A REPORT ON BFSI

A project submitted to PERIYAR UNIVERSITY, SALEM

BACHELOR OF COMMERCE

submitted by

N. Karishma Kamari

REG NO : C21UG140COM057

NM ID : AD51A5EF0EED64196664011B13F42455

under the guidance of

S.JEMI –BFSI TRAINER

SHRI SAKTHIKAILASSH WOMEN'S COLLEGE

AMMAPET, SALEM-03

(AFFLIATED TO PERIYAR UNIVERSITY, SALEM)

OCTOBER - 2023
 BFSI PROJECT

NAME N.Karishma Kumari

DEPARTMENT 3rd year B.Com.

NAN-MUDHALVAN ID AD51A5EF0EED64196664011B13F42455

ROLL NO C21UG140COM057
 PROJECT TITLE 1.SAVINGS/CURRENTACCOUNT
2.FIXED DEPOSIT
3. HOUSING LOAN

DATE

SPOC DR. S. KRISHNA PRIYA

ACKNOWLEDGEMENT

I wish to express my gratefulness to Dr.S.Jayanthi, M.Sc., M.Phil.,

Ph.D., Principal, Shri Sakthikailassh women's college Salem.

I express my sincere thanks to Dr.S.Krishna Priya, MBA., Ph.D., SPOC

of Shri Sakthikailassh women's college Salem.
I have absolutely no words to express my feelings of gratitude to the trainer
S.Jemi trainer from TNASDC for her Constant guidance during the
project.

DECLARATION

I hereby Declare that this BFSI Training Report submitted to Periyar

University Salem for the academic year 2023-2024 is a record of my
original work done under the guidance of S. JEMI Trainer.

DATE : Signature of the Student

PLACE : N.Karishma Kumari
 Index

S.NO
TITLE Page No
INRODUCTION 01
1

PROJECT- 3 02
2

SAVINGS / CURRENT ACCOUNT

PROJECT-7 09
3

FIXED DEPOSIT

16
4 PROJECT- 8

HOUSING LOAN

5
CONCLUSION 27
 INTRODUCTION
Banking refers to the system of financial institutions, such as banks and credit unions,
that provide various financial services to individuals, businesses, and governments.
Banking services mainly include accepting deposits, lending money, facilitating
transactions, and offering various financial products like savings accounts, loans, and
credit cards. Banking plays a crucial role in the economy by facilitating the flow of
money and enabling economic activities.

There are two main types of financial institutions: banking and nonbanking. Banking
institutions include commercial banks, savings and loan associations, and credit unions.
Non-banking financial institutions include insurance companies, pension funds, and
hedge funds. A financial institution is a company engaged in the business of dealing with
financial and monetary transactions such as deposits, loans, investments, and currency
exchange. Financial institutions include a broad range of business operations within the
financial services sector, including banks, insurance companies, brokerage firms, and
investment dealers.

1
 PROJECT 3

SAVINGS ACCOUNT

Saving is income not spent, or deferred consumption. Methods of saving include

putting money a side in, for example, a deposit account, a pension account, an
investment fund, or as cash. In this modern hustling world, every earning individual
wants a safe place to store the earned money, and that’s where Saving Account comes
into play .It is a deposit account held with a bank to manage your savings, expenses,
and investments.

A standard transaction in a bank looks as follows- A deposits money in the bank as

extracash/loan/salary, then the bank gives the same amount to B on interest as a loan.
Bank earns its money from the interest on the loan to B. It pays A the interest for the
money that has been given to B.

WHAT IS SAVING ACCOUNT..?

This is the most basic type of account you can open at any bank. A Savings Account,
by definition, allows you to deposit your money, safe with the bank, so you don't have
to carry it around with you or hide it in that rusted old steel safe at home.
Don't worry, you can withdraw these funds when you need them.

INTEREST RATES

Almost all banks nowadays provide very modest interest rates on savings accounts
ranging from 3-4%, but some private banks offer interest rates up to 6-7% vide
condition that the account holder keeps a minimum balance of say 75k-1Lac Interest
rate is variable, one day, it can be 6%, and the next, it can be 4%.It is calculated every
month and paid quarterly.

VARIOUS TYPES OF SAVINGS ACCOUNT

• Savings Account. ...

• Zero Balance or Basic Savings Account. ...
• Women's Savings Account. ...

2
 • Kids' Savings Account. ...

