Disbursement Of Home Loans By Commercial Banks

DEPARTMENT OF MANAGEMENT

DISBURSEMENT OF HOME LOANS BY COMMERCIAL BANKS A STUDY OF LUDHIANA CITY

Submitted to Lovely Professional University In partial fulfillment of the requirements for the award of degree of MASTER OF BUSINESS ADMINISTRATION

Submitted by:

Supervisor:

MEHAK PURI

MISS BHARTI AGGARWAL

2020070070

LECTURER

DEPARTMENT OF MANAGEMENT LOVELY PROFESSIONAL UNIVERSITY PHAGWARA (2007-09)

Page 1

TO WHOMSOEVER IT MAY CONCERN This is to certify that the project report titled “DISBURSEEMNT OF HOME LOANS BY COMMERCIAL BANKS – ASTUDY OF LUDHIANA CITY” carried out by Miss Mehak Puri D/o MR Ajay Puri has been accomplished under my guidance & supervision as a duly registered MBA student of the Lovely Professional University, Phagwara. This project is being submitted by him/her in the partial fulfilment of the requirements for the award of the Master of Business Administration from Lovely Professional University. Her dissertation represents his original work and is worthy of consideration for the award of the degree of Master of Business Administration.

___________________________________ (Name & Signature of the Faculty Advisor) Title: ______________________________ Date: ______________________________

Date:

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DECLARATION

I, "MEHAK PURI”, hereby declare that the work presented herein is genuine work done originally by me and has not been published or submitted elsewhere for the requirement of a degree programme. Any literature, data or works done by others and cited within this dissertation has been given due acknowledgement and listed in the reference section.

_______________________ (Student's name & Signature) _______________________ (Registration No.) Date:__________________

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PREFACE Research work in management is extremely important for it gives a close view of the real business world and bridges the gap between theory and practical. For any MBA student who is striving to perform outstanding, it is of paramount importance that apart form theoretical knowledge one must also gain practical knowledge. which in turn widely influence their conceptions and perceptions. This project was undertaken towards the partial fulfillment of the requirements Lovely professional university ,Phagwara. This really provided me an opportunity to demonstrate my ability in applying theory to practical business situations. The study undertaken by me is "disbursement of home loans by commericial banks " In this, I have tried to perform my best.In the forthcoming pages an attempt has been made to present comprehensive report concerning different aspects of my project.

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ACKNOWLEDGEMENT "Gratitude is not a thing of expression, it is more matter of feeling." There is always a sense of gratitude which one express towards others for

their

help and supervision in achieving the goals.

This formal piece of acknowledgement is an attempt to express the feeling of gratitude towards people who helpful me in successfully completing of my training. I would like to express my deep gratitude to Miss bharti Aggarwal my training coordinator for their constant co-operation. she was always there with his competent guidance and valuable suggestion through out the pursuance of this research project. Special thanks to Miss Bharti Aggarwal who guided me to work honestly and to give valuable suggestion for improving my work Last but not least I would also like to place of appreciation to all the respondents whose responses were of utmost importance for the project. Above all no words can express my feelings to my parents, friends all those persons who supported me during my project. I am also thankful to all the respondents whose cooperation & support has helped me a lot in collecting necessary information. I would also like to thank almighty God for his blessings showered on me during the completion of project report

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EXECUTIVE SUMMARY Home is a dream of a person that shows the quantity of efforts, sacrifices luxuries and above all gathering funds little by little to afford one’s dream. Home is one of the things that everyone one wants to own. Home is a shelter to person where he rests and feel comfortable. Many banks providing home loans whether commercial banks or financial institutions to the people who want to had a home. The housing sector plays an important role in the economic development of the country My project title is “disbusremnt o f home loans by commericial banks “ a study o f ludhiana city. I selected this topic because The Indian housing finance industry has grown by leaps and bound in few years.Total home loans disbursements by banks has risen which witnesses phenomenal growth from last 5 years. There are greater number of borrowers of home loans.so by this study we can find out satisfaction level of customers and problems faced by them in obtaining home loans. My objectives of study are•

To make comparative study of Disbursement of home loans by commercial banks.

•

To study the satisfaction level of customers about home loans.

•

To study the problems faced by customers in obtaining the home loans.

For this I had taken four commercial Banks in Ludhiana city namely ICICI Bank, PNB, standard chartered Bank, SBI. It includes two public sector banks and two private sector banks. The period of study is five years commencing from 2004-2008. In the research methodology I had taken both primary data as well as secondary data , in the primary data I had make a questionnaire to check the satisfaction level of customers about home loans . in the secondary data I had studied the annual reports of RBI ,commercial banks & broachers of these bank For the first objective I had collected the information about the number of account holders of specified banks, no of disbursement of home loans and recovery of these loans. After analysis I came to following findings In the comparative study of specified banks Its found that

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Ø Punjab National Bank is having large number of customer base with high loan disbursement and recovery of loans Ø the standard chartered bank showed less outstanding balance which presented in percentage form in the diagram In case of second objective i.e customer satisfaction level it is found that Ø On the basis of data the ICICI bank is emerging at higher position as compare to Standard chartered bank and other public sector banks on ground of professionally managed services, reliable & transparent system, easy query handling etc And problems face by customers in obtaining home loans are

§ The customer does not had proper knowledge about different home loan products so they face problem in making a good deal. § There are procedural delays, which harass the customers lot. This will crush the curtsy of customers to avail the home loan. § The attitude of bank employees some times non cooperative and it creates a hurdle in building trust and Confidence among customers about banks. § The banks do not take into account the paying capacity of customers. So some customers are not able to get amount of loan needed by them.

