Banking Project

BANKING SECTOR IN INDIA The Indian banking has come from a long way from being a sleepy business institution to a highly proactive and dynamic entity. This transformation has been largely brought about by the large dose of liberalization and economic reforms that allowed banks to explore new business opportunities rather than generating revenues from conventional streams (i.e. borrowing and lending). The stalwarts of India's financial community nodded their heads sagaciously when Prime Minister Manmohan Singh said in a speech: "If there is one aspect in which we can confidentially assert that India is ahead of China, it is in the robustness and soundness of our banking system." Indian banks have been rated higher than Chinese banks by international rating agency Standard & Poor's. The competition heated up with the entry of private and foreign banks.deregulation and globalization resulted in increased competition that refined the traditional way of doing business. They have realized the importance of a customer centric approach, brand building and IT enabled solutions. In the fierce battle for market share and mind share, the most potent weapon is a strong, well recognized and trusted brand name. Brands attract and convince people that they will get what is promised. Banking today has transformed into a technology intensive and customer friendly model with a focus on convenience. The companies have redoubled their efforts to woo the customers and establish themselves firmly in the market. It is no longer an option for a company to provide good customer service, it is expected. Reforms are continuing as part of the overall structural reforms aimed at improving the productivity and efficiency of the economy. The sector is set to witness the emergence of financial supermarkets in the form of universal banks providing a suite of services from retail to corporate banking and industrial lending to investment banking. The financial services market has become a battle ground with the marketers with the latest and the most sophisticated weapons. Currently overall, banking in India is considered as fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. Even in terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets-as compared to other banks in comparable economies in its region. The Indian banking industry is currently in a transition phase. On the one hand, the public sector banks, which are the mainstay of the Indian banking system, are in the process of consolidating their position by capitalizing on the strength of their huge networks and customer bases. On the other, the private sector banks are venturing into a whole new game of mergers and acquisitions to expand their bases. The use of technology has placed Indian banks at par with their global peers. It has also changed the way banking is done in India. ‘Anywhere banking’ and ‘Anytime banking’ have become a reality. The financial sector now operates in a more competitive environment than before and intermediates relatively large volume of international financial flows.

The introduction of Basel II norms from 2009 and the fair level playing field that will be available to foreign banks from 2010 will further enhance the solidarity of the Indian banking sector and open new avenues for consolidation and the increased competition will ensure that in the end the Customer is the king.

STRUCTURE OF INDIAN BANKING SECTOR The Reserve Bank of India act as a centralized body monitoring any discrepancies and shortcoming in the system. It is the foremost monitoring body in the Indian financial sector. The nationalized banks (i.e. government-owned banks) continue to dominate the Indian banking arena. Industry estimates indicate that out of 274 commercial banks operating in India, 223 banks are in the public sector and 51 are in the private sector. The private sector bank grid also includes 24 foreign banks that have started their operations here. Under the ambit of the nationalized banks come the specialized banking institutions. These co-operatives, rural banks focus on areas of agriculture, rural development etc.,

The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility-without any stated exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector, the demand for banking services-especially retail banking, mortgages and investment services are expected to be strong. M&As, takeovers, asset sales and much more action (as it is unravelling in China) will happen on this front in India. With the credibility of the Indian banking system on a high, a number of Indian banks are now leveraging it to expand overseas. State Bank of India, the country’s largest bank has acquired 76 per cent stake in a Kenyan bank, Giro Commercial Bank, for US$ 7 million. Canara Bank is helping Chinese banks recover their huge non-performing assets (NPA). To meet the challenges of going global, the Indian banking sector is implementing internationally followed prudential accounting norms for classification of assets, income recognition and loan loss provisioning. The scope of disclosure and transparency has also been raised in accordance with international practices. India has complied with almost all the Core Principles of Effective Banking Supervision of the Basel Committee. Some Indian banks are also presenting their accounts as per the U.S. GAAP. The roadmap for adoption of Basel II is under formulation.

Credit Tree Of A Bank

Bank

Corporate loans

term loans working capital financing equipment financing

Retail loans

home loans car loans personal loans education loans

Small & Medium Sector lending

term loans

the retail segment of the bank forms a major part of its portfolio. All the banks try their best to penetrate further int o the market to enhance their profitability. With the rise in disposable incomes in the past few years, there is a huge scope for banks to actually give more credit to the people. Housing loans constitute a major part of the lending in the retail segment. Banks like ICICI and HDFC have two third of their retail segment in the housing loans.