• Senior Citizens' Savings Account. ...

• Family Savings Account. ...
• Salary Account – Salary Based Savings Account.

There are different types of savings accounts to choose from, and they're not all alike.
The options include traditional savings accounts, high-yield savings accounts, money
market accounts, certificates of deposit, cash management accounts and specialty
savings accounts.

HOW TO OPEN A SAVING ACCOUNT

7 steps to take to open a savings account

• Choose how to apply

• Gather your identification
• Provide contact details
• Select a single or joint account
• Accept the terms and conditions
• Submit your application
• Fund your new account

Personal details:

• Full name
• Date of birth
• Gender
• Marital status
• Nationality

Financial details :

• Occupation
• Employers Name and Address
• Annual income

3
 • Source of income

• Tax-related information

Addressing details :

• Residential address

• Permanent address (if different from your residential address)

• ID/KYC proof system:
• Government-issued photo ID(Eg:passport, drivers license or national
IDcard)
• Proof of address (Eg:utilitybill or rental agreement)
• Social security number or equivalent

INTEREST CALCULATION OF SAVING ACCOUNT

Interest calculated every month = Daily Balance *(Number of days)* Interest /

(Days in the year) For instance, the daily amount is Rs. 4 lakhs, and the interest rate
on the particular savings account is 4% per year; the calculation will be as follows:

4 lakhs * 30 * (4/100) / 365 = Rs.1315 per month in interest.

The interest rate formula is Interest Rate = (Simple Interest ×100)/(Principal× Time).

To calculate interest per month, you use the simple interest formula: Interest=P×R×N,
where P is the balance, R is the interest rate, and N is the number of periods.

Effective annual interest rate = (1 + (nominal rate ÷ number of compounding periods))

^ (number of compounding periods) - 1. For investment A, this would be:
10.47% = (1 + (10% ÷ 12)) ^ 12 – 1.

SIMPLE INTEREST1

A=P×R×T

2
COMPOUND INTEREST

A = P(1 + R/N)NT

4
• A: the amount of money you’ll have in your bank account after interest is paid
• P: your principal deposit, or the original balance of your account
• R: the yearly interest rate of your account in decimal format (APY)

• N: the number of times your bank compounds interest in a year (12 times)
• T: the time, in years, you want to calculate for (1 month = 0.083 year

ADVANTAGES OF SAVINGS DISADVANTAGES OF

ACCOUNT SAVINGS ACCOUNT

• LOW-INTEREST RATES
• FEES
• AUTOMATES THE PAYMENTS
• MINIMUM BALANCE
• AUTOMATIC SAVINGS
• Requirements
• LIQUIDITY AND CCESSIBILITY
• LOW-RISK

5
 CURRENT ACCOUNT OPENING

WHAT IS CURRENT ACCOUNT..?

Current accounts are a type of bank account that is used by businesses for dayto-day
financial transactions. They are often used by business owners and corporations to
manage their finances. Recent digitization of finance has led to the rise of digital-only
bank accounts that have made banking easier than ever.

A current account allows businesses to keep their financial transactions separate from
personal finances. This clear demarcation helps in maintaining accurate records and
simplifies accounting processes.

DOCUMENTS REQUIRED TO OPEN A CURRENT ACCOUNT

The specific documents required to open a current account can vary depending
on the bank and the type of account.

• KYC Documents

• Business Registration Documents

• Proof of Business Address
• Business PAN Card
• Other Documents

6
CURRENT ACCOUNT OPENING DOCUMENTS:

There are some documents that you need to open a current account irrespective of your
type of business, and a few additional documents based on the type of your business.

Address proof Aadhar card, voter ID card, rent agreement, electricity bill,
telephone bill, water bill, passport, driving license (any one)

Identity proof
PAN card, passport, voter ID card, driving license, Aadhaar card
(any one)

Business proof
Business registration proof or incorporation certificate

Bank proof
Account opening cheque from an existing bank account

CURRENT ACCOUNT OPENING DOCUMENTS PUBLIC / PRIVATE

DOCUMENTS REQUIRED

Here’s the checklist of documents required to open a current account for joint stock
companies (public or private limited):

• Memorandum of Association (MoA)

• Articles of Association (AOA)
• An updated list of directors of the Public/Private limited company
• Board Resolution (BR)
• Shareholding pattern/ list & ID proofs of all the beneficial owners owning
more than 25% of the firm
• Address proof: anyone out of Aadhar card, voter ID card, rent agreement,
electricity bill, telephone bill, water bill, passport, driving license
• Identity proof: anyone out of PAN card, passport, voter ID card, driving
license, Aadhaar card
• Business registration proof or incorporation certificate
• PAN of the entity
• Latest passport size photo

• Account opening cheque from an existing bank account

7
On 2nd April 2016 Dharmesh opened a current account with the Corporation Bank
Limited, and

deposited a sum of 50000.

