INDEX

Chapter no. Topics Page no.

I INTRODUCTION
Chapter Contents
o Introduction of loans
o Objective of loans
o What is loans?
o Definition of loan
o Importance and features of loan
o History of home loan
o Types of home loan
o Advantages and disadvantages of loan
o Eligibility criteria for home loan
o Profile of organisation

II REVIEW OF LITERATURE
Chapter contents
o Literature Review
III RESEARCH METHODOLOGY
Chapter contents
o Source of Primary & Secondary data

IV DATA ANALYSIS & INTERPRETATION

Chapter contents
o Survey [Questionaries’]
V FINDINGS & CONCLUSION
Chapter contents
o Findings and Recommendation
VI LIMITATION & FUTURE SCOPE
VII CASE STUDY
VIII BIBLIOGRAPHY
IX APPENDIX

INTRODUCTION
1
A Comparative study on Home loan of SBI bank & ICICI bank

CHAPTER 1

INTRODUCTION

2
Home is where the heart is-owning a home is a lifelong dream for most
of the people. Home is more or less a lifetime investment and hence home
loans are an integral part of every person who dreams and wants to have a
living space of his own.

Buying a home is a probably the biggest purchase most of us will ever

make in our lifetimes. Owning our own home is a watershed event in our
life. You are the master or mistress of your own space, your little corner
in the universe. But the process of finding your little nest is stressful one.
A once in a lifetime investment needs a loan and that is how a home loan
comes into the scheme of things in your life.

Almost every citizen wishes to purchase their home in their name and
in this day and age land and property prices have increased significantly
offering an attractive investment of individuals in India. Almost all public
and private sector banks are offering home loans at attractive rate for
purchasing their dream home. Home loan usually cover a variety of types.
All banks have come out with home loan product studded with features
and value additions that make the schemes not only attractive but also
serve as a sustainable source to the borrowers for owning their dream
home.

State Bank of India (SBI) is a multinational financial services company

headquartered in Mumbai, and in one of the largest banks in the world.
With amazing home loan products and incredible, competitive rates of
interest, SBI have definitely one of the largest players in the home loan
market. The bank has also incorporated top of the line technology into its
financial services making it a customer friendly platform for customers to
use. ICICI bank is one of the most popular multinational banks in India.
In terms of assets, it is the third largest bank in the nation and is the
fourth largest in terms of market capitalisation. With an array of services

3
to offer, ICICI is the go-to bank for many individuals all over the country.
One of its most prominent products is their home loan product. Its wide
range of home loan products clubbed with its impeccable customer
service, and its vast network of branches makes ICICI bank one of the top
banks in the country for home loans. With two heavyweights like these to
choose from, it can be a strenuous task. Below is a comparison table that
can help ease your decision-making process.

OBJECTIVES

• Ascertain the profile and characteristics of potential buyers.

• To find out the market position of loan.

• The study is done to understand the documents involve in the home

loan scheme and the repayment methodology adopted by various banks
and the HFC’s (Hosing Finance Corporation).

• To innovate home loan schemes and the risk capturing mechanism

adopted by the HFI’s and the future of the home loan segment has been
undertaken as a part of this study.

• To study scope of loans in future.

• Retail banking has been popular segment to enter into many banks.

• To know the preference of loan & advances of SBI over ICICI.

4
WHAT IS LOAN?

A loan that a business owner gets from a bank. A loan is the act of giving
money, property or other material goods to another party in exchange for
future repayment of the principal amount along with interest or other
finance charges. A loan may not be for a specific, onetime amount or can
be available as an open-ended line of credit up to a specified limit or
ceiling amount. Although many business owners who need financing will
automatically think to turn to a bank for that funding, traditionally,
paperwork and processing costs involved in making and servicing loans
have made the small loans most entrepreneurs seek too costly for big
banks to administer. In recent years, however, the relationship between
banks and small businesses has been improving as more and more banks
realize the strength and importance of this growing market. With
corporations and real estate developers no longer spurring so much of
banks' business, lenders are looking to entrepreneurs to take up the slack.
Many major banks have added special services and programs for small
businesses; others are streamlining their loan paperwork and approval
process to get loans to entrepreneurs faster. On the plus side, banks are
marketing to small businesses like never before. On the downside, the
"streamlining" process often means that, more than ever, loan approval is
based solely on numbers and scores on standardized rating systems rather
than on an entrepreneur's character or drive. You may be able to boost
your chances of getting a loan by finding a lender whose experience
matches your needs. Talk to friends, lawyers or accountants, and other
entrepreneurs in the same industry for leads on banks that have helped
people in your business. Put in the work to find the right lender, and
you'll find it pays off.

5
DEFINITION OF LOAN

Loan is “An arrangement in which a lender gives money or property to a

borrower and the borrower agrees to return the property or repay the
money, usually along with interest, at some future point(s) in time.
Usually, there is a predetermined time for repaying a loan, and generally
the lender has to bear the risk that the borrower may not repay a loan
(though modern capital markets have developed many ways of managing
this risk).

TYPES OF LOANS

Loan refers to a sum of money borrowed at a particular interest rate.

More generally, it refers to anything given on condition of its return or
repayment of its equivalent. A loan may be acknowledged by a bond, a
promissory note, or a mere oral promise to repay. Banks grants 3 types of
loans which are as Commercial loans or Industrial loans, consumer loans
and Mortgage loans

1) Commercial loans: commercial loans are mainly provided to the

business and industrial firms.
These have divided into:

 SHORT TERM LOANS: Short term loans are mainly given for a
period up to 1 year and usually granted to the business and
industrial firms to meet the working capital requirement. For eg.
Cash credit, bank overdraft etc. (loans to finance the purchase of
material or labour)
 LONG TERM LOANS: long terms loan are granted for a period
above 5 years and are granted to meet capital expenditure. For e.g.
Project Finance, Education loan etc.(Loans to purchase machinery
and equipment.). Most commercial bank offers a variable interest
rate on these loans, which means that the interest rate can change
over the course of loan. Sanction Of loan depends upon the credit

6
 and loan history of the borrower, the borrower ability to make
scheduled loan payment, the amount of capital the borrower has
invested in the business, the condition of the economy and the
value of the collateral the borrower pledges to give the bank if the
loan payments are no made.