Importance Of Bank Credit In A Nation’s Progress A healthy and sound banking sector is considered as one of the pillars of economic progress. Bank credit gives impetus to the process of economic development. It helps all the sectors of the economy namely- manufacturing, services, small and medium enterprises, rural sector, and agriculture. Budding entrepreneurs, distressed farmers, big corporates, local shopkeepers and sometimes even the government look towards the banks when it comes to financing needs.bank credit pushes up the spending capacity of the public by making loans easily available and this gives a boost to the aggregate demand which in turn leads to a rise in national income This can be explained with the help of an example:

Maruti Udyog Ltd

Dealer in cars e.g. Rana Motors

Final Consumer

We can take the example of a car manufacturer say Maruti Udyog Ltd. MUL will depend on bank for financing its working capital needs, expansion policy etc. so bank plays an important role in the manufacturing of cars. Once manufactured, these cars will move to a dealer. There is always a possibility of that dealer having taken a loan from a bank for setting up his showroom. When the customer comes to buy a car, the bank also provides loan to that customer for purchasing the car. So the above example clearly illustrates how a bank helps in creating value in the economy by advancing loans and circulating money, there are many such examples which will establish the importance of banks in an economy.

Types Of Loans There are two types of loans available when you go for taking a loan: Fixed rate loan Fixed rate home loans are loans available with a fixed rate of interest for a given period of time. They are subject to review after a fixed period of time which is generally three years. Floating rate loan Floating rate home loans are linked to the prevailing market rate of interest. Floating rate loans are therefore subject to change at periodical intervals. Typically, a floating rate is brought up for review once every quarter. However, the time period can differ across different policies. Usually, fixed rate loan have a higher rate of interest than the floating rate of interest. This is because the bank can not hedge his position with respect to a fixed rate loan in case the rate of interest rises, whereas floating rate loans are linked to market rate of interest. So, they charge a lower rate of interest in this case.

Current Trends In The Retail Loan Segment 

In the last year the RBI has exercised considerable control over the interest rates. RBI has raised CRR and SLR twice which has led to hardening of interest rates in the retail and corporate sector. Most of the banks have raised their rate of interest on loans from 100 to 200 basis points.



The rising interest rates have slowed down the growth in the retail segment . it has led to increase in EMIs for most of the loans. In some cases EMIs have risen as much as Rs 2000.



one of the reasons for RBI taking stringent measures is because there is a fear of retail bubble in the real estate market due to easily availability of home loans. RBI has taken a series of measures, ranging from raising its key policy rates to risk weightage on loans extended to retail sector, to moderate the credit growth of banks. RBI has been uncomfortable with banks' excessive lending to retail segment, especially the housing sector.



With increased competition from foreign banks from 2010, the banking sector will see lot of consolidation through Mergers and acquisitions. The competition will heat up further and the banks would be vying for market share in the retail segment loans.

CAR LOANS Almost all the banks- whether public or private offer car loans/loans on two wheelers/loans on consumer durables. different banks lend on different rates and terms and conditions. To obtain a loan, a customer first of all has to fill an application form provided by the bank which contains details regarding the amount of loan required, repayment capacity of the customer etc. The bank then processes the application form and decides whether the loan should be approved or not and how much amount should be lent. The amount that is finally lent depends upon the repayment capacity of the customer.

Appraisal of Loans 1. The loan is given upto a maximum of 85% of the value of the car. Sometimes the loan may be for the amount of the purchase but this depends upon the policies adopted by different banks 2. Minimum age for taking a car loan is 21 years and the maximum age is either 60 years or the retirement age, whichever is earlier 3. While giving the loan, the banker takes into account the repayment capacity of the applicant. The amount of loan granted depends upon the repayment capacity only. In arriving at the repayment capacity, the bank takes into account the annual income of the applicant, his assets and liabilities. The assets include:  Savings in banks  Accumulated EPF/GPF  Units of UTI/Mf  National savings certificates/LIC Policies  Shares and Debentures  Immovable Property  Other assets The liabilities may include:  Outstanding loan from bank  Outstanding loan from employer/relatives etc  Outstanding loan from co-operative society In case the applicant has any outstanding loan from any of the above mentioned sources, this will affect his repayment capacity. Clubbing of incomes In case of an applicant where more than one person is working, their incomes can be clubbed together to decide the repayment capacity of the applicant.