His further deposits are: His withdrawals are:

15 April 6000 15 April 6000

12 June 9000 12 June 9000

10 Aug 14000 10 Aug 14000

• Show Dharmesh’s a/c in the ledger of the Corporation Bank. Calculate

interest at 6% on the debit balance and 3% on credit balance. Prepare the
account as on 30th September 2016. Make the calculation to the nearest
rupee

CALCULATION OF INTEREST:

• On 4742000 @ 3% for 1 day = 308.68

• On 438000 @ 6% for 1 day = 71.80
• Net Interest = 236

ADVANTAGES OF CURRENT ACCOUNT

• Conduct your day-to-day transactions with ease.

• Make higher transactions without a worry
• Keep track and protect your transactions

• Conduct Bulk Payment transactions with Collection Services

• Conduct foreign transactions
• Boost your credit rating

8
DISADVANTAGES OF CURRENT ACCOUNT
• Interest Rates Can Change
• Easy Access
• Minimum Balance Requirement

9
 PROJECT 7

FIXED DEPOSIT

Fixed deposits are a safe investment option that will assure a consistent interest rate,
special interest rates for senior citizens, multiple interest payment options, no market
risks, and income tax deductions.

Before forming a new FD or also renewing an existing one - it is critical to evaluate

the most recent fixed deposit rates offered by the country's top banks. Here are the
most recent fixed deposit rates for 2023.

FD INTEREST RATE

One of the best ways to secure your money is by investing in fixed deposits which not
only helps you to save money but also helps you to earn a substantial interest in it.
Competitive Bank FD interest rates help the depositor to get a good Return on
Investment over a fixed tenure. Under the fixed deposit scheme, the depositor deposits
the money only once at the time of opening the account. The interest rates offered
depends on the bank, deposit amount and the tenure you choose.

At the end of the tenure, the interest accrued is calculated on the principal amount and
the total amount is paid back to the depositor. The tenure of fixed deposits may range
from 7 days to 10 years. In the next section, we have enlisted some of the banks that
offer competitive interest rates.

Banks provide a comparatively lower rate of interest on bulk deposits exceeding Rs.
1. crore and higher rates on deposits less than 1 crore. DHFL Bank is one of the highest
interest offering banks and provides an interest rate of up to 9.25% for fixed deposits.
The fixed deposit interest rates are determined by changes in the RBI monetary policy
such as the repo rate, base rate, internal liquidity position of banks, credit demand,
economic conditions, etc. The factors on which the bank FD rates vary are the
deposited amount, deposit tenure, and the type of depositor.

10
Small Finance Banks and NBFCs offer the highest FD interest rates. Following them
are PSU Banks and large Private Sector Banks. However, Private Sector Banks like
Bandhan Bank, DCBBank, Tamilnad Mercantile Bank, RBL Bank, IDFC First Bank,
IndusInd Bank, Yes Bank, SBMBank, CSB Bank and Federal Bank offer higher FD
slab rates than the fixed deposit rates offered by other Private Sector Banks. FD interest
rates of scheduled banks range from 2.50% p.a. to 9.00% p.a. for the regular depositors
for tenures ranging from 7 days to 10 years. Senior citizens are usually offered an
additional interest of 0.50%-0.75% p.a. above the applicable FD card rates.

GUARANTEED RETURNS ON INVESTMENT

FD interest rates booked at the time of opening an Fixed Deposit account remains the
same till its maturity, regardless of any changes in the banks’ FD card rates in the
interim. For instance, ifan individual opens a bank fixed deposit of 3 years tenure at
6% p.a., the interest rate will remainthe same till the completion of its 3 years tenure.
This offers a high degree of income certainty inFDs, even higher than those offered by
most small saving schemes.