2) Consumer loans: One of the important areas of bank financing in

recent years is towards purchase durables like TV sets, Washing
machines etc. Banks also provide liberal car finance. These days
banks are competing with one another to lend money for these
purposes as default of payment is not high in these areas as the
borrowers are usually salaried person as default of payment is not
high in these areas as the borrowers are usually salaried person
having regular income, Further, banks interest rate is also higher.
For e.g. Housing loan, medical loan, car loan, Education loan.
There are two types of consumer loans

 Closed ended credit: Closed ended loan are for fixed period of
time, fixed amount of loan, but not for a fixed purpose. The items
purchased by the consumer serve as collateral for the loan.

 Open ended credit: Open ended loan are for variable amount of
money and it does not require the borrower to specify the purpose
of the loan. For e.g. Credit cards. Most open ended loans carry
fixed interest rate and its require no collateral for the loan.

3) MORATGE LOAN : A mortgage loan or simply mortgage is a

loan used either by purchasers of real property to raise funds to buy
real estate, or alternatively by existing property owners to raise
funds for any purpose while putting a lien on the property being
mortgaged. The loan is "secured" on the borrower's property
through a process known as mortgage origination. This means that
a legal mechanism is put into place which allows the lender to take
possession and sell the secured property to pay off the loan in the
event the borrower defaults on the loan or otherwise fails to abide
by its terms. The word mortgage is derived from a Law French
term used in Britain in the Middle Ages meaning "death pledge"
7
These are usually long term loans and the interest rates charged can
be either a variable or a fixed rate for the term of the loan which
often ranges from 15-30 years. These loan are used to purchase
land or building such as household and factories which serves as
the collateral for the loan. There are many types of mortgages used
worldwide, but several factors broadly define the characteristics of
the mortgage. All of these may be subject to local regulation and
legal requirements.

• Interest: Interest may be fixed for the life of the loan or

variable, and change at certain pre-defined periods; the
interest rate can also, of course, be higher or lower.

• Term: Mortgage loans generally have a maximum term, that

is, the number of years after which an amortizing loan will
be repaid. Some mortgage loans may have no amortization,
or require full repayment of any remaining balance at a
certain date, or even negative amortization

• Payment amount and frequency: The amount paid per period

and the frequency of payments; in some cases, the amount
paid per period may change or the borrower may have the
option to increase or decrease the amount paid.

• Prepayment: Some types of mortgages may limit or restrict

prepayment of all or a portion of the loan, or require
payment of a penalty to the lender for prepayment.

• The most common way to repay a secured mortgage loan is

to make regular payments toward the principal and interest
over a set term. This is commonly referred to as (self)
amortization in the U.S. and as a repayment mortgage in the
UK. A mortgage is a form of annuity and the calculation of
the periodic payments is based on the time value of money
formulas

8
THE IMPORTANCE OF LOAN

A question that then person who does not have a good amount of money
at particular time has no right to see dreams? Is he not authorized to fulfill
his desire on time? Should he stop dreaming? No, because there is
solution for these queries. Loans are available for these purposes only.
Loans are provided to people for such critical circumstances which may
occur at any time. In anyone’s life a situation may come when all of
sudden you require cash. A moment when you do not want to borrow
cash from your relatives. There may occur any kind of emergency when
you need huge amount of money. There are various types of loans like
home loans, student loan etc. You can take any type of loan you need. For
each and every kind of need, loans are available. Home loans are
available for general home purposes like buying a luxurious car, going for
a holiday trip, educational purpose, home improvement etc.
Many of your desires can be fulfilled by this loan. Personal loans are
available for personal requirements like wedding ceremony, purchasing a
home etc. Suggest on that it is provided basically to students for higher
education. Student who want to study more but cannot afford can get
apply for such loans and continue their studies. To start a new business,
you require a huge amount of money.
A person wish willing to setup a business may not have that much cash
which can meet out his requirements. For the business loans are available.
You can get business loans to start and well establish a new business
loans to start and well establish a new business in market. Whatever may
be the kind of loan, all have fully fledged facilities. All kind loans have
their own importance. Above all, need of money explains the importance
of loans.

FEATURES OF HOME LOAN

Loan Amount: The loan amount is also determined by the repaying

capacity and credit profile.
Rate of Interest: Interest rate starts from 8.20% onwards and it can go up
to maximum of 11.35%.
9
Processing fee: Up to 1% of the loan amount or INR 1500 and for
locations such as Mumbai, Bangalore and Delhi will have to pay INR
2000

Tenure: The repayment period is up to 30 years

Easy Balance Transfer: With this facility, you can transfer your existing
home loan with other bank to ICICI Bank for a lower interest rate.

Prepayment: No charges are levied on partial prepayment or foreclosure

of the home loans and home improvement loans with floating rate of
interest. For fixed interest rate of home loans, customers will have to pay
2% of the outstanding principal with applicable taxes.

Insurance Policy: An insurance cover to protect your family against

repayment of home loan in the event of unfortunate situations.

10
HISTORY OF HOME LOAN

Home loans are usually the largest loans that consumers will ever make.
Because of this, it is important to know how home loans are started, the
different types of home loans and similarities and differences between
them. In this way, consumers can make the best decision on which loan is
the best decision on which loan is the best for their purpose.