Finally the whole research was carried out in a systematic way to reach at exact results. The whole research and findings were based on the objectives some of the limitation faced in collecting the data were lack of time, lack of data, non-response, reluctant attitude and illiteracy of respondents, which posed problems in carrying out the research.

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Some of the suggestions are ü To increase their customers, the banks should provide specialized services in this sector. These services can be such as proper guidance to the customer regarding the processing of loans, especially for the customers who are illiterate. ü To satisfy their customers and for good dealings in future, the banks should make prompt disbursement of loan amount to the customers so that they can buy or construct their dream home as early as possible. ü The Banks should use easy procedure, or say, less lengthy procedure for the sanctioning of loan to the customer. There should be less number of legal formalities, in case this exists, then, these should be completed in less time. This will be helpful in attracting more customers. ü Although the interest rates on specific norms, yet customers seek less interest rate which can lower their cost of house. So banks should try to lower their interest rates. Needles to say, that the bank which is having lower interest rates, have the maximum clients for loans.

ü The public sector banks should improve their overall services to increase the number of customers for home loans. They should recruit professionals to provide such services and to satisfy the customers .

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CONTENTS S.No

Chapter

Page no

1

1.1 Introduction

11

introduction to home loans Advantages Disadvantages Disbursement o f home loans Objectives of study Need of study Scope of study Methodology Research design Source of data Tools for analysis Limitation of study

3

4

25 25 25 26

Survey of Literature

.

Disbursement

of

home

29

loans

by 34

commercial banks 5

Analysis of customer satisfaction level

46

Page 9

6

Conclusion & Suggestions

77

7

Bibliography

83

8

Appendix

85

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CHAPTER 1

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CHAPTER - 1 INTRODUCTION

1.1 INTRODUCTION TO HOME LOANS Home is a dream of a person that shows the quantity of efforts, sacrifices luxuries and above all gathering funds little by little to afford one’s dream. Home is one of the things that everyone one wants to own. Home is a shelter to person where he rests and feel comfortable. Many banks providing home loans whether commercial banks or financial institutions to the people who want to have a home. Many banks are providing home loans at cheapest rate to attract consumers towards them. The more customer friendly attitude of these banks, currently offer to consumers cheapest loan over homes. In view of acute housing shortage in the country, and keeping in mind the social – economic role of commercial banks in the present times, the RBI advised banks to encourage the flow of credit for housing finance. With the RBI reducing bank rate, the home loan market rates nosediving by 50 basis points. The ICICI Bank and Standard chartered bank has become the first player in this sector to announce a housing loan for a 20 years period. No doubt it will enhance the end cost of the home but it will facilitate people to plan their house over longer duration Now, it has been made easy for a person to buy that dream house which he dreamt of long ago. 1.1

ADVANTAGES OF HOME LOANS The various benefits of home loans arising to the customers are:-

(i)

Attractive interest rates The various banks offer attractive interest rates to boost and help

their customers. Many banks provide loans on fixed or floating rates to facilitate consumers as per their needs. (ii)

Help in owning a home

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The home availed by a person with the help of banks, because they provide technical and financial assistance to customers for owning their dream home. (iii)

No requirement of guarantor The commercial banks now a days, liberlise their laws regarding

home loans. Some of banks don’t even require the guarantor to grant loan to their consumers. They also make consumers free by reliving him to find a guarantor to complete the proceedings of availing loan. (iv)

Door-Step Services These door to step services are provided from enquiry stage to the

final disbursement takes place such services are beneficial for customers in present busy life. Banks like ICICI bank and standard chartered bank provide door to step services to customers to borrow loan. (v)

Loan period There are many banks which provide maximum loan tenures upto

15-20 years based on the loan amount and the creatibility of customers. This relieves the customers to repay loan amount till a long period. (vi)

For accidental death insurance Some banks provide free accidental death insurance with housing

loan which is also beneficial for the customers. These benefits or advantages of home loans are responsible for making than so popular among customer that a person who don’t have their home and want to buy, they do it with home loan. Home loans help such persons in making their dream home. 1.2

DISADVANTAGES OF HOME LOANS The main disadvantages of home loans are high lightened as below:

(i)

Delays in processing Many times, there are huge delays in processing of providing home

loans because various formulations to be fulfilled in this process. Due to these delays customers feel mentally as well as financially weak.

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(ii)

Fluctuating interest rates Some banks give home loans at floating rates, which fluctuate at

different intervals due to some reasons. These changes sometimes, may lead to increase in interest rate which will increase the cost of home loans to the customers. (iii)

High Cost The public sector banks charge high processing cost for home

loan’s sanctioning. They are forced to pay serious charges at various stage to fulfil the requirements. Some consumers are not able to pay such charges so such people could not avail the benefits of home loan schemes.

(iii)

Problems in disbursement There are many problems in disbursement of home loan amount.

