do not sanction advances on a long-term basis
beyond
small a
proportion of their demand and time liabilities. They cannot afford to lock up
their funds for long period. Hence a considerable percentage of their advances is
repayable on demand.
Advances may be granted against tangible security or in special deserving cases
on an
unsecured/clean basis.
1. Loans
2. Overdrafts
3. Cash credits
4. Temporary Overdrafts
5. Clean advances
6. Term loans
7. Bridge loan
8. Participation loan
9. Loans to small borrowers
10. Hire purchase and leasing finance
11. Bills purchased
12. Bills discounted
Loans
Bank loans are called indirect agents of production. For achieving a sustained rate
of
economic growth over a long period, greater efforts have to be made to increase
agricultural and industrial production, and in this increased production, bank
credit
plays a significant role. But banks in India are not free to employ their funds n an
arbitrary manner, while lending, they will have to keep in mind factors like a
desirable
balance among liquidity, safely and profitability, legal and statutory requirements,
socio-economic conditions of the country, priorities set by economic planners, and
so
on. Banks try to achieve this objective through maintaining a particular
relationship
between their assets and deposits. As such, between advances and deposits in
the form
of advances among as many different types of securities and over as wide an
areas as and they avoid granting too large a proportion of their advances to one
possible,
party
or to a single industry. While these factors limit banks capability to lend, they are,
nevertheless expected to grant credit according to the changing economic scene
conditioned by the programs and priorities of different Five Year
Plans.
In a loan account the entire amount is paid to the debtor at one time, either in
cash
by or
transfer to his current account. No subsequent debit ordinarily allowed except
by
way of interest, incidental charges, insurance premiums, expenses incurred is
provided for by installment without allowing the demand character of the loan to
be
affected in any way. There is usually a stipulation that in the event of installment
remaining unpaid, the entire amount of the loan will become due. Interest is
charged
on the debit balance, usually with quarterly rests unless there is an arrangement
to the
contrary. No cheque book is issued. The security may be personal or in the form
of
shares, debentures. Government paper, immovable property, fixed deposit
receipts,
life insurance policies, goods etc.
.
.
Procedure for applying Retail Loans
Application
CIBIL Reports
Pre Credit
LAPS
Inspection
Deviation
Appraisal
Approval
Disbursal
a. Application
First of all, the applicants have to make an application to the concerned
bank
whichinhe/she wants to get loan. Also need to submit the documents that are
requested by the bank as per the needs of the
loan.
b. CIBIL (Credit Information Bureau (India) Limited)
Reports
CIBIL¶s aim is to fulfill the need of credit granting institutions for
comprehensive credit information by collecting, collating and disseminating
credit information pertaining to both commercial and consumer borrowers,
to a
closed user group of Members. Banks, Financial Institutions, Non-Banking
Financial Companies, Housing Finance Companies and Credit Card
Companies use CIBIL¶s services to check the credibility of the customer in
order process his request (i.e., loan process, credit card approval or any
sanctioning any of company¶s products to the
c. customer).
Pre Credit
Banks or financial institutions will verify the all documents submitted by the
customer for loan and the customer¶s income, liabilities, valuation of
personal properties and ability to repayment of the loan. Based on this
report, the Pre Crediting Officer suggests deviations (if any) in interest rate,
repayment period, loan amount, additional security etc. regarding the
application of the customer in order to approve the
d. loan.
Deviation
In this phase, the Loan Officer suggests deviations (if any) in the loan
amount,
repayment tenure, processing charges, security or interest rates by
considering
the Pre Credit Report of the customer prepared by Pre Crediting Officer of
the
bank. This is also an important phase in the loan procedure. Branch
Manager
can also suggest deviations at any point of time during loan sanction
e. process.
Online Automation of Customer Data
(LAPS)
LAPS (Lending Automation Processing Software) is used to automate the
customer profile i.e., personal details, employment details, income details,
CIBIL report, property details etc. Based on the details entered, the software
provides a rating to the customer.
f. Inspection (Residence, Work Place, Personal Property)
Based on the documents submitted about the residence, employment,
property
etc. are being inspected by a loan officer of the financial
g. institution.
Appraisal
Based on the inspection report submitted by the loan officer, customer¶s
credibility will be appraised which is a major phase in loan sanctioning
procedure.
h. Approval
Based on the rating given by the LAPS and the appraisal report, senior
manager of the branch or any other employee of equivalent designation will
decide whether to approve the loan or not.
i. Disbursal
Once the loan has been approved, the loan amount will be disbursed based
on
the requirement of the customer. Based on the nature of the application,
additional documents may be required during disbursement of the loan
amount.
Comparative Study of Housing Loan Applicants
Name
Age, Marital Lokesh Kumar Singh
Status & 30Yrs, Graduate
Middle &
Management,
Qualification Single Income,
Indian
Gross Oil Corporation
Employment Ltd.,
Rs73,845 Bharat Singh
Details West Bengal.
Deductions, 29Yrs, Graduate &
Proprietor,
(Salaried/ Govt. Public Sector
Rs16,744 Married
Own Business / Self Amit Kumar
Self None Employed 28Yrs, Graduate
Proprietor,
Employed)
Co- Yes Own Business / Self
Applicant Gross Income, Employed
Income Rs366,66 (Applicant)
Rs34L @ 9.50%
Details Rs39,027(Co-
(180Months),
Purchase Flexible
of Flat
Applicant)
ROI
Rs42.40L
EMIRs35,504
Deductions,
3based on
Rs5486 (Applicant)
Proposed
Income Tax Returns
Rs2000
Loan (Co-Applicant) None
Yes (Short Term)
Amount Gross Income,
EMIRs37,930 Rs14194
Relationship
repayment Deductions,
with Bank No capacity Rs1560
Loan Details Rs20L @ 8.75%
of
(Loan Amt. (240Months), Flexible
Purchase of Flat borrower
@ ROI ROI
Rs30.08L
EMIRs18,214 EMIWithin
(Tenor))
0based on LimitLimit
Purpose Proposed
Income Tax Returns Has not changed
Property Loan location in past 3 years Yes (Short Term)
Cost Amount
EMI Rs5L @ 9.00%
EMIRs27,563 (300Months), Flexible
Purchase of Old Flat
repayment ROI
Rs13.69L
EMIRs4,112
capacity
of 2based on
borrower Proposed
Income Tax Returns
Mobility of EMIWithin Loan
Individual¶s LimitLimit Amount
Location Has not changed EMIRs5,537
No. of location in past 3 years repayment
Dependents capacity
Proof of of
Income of borrower
Borrower EMIWithin
LimitLimit
Has not changed
location in past 3 years
Documents required to Process Loan Application
For General Applicant:
y
Passport size Photograph
y Age Verification Certificate (school/college/leaving certificate or mark
sheet, PAN card. Election Identity card, Passport, Driving License, Ration
Card, Birth Certificate.)
y Bank Statement for past 36 months or salary Account and any other
operating A/C.
For self Employed:
y
Computation of Income, Balance sheet, the Profit and Loss A/C along
with schedules of company and individuals for past 3 years duly
certified by C.A.
y
y
y
y
y
y
y
y
y
Memorandum/Article of Association or partnership as
applicable.