CAPITAL PROTECTION

Fixed deposits booked with the scheduled banks are covered under the deposit
insurance program of DICGC, a subsidiary of RBI. The insurance cover is applicable
on cumulative bank deposits, which include fixed deposits, savings account, recurring
deposits and current account, of up to Rs 5 lakh per bank per depositor, in case of bank
failure.

11
TAX DEDUCTION UNDER SECTION 80C

Many banks and NBFCs offer 5-year tax-saving FD scheme with lock-in period of 5
years. The principal component of up to Rs 1.5 lakh each financial year can be claimed
as tax deductions u/s 80C of the Income Tax Act. However, the interest component is
taxed as per the tax slab of the depositor.

LOAN AGAINST FIXED DEPOSIT (FD)

Depositors can leverage their FDs to avail loans. Loans against FD are usually offered
in the form of overdraft facility, wherein the credit limit is sanctioned on the basis of
the Fixed Deposit amount pledged as collateral and the interest is also levied only on
the amount drawn till its repayment. Moreover, the borrower continues to earn interest
on the pledged FDs during the loan tenure. Withdrawals can be made anytime up to
the credit limit from their overdraft account and repay it as per their repayment
capacity. These features of loans against FDs make them an excellent tool for
mitigating frequent liquidity and cash flow mismatches, without requiring prematurely
closing FDs and incurring premature withdrawal penalties.

In India, Fixed Deposits are one of the most popular ways to save money. They are a
safe investment, offer good returns, and are easy to open.

So, what exactly is a Fixed Deposit?

In a Fixed Deposit, you put a lump sum in your bank for a fixed tenure at an agreed
rate of interest. At the end of the tenure, you receive the amount you have invested
plus compound interest.
12
Here I’ll deposit 2lakh given to me in different banks to find where I can get highest
return.

INTEREST RETURN AFTER

ORGANIZATION AMOUNT
RATE 24 MONTHS

GOVERNMENT BANKS 50000 6.9% 70,392

PRIVATE BANKS 25000 5.3% 32,520

NON BANKING FIN

25000 9.10% 78,408
COMPANIES

POST OFFICE SCHEME 75,000 8.2% 1,12,544

GOVERNMENT BANK PRIVATE BANK

 13

THE FORMULA TO DETERMINE FD MATURITY AMOUNT

There are two types of FD that you may avail of – simple interest FD and compound
interest FD
Grow has calculators for both types of FD.

The fixed deposit calculator for simple interest FD uses the following formula –M =
P + (P x r x t/100), where –
• P is the principal amount that you deposit

• r is the rate of interest per annum

• t is the tenure in years

For example, if you deposit a sum of Rs. 1,00,000 for 5 years at 10% interest, the
equation reads

14
–
M = Rs. 1,00,000 + (1,00,000 x 10 x 5/100)
= Rs. 1,50,000
For compound interest FD, the FD return calculator uses the following formula –M=
P + P {(1 +i/100) t – 1}, where –

• P is the principal amount

• i is the rate of interest per period

• t is the tenure
For example, if you take the same variables, the compound interest FD will accrue,
M= Rs. 1,00,000 {(1 + 10/100) 5-1} Or, Rs. 1,61,051

ADVANTAGES OF THE FIXED DEPOSITS • EASY

AVAILABILITY

The Fixed Deposit scheme is available to all the public and private sector banks in
India. You can open the FD, through internet banking as well. There is no need to go
to the bank for opening FD if you have the KYC or "Know Your Customer"
formalities done at the bank.

• GUARANTEED RETURNS

FD offer greater interest than the saving accounts. The rate varies between 7 % to 8
%. The interest gains of an FD also vary with its tenure, so that a long-term FD
accrues better interest gains. The fixed deposit interest rate comparison charts,
available online, will reveal to you which bank is offering the greatest of returns.

16
• TAX EXEMPTION

The original monetary amount, which the depositor deposits in the FD, is exempt
from taxation, under the Section 80C of the Income Tax Act. FDs are a widely used
tax saving option by both salaried individuals and workers, and the business persons.
The section offers an exemption of up to Rs 1.5 lakhs, towards an FD deposit.

• PROVIDES FOR PARTIAL WITHDRAWALS

Some banks offer the FD schemes that provide for the partial withdrawals. The
balance that remains in the FD account after withdrawal gets the same interest. These
FDs are hence more lucrative and can be used to withdraw money, in times of need
and crisis.

• LOAN FACILITY

An FD can also be used for getting a loan. The loan facility helps the depositor to get
the finances when he or she requires them. The loan may extend up to 90% of the
principal and the interest that has been accrued on it.