There are some delay in disbursement of loan amount to the customers due to legal formalities. This causes problems to the customers. These are limitations or disadvantages of home loans. But some times some banks charges high installments to repay loan amount. Such also causes problem to customers. These limitations can be removed by providing good and promote services to the customers. 1.3

DISBURSEMENT OF HOME LOANS The every bank has its own procedure to disburse the loan amount

among customers. After choosing your right home, the next step is disbursement of home loans. The loan amount is disbursed after identifying and selecting the property or home that are purchased and submit the requisite legal documents. In the disbursement of home loans a clear title and full verification to ensure that a person has full rights on his house. The 230A clearance of seller and /or 371 clearances from the appropriate authority of income tax is also needed. (i) Eligibility criteria However, if one is a resident or non-resident individual who is

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planning to buy a house in India, one can apply for a home loan. If a person has decided to buy a property in the near future, he/she can apply for a loan before even selecting the property. Once the maximum amount to put into the property has been decided, the Housing Finance Institutions or Banks will let the customer know that how much he/she is eligible for and this helps to plan out the budget. (ii) Conditions regarding co-applicants All Housing Finance Institutions lay down conditions on who can be co-applicants. All co-owners to the property. need to be co-applicants to the loan necessarily. These institutions do not permit minors to join in as either coowner or as co-applicants because a minor is not eligible to enter into a contact as per law. They do not permit even friends or relatives who are not blood relatives to take a property jointly. However, Income of co-applicants can be clubbed together to get higher loan eligibility. Given below is a Table that throw light on acceptable relationship of a co-applicant for clubbing of income. Income Clubbing of Co-applicants:- It is as follows:Combination Income Clubbing: Ø

Husband-Wife:- Income of husband-wife can be clubbed.

Ø

Parent-son: - It can be clubbed if only son is there but not if any male sibling exist.

Ø

Brother-Brother: - If they are currently staying together and intend to stay together in the new property, then only, their income-can be clubbed for above purposes.

Ø

Brother-Sister: - No clubbing-is possible.

Ø

Sister-Sister: No clubbing is possible.

Ø

Parent-Minor- Child: - No clubbing is possible in this case also.

(iii) General Terms and Conditions The following are the terms and conditions applicable to the basic home loan product only. These are likely to change on the basis of the variations

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of the home loan product. Typically, in a general home loans, the following conditions are applicable: a)

The loan to value ratio (LTV) cannot exceed a particular percentage. This differs from product to product and from one Housing Finance Institutional Bank (HFI/B) to another. The components of the value of the property calculated here are covered under cost of property.

b)

The maximum tenure of the bank is nominally fixed by HFI/Bs. However, HFls/Bs do provide for different tenures with different terms and conditions.

c)

The installment that one pay is normally restricted to about-50-per cent of the monthly-gross income of the candidate.

d)

The total monthly outflow towards all the loans that have been availed of, including the current loan is normally restricted to 50% of the gross monthly income.

e)

One will be eligible for a loan amount which is the lowest as per one's eligibility. This is calculated as per the LTV norms, the HR, norms and the FOIR norms as mentioned above.

f)

Most HFls/Bs consider the profile before they judge the repayment capacity. The judgement is based on age, qualifications, number of dependents, employment details, employer credentials, work experience, previous track record of repayment of any loans that have been availed of, occupation, the industry to which the candidate's business relates to, if he/she is self-employed, then the turnover in the last 3-4 years etc.

g)

Some HFIs/Bs insist on guarantees from other individuals for the repayment of the loan. In such cases, the customers has to arrange for the personal guarantee before the disbursement of the loan takes place.

h)

The property should be technically clear before the HFIs/Bs disburses the loans amount. Most of institutions and banks have a teams of technical experts who visit the site to get a technical report before the disbursement of loan. This is also beneficial to the customer as they check for the

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technical quality and compliance with local laws. i)

The property should be legally clear before one can avail of a disbursement of the loan amount. Housing-Finance Institutions /Banks (HFIs/Bs) take legal clearance from their lawyers before the disbursement of amount. This proves to be beneficial to the customers as a legal expert checks his/her documentation to ensure that he/she get a proper title to the property.

j)

The disbursement of the loan is as per the progress of construction of the property unless it is a ready property in which case the disbursement will be by one single cheque. PEMI or simple interest on the loan amount disbursed to the customer in case of a part disbursement will be payable by the customer on the disbursement.

k)

The disbursement in most cases will be favoring the builder or the seller or the society or the development authority as the case may be. The disbursement

will

come

in

the

customer's

favour

under

special

circumstances only. l)

The repayment of loan can be made either through deduction against salary, post-dated cheques, standing instructions or Auto debit instructions to bank.

m)

The principle is amortized either on annual reducing or monthly reducing basis as the case may be. The above terms and conditions are generally true for most

Housing Finance Institutions/Banks with respect to the general Home Loans. However, the specific terms and conditions vary with respect to special Housing Finance Institutions or Banks. (iv) Charges applicable to home loans The different kinds of charges applicable to home loans are discussed below: a)

Processing fees First of all, comes the process fee. This is a charge that is levied by

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most HFls/Bs. This has to be paid at the time of submission of the application form. It's normally charged as a percentage of the loan amount sanctioned. Some HFls also charge a flat fee based on the loan amount instead of a percentage. When a lower amount is sanctioned the excess fees paid at the time of submission of the application is adjusted with the charges, which one make to the HFI/B subsequently. Most HFls/Bs refund the processing fee if the loan application is rejected. b)