Brief profits of the company.
A/C continuity proof for the last one year.
Office address proof.
Residence address proof.
Qualification certificate for self-employed professionals.
Sale deed/ Agreement of sale. (In case of Housing Loan)
Copy of approval plan if applicable. (In case of Housing Loan)
Letter of allotment of Housing Board or society. (In case of Housing
Loan)
y
y
Permission for construction if applicable. (In case of Housing
Loan)
Valuation of property which is to be financed. (In case of Housing
Loan)
y
y
In case of agricultural land conversion into ± copy of relative
order.
NOC under the provision of ULC Regulation Act, 1976 in original.
For Salaried:
y
y
Latest salary certificate/sleep showing all the deduction of the
employer.
Four month¶s salary statements required in case of variable
salary New Delhi Institute of Management ± Bank of Baroda

25
y Latest form 16/ I.T. Returns
y Appointment/Increment letter from the employer for annual benefit to be
considered.
Note
y More or less additional documents may be required as per the banks
rules.
Terms related to Retail Loans
y
EMI: Equated Monthly Installment till the loan is paid back. It consists of a
portion of interest and the principal.
Floating Rate of Interest: Rate of interest which varies with the market
lending rate. This means that there is an element of risk of paying more
than
budgeted amount in case the lending rates goes
up.
Monthly Reducing Balance: In this system interest reduces monthly with
repayment of Principal amount.
Annual Reducing Balance: In this system principal is reduced annually at
the
end of the year so you end up paying interest even for the portion of
principal
you have actually paid back.
Fixed Rate of Interest: Rate of interest remains unchanged throughout the
period of the loan.
Processing Charge: It's a fee payable to the on applying for the
loan.
Prepayment Penalties: When loan is paid back before the agreed term of
the
loan, then banks/ institutions charge penalty for the
prepayment.
Commitment Fee: Some institution charge commitment fee in case the loan
is not availed within a stipulated period, after it is processed and
sanctioned.
Miscellaneous Cost: It is quite possible that some lenders may charge
documentation or consultant charges.
y
y
y
y
y
y
y
y
.
.
Home Loan is available for,
y
y
y
y
y
Purchase of new / old dwelling unit.
Construction of house.
Purchase of plot of land for construction of a house.
Repaying a loan already taken from other Housing Finance Company /
Bank.
Repayment period up to 25 years (floating rate
option).
,

.
.
RBI Directive for Home Loans
The Reserve Bank of India (RBI) has in the latest directive asked the
banks toIndian
be more "fair and transparent" while signing their agreements with the
consumers. This has come following complaints from various consumer sections
regarding home loans.
It has emphasized on the fact that while giving a home loan, the banks should not
tie
their loans with their own prime lending rates (PLR) which often results in pro-
bank
and against consumer interest.
y
Households should get credit counseling before signing any loan
agreement.
In such case, banks should give credit counseling to customer before giving
a
loan. Any non-governmental organization can also give independent credit
counseling to small borrowers.
y
Consumers often complain of not receiving benefits of falling interest rates
as
banks tie their floating rate loans with its PLR and even when rates fall, the
banks kept the PLR unchanged. But when interest rates are hiked, the
banks
increase the benchmark rate, thus making customers pay a higher rate and
consequently increase the number of EMIs too. The RBI has asked the
banks
to mend rules for the same.
y
Individual borrowers should ask for the exact tenure and EMI while taking a
fixed rate loan. The RBI has also resolved to look into all consumer
complaints if it is bought to the regulator's notice.
y
The IRDA (insurance regulator) has powers to take action against banks if a
customer feels cheated while buying an insurance product. On its
regulatory
role, the RBI is trying to maintain a balance between the extent of freedom
granted to the banks and the objectives of
y governance.
RBI has made it mandatory for all banks - including private and foreign
banks
- to offer a passbook to their customers with the address and telephone
number
of the nearest branch.
y
Customers have often been harassed by banks' call centers where there is
no
accountability of the query made. The "do not call" registry has also been
flouted by banks as customers are bombarded with unnecessary product
offerings. The RBI has directed the Indian Banks' Association to come out
with a single "do not call" registry or when a customer adds his name to a
single bank registry it should then stop unsolicited calls from all
y banks.
On rising credit card frauds and wrong statements given by the banks, the
RBI
has asked the customers to approach the ombudsman to redress their
problems.
This way the RBI feels would inculcate more consumer friendly practices
among Indian banks.
Tax Benefits
There are certain tax benefits for the resident Indians based on the
principal
and interest component of a loan under the Income Tax Act, 1961. It may help
one benefit
tax get up to Rs.50, 490 p.a. (approx). if interest repayment of Rs.1,50,000
p.a.
paid.isIn addition to this, one also is eligible for getting tax benefits under section
80C
on repayment of Rs.1, 00,000 p.a. that further reduces the tax liability by
Rs.33.660
p.a.
These deductions are available to assesses, who have taken a loan to either buy
or
build a house, under Section 24(b). However, interest on borrowed capital is
deductible up to Rs150, 000 if the following conditions are
fulfilled:
y
Capital is borrowed for acquiring or constructing a property on or after April
1, 1999.
y
The acquisition and construction should be completed within 3 years from
the
end of the financial year in which capital was borrowed.
y
The person, extending the loan, certifies that such interest is payable in
respect
of the amount advanced for acquisition or construction of the
y house
A loan for refinance of the principle amount outstanding under an earlier
loan
taken for such acquisition or construction.
If the conditions stated above are not fulfilled, then the interest on borrowed
capital is up to Rs30, 000 though the following conditions have to be
deductible
satisfied:
y
Capital is borrowed before April 1, 1999 for purchase, construction,
reconstruction repairs or renewal of a house
y property.
Capital should be borrowed on or after April 1, 1999 for reconstruction,
repairs or renewals of a house property.
y
If the capital is borrowed on or after April 1, 1999, but construction is not
completed within 3 years from the end of the year, in which capital is
borrowed.
In addition to the above, principal repayment of the loan/capital borrowed is
eligible
for a deduction of up to Rs1,00,000 under Section 80C from assessment year
2006-07.
Terms and conditions for availing Tax benefits on Home Loans
1. Tax deductions can be claimed on housing loan interest payments, subject
to upper
an limit of Rs1, 50, 000 for a financial year.
2. An additional loan for extension/improvement to the same house and the
individual's deductions on the existing loan are less than Rs1, 50,000; he
can
claim further benefits from the additional loan taken, subject to the upper
limit
of Rs1, 50, 000 for a financial year.
3. Tax benefits under Section 24 and deduction under section 80C of the
Income
Tax Act can be claimed only when the payment is made. If an individual
fails
to make EMI payments, he cannot claim tax benefits for the
same.
4. According to the Income Tax Act, tax rebates can only be claimed by the
loanapplicant.
5. The interest on home loans taken for repairs, renewals or reconstruction,
alsoqualifies for the deduction of Rs 150,000.
6. A husband and wife, both of whom are tax-payers with independent income
sources, get tax deduction benefits, with respect to the same housing loan;
to
the extent of the amount of loan taken in their own respective
name.