Suppose an individual’s loan eligibility, based on his income, works out to approximately Rs 1,000,000 for a given set of criteria. But the individual wants a loan worth Rs 2,000,000. Assume that this individual’s spouse too is earning a similar annual income. In such a case, the individual can club his spouse’s income alongwith his own income and then opt for a home loan. The eligibility in this case, will be calculated on the clubbed income of both husband and wife- thereby enhancing the individual’s eligibility to the extent of the spouse’s income. In our example, the eligibility will now stand doubled at Rs 2,000,000 from Rs 1,000,000 earlier. 4. The loan is secured by these two things: a. Primary security: the asset itself is the primary security. In case of car loans, it is known as Hypothecation of vehicle. The registration card of the vehicle will contain the condition that the vehicle has been hypothecated to a bank.

  

b. Collateral Security: the collateral security may be any of the following: Third party guarantee of spouse Third party guarantee of any other person Pledge of securities etc.   5. Documents required: o Statement of bank accounts for the last 16 months o Signature of identification from bankers of borrowers/guarantor o A copy of voter ID card/passport/pan ID card o Proof of residence o Latest salary slip showing all deductions and TDS certificate in case of salaried persons o Copy of Income tax Returns for last two financial years o Proof of official address for non-salaried persons 6. Disbursement The entire loan is disbursed at one time. 7. Processing Fee The processing fee varies between 0.5%-2% depending upon different banks. Sometimes there is a complete waiver of processing fee under special schemes. 8. Pre-Payment charges

Usually, public sector banks don’t charge anything on the pre-payment of loans but private bank charge a penalty on the pre-payment of loans. The penalty is usually charged as a fixed percentage on the amount of principal outstanding.

HOME LOANS

DOCUMENTS REQUIRED 1. SALARIED CUSTOMERS  Application form with photograph.  Identity and residence proof.  Latest salary- slip  If income is fixed then two latest salary slips.  If income is variable then four latest salary slips.  Form 16.  Bank statements of the last six months.  Processing fee cheque.

SELF EMPLOYED PROFESSIONAL  Application form with photograph.  Identity proof.  Official and residential address proof.  Educational qualifications certificate and proof of business existence.  Balance sheet and profit & loss a/c for the last three years.  Bank statements of the last six months.  Processing fees cheque.  Income tax return for the last three years of self and business.  CA certification on the accounts of the company.

2. SELF EMPLOYED NON PROFESSIONAL  Application form with photograph.  Identity proof.  Official and residential address proof.  Educational qualifications certificate proof of business existence.  Business profile  Income tax return of the last three years of self and business along with computation of income.  Balance sheet and profit & loss a/c of the last three years.  Bank statements of the last six months of self and business  Processing fee cheque.  If a company i. List of directors and shareholding pattern ii. Annual return of the company iii. Memorandum/Articles of association  If partnership firm i. Partnership deed ii. Audit report of the concern.  Sanction letters of all the term loans along with their repayment schedule.

Guidelines For Analysis Age Norms  Minimum age of the applicant must be 21 years.  Maximum age of the applicant must be either 65 years or the age of retirement. Income Norms  For salaried income must be greater than Rs. 9000 per month.  For self employed professionals gross income must be greater than Rs. 60000 per annum.  For self employed non professionals gross income must be greater than 

Rs. 60000 per annum (in retail) and



Rs. 100000 per annum (in non retail)

Loan Tenure  For salaried customers

20 years

 For self employed professional

20 years

 For self employed non professional

15 years

Loan Amount  Minimum loan amount

1 lacs

 Maximum loan amount

300 lacs

Fixed Obligation To Income Ratio (FOIR)  For salaried o Income between- 9000-25000, FOIR is taken as 50% o Income >25000, FOIR is taken as 55%  For self employed non professional

o FOIR ranges between 55% to 100%  For self employed professional o FOIR ranges between 55% to 100% o LTV depends upon the profile of the applicant.

Rate Of Interest There are two types of rates :1. Adjustable Rate Home Loan The rate of interest is not fixed in this ARHL. It is decided on the basis of convenience of the applicant and his flow of income. The amount of EMI keeps varying from period to period. The various varieties of ARHL includes:•

FLIP

•

Stepped increase

•

SURF

2. Fixed rate home loan The rate of interest is fixed in this FRHL. The EMI is fixed and the applicant is required to pay the same amount in every period. Bank Statements  Bank statements are analyzed for cheque bounces, minimum balance charges and stop payments.  Minimum number of cheque bounces permitted is two.  Minimum number of stop payments permitted is three.  The statements are also checked to track the repayment track of the existing loans.