Administrative fees This charge is again, normally, a percentage of the loan amount

sanctioned. It is collected by the HFI/B for the maintenance of customer's records, issuing interest certificates, legal charges, technical charges, etc. though the tenure of the loan. It is payable by the customer when he/she accepts the offer letter given by the HFI/B. This payment has to be made before the availment of the disbursement. The mode of collection of these fees varies from one HFI/B to another. c)

Rate of interest This is the rate of interest applicable on the loan amount through

the tenure of the loan. It is charged on the principal monthly reducing method. Most HFIs/Bs give an option to select either a Fixed rate of interest or a variable rate of interest. d)

Legal Charges Some HFIs/Bs mainly Public Sector Banks levy legal charges that

they incur on getting the property documents vetted by their panel of lawyers. e)

Technical Charges These charges are also levied by certain Housing Finance

Institutions/Banks (HFIs/Bs) to meet their expenses on the technical site visits to the customer's property. This ensures quality of construction and construction within the norms as stipulated by the respective approval authority. f)

Stamp duty and registration charges HFIs that go in for a registered mortgage, pass these charges on to

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the customer. These are rather heavy in certain states depending on the laws laid down by the state where one buy a property. g)

Personal Guarantee from Charges Since the personal guarantee provided by the customer need to be

stamped, these charges are also recovered from the customer. They are charged to him by HFIs who demand for Guarantees. h)

Cheque Bounce Charges In case the cheques through which one make a payment to HFls get

dishonored, some minimum charges are levied by the HFI. The same are recovered from the customer. i)

Delayed payment charges HFls/Bs charge delayed payment charges from the customer if

he/she delays the payment of installments beyond the due date. j)

Additional charges These are levied as a percentage on the delayed payment charges by

most HFls. They are levied if one fail to pay the dues within the stipulated time after a delay has taken place. k)

Incidental charge This is payable in case the HFI/B sends a representative from their

organization to collect their outstanding dues. It is normally charged at a flat rate per visit. These charges are levied by most HFls/Bs. l)

Prepayment Charges . This is a penalty charged by HFls/Bs from when one makes either a

part prepayment or a full repayment of the loan. This charge is levied only on lump sum payments and not on the EMls that one pays. This charge is levied on the amount prepaid by one and not on the entire outstanding principal. These charges are gradually being discount. So, these are the charges levied by most Housing Finance Institutions and Banks while granting home loan to the customers. Now, the decision on the repayment capacity shall be talked about as follows: -

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(iv)* Judgement regarding repayment capacity on the basis of income

To understand how the income of a customer is considered to arrive at his repayment capacity, it is first necessary to classify customers into salaried and self employed individuals. a)

The income of the salaried individual is considered in the following

manner: Gross monthly income as it appears on the salary slip Less:- Any non regular variable income appearing on the salary slip (including overtime, etc.) Add: - 50 per cent of the average variable income of the last six months. Add: - Any fixed cash/voucher payments for which proof can be submitted. Add: - 50 per cent of the average variable cash/voucher payments with proof like traveling reimbursement etc. Add:- HRA receivable if not being received already in the salary slip. The above income calculated for the calculation of eligibility using IIR and FOIR norms. For calculation of FOIR, the installments of all the loans that one has availed of currently for which repayment is being made is taken into account as well. The lower of the two eligibilities is considered as the maximum repayment capacity. b)

To consider income of Self-employed individuals we further classify them

into Professionals and non-professionals. •

Professionals: - Comprising doctors, chartered accountants, lawyers, architects, etc. For calculation of eligibility of professional's income is computed by most HFIs using the gross professional receipts instead of the Net profit as in the case of self-employed non-professionals.

•

Non-Professionals: - The income of non-professionals is normally calculated by HFIs in the following manner: -

Average of the net profits of last 2 years as it appears in the profit and loss account (Returns need to be filed for the same. They should be filed regularly

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before the due date is over). Less: - Any income, which is unusual and non-recurring in nature like sale of some asset, etc which affects profits substantially, Add: - Any expense that is unusual and non-recurring in nature like repairs and maintenance that has not been capitalized and effect profit adversely. Add: - 50 per cent of the average depreciation of the last two years. The above income is calculated for the calculation of eligibility using IIR and FOIR norms. For calculation of FOIR the installments of all the loans that one has availed of currently for which repayment is being made is taken into account and the eligibility is worked out. The lower of the two eligibilities is considered as the maximum repayment capacity. (v) Credit documentation Given below is the exhaustive list of credit documents- that need to be submitted for a general home loan product. The documents vary from one HFI/B to another based on one's employer, qualifications experience etc. The general requirements are as follows: a)

Income Documents: - For salaried slips for the last three months-

appointments letter-salary certificate-retainership agreement, if appointed as a consultant-Form 16 issued by the employer in customer's name income document for self employee - last three years profit and loss account statement duly attested by Chartered Accountants. Last three years Balance Sheets duly attested by Chartered Accountant, last three years Income Tax Returns with computation chart duly filed and certified by the Income Tax authorities. b)

Proof of employment: - Identify card issued by the employer- Visiting

card. c)

Employer's details (In case of private limited companies): Profile of employer on employers letterhead (to be signed by a senior

person in the organization) comprising •

Name of promoter/directors

•

Background of promoters/directors

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•

Nature of business activity of your employer

•

Number of employees

•

List of branches/factories

•

List of suppliers

•

List of clients/customers

•

Turnover of employer

•

Annual reports of the employer for the last two to three years.

d)