7. If an individual buys a house and sells it within the same year or after 3
years,
and if any profit is made, then a capital gains tax liability arises on the
same
for which the individual is liable to pay short-term capital gains tax since
the
sale took place in the same year. But in case, if the sale had taken place
after 3 then a long-term capital gains tax liability would have
years,
arisen.
8. On being proved that the home loan is simply an arrangement between the
loan-seeker and the builder or with a third party for the purpose of claiming
tax benefits, then tax benefits will not be allowed and benefits, previously
claimed, will be clubbed to the income and taxed
accordingly.
9. Tax benefits on interest on housing loans are allowable only for the original
loan and according to Section 24 (1), tax benefits can also be availed for a
second loan taken to repay the first loan but not for subsequent loans. This
means that if you have already availed of one loan to refinance the original
loan and now want to avail a third loan to refinance the second loan, tax
rebate
on interest payments will not be permissible.
.
Home Loan Types
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. It is always advisable to consult a
home
loan expert or consultant before applying for a home loan or purchasing a
property.
You can take different types of home loans like
y
Home Purchase Loans: These are the basic forms of home loans used for
purchasing of a new home.
y
Home Improvement Loans: These loans are given for implementing repair
works, healing and renovations in a home that has already been
y purchased.
Home Construction Loans: These loans are available for the construction of
a new home.
y
Home Extension Loans: These loans are given for expanding or extending
an
existing home. For eg: addition of an extra room etc.
y
Home Conversion Loans: These loans are available for those who have
financed the present home with a home loan and wish to purchase and
move to home for which some extra funds are required. Through home
another
conversion loan, the existing loan is transferred to the new home including
the
extra amount required, eliminating the need of pre-payment of the
previous
loan.
y
Land Purchase Loans: These loans are available for purchasing land for both
construction and investment purposes.
y
Bridge Loans: Bridge loans are designed for people who wish to sell the
existing home and purchase another one. The bridge loans help finance the
new home, until a buyer is found for the home.
Comparative Study of Bank¶s Retail Loan Products
2009-2011
Comparative Analysis of PSU Banks ± Home Loan Products
Bank
Products
Bank of Baroda
Type
Baroda
Home Loan Interest
(P.a.) State Bank of India
9.5%to Type
10.75% SBIHI-
SBI
(Fixed) FIVE
Advantage
Interest (P.a.)
8.5%to (<=Rs5L)
(>Rs50L)
8% to 10.5%
9.75% Bank of India
SBI Easy
(Fixed) 1. Construction
(Floating) (<=Rs50L)
9%(Floating)
Max. 10.5% 2. Purchase
Amount Baroda 8% to 11% 3. Repairs
Home (Fixed)
No Upper Limit
Improvement 9.25%(Floating)
Tenure 8% to 11%
Processing Loan
Baroda14.5% (Fixed)
Charges Home Loan - 25Yrs15Yrs ± 25Yrs 10%(Floating)
HomeImprovement
Home Loans Loan - Construction&
to
10Yrs Purchase
Up ± Rs3Cr
to Rs30L,
NRIs/PIOs
Up to Rs20L,Up to Rs5L - Rs1K, Repairs
0.55%
Up to ±Loan
of
Rs10L,Rs20L,
Up to Rs1Cr
0.35% of the LoanRs5L to Rs10L - 2K,
Margin Purchase
Amt.(Min.
15% Cost of athe
Rs3K,
of Plot-
Above Rs20L,Rs10L to Rs20L-Rs5K, Rs30L,
Max.-10K)
Property,
Home Loan,
0.4% of the LoanRs20L to Rs50L - Rs7K, Purchase/Acquire
Rs30L-Rs50L,
Above Rs10L,
Up to Rs20L ± 20%
Rs50L to 1Cr -Up to Rs75L ± 20%
Rs8K, of House
Rs15K
20% Cost Hold
of the-
38 Above Rs20L ±Rs1Cr15%
to 5Cr -Above
Rs10K,Rs75L ± 25% Rs1L
Rs50L-Rs1Cr,
Property
Home Improvement Loan,
Above Rs5Cr -New Delhi Institute of Management ± Bank of Baroda
Rs20K Ranges
Rs20K Up to
25% of the Project Cost
20Yrs
Rs1Cr - Rs3Cr,
Rs50K
Comparative Study of Bank¶s Retail Loan Products
2009-2011
Eligibility
1. Minimum age must be 21
years. Age of the borrower 1. The applicant should be at
Interest plus repayment period shouldleast 18Yrs old from the date of
Rates not
Upbeto beyond retirement
Rs30L,Fixed8% age
to 11%loan sanction.
or 65 years whichever is
9.5% toFloating 9% to 10% 2. The loan applicant should
Fixed
earlier
10.5% have a source of regular 1.Salaried
2.Above
Must be employed/self-
Rs30L, income. employees,
1.Equitable
employed
10.25% toor having a 3. In case of NRIs the applicantProfessionals like
39 business Mortgage(1st
10.75% unit and staying should be holding a legitimateDoctors, Lawyers,
New Delhi Institute of Management ±Charge)on
abroad
Floating least for 2 years Indian passport or a legitimate Bank of Baroda
Up toatRs30L, Engineers,
land/flat/house.
3.8.5%
Musttohave
9% minimum grosswork permit and should have 2.3 Chartered
rdParty
annual
Aboveincome
Rs30L, equivalent to been employed overseas for atGuarantee.
Accountants, Self-
Rs.5Lacs
9.25%toper annum. least 2Yrs. employed persons.
No
9.75% Requests are also
An equitable mortgage of the 1. Equitable mortgage of theSecurity consideredin
housing property and / or property. special cases from
2. Other tangible security ofother suitable Groupof
securities. individuals, NRIs,
adequate value like NSCs, Life PIOs, HUF, Prop.
Insurance policies etc., if the Firm, Partnership
property cannot be mortgaged. firmsand
± No 1. The bank charges a penaltyPrepayment Up to
corporate.
Rs20L FixedNo
Prepayment Penalty (If Closed for prepayment of the homePenaltyFloating 8.75%
from own sources)loan if the loan is pre-closed to
In case of full prepayment or even before the half of the 11%
foreclosure (other than from genuine loan tenure.
own sources) fees will be 2. There is no provision of
charged at 0.5% for each year penalty for bulk payments if the
of the residual period subject loanschemeisnot
to max. 2%.discontinued.
Comparative Study of Bank¶s Retail Loan Products
2009-2011
USPs
1. 0.25 bps concession in rate
of interest is available to 1.NoApplicationor
employeesofpreferred Administration Charges. 1. Interest is
organizationsandgroup
Analysis 2. Loans can be repaid up to the calculated on daily
y borrowers. age of 70Yrs. balance basis.
2. Hassle free processing of 3. Only Bank to offer Home 2. No Prepayment
Among PSU Banks, SBI has better product profile in home loan category.
loans as majority of proposedLoans @ 8% p.a. ROI (for 1st Penalty.
Bank of Baroda
housing competes
societies strongly with SBI by providing equivalent product
is approved Year). 3. Free Personal
profile.
by the bank. 4. Low Processing Charges. Accident Ins.
y 3. One of the Oldest Banks in5. No Upper Limit on the Loan.