For many years, the only way in which to obtain money to purchase a
home was to apply for a conventional home loan. This type of loan was
obtained through a bank, credit union or other private, non-government
affiliated financial institution. In 1938, the Federal National Mortgage
Association, better known as

“Fannie Mae” was created and established as a Federal agency by then-

President Franklin Roosevelt as part of his new deal. It made it possible,
even during a time when most people were out of work and had little, if
any, income to still be able to afford a home.

In 1970, the Federal Home Loan Mortgage Corporation known as

“Freddie Mac”, was created to lessen the “monopolization” of home
lending that is was felt that Fannie Mae enjoyed. Both Fannie Mae and
Freddie Mac were at one time considered “government” auspices.

11
TYPES OF HOME LOANS

Home loans are an attractive and popular means of buying a dream house
for most people. In India, the demand for home loans has increased
manifold in the last decade. Every day numerous people apply for home
loans to own a perfect abode for themselves. The fact that home loans
come with added advantages (like tax benefits) is the icing on the cake.

Lenders provide home loans not only for buying houses but for a variety
of related purposes. The home loan market is brimming with diverse
home loan products which cater to different needs of individual
customers.

The following are some popular types of home loans available in the
Indian housing finance market:

 Land purchase loans

Land purchase loans are taken to buy a plot of land on which a borrower
wishes to construct her/his house. Most banks offer up to 85 per cent of
the price of the land. These loans can be availed for residential as well as
for investment purposes. Almost all leading banks offer this loan like
ICICI Bank (land loan), Axis bank (loan for land purchase) etc.

 Home purchase loans

The home purchase loans are the most popular and the most commonly
available home loan variants. These loans can be used to finance the
purchase of a new residential property or an old house from its previous
owners.

12
In this type of loan also, lenders usually finance up to 85 per cent of the
market value of the house. These loans are provided either on fixed
interest rates or floating interest rates or as hybrid loans.

All banking institutions and housing finance companies provide this type
of loan.

 Home construction loans

These loans can be availed by those individuals who want to construct a
house according to their wishes rather than purchasing an already
constructed one. The loan application and approval process for home
construction loans are somewhat different from those of the commonly
available housing loans.

The plot of land on which the borrower wishes to construct the house
should have been bought within a year for the cost of the land to be
included as a component for calculating the total price of the house. If the
plot has been purchased more than a year ago, then the above clause is
not applicable.

The borrower has to make a rough estimate of the cost that will be
incurred for the construction of the house and then apply for the loan with
the same amount. The lender then takes over from there and analyses the
application to decide whether or not to sanction the loan.

The approval or disapproval of the same is intimated by the lender to the

applicant. The loan amount may be disbursed at one go or in several
installments according to the progress in the construction of the house.

Banks like Canara Bank, UCO Bank, Bank of Baroda provide these
loans.

 Home expansion/Extension loans

13
Home expansion or extension loans are useful in situations when people
want to expand their existing house. Expansion includes alteration in the
current structure of the residence to add extra space such as constructing a
new room, a floor, a bigger bathroom or enclosing a balcony. Though
many banks provide loans for these purposes as part of home expansion
loans, some banks lend for the same purposes as part of their home
improvement loans.

It depends on how a bank category its loans. Some popular banks which
provide home expansion loans are HDFC Bank (HDFC Home Extension
Loan), Bank of Baroda etc.

 Home improvement loans

Home improvement loans are availed by individuals who already own a
house but lack the funds to renovate it. All kinds of renovations and
repair works can be financed using this variant of home loans such as
internal and external painting, external repair works, electrical work,
water-proofing and construction of underground or overhead water tank
etc.

ICICI Bank, Vijaya Bank and Union Bank of India are among those
banks which provide specialized home improvement loans.

 Home conversion loans

Those borrowers who have already purchased a house by taking a home
loan but now want to buy and move to another house opt for the home
conversion loans. Through these loans, they can fund the purchase of the
new house by transferring the current loan to the new house. There is no
need to repay the loan on the previous home.

14
Though useful, this segment of home loans is accused of being quite
expensive. This housing finance scheme is provided by HDFC Bank
among others.

 NRI home loans

NRI home loans is a specialized home loan variant which has been
developed to assist non-residents in acquiring housing finance to buy
residential property in India. These loans are meant exclusively for the
non-resident Indians.

The formalities of availing this segment of home loans is similar to the

regular home loans which are offered to residents, only the paperwork is
a bit elaborate. Almost all public and private sector banks provide NRI
home loans.

 Balance transfer loans

Balance transfer option can be availed when an individual wants to
transfer his home loan from one bank to another bank. This is usually
done to repay the remaining amount of loan at lower interest rates or
when a customer is unhappy with the services provided by his existing
lender and wants to switch to another lender.

Banks such as Deutsche Bank, ICICI Bank, Kotak Mahindra Bank offer
this facility among other lenders.

 Stamp duty loans

Stamp duty loans are provided to pay off the stamp duty charges on the
purchase of a property. The amount from this loan can be used solely for

15
this purpose. This segment of home loans has yet not gained much
popularity.

 Bridged loans
Bridge loans are short term loans which are meant for people who already
own a residential property but are planning to buy a new house. It helps
borrowers to fund the purchase of the new house until a buyer is
identified for the old house. It is extended for a period of less than two
years and requires the mortgage of the new house with the lender. Some
banks offering this type of loan are Vijaya Bank, HDFC Bank etc.

16
ADVANTAGES AND DISADVANTAGES OF HOME
LOAN

 MAKES BUYING A HOME AFFORDABLE FOR ALL

The home loan makes it easier for an average middle-class salaried

person to afford buying a home of their own. The lenders in India
sanction or reject the home loan application based on the credit score of
the applicant as well as their capability to repay the amount. If you
receive an income regularly and have the capacity to repay the EMIs
(equated monthly instalment), the lenders will quickly approve the
application. Additionally, the home loans have a long tenure, typically it
ranges from 15-20 years, which means the EMI is smaller and more
affordable. So, by availing a loan, you can enjoy the happiness of being a
homeowner.