Proof of age (Anyone of the following): - Passport- Voter's ID card-PAN

card-Ration card-Employer's identity card-School leaving certificate-Birth certificate. e)

Proof of residence (Anyone of the following): - Ration card-Passport-

PAN card-Rent agreement, if the customer is staying currently on rent- Bank Pass book-Allotment letter from the company if he/she is residing in company quarters. f)

Proof of name change (If applicable): - A copy of the official gazette -A

copy of a newspaper advertisement publicizing the name change-Marriage certificates. g)

Proof if investment (If required): - Bank statement for the last six

months of all operating and salary accounts - Bank statements for the last six months of all current accounts, if self-employed-any other photocopies of investments held, if required by the HFC. (vi) Legal documentation Legal Documentation the typical legal documents that need to be submitted to the HFC arc discussed here. Given below is a list of legal property documents that need to be submitted to the HFC for mortgage of the property. The name and the list of documents vary from state to state and also depend on the type of property being financed. A broad outline of the documents required is given below. a)

Acceptance copy of the offer letter issued by the HFC/B.

b)

Title documents of the property that include -sale agreement duly

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registered-Own contribution receipts - Allotment letter-Registration receipt-Land documents indicating ownership, if applicable- Possession letter-Lease

agreement,

if

applicable

(Property

bought

from

a

development authority) - Mortgage deed if the HFC opts for a registered mortgage. c)

No Objection Certificate from the developer, society or development authority as applicable.

d)

Personal Guarantees, if applicable.

e)

In case of alternator additional security, documents for the same depending upon the security details.

f)

Post dated cheques for the EMls. The above documents are only indicative in nature and do not cover

the entire list. It may, also be noted that in a resale case, the previous chain of agreement also need to be taken. (vii)

The tax benefits that are applicable to housing loans for individuals

Currently Tax Benefits to individuals are available only for the Home Loans and Home Extension Loans products. The benefits available are covered under these sections. Property Insurance :- Is it compulsory to insure the property? Some HFls insist on a mortgage redemption life insurance policy. In this case the customer gets a benefit of an interest rate reduction. Though the HFI may not insist, it is better to go in for property insurance to safeguard the asset against any sort of damage or loss. The customer can select the tenure for the property insurance. The insurance premium is changed up front. Most insurance companies provide for huge discounts on the rate of premium for larger tenures. The premium charged currently is seventy-seven for every lakh of property for a year. So a customer has to fulfil various conditions to be eligible for availing home loan from a Housing Finance Institution/Bank After fulfiling these conditions, a customer can avail loan at low interest rate i.e. fixed rate or

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floating rate. A decision on whether one should go in for a fixed-rate loan or a floating-rate loan now is a function of two factors i.e. One's perception of where interest rates in the economy are headed and one' capacity to ride the interest rate changes. A floating-rate loan let one take advantage of further falls in interest rates but one stand to loose if interest rate, rise again. However this decision is based on the perception of the consumer.

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1.2

OBJECTIVES OF STUDY

There is no strongest foundation for your dream home, than a cheap loan. Home loans have become that stronger foundations for people who want to own a home. The main objectives of the study are as follows:i)

To make comparative study of Disbursement of home loans by commercial banks.

ii)

To study the satisfaction level of customers about home loans.

iii)

To study the problems faced by customers in obtaining the home loans.

1.3 NEED OF STUDY The Indian housing finance industry has grown by leaps and bound in few years.Total home loans disbursements by banks has risen which witnesses phenomenal growth from last 5 years. There are greater number of borrowers of home loans.so by this study we can find out satisfaction level of customers and problems faced by them in obtaining home loans.

1.4 SCOPE OF STUDY

The present study will be confined to four commercial Banks in Ludhiana city namely ICICI Bank, PNB, standard chartered Bank, SBI. It includes two public sector banks and two private sector banks. The period of study is five years commencing from 2004-2008

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1.5 RESEARCH METHODOLOGY

Research Methodology Research methodology is a way to systematically show the research problem. It may be understood as a science of studying how research is done scientifically. It is necessary for the researcher to know not only the research methods but also the methodology. This Section includes the methodology which includes. The research design, objectives of study, scope of study along with research methodology and limitations of study etc. To study the disbursement of home loans by commercial banks, the study shall be conducted in the manner enumerated below-

1.5.1 Research Design This project is based on exploratory study as well descriptive study. It was an exploratory study when the customer satisfaction level was studied to suggest new methods to improve the services of banks in providing home loans and it was descriptive study when detailed study was made for comparison of disbursement of home loans by commercial banks.

1.5.2 SOURCES OF DATA To fulfill the information need of the study. The data is collected from primary as well as secondary sources-

A -Primary sourceI decided primary data collection method because our study nature does not permit to apply observational method.

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In survey approach we had selected a questionnaire method for taking a customer view because it is feasible from the point of view of our subject & survey purpose. We conducted 100 sample of survey in our project to judge the satisfaction level of customers which took home loans.

•

Sample size

For the questionnaire I have taken the sample size of 100 customers of selected banks

B - Secondary source Secondary data is taken from such as: •

Information collected from customers.

•

Annual published report of RBI

•

The various reports and journals published by RBI concerned with banking

•

Different brochure of banks.

Reports of various study group or working groups appointed by Government from time to time

1.5.3 Tools of Analysis The analysis of data is done on the basis of following statistical techniques:•

Percentages.