Other than the above mentioned norms the following norms are also kept into consideration while checking the credentials of the customer and checking for his eligibility :→ Number of dependents must not be more than five. → Property must be within geographical limits. → Additional security may include any personal guarantee or collateral security. Personal guarantee becomes compulsory in the absence of any co-borrower or if the loan is of a huge amount. → Maximum number of co-borrowers permitted is three. → The applicant must not be of a negative profile.

Process

Checking the credentials of the applicant through a field investigation and telephone verification. The risk of default associated with the client is also verified.

Listing out the documents necessary which are not given by the applicant though essential to determine his/her eligibility for the loan and to ensure the credibility of the applicant.

Calculating the eligibility of the applicant i.e. the amount of loan which can be given to them. The eligibility of an applicant depends upon: The gross income of the individual Age of the individual Age at maturity of the loan Number of dependents Assets and liabilities of the applicant Stability of income Continuity of occupation Repayment record of existing loans Repayment capacity of the applicant

Analysis of the bank statements to check the number of cheque bounces and the number of atop payment charges. Bank statements are also used to track the regular debits from the accounts by way EMI on loans. This is done to have an overall view of the repayment track record of the applicant

In case of self employed professionals and self employed non professionals the financial statements are also analyzed to track the growth rate of profits and sales. Ratio analysis is done to analyze prospects of the firm/company/concern.

Information about the company is also acquired from the debtors, creditors and clients.

Disbursement Of Loan The process of disbursement begins after the loan has been sanctioned in favor of the applicant. After sanctioning of the loan •

Loan is called upon for disbursal when required.

•

A representative visits the customer and collects legal documents, loan documents and PDC’s.

•

All the legal documents are checked by a lawyer.

•

A site engineer visits the property to verify the stage of construction and analyse the market value of the loan.

•

Lastly a disbursement cheque is prepared which is delivered to the client.

The process of disbursal can broadly be classified into three stages: 1. Credit Appraisal It contains all the terms of sanction i.e. the amount sanctioned, the tenure of the loan, the rate of interest, the type of interest, type of EMI, credit appraisal memo detailing out the eligibility of the applicant. 2. Technical Appraisal It details out the market value of the property, the stage of construction, the total area of the property. 3. Legal Appraisal It contains all the legal documents relating to •

Loan agreement

•

Declaration

•

Promissory note

•

Power of attorney

Fundamentals 1. All properties originate from authorities like: a. Individuals b. Societies c. Builders d. Pseudo authorities 2. Properties can be purchased from only two sources a. Primary market: direct purchase b. Secondary market: resale

Major Documents Direct allotment of authority flats Pre-Disbursal Documents: ü Original Allotment Letter ü Original Receipts of Payment ü Original Mortgage Permission /Intimation letter (in DDA Flat allotment only -letter duly acknowledged by DDA submitted by borrower with DDA to record charge of ICICI Home Finance on the property. ü Original letter from borrower to ICICI Post Disbursal Documents: ü Letter of Possession /Possession slip ü Original lease Deed/Conveyance Deed as and when executed

Direct allotment of Society Flat Pre-Disbursal Documents: ü Original Share Certificate ü Original Allotment Letter (If applicable) ü Original receipts of payment made to society ü Original Mortgage Permission ü Original letter from borrower to ICICI Post Disbursal Documents: ü Original lease Deed/Conveyance Deed as and when executed ü Original Possession Letter Direct Booking from Builder (Developer) Flat: Pre-Disbursal Documents ü Original stamped agreement to sell (Flat Buyers Agreement A Copy) ü Original Allotment Letter (if applicable) ü Original Mortgage permission from Builder /Developer ü Original receipts of payment made to the developer ü Copy of demand letter (if applicable) ü Original Tripartite /Cash down letter Post Disbursal Documents

ü Original conveyance deed in favor of Borrower ü Possession Letter

HOME PURCHASE –SELF CONSTRUCTION / IMPROVEMENT Freehold Property (Original) ü Current sale deed ü All previous sale deed ü Any other document in title chain through which any person has acquired title.Viz.General power of attorney, Agreement to sell, Allotment Letter, Gift deed, etc. ü Empanelled lawyers title confirmation report. Leasehold Property (Original): ü Lease deed ü Transfer Memorandum Order ü Transfer Deed (if applicable) ü Mortgage Permission ü Any other document in title chain through which any person has acquired title.Viz.General power of attorney, Agreement to sell, Allotment Letter, Gift deed, etc ü Empanelled lawyers title confirmation report