Cover for the
SBI offers
India and loan at flexible
Customer Trust.interest rates by
6. Interest charging
charged on 8.00% p.a.
the daily interest rate
borrower.
for
first year.
4. One of Whereas,
the largestBank
and of Baroda
most offers flat
reducing balance. interest rate of
4. Loan 8.50%
min. amt. of
widespreadnetworksof
from the first year of loan disbursement. Rs1L for
y branches across in India. furnishing the
5. Easy
Bank and Flatoffers
of Baroda EMI a concession of 0.25bps in interest rates house/flat.
for
Repayment
employees
of Option. Organizations. Whereas, SBI offers no concession to
Govt. or Preferred
6. Interest charged on the
any
type of customers.
daily reducing balance.
y
7. Free Personal Accident Ins.
Bank
Coveroffor
Baroda process the loan application in 6 days after submitting loan
the borrower.
application. Whereas, SBI takes at least 10 to 15 days to process the loan
application.
y
Bank of India does not charge any penalty on prepayment of loan.
Whereas,
Bank of Baroda charges nil penalty on amount prepaid from own
sources.
y SBI offers a no upper limit on the loan amount. Whereas, Bank of Baroda
offers a max. amount of Rs1Cr.
New Delhi Institute of Management ± Bank of Baroda

40
Comparative Study of Bank¶s Retail Loan Products
2009-2011
Competitive Advantage ± BOB Over SBI ± Housing Loans
Bank
Concession
Bank of Baroda
Offers 0.25bps concession in Rate
of Interest to Employees of State Bank of India
Preferred Organizations & GroupNo concession in Interest Rates
Margin Borrowers. is Offered.
Prepayment Penalty Over Rs20L of loan amount only
20% of margin is charged.
Interest Rates
Up to Rs20L ± No Prepayment
EMIs Penalty (If it is closed from own
sources). Up to Rs75L of loan amount a
EMIs-Housing Loansmargin of 20% is charged.
Bank The bank charges a Penalty for
Amt.,
EMIs Prepayment of the home loan if
Rs30L
(Rs.) Bank of Baroda the loan is pre-closed even
Tenure,
Total GeneralGovt. or Preferred Organization
(8.50%) before the half of the genuine
15Yrs
Interest FloatingFixedFloatingFixed loan tenure.
(9.50%)
Paid Flexi Interest Rate Facility is Flexi Interest Rate is not
(8.25%)
(Rs) provided.provided.
(9.25%)
Flexible EMIs.Reducing EMIs.
SBI
Floating
Fixed
29,542.19
30,875.77
29,104.21
31,326.74
23,17,594.2
25,57,638.6
22,38,757.8
26,38,813.2
-
- 28,669.56
Competitive Advantage ± SBI Over BOB ± Housing Loans 22,897.25 27,859.42
Bank 17,43,101.98 24,912.39
Products 20,33,282.14
Amount
Tenure
Bank of Baroda
Less Number of Categorizations.
Maximum up to Rs1Cr.
Maximum of 25Yrs.
SBI
Wide Variety
Categorizations of
Product
No Upper Limit on the Loan.
Processing Charges
Prepayment Penalty
Maximum of 25Yrs but the
41 Individual age can be up to
70Yrs.
New Delhi Institute of Management ± Bank of Baroda
Charges a Min. of 0.35% on Loan Low Processing Charges.
Amount.
No Penalty up to Rs20L.No Penalty for Bulk Payments.
Comparative Study of Bank¶s Retail Loan Products
2009-2011
Comparative Analysis of Private Banks ± Home Loan Products
Bank
Products
HDFC Bank
1. Construction
2.Max
Purchase
- Rs1Cr
3. Repairs ICICI Bank
1. Construction
2. Purchase
Min. - Rs2L
3. Repairs
Max. - Rs1Cr HSBC Bank
1. Construction
2. Purchase
Mumbai &
Max. 3.
New Repairs
Delhi(NCR),
Amount
Tenure Rs.5L to Rs.5Cr
Processing Bengaluru,
Charges Ranges Up to 20Yrs Rs.5L to Rs.3Cr
Chennai,
Ranges Up to 25Yrs
Rs.2L to Rs.3Cr
Margin RangesUpto
1% of Loan Amt. + Service 0.5% of the loan amount or 25Yrs
Eligibility Tax as ApplicableRs1500/-(Rs2000/-for 1% of the loan
Interest Mumbai, Delhi & Bangalore), amount applied for,
Rates 1. The applicant whicheverishigher+
should be at subjecttoa
least 18Yrs
Not Required old applicable
from the Service
date Tax & minimumof
of loan sanction.Surcharge. 1. You must be employed or Rs10000plus
15%
2. Theofloan
the costHome Loa,
applicant should self-employed with a regular service tax. be in
1.Age Should
have a source of regular20%source
15% to of the Cost
of income.
Fixed13.75 15% of the
between 24Yrs Costto
income. 2.Floating
Age Should
11.25% be in between 65Yrs
1. Equitable Mortgage (1st
3. In case of NRIs the 24Yrs to on
65Yrs.
Charge) land/flat/house. 2. Income, 11% to
applicant should be holding a Rs5L p.a (salaried)
2. 3rd Party Guarantee. Fixed 14%
legitimate Indian passport or a Rs7. 5L p.a (self-
Security legitimate work permit and Floating 9% to
employed)
14%
42 should have been employed
overseas for at least 2Yrs. New Delhi Institute of Management ± Bank of Baroda
Fixed14.25%
Floating 8.75%to
9.25%
Comparative Study of Bank
¶s Retail Loan Products
2009-2011
Prepayment 1. No prepayments allowed in
first 6 monthsPenalty Nil - 2% + applicable Service 1. You can opt to
2. 6 months - 5 years, Tax & Surcharge on full pre-pay up to 25%
1.Prepayment
USPs 1.5% of original loan prepaymentof your loan every option up to 25% of
amount 1. The customer can break the 1. Doorstep delivery year.ofPre-payment
homeloan after 6 months
3. 5 years -10 years,
loan into two segments with loan papers. is permitted ofafter a
disbursement.
Analysis
0.75% of original loan minimum of 6
2.Pre-approved
y one part being charged with
amount fixed rates andBanks,
another part bank
2. Sanction approval months
withoutfollowing
loan facility.
4. > 10Among
years, Private HSBC has better product
loan profile in home loan
disbursal.
with floating rates, thus 3. Provides the
category.
No closure feeHDFC bank andhaving selected
ICICI bank a property.
competing strongly
2. For with
amount HSBC
in of bank
option by
switching
minimizing the risk factor.
providing equivalent product profile.
2. No security/guarantor is 3. Brand Image and excess has more of 25%
fromofa floating rate
y the loan amount
home loan to a
number of customers.
HDFC bank offers loan at flexible interest rates by
required. chargingfixed
sanctioned -8.25%
3%.of
ratep.a.
home
interest
3. Among rate for first
Private Banks, Amt. Prepaid
year. Whereas, HSBC bank offers flat interest loan once rate of at
a year
min.