•

Averages

•

Charts

• 1.5.4 Limitations of the study

This study also includes some limitations which have been discussed as follows: i)

The sample size of 100 customers and 4 banks might prove a limitation because of difficulty in generalization of results.

ii)

To collect the data from various banks was quite difficult due to noncooperation of some banks. This proved to be major limitation of the

Page 27

study. iii)

To access such a large number of customers was difficult because of noncooperative attitude of respondents.

iv)

Lack of data was also the other limitation of the study as some of banks do not have proper data on topic.

v)

There was limitation of time to conduct such a big survey in limited available time.

vi)

Ignorance and reluctant attitude of customers was also a major limitation in this study. Thus above all were the limitations in this research study. The

maximum efforts were made to overcome these limitations in the study.

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CHAPTER 2

Page 29

CHAPTER - 2 REVIEW OF LITERATURE

SUMMARY

•

After going through pervious studies of Home loans I came to conclude that-

•

There is growth of home loans after 2001

•

Home loans have an inverse relation with interest rates i.e. when interest rate low the demand of home loans increase. (Ojha 1987)

•

People are going more towards home loans than private mortgage insurance (Berstain 2008)

•

Government taking various steps to encourage people to go toward home loans (Haavio, Kauppi 2000)

•

Growth of home loans are due to increase of living standard of people, shifting from joint family to nuclear family (La courr, Micheal 2007)

•

There are some problems also attach with these home loans such as time i.e filling of application of loan to closing ,people have their own specified needs from these home loans which are not fulfilling. (La cour Micheal 2006)

•

SBI provide a very low interest rate on home loans as compared to other banks. (SBI May 2000)

Now after this conclusion the details of reviews are below-

Berstain David (2008) examined in his study taken from 2001 to 2007 that in this period there is increase use of home loans as compared to private mortgage insurance (PMI).he have divided his study into four sections. Section 1 describes why people are going more for home loans than PMI. the main reason for this that now home loans market provide Piggybank loans for those people who don’t have 20% of down payment. Section 2 tells the factors responsible for the growth of home loans and the risks on shifting toward Page 30

home equity market without any PMI coverage. PMI can protect lenders from most losses up to 80% of LTV and the absence of PMI will result in considerable losses in an environment. Section 3 tells the measures in changes of type of loans. For this he have taken the data from the 2001 and 2007 AHS a joint project by HUD and CensusThe results of this analysis presented in Table One reveal a sharp increase in the Prevalence of owner-occupied properties with multiple mortgages among properties withNewly originated first mortgages. Section 4 describe the Financial status of single-lien and multiple-lien households and for this he have taken the survey of consumer finance and show that financial position is more weaker in multiple loans than the single loans Vandell ,kerry D (2008) analysis the sharp rise and than suddenly drop down home prices from the period 1998- 2008. changes in prices are for the reasons as such economic fundamentals , the problem was not sub prime lending per se, but the Fed‘s dramatic reductions, then increases in interest rates during the early- mid-2000 , the housing ―boom was concentrated in those markets with significant supply-side restrictions, which tend to be more price-volatile; he problem was not in the excess supply of credit in aggregate, or the increase in sub prime per se, but rather in the increased or reduced presence of certain other mortgage products La courr, Micheal(2007) analysis in his study the factors affected the increase in the level of Annual percentages rates (APR) spread reporting during 2005 over 2004. the three main factors are changes in lender business practices; (2) changes in the risk profile of borrowers; and (3) changes in the yield curve environment. The result show that after controlling for the mix of loan types, credit risk factors, and the yield curve, there was no statistically significant increase in reportable volume for loans originated directly by lenders during 2005, though indirect, wholesale originations did significantly increase. Finally, given a model of the factors affecting results for 2004-2005, we predict that 2006 results will continue to show an increase in the percentage of loans that are higher priced when final numbers are released in September 2007. La cour Micheal (2006) examined the home purchase mortgage product preferences of LMI households. Objectives of his study to analysis the factors that determined factors their choice of mortgage product , is different income groups have some specified need to

Page 31

met particular product. The role pricing and product substitution play in this segment of the market and do results vary when loans are originated through mortgage brokers? For this they have use the regression analysis and the results are high interest risk reduce loan value. Self employed borrower chooses reduce documented loans than salaried workers. use of this product type seems to be more prevalent among borrowers with substantial funds for down payment and better credit scores. In case of pricing Multi families requires price premium and larger loans carry lower rate.

And the role of time,

particularly, the time required for the loan to proceed from application to closing it is find that government lending taking the longest time and Nonprime loans the shortest time. Multi family properties take longer time in closing. And during peak season take longer time to close. And for last objective it is find that broker originated loans close faster. The effect of mortgage brokers on pricing and other market outcomes is fertile ground for additional research. Dr. Rangarajan C. (2001) said that the financial system of India built a vast network of financial institutions and markets over times and the sector is dominated by banking sector which accounts for about two-third of the assets of organized financial sector. Haavio, Kauppi (2000) stated that countries where a large proportion of the population lives in owner – occupied housing are experiencing higher unemployment rates. Than countries where the majority of people live in private rental housing, which might suggest that rental housing enhances labour mobility. In this paper, they develop a simple inter temporal two region model that allow us to compare owner occupied housing markets to rental markets and to analyze how these alternative arrangements allocate people in space and time. announced that it will offer loans for Rs. 2-10 lakh at 12.5 percent the lowest rate offered by any housing finance provider, big brother SBI has taken the rate war in the home loans category to new heights. This is because, apart from the low rate, the interest on these loan is calculated on principal, which is reduced every month unlike other housing finance companies which calculate interest on annually reducing basis. Narasimham Committee (1991) points out that although the banking system in our country has made rapid progress during the last two decades, there is decline in productivity and efficiency and erosion of profitability. The committee strongly make