.DISADVANTAGES OF THE FIXED DEPOSITS • INTEREST

ARE TAXED UPON

All interest gained on the fixed deposits are fully taxed upon. The income is
denoted under the head “Income From The Other Sources" when you file your ITR
to Income Tax Returns.

There are other financial instruments available, which provide you the benefit of tax-
free savings. The PPF and the government bonds, are a few of them.

• TDS TAXATION

Interests gained from a FD are also charged with TDS. Banks reduce it from the
interest accrued at the end of each year. However, the depositor has the option to opt

17
out of TDS, and pay all the interest at the maturity. The form 26 AS, is linked to the
PAN card of the depositor and shows all the TDS deductions made towards the FD.

PROJECT 8

HOUSING LOAN

Buying a house is one of the biggest dreams come true for most people and
an extravagant affair altogether. Imparting life to such a dream requires a lot of effort
from the buyers’ end and the best one can do to accommodate the home in their
budget is through a home loan.

A home loan can be opted to buy a new house/flat or a plot of land where you construct
the house, and even for renovation, extension, and repairs to an existing house.

TYPES OF HOUSING LOAN

• Home Loan
• Home Construction Loan
• Home Extension Loan
• Home Improvement Loan
• Composite Home Loan

HOME LOAN

This is the most common type of home loan availed to purchase a house. There are
many housing finance companies, public banks, and private banks that offer housing

18
loans where you borrow money to purchase the house of your choice and repay the
loan in monthly instalments. You can get up to 80%-90% of the house’s

19
market price in the form of financing. The lender will hold the house until you
completely repay the loan.

HOME CONSTRUCTION LOAN

This is the right home loan type if you already have a plot of land and you need
financing to construct a house in that land.

HOME EXTENSION LOAN

Say you already own a house and you would like to extend the house with another
room or another floor to accommodate the growing family. Home extension loan
provides financing for this purpose.

HOME IMPROVEMENT LOAN

A home improvement loan provides financing for renovating or repairing the house if
there’s any fault in the existing system, such as painting the house’s interior or exterior,
plumbing, upgrading the electrical system, waterproofing the ceiling, and more.

COMPOSITE HOME LOAN

This type of home loan provides financing for purchasing the plot of land where you
would like to construct a house and for the construction, both within a single loan.

BENEFITS OF TAKING A HOME LOAN

TAX BENEFITS

• The foremost benefit of a home loan is the income tax deduction you can claim on
the interest and principal repayments. You can claim up to Rs.1.5 lakh on principal
repayments u/s 80C, up to Rs.2 lakh on interest repayments u/s 24B, up to Rs.2 lakh
on interest repayment in special circumstances u/s 80EE and 80EEA, and up to Rs.1.5
lakh on stamp duty expenses u/s 80C.

20
LOWER INTEREST RATE

• The home loan interest rate is much lower as compared to any other loan types
available. If you come across a cash crunch, you may get a top-up on the existing home
loan at a lower interest rate than a personal loan to solve the issue.

LONG REPAYMENT TENURE

• Unlike any other loans, home loans come with longer repayment tenure, as much as
25-30 years. This is owing to the significant loan amount one will have to borrow to
purchase a house.

NO PREPAYMENT PENALTY

• When you take a floating-rate home loan, you can make prepayments towards the
loan whenever you have a lump sum at hand without having to pay any prepayment
penalty. This will help you close the home loan much before the set loan tenure.

HOME LOAN INTEREST RATES

• The average home loan interest rates are from 6.5% to 12.00% in India as of
March 2021. The rates usually vary from lender to lender, RBI-prescribed repo rate,
inflation, economic activities, and many other factors.