 A COST-EFFECTIVE WAY OF AVAILING CREDIT

One of the major home loan loans benefits is that it comes with a lower
interest rate than other forms of borrowing like a personal loan or a gold
loan. This is because the lender uses the property that you wish to
purchase as a security against the amount you borrow.Home loans
interest rates are the lowest among other types of loans, although the
interest ranges from lender to lender, it usually hovers between 8% to
12%. Make sure that you choose a lender that is offering the loan at the
best interest rate; even a slight difference in the interest rate could save
you thousands of Rupees in the long run.

 CAPITAL GROWTH

Over the past decades, the cost of the real estate properties in India has
been on the rise consistently. Many experts suggest that the capital

17
appreciation of the real estate properties has been much higher than the
interest you pay on the home loan. For example, if you have availed a
loan of Ten lakh rupees at the interest rate of 10 per cent and if the value
of the property increases even by 20% by the end of the loan period, then
the capital appreciation will be higher than the interest you pay. The
appreciation of capital will help you take care of the expenses and yet
gain profit on the sale of the property.

 COMPULSORY WAY OF SAVING

If you are wondering whether a home loan is good or bad, you must know
that it has both sides. It is just up to you how you deal with it. When you
have cash in hand, it can be challenging to resist the temptation of
spending. If you are confident that you will have a steady stream of
income but are unable to save any money, then taking a home loan is the
best way to have saving. The money you pay towards the EMI, you can
look at it as a saving rather than an expenditure. This is because after you
repay the loan completely, you will become the owner of the house,
which will have an increased value at the end of the loan tenure.

 GUARANTEES SAFETY OF THE PROPERTY

Buying a home is once a lifetime expense, and you would surely want to
ensure that the property you invest in is free of any legal issues. This is
where availing a home loan can be a great boon. When you approach a
lender for a housing loan, the lender will do a full background check of
the credibility of the builder as well as the property itself. They will
review the paper associated with the property and ensure that the building
is legal and that the builder has obtained all the clearance certificates
from the local authorities. Also, the lender will ensure that the property is
not involved in any legal disputes. So, with the lender taking care of the

18
paperwork, you need not go through the tedious process yourself, and if
the lender approves the loan, you can be sure that the property you wish
you buy is safe.

 INCREASES THE LOAN ELIGIBILITY

When your home loan is in effect, and as you continue to repay the
amount diligently or if you have already repaid the loan in full, your
CIBIL (Credit Information Bureau (India) Limited) score will
automatically increase, and the lenders will classify you as a safe and
responsible borrower. This will help you improve your loan eligibility.
You can use this to advantage and avail loan at a more affordable interest
rate.

 TAX BENEFITS

This is another significant benefit of availing a home loan. If you

mortgaged property against a loan, you could claim a tax deduction on
the principal as well as the interest part of the repayment. For the
repayment of the principal component of the home loan, you can claim a
deduction under Section 80C. The maximum limit for deduction in this
regard is Rs.1.5lakhs. For the repayment of the interest component, you
can claim a deduction under Section 24B. The maximum deduction you
can claim for the interest repayment is Rs. 2 lakhs. These deductions can
be a massive amount in terms of calculating your overall annual tax
obligation. If you buy a house without a loan, you will miss out on these
tax benefit on home loan.

19
DISADVANTAGES OF HOME LOAN

 IT IS A BIG COMMITMENT

Once the lender approves your home loan application, you are making a
huge commitment for a long period. The typical duration of a home loan
last between 10 to 30 years. This means that you would have a debt for a
significant amount of time in your life. Once the loan is in effect, you
would have to be prepared to control your expenses and focus on the
repayment.

 HOME LOAN MAY CARRY RISKS

The duration of the home loan typically spans over 10 to 30 years, which
is quite a long time. During this period, several unforeseen circumstances
can occur. Some of these instances can make it difficult for you to repay
the loan. Events like divorce, sudden illness, loss of job, accident, can put
in a tremendous financial turmoil and affect your ability to cope with the
burden of the loan, which in turn can result in the loss of the property. In
case, if you fail the repay the loan, the lender has the authority to take
over the property and sell it to gain back the money they lent you as a
home loan.

 LOSS OF INVESTMENT OPPORTUNITY

This is one of the most overlooked disadvantages of home loan. When

you apply for a loan, irrespective of big or small the loan amount is or
how long or short the duration is, as you continue to repay the amount,
you lose the opportunity to invest the same amount in an investment tool
that could yield you valuable returns. Imagine, instead of paying the
EMIs, if you could use the amount to invest in mutual funds or in a fixed
deposit, you would get valuable returns in the long run.

20
  LOSS OF TAX BENEFIT ON THE HRA COMPONENT

The employers pay housing Rent Allowance or HRA to the employees as

part of their salary. The HRA allows the employees to claim a tax
deduction for the rent they pay for the housing. To claim the HRA tax
benefit, you must meet the following requirements :

 You must stay in a rented house in the city of employment and

own a home in a different city.
 Your house is under construction or is under re-development, and
you have rented a house until the construction work is completed.

21
  ELIGIBLITY CRITERIA FOR HOME LOANS

How much an applicant can borrow?

Home loans range from Rs. 1Lakh to Rs. 50lakhs. Your repayment period
can vary from 1 year to 20 years depending upon your capacity to repay.

Eligibility:

Age: - Minimum: you should be at least 21 years of age.

Maximum: at the time of loan maturity you should not exceed 65 years or
your retirement age, whichever is earlier.

Individuals:

You should have completed a minimum of 2 years of services (with a

minimum of 1 year in the current job)

Business persons/self-employed professionals:

You must have an established business or professional practice of not less

than 3 years, with a positive net worth and must have posted a net profit
for the last 2 years.