9.00% from the first4.year of loan
Highly disbursement.
networked bank in no extra cost.
43 HDFC offers low ROI (i.e., 4. Resident Indians
India. New Delhi Institute of Management ±are eligible
Bank for
of Baroda
8.25% p.a.) on loan amt. certain tax benefits
4. An applicant¶s minimum on principal and
age should be at least 18Yrs. interest components
of a housing loan
under the Income
Tax Act, 1961.
Comparative Study of Bank¶s Retail Loan Products
2009-2011
y
HSBC bank offers a max. amount of Rs5Cr. Whereas, other private sector
banks offer a max. amount of Rs1Cr.
Comparative Study - PSU Banks Over Private Banks - Housing Loan
Bank
Categorizations
PSU Banks
PSU Banks provide Wide Variety
of Product Categorizations one of Private Banks
which is State Bank of India. LessNumber
Bank of Baroda offers 0.25bps Categorizations. of
Concession concession in rate of interest to
Govt. or Preferred Organization
No Private Bank offers a
employees.
Amount concession in rate of interest.
Prepayment Penalty
State Bank of India offers a no HSBC offers a Maximum
upperof
Bank limit on the
Baroda loan amount.amount
Charges No Fee of Rs5Cr.
on part prepayment / full Among Private Banks, Only
Interest Rates prepayment of the loan amount
Axis Bank charges No Fees
Processing Charges from own sources. prepayment of part / full loan
EMI State Bank of India offers 8.00%
amount.
Tenure interest rate for 1st year afterBank offers 8.25%
HDFC
EMIs - Housing
disbursement of loan Loan
amount.
Interest Rate for 1st year after
Bank SBI Offers Low Processing disbursement of loan amount..
Amt., Bank ofCharges.
Baroda ICICI Bank Offers 0.5%
Rs30L GeneralGovt. or Preferred
(8.50%)
Processing Charges on the
Tenure, (9.50%) Organization
loan amount.
15Yrs FloatingFixedFloatingFixed (8.25%) offers Flat EMIs.HDFC Bank offers flat EMIs.
Bank of Baroda
EMIs (9.25%)
SBI allows a maximum repayment All Private Bank allows
(Rs.)
period of 25Yrs but the individual repayment for HDFCa Max. of
Total
age must can be up to 70Yrs.15Yrs. Floating
Interest
Paid 29,983.46
(Rs) 23,97,022.8
Fixed
40,457.39
42,82,330.2
29,542.19
23,17,594.2
30,875.77
25,57,638.6
29,104.21
22,38,757.8
31,326.74
26,38,813.2
Analysis
y In Home Loan category, SBI is the market leader. Whereas, Bank of Baroda
is competing strongly by providing better products and
44services.
New Delhi Institute of Management ± Bank of Baroda
Education Loans in India
Most students and parents today realize
how expensive an education is. Whether
you hope to study at a private high school,
a college, university, or an overseas school,
tuition costs plus the costs of books and
living can quickly add up. If you are
worrying about the cost of school, you
should not feel that money has to decide
your education. There are a number of
financial aid options that can help you.
Educational loans can be one important
part of your overall financial aid package.
There are special distance education loans,
need-based loans, college loans, government based loans, and private education
loans
-- in fact, chances are excellent that there are educational loans that can meet
your
specific needs.
What Education Loans are?
Educational loans work like any other debt. That is, loans are simply specific
money
that you borrow from a bank, a private lender, or some other type of lender.
Afterwards, you must repay your debts with interest. However, unlike other types
of
loans, educational loans are different in several
respects:
Different Qualification Features
Loans created for students recognize the fact that students have not had time to
build
up credit rating. For this reason, applications for student loans are simpler and
more
streamlined. The qualifications for such loans are also usually more
lenient.
Generous Repayment Terms
Loans designed to help students pursue an education recognize that students
should
spend their school time studying, not working to repay a loan. For this reason,
many
loans created for students allow students to pay back their debts very gradually
and
only after graduating. This means that students can focus on their studies rather
than
on their loans. In fact, most loans designed for students give students the
opportunity
to put off repaying their debt until six months after graduation. This gives
studentstoasettle down and find a job before repaying their
chance
debts.
Many Various Student Loan Types are Available
Since there are so many students, each with separate needs, there are a number
of
loans designed to help students pay for their education. Many of these loans are
designed specifically to help students with their unique money issues. There are
loans
created by private sources, by the government, and by schools. Many feature
very lowrates. Some are need-based and some are not. No matter what a
interest
student's
financial needs, there is likely a loan available that can help the student meet
their
educational goals.
Comparative Study of Bank¶s Retail Loan Products
2009-2011
Comparative Analysis of PSU Banks - Education Loan Products
Bank
Products
Bank of Baroda
Type
Baroda Vidya
Interest
(P.a.) State Bank of India
10.00% Education
abroad. in
India
Corporation
Bank
or Corp Vidya
Baroda Gyan12.00% (Education in India
Max. Baroda Scholar 12.00% or abroad.)
Amount Baroda Career 12.75%
Type
Development Max.
Plan Amount In India ± Rs10L
Rs4L Abroad ± Rs20L In India ± Rs10L
Tenure Abroad ± Rs20L
Baroda
Vidya 5Yrs ± 7Yrs
Baroda Gyan Rs10L (MoratoriumPeriod- 7Yrs ± 10Yrs
BarodaRs20L Course period + 1 year or 6(Moratorium Period -
47 Scholar
months
New after getting
Delhi Institute job, Course
of Management period
± Bank of Baroda+ 1
BarodaIn India, whichever is earlier.) year or 6 months
CareerRs10L after getting job,
Development Abroad, whichever is earlier.)
PlanRs20L
A Maximum amount of Rs50L
is sanctioned based on the Merit
of the Candidate.
TypePeriod
BarodaMax.12
VidyaEMI¶s.1st
EMI to be
due12
months after
1st
disbursement
ofeach
year's loan
component.
Baroda Gyan 5 to 7Yrs
after
Moratorium
Baroda
Period
Scholar
(Course
period + 1
year or 6
months after
getting job,
whichever is
Comparative Study of Bank¶s Retail Loan Products
2009-2011
earlier.)
Baroda
Career 60 EMIs
Tenure Development (Course
Processing Plan period + 6
Charges Type months or 3
Baroda Gyan Nilmonths after
Vidya getting job,
Baroda
whichever is
Scholar 1% of the
earlier.)
Loan
Amount 1. No processing fee/ Studies in India ± Nil
Margin amount
Nil upfront charges.Studies Abroad -
Baroda Sanctioned. 2. Deposit of Rs.5000/- for Rs.2000.
(Refundable)
1. Should be an Indian nationaleducation loan for studies
Career
Development
residing in India. abroad
Up to Nilwhich will be
Secured admission to the adjusted
2.Plan Rs4L in the margin
Up to Nil
TypeMax.
eligible Amount
courses in the reputedmoney.