ELIGIBILITY

Banks have a list of eligibility criteria for home loans. The first thing banks look at is
one’s credit history to understand their repayment habits. Typically, a credit score of
750 and above is preferred. Some other important factors taken into account are as
follows:

• Age
• Employment Type
• Minimum Annual Salary
• Collateral Security
• Margin Requirements

21
 • Assets, liabilities, stability, and continuity of occupation
• • Residency status (Resident Indian/ Non-Resident Indian)

DOCUMENTS REQUIRED

Agriculturists Salaried Customers Businessmen/Non-

Salaried Professionals

Application form with

Application form with Application form with
photograph
photograph photograph
Identity and Residence
Identity and Residence Identity and Residence
proof
proof proof
Last 6 months bank
Last 6 months bank Last 6 months bank
statements statements statements
Processing fee cheque
Processing fee cheque Processing fee cheque
Copies of Title
Educational
Documents of
Agricultural Land Latest Salary Slip Qualifications Certificate
depicting Landholding and Proof of Business

Copies of Title Business Profile and

Documents of Form 16 Previous 3 years Income
Agricultural Land Tax return (self and
depicting crops business)
Statement of previous 2 Previous 3 years
years of loans availed Profit/Loss and Balance
Sheet

22
 HOUSING LOAN FOR GOVERNMENT EMPLOYEE ANNUAL
INCOME RS.10 LAKH

When it comes to applying for a home loan, government employees enjoy certain
privileges. A secured job with a stable salary makes them suitable borrowers. While
getting a home loan for government employees is simple, it can also be overwhelming
with so many options available.

HOME LOAN BENEFITS FOR GOVERNMENT EMPLOYEES

The following are some of the perks that you can enjoy as a government employee
when you apply for a housing loan:

COMPETITIVE INTEREST RATES

If you are eligible for a housing loan, you may get a loan at a lower housing loan rate
interest. However, if you are a government employee, you can get a loan at even lower
rates. Female government employees in particular get up to 0.05% as a concession on
the home loan interest rate. Such benefits make it even more favourable for
government employees to apply for a home loan.

ZERO PROCESSING FEES

To qualify for a housing loan for government employees, you have to fulfil the laid
out house loan eligibility criteria. Eligible loan applicants will get the loan sanctioned
faster without waiting for days to get approval.

MINIMAL PAPERWORK

Home loans for government employees require the applicant to submit only a few
documents online. This facilitates faster approval and disbursal process.
 21

HOME LOAN ELIGIBILITY FOR GOVERNMENT

EMPLOYEES

• The eligibility criteria for a smooth application process for housing loan for
government employees requires:
• You must be an Indian citizen between the age of 23 and 62 years
• You must have a work experience of at least 3 years
• You must have a CIBIL score of 750 or above

HOW TO APPLY FOR A HOME LOAN FOR GOVERNMENT

EMPLOYEES

To enjoy the home loan benefits for government employees, follow the steps
mentioned below when applying:

• Step 1: Go to the bank’s website, choose the ‘Home Loan’ option, and simply
click on the ‘Apply Now’ button
• Step 2: Enter basic contact information and the One Time Password (OTP)
received on your registered mobile number
• Step 3: Input your personal, financial and property details to complete your
application process

Then the information that you shared with the portal will undergo a verification
process. If verified successfully, the lender will credit the loan amount into your bank
account within a week. The rest of the instalments will follow as per the disbursement
schedule.
 22

DOCUMENTS REQUIRED FOR A HOME LOAN FOR

GOVERNMENT EMPLOYEES

Mentioned below are the documents required to apply for a housing loan for
government employees:

1. INDIVIDUALS DOCUMENTS

• Home loan application form completely filled with 3 passport-size photos

• Identity card of your employer
• Aadhaar card / Passport/ Driving license
• Address Proof: Latest copy of Electricity bill / Telephone bill / Water bill / Gas
bill

2. PROPERTY DOCUMENTS

• Permission of property construction (If at all applicable)

• Registered Agreement of Sale / Stamped Agreement for Sale
• Occupancy Certificate (If the loan is for a ready-to-move property)
• Share certificate (Applicable for Maharashtra State), maintenance bill, electricity
bill and property tax bill
• Allotment papers

3. INCOME PROOF FOR SALARIED APPLICANTS

• Form 16 or your latest salary slip for the last three months
• Bank account statements for the previous six months
• I-T department-acknowledged tax returns of the past 2 years, If the applicant has
taken any loans in the recent past, loan account statements of the past 1 year
 23

HOUSING LOAN FOR BUSINESS MAN TURN OVER RS.50

LAKH

SELF-EMPLOYED? YOU ARE ELIGIBLE TOO

Self-employed entrepreneurs can get home loans with as much ease as those with
salaries or regular incomes. Lenders have designed home loan products specifically
tailored to meet the requirements of the self-employed. In general, there are two
categories of self-employed individuals: professionals and non-professionals.

• PROFESSIONALS include doctors, engineers, lawyers, CAs, MBAs, etc., who

are educationally qualified in their domain and have set up their own businesses.