NOTE: Minimum net take home salary of Rs.6000/-p.m. for salaried

employees or annual income of not less than Rs. 1.20lakh for
businessman/self-employed professionals. (spouse/co-applicant’s income
can be included in the income computation.

1. Individuals who are salaried or self-employed, professionals,

businessmen are eligible. Proprietary concerns, HUF, partnership firms or
limited companies are not eligible for this loan, where partners at their
individual capacity are free to avail this loan.

2. As a customer to enhance the loan eligibility, all HFIs lay down

conditions to whom to be applicants, all co-owners to the property should

22
necessarily to be co-applicant. Income of the co-owners can be clubbed
together to get higher loan eligibility. Minors are not eligible to become
co-owners, as also friend and relative’s only blood relatives are eligible to
take a property jointly.

Some of the acceptable relationships where loan clubbing is possible

Combination Income Clubling

Husband – Wife YES

Parent-Son YES (IF ONLY SON)

Parent-Daughter YES (IF ONLY CHILD)

Brother-Brother YES (if current staying together

and intend staying together in new property)

Brother-Sister NO

Sister-Sister NO

Parent-Minor Child NOT Eligible for Loan

3. The minimum age for the applicant and the co-applicant to become
eligible for the commencement of the loan is 23 years; no- applicant can
be 18 years of age if their income is not clubbed to calculate the loan
eligibility.

4. The maximum age at the time of loan maturity for applicant or co

applicant is 60 years or the retirement age whichever is earlier.

23
APPLICATION STAGE

This is the stage where the application from first reaches the concerned
service center /workstation. Here all the documents in the application are
received by the experienced staff present at the workstation. The banks
employee who reviews the file checks to see whether all documents are
present and in their proper place. If the documents are duly filled not
fake, attested by authority and present in order. In case any document is
missing the applicant is contacted electronically or by mail or by
telephone and requested for the documents to be submitted. This exercise
is called FOLLOW UP. The credit appraisal of the loan application starts
at this stage. The workstation employees compute the gross salary, IIR,
FOIR, loan eligibility ratio etc. The credit worthiness of the applicant is
calculated here.

 It is also at this stage that the QUICK DATA ENTRY of the loan
application is done to create a serial no, of the application. After
that another page appears and more data is entered. It is now that a
special and unique LOAN A/C NO. Is created under which all the
loan processes will be carried out. The system of electronically
recording the data helps to create ready reference, a proof helps in
quick and easy processing of the data. It also helps to very easily
and quickly share the data with other employees of bank.
 The next and important processing performed at the workstation is
that of filling up a document known as the INTERVIEW SHEET
for processing individual loans. It contains various simple entries
like

1. Name of borrower

2. Name of co-borrower

24
3. Income details

4. Family background and permanent address etc.

5. Gross salary

6. Rental

7. Other incomes

8. Obligations

9. Remarks

25
 PROFILE OF THE ORGANIZATION

State bank of India, the country largest and oldest commercial bank with
a branch network of over 1100 branches and six associate banks located
even in the remotest parts of India. SBI offers a wide range of banking
products and services to corporate and retail customers. The bank
descends from the Bank of Calcutta, founded in 1806 via the Imperial
Bank of India, making it the oldest commercial bank in the Indian
Subcontinent. The Bank of Madras merged into the other two presidency
banks in British India, the Bank of Calcutta and the Bank of Bombay, to
form the Imperial Bank of India, which in turn became the State Bank of
India in 1955.[10] The Government of India took control of the Imperial
Bank of India in 1955, with Reserve Bank of India (India's central bank)
taking a 60% stake, renaming it State Bank of India.

ICICI Bank, stands for Industrial Credit and Investment Corporation of

India, is an Indian multinational banking and financial services company
headquartered in Mumbai, Maharashtra, India, with its registered office in

26
Vadodara. In 2014, it was the second largest bank in India in terms of
assets and third in term of market capitalization. It offers a wide range of
banking products and financial services for corporate and retail customers
through a variety of delivery channels and specialized subsidiaries in the
areas of investment banking, life, non-life insurance, venture capital and
asset management. The bank has a network of 4,850 branches and 14,404
ATMs in India, and has a presence in 19 countries including India.

 HOME LOAN PURPOSE

 Purchase construction of house flat
 Purchase of a plot of land for construction of house
 Extension /Repair/Renovation or alteration of an existing house/flat
 Takeover of an existing loan from other banks housing finance
companies.

 ELIGIBILTY
 Minimum age -18 years as on the date of sanction
 Maximum age-for a home loan borrower is fixed at 70 years i.e.,
the age by which the loan should be fully repaid.
 There should be availability of sufficient, regular and continues
source of income for serving the loan repayment.

 DOCUMENTS
 Two photographs of each applicant.
 Proof of residence of each applicant.
 Copies of PAN Card for identify proof.
 Latest & original salary slip of employees/business proof for
businessman.
27
  Two years IT return form 16 for employees and three years IT
return with computation sheets for businessman/self-employed.
 Balance sheet for last three years for business man.
 Six months’ salary account statements for employees and saving
account statement for businessman/self-employed.
 Copy of agreement of sale.
 Copy of registry of house/plot/flat plus old registries.
 Copy of allotment letter/re-allotment letter of house/plot/flat.
 Latest plot /flat/house builder’s approval letter to be developing
the project and copy of license.
 Latest Non Encumbrance Certificate of plot/flat/house.
 Copy of approval Map/approval site plan of builder.
 Estimate copy of construction from government approved
Architect for construction/renovation cases.
 List of documents held with other bank from which housing loan
is to be taken over.

 SECURITY
 Equitable mortgage of the property
 Other tangible security of the adequate value like NSC’s, life
insurance policies etc., if the property cannot be mortgage.