Above In India,
Eligibility Rs4L
BarodaNil (foreign/indian).
institutions 1.Rs4L
The 5%
applicant should be Above In India,
3.Vidya
Have secured admission to at least Abroad,
18Yrs old from the 1.Rs4L 5% be an
Baroda Gyan Up toentrance
Rs4L- Should
the course through test
date 15%
of loan sanction. Abroad,
48 / merit based
Nil selection process. Indiannational
2. The
New Delhiloan applicant
Institute should
of Management 15%
residing
± Bank ofin India.
Baroda
Above Rs4L-
have a source of regular 2.Shouldhave
5%
income. completed previous
Baroda15%
3. In case of NRIs the qualifying
Scholar
applicant should be holdingexaminations.
Baroda
a legitimate Indian passport 3. Secured admission
Career
or a legitimate work permittoProfessional/
Development
Plan Technical courses in
Comparative Study of Bank¶s Retail Loan Products
2009-2011
Eligibility
Interest
Rates Up to 10.00%
Security Rs4L
1.Above
Up to12.00% - 12.75%
Rs.4L - No security
Rs4L
2. Above Rs.4L and up to and should have been Indiaorabroad
Rs.7.5L, employed
New overseas
Delhi Institute for at through
of Management Entrance
± Bank of Baroda test
Collateral in the form of a least 2Yrs./Meritbased
49 suitable 3rd party guarantee
selectionprocess/
along with assignment of future Management quota.
income 4. Person already in
3. Above Rs.7.5L, gainful employment
Tangible collateral security not eligible for loan
equal to 100% of the loan under the scheme
amount along with assignment except for pursuing
of future income eveningcourse
Baroda Career Development covered under the
Plan, scheme of approved
Institute.
5. If a gainfully
employedperson
wants to pursue full
time education either
on study leave or by
resigningfrom
present employment,
such proposals may
beconsidered
providedthe
applicant submits the
proof in this regard
to the sanctioning
authoritybefore
disbursement of loan.
Up to Rs4L 11.25%Up to 11.00%
Rs4LAbove12.75%
Above 12.00%Rs4L±Rs5L
Rs4L ±Above11.75%
Rs7.5LRs7.5L
Above 11.50%
Rs7.5L
1. Up to Rs.4L - No1. Up to Rs.4L,
securityCo-
2. Above Rs.4L and up toobligationof
Rs.7.5L,Parent/s,Grand
Collateral security in the Parent/s (if parents
form of suitable third party are deceased). No
guarantee. The bank may, at other security.
its discretion, in exceptional 2. Above Rs.4L and
cases, waive third party up to Rs.7.5L,
guarantee if satisfied withCo obligation of
the net-worth/means of Parent/sGrand
parent/s who would be Parent/s (if parents
executing the documents as aredeceased)
"joint borrower".togetherwith
Comparative Study of Bank¶s Retail Loan Products
2009-2011
Security
1. 100% tangible collateral
security by way of mortgage of3. Above Rs.7.5L,
property or assignment of Tangiblecollateral
All loans should be secured
securities
Prepayment Charges 1%NSC, KVP,
of the LIC
Outstanding security
by of suitable value,
parent(s)/guardian
Charges1%ofthe of the
policy, FDR etc.
USPs Loan Amount.Outstanding along
studentwith
Loan Amount.Penalty the assignment
borrower. In case of
2. Personal guarantee of Father
1. 1% interest concession, if of future income of the
marriedperson,co-
/ mother of the applicant or any student
obligatorfor
canpayment
be eitherof
interest debited during the
other person having sufficient 1.Low
spouse
Processing
installments.
or the parent(s)/
repayment holiday is serviced.Charges. collateral in the form
worth. parents-in-law
2. Hassle free processing. 2. Interest charged on the 1.1%interest
of suitable third party
3. One of the Oldest Banks in daily reducing balance. guarantee.
concession,if
Analysis
India and Customer Trust. 3. 0.5% Concession in rate interestdebited
3. Above Rs.7.5L,
y
4. One of the largest and mostof interest to loans for girl during
Among PSU Banks, Bank of Baroda has better product profile.Co-obligation
widespreadnetworksof Whereas, SBIof
the repayment
student. Parents/Grand
holiday is serviced.
competing strongly.
branches across in India. 4. One of the Oldest Banks Parents
2. 0.5% (if Parents
Concession
y 5. Easy EMI Repayment in India and Customer aredeceased)
in rate of interest to
y Option. Trust. togetherwith
loans for girl student.
Bank
6. 1%ofConcession
Baroda offers a max.
in rate of amount
5. One of the
Rs50L.
largest and 3. tangiblecollateral
0.5% Concession
interest
Bank to loansoffers
of Baroda for girl
1%student.
concession to girl students.
most widespread networkWhereas,
of rateSBI
security
in and withto
ofalong
interest
Corporation Bank offersthe
7. Interest charged on daily
0.5% branches across
concession to girl in India loans
students. the assignment
for SC/ST. of
50 reducing balance. future income of the
4.Maximum
student
± Bank offor
New Delhi Institute of ManagementRepayment payment
Period of
Baroda
of installments. The
10Yrs.
loan to be fully
securedafter
maintaining
prescribed margin on
respective securities.
Nil
Comparative Study of Bank¶s Retail Loan Products
2009-2011
Competitive Study ± BOB Over SBI ± Educational Loan
Bank
Categorizations
Concession
Bank of Baroda
Wide Variety of Product
Categorizations.
Charges1%ofthe
1. 1% Concession
outstanding
Charges in rate of
loan Interest
10.00% amount.
interest to loans
Rate up to Rs4L. for girl Charges 11.25% Interest
student.
Low EMI for the loans up to RateStateup toBank
Rs4L.
of India
2. 1% interest concession, ifHigh EMI for the loans up to
Rs7.5L. LessNumberof
interest debited during the Rs7.5L when compared to
Amount Categorizations.
repaymentholidayis Bank
Prepayment Penalty 0.5% of Baroda. in rate of
Concession
serviced.
Interest Rates interest to loans for girl
A Maximum amount of
EMIs student.
Rs50L is allowed.
A Maximum amount
Rs20L is allowed. of
EMI- Educational Loan
Product
Rs 4L @ 5Yrs
Rs 5L @ 5Yrs Bank of Baroda
Rs 15L @ 5Yrs EMITotal Interest State Bank of India
8,598.821,09,929.20 EMITotal
Baroda Career Development Plan Interest
Rs 10L @ 5Yrs 11,122.221,67,333.20 8,746.921,24,815.20
Rs 15L @ 5Yrs 33,366.675,02,000.20
22,625.30 11,312.651,78,759
33,937.95 3,57,518 33,177.484,90,648.8
5,36,277 -
- -
Analysis -
y Among PSU Banks, Bank of Baroda is the market leader. Whereas, SBI is
competing strongly as it is oldest and highly networked bank in
51India.
New Delhi Institute of Management ± Bank of Baroda
Comparative Study of Bank¶s Retail Loan Products
2009-2011
Comparative Analysis of Private Banks - Education Loan Products
Bank
Products
Axis Bank
Education in India or abroad
HDFC Bank
HSBC Bank
Education in India or Education in India or
abroad
In India for Students and
± Rs15LUpto abroad
Rs1Cr
also Working
Abroad ± Rs20L Executives.