• SELF-EMPLOYED NON-PROFESSIONALS include traders, contractors,

commission agents, etc. and are not educationally qualified in their area of business

ELIGIBILITY TO APPLY

Self-employed individuals are eligible to apply for home loans, either individually or
jointly. While all proposed owners of the property will have to be coapplicants, all co-
applicants need not be co-owners. Usually, co-applicants are close family members.
Key factors considered by the lender are:
 24

INCOME AND REPAYMENT CAPACITY OF THE

APPLICANT For this purpose, lenders require 3 years’ IT returns and at least 2
years’ audited Profit and Loss Account Statements and Balance Sheets of the business
entity.

PROFILE OF THE APPLICANT

The lender assesses the home loan application based on certain individual parameters
like:

• APPLICANT’S AGE : The younger you are, the more time you have to
repay your loan and longer the home loan tenure you can apply for. Older applicants
may need to make a larger down payment towards the home purchase.

• EDUCATIONAL QUALIFICATIONS : Some lenders use

educational qualifications as a parameter for assessing the eligibility of the customer.

• NUMBER OF DEPENDANTS : The amount of disposable income is

an important factor in assessing the applicant’s ability to repay the home loan. It is
assumed that higher the number of dependents, lower is the applicant’s disposable
income and vice versa.

DOCUMENTS REQUIRED

The following are the important documents that all the applicants/co-applicants
need to submit along with the signed application form for the loan approval:

• Proof of identity (Passport, Voter Card or Adhaar Card Copy)

• Proof of residence (Passport, Voter Card, Adhaar Card, Bank Account
Statements, Property Tax Receipts, Utility Bills)
• Proof of income (IT Returns, PAN Card, TAN Card, Current Account
Statements)
• Certified financials (Audited Profit and Loss Account and Balance Sheet) •
Property related documents (Copy of the Property Purchase agreement)
 25

TERMS AND CONDITIONS

Indicated below are the broad terms and conditions applicable to home loans
for self-employed applicants:

TENURE OF THE LOAN

The maximum tenure for home loans under adjustable rates can stretch up to 30 years.
In case of fixed rate home loans, the maximum tenure is 20 years.

AMOUNT OF LOAN

The amount of loan approved by the lender will depend on a number of factors such
as the customer’s repayment capacity, age, etc. Indicated below is the maximum
amount the lender would offer depending on the cost of the property:

• 90 percent of the property cost – loan amount up to Rs. 30 lakh

• 80 percent of the property cost – loan amount between Rs. 30.01 lakh and Rs. 75
lakh
• 75 percent of the property cost – loan amount above Rs. 75 lakh

INTEREST RATES
Lenders offer two kinds of interest rate options – fixed and adjustable.

ADJUSTABLE RATE HOME LOAN

It is linked to the lender’s benchmark or Retail Prime Lending Rate (RPLR). The rate
is revised every quarter depending on any change in the RPLR. If the interest rate
changes, it usually results in a change in your home loan tenure, with or without a
change in EMI.
FIXED RATE HOME LOAN

Here, the interest rate remains the same as the rate determined at the time of loan
disbursement. However, it remains fixed for a stipulated period of 2/3/10 years, after
which the loan automatically gets converted to adjustable rate. Some lenders allow
customers to switch between fixed and adjustable rates depending on certain
conditions.

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REPAYMENT OPTIONS

TRANCHE BASED EMI

• If you purchase a property under construction, the EMIs start only after the full
disbursement of the home loan. Until then, you have the option to pay interest only on
the amount drawn and start paying the EMIs once the entire loan amount is disbursed.

ACCELERATED REPAYMENT

• This option facilitates increase in the EMI payment as your income increases,
resulting in the faster repayment of the loan.

TELESCOPIC REPAYMENT

• This option allows you to extend the tenure up to 30 years, enhancing the loan
amount you are eligible for or reducing the amount of EMIs.
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CONCLUSION
Banking holds a crucial role in our day-to-day life. We must adhere to the
banking system as responsible citizens. The banking system acts as a
crucial base for the financial system as well as the entire economic system
of the country. It provides a base to the market and the companies. For the
savings and other economical aspects banks are the most reliable option
for us where we can save, invest or borrow money by a given terms and
conditions. That's why we can easily say that money and banking are the
most important segment in the economic circumstances.
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