28
 LOAN PROCEDURE FOLLOWED

The procedure involve in the disbursement of home loan by any bank

entails the followings steps

 Home loan application form is first submitted by the customer

covering all details.
 Checklist of requirements is requested for from the customers, and
all documents are required to be submitted (copies), they are then
verified whether the details are failed in correctly and whether all
the documents are submitted.
 Additional loans, if any are applicable. Many banks provide for the
supplementary loan as a part of their comprehensive home loan
scheme.

SCRUTINY OF THE DOCUMENTS

The retail processing is a procedure, which involves careful scrutiny of

accounts. SBI bank uses a specialized system to go through the accounts,
before dispersing the loan to the customer. The basic groups set up in the
process of loan applications are:

RETAIL MANAGER ENTERER GROUP:

This group does the data entry. Upon completion of the data entry the
group forwards the same to the RM Verifier group to verify and resends it
to the former in case of tiny discrepancies for editing.

The loan officer enterer group and the RM verifier group should ensure,
confirm and verify the following:

29
  The organization is in the appropriate list.
 The organization is not in the negative list
 The property location is not in the negative list.

Applicant Details:

 Name and the personal details

 Identify details address
 Employment details- salaried
 Financial details: Income asset ownership, existing bank account
details and credit card details.
 Employment details: business
Financial details: Existing bank accounts and credit card details.

EXISTING LOAN DETAILS

The name of the financial institution (in case of takeover) type of loan,
purpose of loan amount etc., as per the home loan application form.

 Loan request: Including the disbursement details.

 Acquisition request: Gee details, loan amount recommended,
name of the customer preferred branch.
 Reference details: Entry of all least one reference in mandatory.
 Property details: The RM enterer group and the RM verifier
group shall affix their initials on the home process note.

30
  HOME LOAN FACILITIES WITH VARIOUS ADD-
ON BENEFITS

The banks have buckled for the completion of the home loan products by
providing various add-on benefits, which has also become a key factor in
the competitive era of home loans.

The banks have tied up with various property insurance companies in

order to make their home loan competitive. The ABN-AMRO bank
which has entered the home loan segment in October 2003 launched its
product “All Smiles Home Loans” with the lowest interest rate of 6
percent in the first year and 6.5 percent in the second year has added a
number of value added services like:

 SMS alert to help the customers keep track of their loan sanctions
and disbursement status.
 The bank also offers its smart Gold credit card to the borrowers
and concessional rates on personal loans and auto loans.

GIC housing finance limited has offered the consumer loans for the
purchase of home equipment at the same rates of interest at the home
loans and lowers than the other consumer loans.

The tenure of consumer loans is restricted to the tenure of 5 years.

Many banks have also done away with the guarantor for provision of the
home loans for amount less than Rs. 10 lakhs.

31
  THE FUTURES OF HOME LOAN

Homes loans are commodity that banks are dying to sell. After all, 30
years of consumer indebtedness secured with a very tangible asset makes
for a great profit, when you consider the compounding of interest. Yet
because of the subprime mortgage crisis, home loan applications are no
longer as easily and quickly approved as lending institutions used to do.

As a matter of fact, those applying mortgage loans now must prove

their income and ability to repay the loan before they can even hope to
get an interested lender to take a closer look.

The interest rates on home loans have started coming down after the
Reserve Bank of India (RBI) decision to reduce the repo rate last month.
The repo rate is the short term lending rate on which the RBI extends
short term loans to banks. The repo rate is one of the major factors that
decide a banks leading rate. The lowering of the repo rate has reduced the
cost of funds for banks and hence there was a drop in loan interest rates.

The rates on new loan accounts have come down more than the interest
rates on existing loans. This is because new accounts are viewed as fresh
sales. Hence, banks float many promotional schemes and go aggressive
on them. The rate cut happens on existing loans only when banks get
comfortable on their overall cost of funds and are sure about maintaining
their net interest margin.

32
 CHAPTER 2

Review of Literature

The Review Committee on NPE‟ 1986 recommended introduction of

institutional loans, while raising fees in higher education sector, as a
strategy for releasing pressure on the government kitty. Though it agreed
that such an arrangement is the need of the hour, yet it mentioned that
educational loans do involve certain problems in India. They were
mentioned as- Psychologically, people are against loans. Credit markets
are not developed. Through the survey of literature, it is evident that
governments around the world used to bear a large part of expenditure on
higher education.

Actually, in almost all the countries, including India student loans used to
be seen as a measure to ensure the protection of weaker sections from the
effects of high user charges, in spite of the above mentioned problems.
The budgetary strains brought wide change in the financing patterns.
Gradually, the debate shifted from „Should there be increased reliance on
private sector and other sources? ‟ To „What is the reasonable balance
between the state, student and private sector? ‟ consequently, there arises
need to lookout for mobilization of additional sources like philanthropy,
endowments, business contributions, taxing corporate sectors etc.

The increased cost recovery needs to be accompanied with student loans.

The government sponsored education loan schemes are no longer there.
The interest charged on education loans is equal to or higher than the
market rate of interest. More recently, this social consideration has got a
backseat and the financial efficacy has become the most important issue.

33
Tilak (1996) found many of the arguments made against student loans to
be valid in India; and therefore, he did not lend support in favor of
student loans. Student loans, without any carefully formulated policy,
may affect the access and equity adversely. Even American critics of
student loans express their apprehensions in this regard while saying that
student loans may lead to inequality of access by restricting participation
of (ethnic) minorities in higher education. He visualized student loans as
a method of generating finances for higher education than a measure to
improve access & equity.

Ram (1996) observed that the Students Loan Programmed was quite
successful in Singapore. He noticed in this regard that full employment,
continuous demand for skills, labor shortages and higher economic
returns to educational investment all tantamount to a degree of economic
development in case of Singapore, where the concept of loans for
education becomes acceptable with little persuasion and public debate.
Actually, Ram agrees with the school of thought (few researchers) which
opines that a country could afford to introduce student loans only at a
given level of development.