Page 32

indications of liberlising, deregulating economy to make Indian baking system more competitive and efficient. Ojha (1987) in his paper "modern international caparison of productivity and profitability of pubic sector banks of India" making Comparison on the basis of per employee indicators and taking examples of state bank group and Punjab National bank noted that Indian banks are the lowest in all accounts. However such international comparison will not be fair for numbers of reasons. Godse (1983) in his essay, “looking a fresh at banking productivity” observe that productivity aspect is only at the Conceptualization stage in banking industry. He suggested improvement in productivity and procedures, costing of operations and capital expenditure etc. Fanning (1982), while examining bank productivity of British banks observed that although the productivity of the UK clearing banks is improving, they are still heavily over manned as compared with similar banks else where. Kulkarni (1979) in his study “Development responsibility and profitability of banks” stated that while considering banks costs and profits, social benefits arising out of it cannot be ignored. He suggested that while meeting social responsibility banks should try to make developmental business as successful as possible. Varde and Singh (1979) in a study "profitability of commercial banks" over 15 years gave consideration to two types of factors that effects interest rates levels i.e. internal factors (including operational and managerial efficiency of individual basis). Banking Commission (1972) reviewed bank operating methods and procedures and made recommendations for improving and modernizing these, particularly relating to customers services, credit procedure and internal control systems. It observed that present methods of working out branch profitability are not appropriate and an integrated costing and financial reporting system is needed. Department of Banking operations and development, RBI : Bombay observed that the rapid expansion of banks activities since 1970 called for a phase of consolidations to improve the quality of banks operational efficiency, productivity and customer services.

Page 33

CHAPTER 3

Page 34

CHAPTER – 4

DISBURSEMENT OF HOME LOANS BY COMMERCIAL BANKS This chapter contains results and discussion on disbursement of Home loans by Commercial Banks. It is divided into two parts one part is related to the disbursement of home loans by different banks and the second part included the comparative study of disbursement of home loans made by commercial banks. Disbursement of Home loans by different banks. 4.a

ICICI Bank

Years

No. of Home loan

Home loan Disbursed

account holders.

(in crore Rs.) Distributed

Recovered

Balance

2004-05

700

90.07

63.05

27.02

2005-06

950

120.00

91.20

28.8

2006-07

1000

144.67

127.31

17.36

2007-08

1303

180.33

165.90

14.43

2008-09

1594

240.00

228.12

11.88

Interpretation On the above table, it is evident that there are increase in No. of account holders from 700 to 1594 in the year 2008-09. The loan amount distributed among home loan account holder has also increased from Rs.90.07 crore in 2004-05 to Rs.240 crore in 2008-09. The recovery procedure for home loans is also strengthening due to increment in recovered amount, i.e. Rs.63.05 crore to Rs.288.12 crore. So it nut shall there are upward trend in number of accountholders and disbursement of home loans. Page 35

4.b

Punjab National Bank

Years

No. of Home

Home loan Disbursed

loan account

(in crores Rs.)

holders.

Distributed

Recovered

Balance

2004-05

810

120.15

97.28

22.87

2005-06

950

183.26

150.00

33.26

2006-07

1120

213.65

185.86

28.05

2007-08

1433

240.87

231.07

9.80

2008-09

1500

265.15

265.05

9.10

Interpretation The Punjab National Bank is Public sector Bank. It comes second after State Bank of India in its branch location and expansion. From the Table, the figures show that there are increasing trend in customer base from 810 in the year 2004-05 to 1500 in the year 2008-09. The bank also show enhancement in loan amount up to Rs.265.15 crore in the year 2008-09. The recovery process of loans in past is slow but now it is increasing. 4.c

Standard Chartered Bank

Years

No. of Home loan

Home loan Disbursed

account holders.

(in crores Rs.) Distributed

Recovered

Balance

2004-05

106

6.21

5.27

0.94

2005-06

130

11.55

10.16

1.38

2006-07

154

17.06

14.35

2.70

2007-08

180

20.09

18.68

1.41

2008-09

260

24.10

23.91

0.48

Page 36

Interpretation The standard chartered bank is a private sector bank. It has also upgrade its position in banking sector in Ludhiana. The figures shown in table reveals that there is upward shift in customer base of Bank from 106 customers to 260 customers. The bank has also increased its share in housing finance by distributing Rs. 24.10 crores in 2008-09. The recovery procedure of Home loan is very sound. 4.d

State Bank of India

Years

No. of Home

Home loan Disbursed

loan account

(in crores Rs.)

holders

Distributed

Recovered

Balance

2004-05

650

104.33

98.12

6.21

2005-06

853

123.24

105.00

18.24

2006-07

1019

150.65

133.46

17.19

2007-08

1132

176.75

144.65

32.10

2008-09

1434

224.00

209.16

14.84

Interpretation:The amount reveal that there is tremendous increase in Home loan accountholders. The amount distributed as home loan is also increased from Rs. 104.33 in 2004-05 to Rs. 224 crore in 2008-09. But the recovery mechanism of the Bank is not so good thats why the outstanding amount shows fluctuating trend.