1% of the loan
Max. Working Executivesamount ± applied
Rs6L (Min.
for,± Rs5L)
Amount
Tenure 5Yrs ± 7YrsRanges Up to 15Yrs
subjecttoa
In India ± Rs10L (MoratoriumPeriod-minimumof
Course period + 1 year plus
Rs10000 or 6 service
Processing Abroad ± Rs20L
(Min. months after getting
tax. job,
Charges 1% of±theRs50K)
loan amount appliedwhichever
Max. 2% of the loan amt.
5Yrs ± 7Yrs 5% to 15%isofearlier.)
the Loan 15% of the Loan
Margin for, subject to a minimum of
AmountAmount
Rs10000
Up to Nilplus service tax.
1.Rs4L
Applicant need to be a
Eligibility Above InIndian
Resident India,
Rs4L 5%
Securedadmissionto 1. Applicant need to be a
Abroad,
professional/technical courses Resident Indian 1.Age Should be in
15%
in India or Abroad through 2. Applicant should be agedbetween 18Yrs to
Eligibility
Entrance Test/Merit based between 16 - 35 yrs. 65Yrs
Interest
selection process. 3. All Loans require a co- 2. Income,
Rates 15.75%
Security applicant. Rs5L p.a. (salaried)
12.00% to 14.00%
Rs7. 5L p.a. (self-
13.00%
employed)
1. Third party guarantee and/or Up to Rs7.5 L ,1.Residential
52 collateral security may be asked No Collateral Or Third Property. Both self-
for in appropriate cases.PartyNew
Guarantee.occupied and owned
Delhi Institute of Management ± Bank of Baroda
2. Assignment of LIC policy inby either primary or
Comparative Study of Bank¶s Retail Loan Products
2009-2011
favor of the Bank for the sum
assured being at least 100% of
Security
the loan amount. The policy is Above Rs7.5L,
kept alive during the currency co-applicant.
of the loan. To ensure this, the Charges 4% on2. Must have a co-
the
annual premium may be 1. Residential
principal Propertyapplicant in India
out sanding
USPs
included in the computation of 2. HDFC Bank Fixed and can only be
the loan requirement, along1. Insurance Protection
1. Pre-approved
with the from
loan
tuition fees and facility. Depositparents or spouse of
otherHDFC ERGO.
2. No Security 3.isLIC/NSC/KVPstudent.
required2. No Prepayment
recurring charges. Further, the 1. Up to 25% of the
Penalty.
Analysis
future income of the student outstanding loan ±
y to be assigned inup
needs to Rs7.5L
favor of of loan Nil (Once Every
3. Doorstep
the Bank delivery
for meeting the of Banks,
home amount. Financial Year).
Among Private Sector HSBC has better product profile offering a
loan papers.
installment obligations. 2. Excess of 25% of
max.
loan of Rs1Cr. Whereas, other banks offers a max. loan amount of
Prepayment 3. No Security is required the outstanding loan
y Nil
Rs20L. for studies in Management
Penalty y ± 4% of the amount
Institutes up to Rs12L prepaid.
HDFC Bank offers (Min.).
a low interest rate of 12.00% among private sector
1. Prepayment option
banks.
HSBC bank offers 4. a max.
A tax repayment tenure of 15Yrs. Whereas,
rebate is offered Axis of
up to 25% bank
loan
under
offers nil penalty on section 80-E
prepayment of the
of loan amount. after 6 months of
53 Income Tax Act 1961* for disbursement.
the entire interest
New Delhi amount
Institute of Management2. 0.5%ofConcession
± Bank Baroda
paid towards your education in rate of interest to
loan. loans for girl student.
3. A Max. amount of
Rs1Cr is provided.
Comparative Study of Bank¶s Retail Loan Products
2009-2011
Comparative Study - PSU Banks Over Private Banks - Education Loan
Bank
Categorizations
PSU Banks
Bank of Baroda provides Wide
VarietyofProduct
Corporation Bank charges Nil as
Categorizations.
penalty on the prepaid loan Private Banks
1. Bank of Baroda Offers,
amount. LessNumber
Bank a.1% Concession
of India in rate of Categorizations.
offers reasonable of
interest to
Interest loans for girl student.
Rates.
Concession
SBI b.1%
Offersinterest concession, if
Low Processing
interest HSBCBankOffersa
Charges.debited during the
Amount repayment holiday is serviced. Concessionof0.5%
Prepayment Penalty 2. Corporation Bank Offers, Concession in rate of interest to
a.0.5% Concession in rate loans
HSBC for girlastudents.
offers
of interest to loans for SC/ST. amount of Rs1Cr. Maximum
Interest Rates Bank of Baroda offers a Max.
Processing Charges amount of Rs50L.
EMI
Tenure
Axis Bank also charges Nil as
EMI- Educationalpenalty
Loan on the prepaid loan
Product amount.
Rs 4L @ 5Yrs HDFC Bank offers 12.00%
Rs 5L @ 5Yrs Bank of Baroda Interest Rate.
Rs 15L @ 5Yrs EMITotal Interest HSBC Bank Offers 1%
HDFC Bank
8,598.821,09,929.20 Processing Charges on the loan
Baroda Career Development EMITotal Interest
Plan
Rs 10L @ 5Yrs 11,122.221,67,333.20 amount. 8,897.781,33,866.80
Bank of Baroda offers Flat HDFC Bank also offers flat
33,366.675,02,000.20
Rs 15L @ 5Yrs 22,625.30 11,122.221,67,333.20
EMIs.EMIs.
33,937.95 3,57,518 33,366.675,02,000.8
CorporationBankallows HSBC Bank allows repayment
5,36,277
repayment for a Max. -
of 10Yrs.for a Max. of 15Yrs.
- -
Analysis -
y In Education loan category, Bank of Baroda holds edge over all other PSU and
Private Sector Banks by providing better products and
services.
54
New Delhi Institute of Management ± Bank of Baroda
Research Methodology
Research forms the foundation of any
project that is undertaken: Research in
common parlance refers to the search of
knowledge. One can also define research as
a scientific and systematic search of
pertinent information on a specific topic.
Redman and Moray define research as ³systematized effort to gain new
knowledge´.
Humans are generally very inquisitive in nature and this inquisitiveness is the
mother
of knowledge and the method employed by humans to gain knowledge of the
unknown is research.
Research thus is an original contribution to the existing stock of knowledge
making
for its advancement. It is the pursuit of the truth with the help of study,
observation,
comparison and experiment.
Research methodology is a way of systematically solving the research problems.
It
may be understood as a science of how research is done. The purpose of research
is to
discover answer to the question through application of scientific
procedures.
All this means that the researcher has to design a separate mythology for the
problem
undertaken by him which may differ from problem to problem. Research carried
out
in their project is based on theoretical and field
study.
Research Objective
The Objective of this study is to compare housing loan products and educational
loan
products of different banks with products of Bank of Baroda. This will help us to
know the Competitive Advantage of Bank of Baroda¶s loan products over its
competitors.
55
New Delhi Institute of Management ± Bank of Baroda
Comparative Study of Bank¶s Retail Loan Products
2009-2011
Steps in Research Methodology
Step 1: Objective of Study of Home-Loans and
Educational Loans
The first step in this study is the defining the
objectives of the study and according to that develops
the further plan.