HOME PURCHASE –RESALE CASE Freehold Property Pre Disbursal Documents: ü Original Agreement to sell and purchase or declaration form Purchaser /Borrower ü Original Agreement for Fixtures and Fittings of Cost Estimate (if applicable) ü Copy of sanction Plan, if applicable

ü Empanelled lawyers title confirmation report Post Disbursal Documents: ü Original Sale deed /Conveyance deed in favor of borrower ü All previous sale deeds ü All other previous ownership documents –Allotment letter, Receipts, general Power of Attorney, Agreement to sell etc. ü Mortgage Intimation Letter (if applicable) Leasehold Property: Pre Disbursal Documents: ü Agreement to sale ü Agreement for fixtures and fittings /Cost Estimate (if applicable) ü Transfer memorandum order ü Empanelled Lawyers Title confirmation report ü Letter from the purchaser to NOIDA/Greater Noida for recording charge of ICICI on the property duly acknowledged by the authority concerned Post Disbursal Documents: ü Original permission to mortgage from Noida in favor of the Bank ü Original Allotment Letter ü Original Possession Letter ü Original Receipts of Payment ü Original Lease deed ü Original Transfer Deed- if applicable

The entire loan amount may not be disbursed in one go. It can be disbursed in parts on the basis of stage of construction and the demand of the borrower. The documents required in case of subsequent disbursal include: •

Original receipt of previous amount disbursed from the builder

•

Acknowledgement receipt of the amount previously disbursed from the customer.

•

Previous disbursal memo detailing out the amount disbursed till date.

REPAYMENT OF LOAN Repayment of loans shall be done as follows: On part disbursement: pre EMI interest shall be paid until final disbursement On full disbursement: equated monthly installments have to be paid including both interest and principal. Repayment of the above can be made through :1. Post Dated Cheques: they are collected in lots of 36 PDCs and 60 PDCs in case of NRIs. 2. Deduction at source: a certificate of deduction at source must be given.

Guidelines For Disbursal Own Contribution (OC) ICICI does not fund full 100% of the cost of property. It tends to fund only a part of it i.e. up to 85%. The balance is required to be paid by the customer on his own. Bank will grant loan only after this OC gap is met by the customer. The customer may be required to pay the amount of own contribution either entirely in the beginning or partly in the beginning and partly at the time of possession of the property.

Funding of loan

Home Loan In case of direct allotment ICICI funds 85% of the market value subject to conditions. In case of resale ICICI funds 85% of the market value, if cost of property ≥ market value. If cost of property < market value, 100% of cost of property subject to 80% of market whichever is lower. Land Loan ICICI funds 75% of cost of property subject to 75% of market value whichever is lower. Here, •

Cost of property (COP) includes = Agreement value +Stamp duty +Furniture and fixtures

•

Agreement value or white value refers to the cost of property as per the agreement.

•

Stamp duty varies from on the basis of location of the property.

•

Furniture and Fixtures generally is up to 20% in case of home loans and if it exceeds 20% and rages from 20% to 50% then such disbursal is termed as Market Value Lending (MVL).

•

Market value refers to the value of the property assessed in the technical.

Technical requirement Technical report is not required in case of direct allotment. Two technical reports are required in case of market value lending and land loan. Both these reports must be from two different agencies and funding is done on the basis of lower of both the market value assessed.

PROCESS OF DISBURSAL

1. Verifying the documents submitted by the applicant. 2. Checking matches of the said property by filling a property dedup. 3. Preparing the following documents are prepared by disbursal executive: Disbursal request form: DRF is a form which details out the total loan amount, the amount disbursed till date along with the current demand for disbursal. Disbursal memo: A disbursal memo points out all the loan details including :Type of loan Amount of loan Processing fees charged Amount of loan disbursed till date Details of the property Mode of payment chosen by the applicant, Cost of the property, Market value of the property as estimated by the technical agency POP sheet It details out the list of documents required at the time of disbursement, the documents received and verified, the documents to be demanded at OTC and post disbursal. OTC OTC stands for Over The Counter. It lists out the documents which are demanded at the time the cheque is handed over to the customer.

PERSONAL LOANS Often in our life needs outweigh our means. So in order to fulfill these needs substantial funds may be required. Such funds are provided by different banks (both public and private) in the form of Personal loan schemes at different rate of interest and terms and conditions.