Hillman (2003) rightly comments that the alternative to free/subsidized

access to publicly financed education is private payment. Student may,
however, lack the means to pay for their education and may wish to
borrow to finance their education costs. The private lenders may be
unwilling to lend for studies. The impediment to lending, according to
him, is asymmetric information that results in moral hazard. The
asymmetric information, that results in moral hazard. The asymmetric
information is that students know their own effort input and motivation,
but lenders can observe neither effort input into studying nor the
motivation to study.

34
Repayment of loans based on the expectation of the future earnings, and
the risk of default facing the lender depends on the observed effort of the
student in studying and preparing for exams A moral hazard problem
arises because, according to him, it is the no observable behaviour of the
student that determines whether education will provide an income or not
which, in turn, will anticipate the repayment of loan He opines that this
moral hazard introduces government involvement into student loans.
Government can provide loans directly through a government agency or
security to the private lender by guaranteeing repayment of loans.
Accordingly, he advocates government supported student loans on the
following grounds: resource potential equity in sharing the costs of higher
education; and efficiency by making students more serious with respect to
their education and careers. (Assistant Professor in Economics)

The Reserve Bank of India (RBI) advised urban co-operative banks

(UCB) against giving big ticket loans to public sector companies on
grounds that it is not in line with 'the co-operative principles and dilutes
the cooperative character of UCBs.' In a notification the RBI said that
UCBs should focus on providing small value loans to middles and lower
income groups Farmers and small businessmen.

"UCBs are advised as a matter of principle. Generally not to grant large

value loans to public sector or government undertakings.” RBI said in a
letter to CEOs of UCB. The RBI has not defined large value loans.

"The move wills results into more availability of lendable resources for
the low and middle income group but it will hamper growth for those
banks that are following sound policy”. These banks found an avenue to
deploy resources with PSU on short term basis for improve their earnings

35
and support their balance size. “Said D R Shirodkar. CEO of New India
Co-operative Bank.

The letter says RBI said has been observed that a few UCB have been
sanctioning high value loans to PSUs by admitting them as nominal
members or otherwise. Sources said that such instances were found in
some Gujarat based cooperative banks. "These banks did not want to
dilute that ownership by giving loans to individuals. So they began giving
short term loans to PSU by making them nominal members. “Said a
senior banker who did not want to be named. To avail loans from a co-
operative bank a borrower has to purchase shares of that co-operative
bank so that he has a stake in the well-being of the bank.

RBI said that UCBs are meant 'primarily to meet the credit needs of the
society by providing loans and advances to low/middle income groups
(small borrowers). Agriculture and Small businesses for furthering the
cause of cooperation. Grant of high value loans to PSUs is not consistent
with the co-operative principles and dilutes the cooperative character of
UCBs.’

36
 CHAPTER 3

Research Methodology

3.1 STATEMENT OF PROBLEM

Housing loan is one of the emerging portfolio of both Private and Public
sector banks. The national housing policy of the Government of India
emphasize that the incentive to be given to customers buying residential
properties. Accordingly, in income tax there has been concessions / tax
sops for the individual buyer for home use. 60-65% Tax sops given by the
government for housing loans have been instrumental in driving growth
in this sector. The government allows tax benefits to both the home loan
consumer and the lender.
A home loan consumer is allowed tax deductions on the following:

 Interest paid on home loan: As per Sec 24 (b) of the Income Tax
Act, 1961, annual interest payments up to Rs 1,50,000 on housing
loans can be claimed as deduction from taxable income.
 Principal repayment of home loan: Sections 80 C read with
section 80 CCE of the Income Tax Act, 1961 says from gross total
income, an Rs.1,00,000 of principal repayment on home loan is
allowed as a deduction.
Under Section 36 (1) (viii) of the Indian Income Tax Act 1961, with
respect to any special reserve created and maintained by a financial
corporation engaged in providing long-term finance for construction or
purchase of houses in India for residential purposes, a maximum amount
of 20 per cent of the profits (earlier it was 40 per cent) obtained from
such business (figured in the head ‘Profits and Gains of Business or
Profession’) and carried to such special reserve is tax deductible. This
deduction is available only up to double the total amount of the
company’s paid-up share capital and its general reserves. Since the loan is
given by banks by mortgaging the property, hence there is significant
security to banker for disbursing the loan. However, the customers have
different opinions about the housing loan scheme.

37
The present investigator noticed from the review of the literature that
there are very few studies to examine financial performance of the banks
in housing loan sector.
“Due to availability of affordable houses on the periphery of metros and
in Tier-II and Tier-III cities, demand for housing finance has been good,”

Mr. R.V. Verma, Chairman and Managing Director, National

Housing Bank, November, 2011

So far in the financial year 2011, the repo rate of Central Bank of India
has raised from 6.75 per cent to 8.50 per cent. Banks countered this
situation by re-aligning their Base Rate upwards from the 8.25 - 9.50 per
cent band as on April 1, 2011, to 10-10.75 percent.

Banks determine their actual lending rates on loans and advances

with reference to the Base Rate and by including such other customer-
specific charges as considered appropriate.

The present study was undertaken with the intent to investigate after
examining the literature reviewed and noticed that their exit gap in terms
of customer satisfaction towards the home loan disbursed by schedule
banks. Accordingly, the problem of the study focus on customer
satisfaction towards the housing loan schemes of the bank. An after has
also be made for comparative study of private and public sectors banks
delivery and disbursement of loan leading to customer satisfaction.
Investigator also attempted to explore reason for shifting of home loan
availed from one bank to another bank.
 Key problems of the study are:

1. To study difference between public sector and private sector bank on

customer satisfaction.
2. To study differences on socio-economic categories of customer on
customer satisfaction of public and private sector banks on house loan

38
3. To study relationship amongst customer satisfaction towards the
bankers and availing of the loan
4. To examine factors affecting public and private sector banks on the
customer satisfaction for the home loan disbursed to their customers.