Develop Research
Planthe Problem
Defining
Step 2: Developing plan for gathering information &
This stage calls for developing the most efficient plan Research Objective
for gathering the need information. Decide the
methods of data collection and the data sources,
sampling method and contact method. Decide the
primary and secondary sources for collecting the
data. Analysis of the
Information
Collect the
Information
Present the Findings
Step 3:Collect the Information
This is the most important step in the study. This is
up
to the individual¶s ability to gather the information
from the selected samples.
Make the Decision
Step 4:Analyze the Information
Step 5:Present the Findings
56
New Delhi Institute of Management ± Bank of Baroda
Sources of Data
A. Primary Data
Primary data is a data, which is gathered by the researcher himself. This
data
can be collected through experiment or through survey. The various
method
of primary data collection is,
1. Observation Method
2. Interview Method

The methods adopted in this study are,


Personal interview through structured questionnaire of Finance and
Marketing head of RLF¶s of different banks etc. Sample of questionnaire
is
attached as an annexure.
B. Secondary Data
Secondary data refers to the data which have already been collected and
analyzed by someone else usually published data are available in form
of, 1. Various publication of central, state and local
government.
2. Books Magazine and Newspapers.
3. Accounting records, sales force reports etc.
4. Websites of banks.
The methods adopted in this study are,
Collecting data from websites of various banks, articles given in various
sites etc. which are mentioned in the references of the
project.
Sampling Plan
This plan calls for the main three decisions for selecting the sample of banks from
whole population of banks in the city.
1. Sampling Unit
Here we define the target population that will be sampled. Total numbers of
banks
working in India are approximately 48.
2. Sample Size
How many banks and financial institution should be
surveyed?
Large samples give more reliable results than small samples. Here 14% of the
population of study i.e. 5 units (branches) are undertaken for
3. study.
Data Collection Procedure
Here I took all the information needed for this study, by means of personal
visits
to banks and by interview. This is the most versatile method. The interviewer
can
ask more number of questions; can record additional observations about the
respondents.
.
Findings & Conclusion
Banker¶s View
y The main businesses of bank is accepting deposits with low interest rates &
lend
it on high interest rate and enjoy the variation for long period of
time.
y Maximum interest rate will help the bank, but it will not attract customer to
earn
the interest for long period. Retail Lending in term of home loans, education
loans is more reliable to gain constant interest for long period of time and
the
recovery will be more. Maximum fund will be disbursed and will have less risk
rather than other loans, which are in short term and high interest rate
schemes.
y Among banking sector, Bank of Baroda & SBI will enjoy long term benefit &
other may have problem in future course. The number of customers that
banks
are chosen for retail loans are salaried employee in which it reduces the risk
involved in recoveries.
Customer¶s View
y In terms of Home loan, SBI is better because of its wide variety of products
andlow interest rates. Whereas, Bank of Baroda is trying to provide better
products
and services by providing concession in interest rates to govt. and preferred
organization employees.
y Bank of Baroda bank sanction loan within short time period with respect to
Nationalize banks.
y Nationalize banks takes maximum time for processing loan
application.
y In co-op. banks loan will be sanctioned but it depends upon the relation with
banking personnel & member of the banks.
y The very important benefit that the customer getting is tax benefit. Home
loans
are the only loan product which Government Of India have given relief & tax
deduction up to Rs1,50,000 p.a. for the income tax
That payee.
is the reason for customer paying less interest that he actual is
having.
Suggestions & Recommendations
y
Interest rate, processing fees, tenure, security and margin money-all these
are
important in all kinds of retail loans - housing loans, education loans, auto
loans, personal loans etc. So bank should revise all above keeping in view
of
all other banks. Bank should appoint some marketing executive for this
purpose who can give information of market and other banks, revision of
loan
timely so that the bank can revise it very soon. These marketing executives
should give report to Head Office directly for timely processing, so that the
market can be fully captured as early as possible.
y
Limit of loan amount of all retail loans should keep increasing keeping in
view
of private sector banks and other nationalized
y banks.
One of the major strengths of Bank of Baroda is timely processing of loan
application. So, it must keep on processing the loan application as soon as
possible.
y
The major competitor to Bank of Baroda in Home Loan category is State
Bank
of India. In order to compete with SBI, Bank of Baroda must introduce
attractive schemes in home loan category and must also adjust the interest
rate
that makes a major difference.
y
In Education Loan category, Punjab National Bank is a major competitor to
Bank of Baroda in Northern part of India. Bank of Baroda has a good
portfolio
in educational loan category, but it is not successful in utilizing this
advantage.
It has to promote its products well in the market in order to can gain
advantage
over Punjab National Bank.
y
Bank of Baroda should not only attract salaried people but also the
businessmen and contractors where more money will be disbursed and may
enjoy large rate of interest.
y
Bank must adopt new methodology for recovering
balances.
y
Bank needs to identify and select the sectors in which the funds are
invested
large andinfor long time period such as Home Loan.
Comparative Study of Bank¶s Retail Loan Products
2009-2011
Questionnaire
Name of the Bank :
Address :
E-mail :
1. What are your housing / education loan products?
2. What is the rate of interest for housing / education
loan?
Floating rate of interest ±
Fixed rate of interest ±
(Concession Offered if any?)
3. What are the documents required for housing / education
loan?
4. What is the maximum amount a borrower can take for housing / education
loan?
5. What percent of margin is allowed on the loan
amount?
6. What is the amount of housing loan in the total disbursement of
loan?a. 0-20% b.20-40% c.40-60% d. 60-80% e. 80% and above
7. What security is to be provided to process the
loan?
(Is a Guarantor required (If so what his / her age limit must
8. be)?)
What is the repayment period?
a. 0-5 years
b. 5-10 years
c. 10-15 years
8. How many days are required for processing a housing / education loan
application?
a. 0-10 days
b. 10-20 days
c. 20-30 days
9. How many days are required for disbursing first installment of loan
amount?d. 0-10 days
e. 10-20 days
f. 20-30 days
f. 30-40 days
g. 40 days and above
d. 30-40 days
e. 40 days and above
d. 15-20 years
e. 20 years and above
Appendix - 1
New Delhi Institute of Management ± Bank of Baroda
Comparative Study of Bank¶s Retail Loan Products
2009-2011
10. What is the amount to be paid to process the loan
application?
11. What will be the penalty if a part or full loan amount is
prepaid?
12. Whether branch will be given as per borrower¶s
choice?
13. What value added services you provide for the
borrower?
14. What is the rating system followed in processing the
loan?
15. Does interest rate depends on rating system or
not?
Appendix - 2
New Delhi Institute of Management ± Bank of Baroda
Comparative Study of Bank¶s Retail Loan Products
2009-2011
Financial Statements of Bank of Baroda
(FY 2009-2010)
Balance Sheet
Appendix - 3
New Delhi Institute of Management ± Bank of Baroda
Comparative Study of Bank¶s Retail Loan Products
2009-2011
Profit & Loss Statement
Appendix - 4
New Delhi Institute of Management ± Bank of Baroda