PURPOSE This loan is granted for any legitimate purpose such as:• Expenses for domestic or foreign travel; • Medical treatment of self or a family member; • Meeting any financial liability such as marriage of son/daughter; • Defraying educational expenses of wards; • Meeting margins for purchase of assets; • Any other purpose or personal reasons.

PROCESS Personal loans are provided by almost all the banks (public or private) at different rate of interest and terms and conditions. A customer can obtain a personal loan through the following steps:1. First of all the customer needs to fill an application form provided by the bank which contains details regarding – • The amount of loan required • The purpose for which the loan is required • The monthly/annual income of the person • The length of his service • Whether any house is owned by him and other assets owned • Other liabilities in brief, etc. 2. Certain essential documents listed by the bank should be submitted by the customer along with the application form. 3. The bank then processes the application form and decides whether the loan should be approved or not. 4. The bank then calculates the eligibility of the applicant i.e. the amount of loan which can be given to him. The eligibility of the applicant depends upon:• The gross income of the individual • Age of the individual • Assets and liabilities of the applicant • Repayment capacity of the applicant

Appraisal Of Loans ELIGIBILITY: The following persons are eligible to apply for Personal Loan:1. SALARIED INDIVIDUALS: The eligibility criteria according to the type of customer is given below:-

Eligibility

Minimum

Maximum

Amount (INR)

Rs 50,000

Rs 7,50,000

Repayment Months

12 months

48 months

Age

23 yrs

58 yrs (At end of loan)

Requirement

Current residence : Current job : Bank account : Phone ownership : Total work : experience Net salary :

2. DOCTORS / DENTIST:

Either owned or 6 months 6 months 6 months Required 24 months Rs 8,000 per month or 6,500 per month for relationship customers

Eligibility

Minimum

Maximum

Amount (INR)

Rs 50,000

Rs 10,00,000

Repayment Months

12 months

60 months

Age

25 yrs

65 yrs (At end of loan)

Requirements

Current residence Total medicine practice Bank account Phone ownership Total work experience Minimum required

: : : : : :

Either owned or 12 months 24 months 6 months Required 24 months Rs 90,000 per year

3. PROFESSIONALS: Eligibility

Minimum

Maximum

Amount (INR)

Rs 50,000

Rs 5,00,000

Repayment Months

12 months

36 months

Age

25 yrs

65 yrs (At end of loan)

Requirements

Current residence Current business Total business experience Bank Account Phone ownership Minimum Income Profit making business Property ownership/ repayment track

: : : : : : : :

Either owned or 24 months 36 months 60 months 24 months Required Rs 90,000 per year Last 2 yrs Required

4. PROPRIETORS AND PARTNERS: Eligibility

Minimum

Maximum

Amount (INR)

Rs 50,000

Rs 5,00,000

Repayment Months

12 months

36 months

Age

25 yrs

65 yrs (At end of loan)

Requirements

Current residence Current business Total business experience Bank Account Phone ownership Minimum Income Minimum Turnover

: : : : : : :

Either owned or 24 months 36 months 60 months 24 months Required Rs 1, 20,000 per year

Property ownership Repayment track

: Required : Required

Service - 5 lacs per year Manufacturing - 20 lacs per year Trader – 25 lacs per year

Repayment Capacity The bank grants the loan to the applicant depending upon his repayment capacity. The amount of loan to be given also depends upon the repayment capacity of the applicant. In order to determine the repayment capacity of an applicant, the bank takes into account the annual income of the applicant, hid assets and liabilities. The assets include:• Property (other than house) • Bank / Post Office deposits • National Saving Certificates • LIC Policy • Gold Shares, Debentures • Units of UTI / Mutual Funds • Other assets The liabilities include:• Outstanding loan from friends / relatives, etc. • Outstanding loan from employers • Outstanding loan from Banks / F.I.s DOCUMENTS REQUIRED: 1. Latest Passport size Photograph – Self and Spouse. 2. Age proof. 3. Copy of Passport or Voters ID card or Driving Licence for proof of Identity.