3.2 OBJECTIVES OF THE STUDY

The objectives of the study are:

1. evaluating and comparing the Home Loan portfolios of Public and

Private sector banks;
2. evaluating and comparing the Home Loan disbursement of public and
Private sector banks;
3. knowing customer’s attitude or response on the home loans schemes;
4. knowing customers’ satisfaction level while dealing with the Bank;
5. suggesting strategies to increase customer satisfaction, understand the
reasons for default.

The section of methodology consists of a short depiction of sample of the

study and demographic composition, the population of the study, the
instruments utilized to collect data, the study design, the procedures used
for data collection, and the details of the methods and techniques used for
analyzing the data.

3.3 RESEARCH DESIGN

Methodology is a body of knowledge by that researchers enable to

explain what they did and how they analyze. All these methods indicate
their limitations and resources help to identify their assumptions relating
to their potentialities to research advances (Miller, 1983). According to
him a research design is an under-pin which help to the types of questions
that can be addressed and the nature and give of the evidence to others so

39
they can come to know that how it is generated (Clark et al. 1984). In
other hand lots people, they have issue of research methodology as
according to them it is a important to any study or research. By this we
can give appropriation between data, research paradigm and collection
methods etc. all the aspects that help to research findings. According to
Churchill (1979) research design give a guide line to researcher for the
collection and analysis. We can say that research design plays an
important role but with a significant link between the theory and
argument, which come by empirical data collected by researcher for study
(Nachmias and Nachmias 2008). An option of research design always
helps to come in a decision with given or fixed range of dimensions of the
research process (Bryman and Bell 207, p.40), but it also come with
influences methodological procedures which can be data collection, data
sampling and statistical packages.

This research design is exploratory and comparative to determine the

customer satisfaction towards house loan scheme offered by public sector
and private banks.

3.4 SOURCES OF DATA

A- Primary Source: - Approaching the home loan customers of public

sector banks and private sector banks and obtaining relevant details by
questionnaires, personally.
 Interviews (Tool: Questionnaire): An interview is a technique of
data collection that involves respondents’ oral questioning and
survey. Interviews can be conducted with varying degree of
flexibility.

 Structured Interview:
Structures Interviews are conducted with a fixed list of questions in a
standard sequence that have mainly fixed or pre-categorized answers. So
as to make the questions always answered in the same circumstances, a
structured interview was standardizing with regard to questions for
respondents’ survey. This significantly minimized the impact of context,
where the answers to a survey question can depend on the type of

40
foregoing questions. Although effects of context cannot be averted, it is
often desirable that all respondents are held across constantly. This
technique to gather information is very limited. To follow the structured
method, mostly the surveys are carried out either telephonically or even
the person is leaned.

B- Secondary Source: - Data has been collected from statistical bulletin

published by varies organizations journals, periodicals, newspapers,
annual reports of the respective nationalized banks, annual report of
Reserve Bank of India (RBI), RBI Bulletin, trend and progress of banking
(annual publication of RBI), SBI, ICICI, HDFC, PNB etc. (bulletin,
annual report) and all publications and reports published by respective
nationalized banks annually. Personally approaching the SBI & ICICI
banks and obtaining relevant details.

 Plan of Analysis: -
For producing data clearly we have used pie-charts as statistical tools. For
representing data neatly and efficiently, percentages and averages have
also been used.

 Development of Data Collection Instrument: -

Survey Method is the mode for collecting data. The questionnaire has
been prepared by the Researcher according to the requirement of the
collected data.

41
 CHAPTER 4

Data Analysis & Interpretation

1. Your Age?
50 responses

42
43
44
45
46
 CHAPTER 5

Findings & Conclusion

FINDING:

 State Bank of India is popular bank as compared to ICICI bank.

 State Bank of India and ICICI bank both provides very good
services to its customers.
 Customer satisfaction level of SBI bank is very high compared to
ICICI bank.
 In the user ratio of home loan 80% of customers are using SBI
product and 20% are in favour of ICICI bank.
 Public prefer to take home loan from SBI bank than ICICI bank.

RECOMMENDATION:

 During this survey, it was found that sometimes customer had to

wait for home loan scheme processing done by the staff of SBI
bank. Efforts should be made to reduce it.
 It was found out that in SBI there is lot of formalities in the home
loan scheme processing, too much documentation is done.
 SBI bank should open more branches in different cities.
 ICICI bank should organize the program in the society, so that
people will be aware about the company and different product of
the bank.
 ICICI bank should make people understand about various benefits
of its product

47
 CHAPTER 6

Limitations & Future Scope

 Limitations:

o It is a long-term debt. This means that you have to deal with it for a
specified period, which means that you have to commit yourself to
making monthly payments specified in your agreement for the
period indicated to repay the loans.
o If you miss payments, you will face serious consequences. You can
face foreclosure or repossession of the property. In addition, you
could also face penalties and legal issues. It will also reflect in your
credit rating, which can lead to a low credit score.
o You may not be able to make early loan repayment. Few lenders
give option for early repayment. Although there are some who will
allow you to do this, they will charge you with early repayment
fees.
o Loans are very helpful. However, you have to manage them well
because you can get into a lot of trouble if you fail to make the
expected payments.

 Future Scope:

o The housing finance is likely to remain a low-risk low margin

business that records fast growth in the foreseeable future.
o Further research work may cover the other credit managers
assisting the branch managers, wherever applicable in respect of
their psychological factors.

48
o Due to this pandemic bank will come up with new facilities.
o Overall survey define that the customers will prefer SBI bank for
taking home loans.
o So SBI should come up with some new facilities and also rate of
interest.
o While taking home loans interest rate is the only thing which
attracts the most for customer

49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70