4. Verification of signature from the bank where salary is credited by the employers. 5. Copy of Ration card / Telephone bill / Passport / Voters I – card for proof of residence. 6. Proof of official address. 7. Current employment proof and employment continuity proof. 8. Latest monthly salary slip showing deductions – of Self and Spouse. 9. Latest Form 16 from employer (for employees) – of Self and Spouse. 10. Copy of IT return for last two years, duly acknowledged by ITO with computation of income, for Professionals. 11. Last six months Bank Statement of the account where salary is credited by employers. 12. Relieving letter of Pensioner from the employer. 13. Credit card statement or repayment track record. 14. Proof of Professional Qualification: Copy of highest professional degree held. 15. Proof of own property. SERVICE CHARGES: • • • • •

For General Category Customer - Processing fee 2% upfront. For Salaried Category - 0.50% and Self Employed (Professionals) - 1% upfront. Legal & stamp charges as per actual. No advance cheques/charges before sanction of loan. No hidden cost to the account of the customer or other administrative charges.

PRE – PAYMENT CHARGES: 2.00% on principal amount outstanding. SECURITY: The maximum amount of loan that can be granted without any Collateral security:• •

In case of Salaried Category individuals – up to Rs 1 lakh In case of Self Employed (Professionals) & General Category Customer – up to Rs 50,000.

The maximum amount of loan that is granted with Collateral security is Rs 5 lakh for all categories. Collateral security – We need collateral security such as LIC Policy, NSC, KVP, IVP, landed property etc. in case the loan amount is more than Rs. 50,000. Rs.1 lacs depending upon different income groups. SANCTION OF PERSONAL LOAN: Within 24 hours of submission of the complete set of documents.

COMPARISON OF PERSONAL LOANS ELIGIBILITY: LENDER Baroda Personal Computer Loan Bank Of Baroda Loan to Pensioners Baroda Personal Loan Bank Of Baroda Marriage Loan BOB Vaibhav Lakshmi Loan Canara Bank Personal Loan HDFC Bank Personal Loans HDFC Bank Personal Loans (Professionals) HDFC Bank Personal Loans for Self Employed (Individuals) HSBC Personal Loan ICICI Personal Loan IDBI Personal Loan PNB Personal Loan

Min. Age (years)

Max. Age (years)

Min. Income (Rs/mth)

Max. Income (Rs/mth)

---

---

1

---

-----

70 ---

1 1

-----

18

60

1

---

21

55

1

---

18

---

---

---

21

60

1

---

21

60

1

---

21

60

1

---

21 21 23 18

60 -------

1 --1 1

---------

SBI Saral Personal Loan

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---

1

---

FEES: LENDER

Processing Fees (%)

BOB Vaibhav Lakshmi Loan BOB Marriage Loan Baroda Personal Loan BOB Loan to Pensioners Baroda Personal Computer Loan Canara Bank Personal Loan HDFC Bank Personal Loans for Self Employed (Individuals) HDFC Bank Personal Loans (Professionals) HDFC Bank Personal Loans HSBC Personal Loan ICICI Personal Loan IDBI Personal Loan PNB Personal Loan SBI Saral Personal Loan

5.00 0.25 0.00 0.00 0.00 0.50

Administrative (%) 0.00 0.00 0.00 0.00 0.00 0.00

2.00

0.00

2.00 2.00 0.00 2.00 2.25 0.00 2.00

0.00 0.00 0.00 0.00 0.00 0.00 1.00

Fee

INTEREST RATES: LENDER Baroda Personal Loan Baroda Personal Computer Loan BOB Marriage Loan BOB Loan to Pensioners BOB Vaibhav Lakhmi Loan Canara Bank Personal Loan HDFC Bank Personal Loans for Self Employed (Individuals) HDFC Bank Personal Loans HDFC Bank Personal Loans (Professionals) HSBC Personal Loan ICICI Personal Loan IDBI Personal Loan

From To From (mths) (mths) (Rs) 12 48 20,000

To (Rs) 2,00,000

Interest Rate (%) 13.50

12 12 12 0 0

60 60 48 36 60

------20,000 ---

1,00,000 2,00,000 1,00,000 2,00,000 5,00,000

14.00 13.00 13.00 13.00 12.00

-----

60 60

-----

15,00,000 10,00,000

12.00 12.00

--0 -----

60 60 -----

--50,000 --50,000

10,00,000 15,00,000 15,00,000 7,50,000

12.00 16.00 11.00 15.00

PNB Personal Loan SBI Saral Personal Loan

12 ---

48 48

10,000 24,000

3,00,000 ---

13.00 14.50

MAXIMUM FINANCING LIMIT: LENDER

Minimum Maximum Maximum Limit Amt. (Rs) Amt. (Rs)

Baroda Personal Loan

20,000

Baroda Personal 20,000 Computer Loan BOB Marriage Loan --BOB Loan to Pensioners ---

BOB Vaibhav Lakshmi Loan 20,000

Canara Bank Personal Loan --HDFC Bank Personal --Loans HDFC Bank Personal --Loans for Self Employed HDFC Bank Personal Loan --(Professionals)

2,00,000

---

2,00,000 1,00,000

2,00,000

5,00,000 10,00,000

15,00,000

10,00,000

Min. Term (mths)

Max. Term (mths)

Rs 2 lakh subject 0 to conditions. The income of spouse can be included if the loan is being applied for jointly. Margin of 25% can be availed on 0 loan amount.

48

--Rs 1 lakh or 10 times of last monthly pension, whichever is lower. Rs 2 lakh or 10 times of net monthly salary, whichever is lower. Six months gross salary. Can take this loan if you are a salaried individual. Can take this loan if you are self employed

0

60

0

48

0

36

---

60

12

48

12

48

Can take loan if you are a salaried 12 individual.

48

48

HSBC Personal Loan ICICI Personal Loan

50,000 20,000

IDBI Personal 50,000 Loan PNB Personal 10,000 Loan SBI Saral 24,000 Personal Loan

15,00,000

---

---

7,50,000

If you’ve been an ICICI Bank 12 customer for the past 6 months you may get privileged rates. --12

3,00,000

---

---

12 times net --monthly income for salaried individuals & pensioners and 1 year’s net annual income in case of others, subject to a ceiling of Rs 10 lakh in all centres.

15,00,000

0

60 60

48 48 48

UNIQUE FEATURES: LENDER Baroda Personal Loan

UNIQUE FEATURES This helps you take care of all kinds of expenses at a short notice. The loan covers medical, marriage, travel expenses and any other personal use. Baroda Personal This enables you to finance your dream PC and also provide Computer Loan for the purchase of legal software. Dual finance provision for PC (up to Rs 1 lakh) as well as software (up to Rs 20,000) BOB Marriage Loan This loan is aimed at financing the marriage of any of the family members. Working women can also avail of this loan. BOB Loan to Pensioners This loan is targeted at pensioners. You can also avail of a Personal accidental death Insurance cover of up to Rs 75,000 BOB Vaibhav Lakshmi This loan is targeted at working women. It can be taken as Loan an overdraft facility or as term loan without any security. Canara Bank Personal This loan is granted to meet genuine personal needs. This Loan scheme is for the benefit of employees of Corporates, PSUs, Government Departments, Institutions, etc.

HDFC Bank Personal Loans HDFC Bank Personal Loans for Self Employed (Individuals) HDFC Bank Personal Loans (Professionals) HSBC Personal Loan

ICICI Personal Loan IDBI Personal Loan PNB Personal Loan SBI Saral Personal Loan

This is a personal loan that can be used in case any sudden financial need arises. This is a loan for Sole proprietors, Partners & Directors in the Business of Manufacturing, Trading or Services. This loan is for Doctors, Chartered Accountants, Engineers, MBA Consultants, Architects, Company Secretaries, etc. HSBC charges interest on utilized personal loan amount only. Just estimate the maximum personal loan amount you need. Interest will be charged only on the amount you withdraw. Flexibility to choose EMI dates – 1st or 10th of every month. With this loan you can get instant money for a wide range of your personal needs like renovation of your home, marriage, holiday, buying a laptop or a home theatre etc. This is a personal loan. Salaried individuals and the self employed too can apply for this loan. This personal loan from Punjab National Bank is to meet all types of personal needs. This loan is for meeting all types of personal needs like marriage, holiday with family, festival celebrations etc.

CURRENT TRENDS IN THE RETAIL LOAN SEGMENT



In the last year the RBI has exercised considerable control over the interest rates. RBI has raised CRR and SLR twice which has led to hardening of interest rates in the retail and corporate sector. Most of the banks have raised their rate of interest on loans from 100 to 200 basis points.



The rising interest rates have slowed down the growth in the retail segment . it has led to increase in EMIs for most of the loans. In some cases EMIs have risen as much as Rs 2000.



one of the reasons for RBI taking stringent measures is because there is a fear of retail bubble in the real estate market due to easily availability of home loans. RBI has taken a series of measures, ranging from raising its key policy rates to risk weightage on loans extended to retail sector, to moderate the credit growth of banks. RBI has been uncomfortable with banks' excessive lending to retail segment, especially the housing sector.



With increased competition from foreign banks from 2010, the banking sector will see lot of consolidation through Mergers and acquisitions. The competition will heat up further and the banks would be vying for market share in the retail segment loans.