Page 37

COMPARATIVE STUDY OF DISBURSEMENT OF HOME LOANS BY COMMERCIAL BANKS:There are number of schemes and products, offered by commercial banks to attract the customers. The comparison among different commercial banks which offer home loans in regard of Disbursement of home loans are as:-

4.1

No. of Home loan accountholders Table 4.1(a)

Years

ICICI

Punjab

Standard

State Bank

Bank

National

chartered Bank

of India

Bank 2004-05

700

810

106

650

2005-06

950

950

130

853

2006-07

1000

1120

154

1019

2007-08

1303

1433

180

1132

2008-09

1594

1500

260

1434

Average of No. of accounts holders:Total of home loan customers = -------------------------------------No. of years

Page 38

Table 4.1 (b) Name of Bank

Average (Rs)

Percentage of Accountholders

ICICI Bank

1109

32

Punjab National Bank

1163

34

Standard Chartered Bank

166

5

State Bank of India

1018

29

Total

3456

100

Percentage of home loan holders

35 30 25 20 15 10 5 0 ICICI Bank

Punjab National Bank

Standard State Bank of India Chartered Bank

Name of bank

Fig. 4.1 Home loan holders of commercial banks

Interpretation The figure reveals that Punjab national bank is having large number of home loan accountholders. So it ranks first among other banks. But privates sector bank ICICI bank is not behind so much with 31% also market leader. The banks have shown increase in their customers base from 2004 tto 2008. But Punjab national bank comes as market leader in the home loan cases.

Page 39

4.2

Home loans distributed by Commercial banks. Table 4.2 (a)

Years

Punjab

Standard

State Bank

National

chartered Bank

of India

ICICI Bank

Bank 2004-05

90.07

120.15

6.21

104.33

2005-06

120.00

183.26

11.55

123.24

2006-07

144.67

213.65

17.06

150.65

2007-08

180.33

240.87

20.09

176.75

2008-09

240.00

265.15

24.10

224.00 (Rs. in crore)

Average of home loans granted

Total home loans granted = --------------------------------No. of years

Table. 4.2 (b) (Rs. in crore) Name of Bank

Average (Rs)

Percentage of home loans granted

ICICI Bank

155.01

29

Punjab National Bank

204.62

39

Standard Chartered Bank

15.80

3

State Bank of India

155.79

29

Total

531.22

100

To understand the comparison more effectively and closely, it has been shows diagrammatically as follows:-

Page 40

Interpretation: There is no doubt that every bank tries to maximize its home loan disbursement. But on the basis of data it is concluded that Punjab national bank shows high average of loan grants Rs. 20.62 crore as compared to ICICI, standard charted bank and SBI respect crores. On this analysis the public sector banks are higher loan provider as compared to private sector banks due to credibility and loan offers by public sector banks.

4.3

Recovery of Home loans Table 4.3 (a) (Rs. in crore)

Years

ICICI

Punjab

Standard chartered

State Bank

Bank

National

Bank

of India

Bank 2004-05

63.05

97.28

5.27

98.12

2005-06

91.20

150.00

10.16

105.00

2006-07

127.31

185.86

14.35

133.46

2007-08

165.90

231.07

18.68

144.65

2008-09

228.12

256.05

23.91

209.16

Average recovery of home loans Total home loans recovered = ---------------------------------No. of years Table 4.3 (b) (Rs. in crore) Name of Bank

Average (Rs)

Percentage of home loans recovered

ICICI Bank

135.21

30

Punjab National Bank

184.05

39

Standard Chartered Bank

14.47

3

State Bank of India

138.08

28

Total

471.80

100

It is more clear with the help of this diagram.

Page 42

Interpretation: In the previous years the recovery process of granting loans are very unorganized and inefficient. So there are less recovery of home loans by the commercial banks. But it is evident from the table that every bank whether public or private showed increase national bank has the greatest recovery of home loans i.e. 39%, thereafter ICICI bank recovered the 30% of sanction amount. The standard chartered bank is having lowest recovery of their granted amount as home lo

4.4

Outstanding Balance Table 4.4 (a) (Rs. in crore)

Years

ICICI Bank

Punjab

Standard

State Bank

National

chartered

of India

Bank

Bank

2004-05

27.02

22.87

0.94

6.21

2005-06

28.8

33.26

1.38

18.24

2006-07

17.36

28.05

2.70

17.19

2007-08

14.43

9.80

1.41

32.10

2008-09

11.88

9.10

0.48

14.84

Average of balance due Total of Balance due in 5 years = -------------------------------------No. of years

Table 4.4 (b) (Rs. in crore) Average

Percentage of

(Rs)

balance due

ICICI

19.89

33

PNB

20.61

34

Standard Chartered Bank

1.38

2

State Bank of India

17.72

31

Total

59.15

100

Name of Bank

Average of one bank %age

= --------------------------- x100 Total Average of Banks

Page 44

The Diagrammatically presentation of data is as below:

Percentage of balance due

35 30 25 20 15 10 5 0 ICICI Bank

Punjab National Bank

Standard Chartered Bank

State Bank of India

Name of bank

Fig 4.4 Balance due on home loans by commercial banks

Interpretation From the above table and figure it shows that standard chartered bank has been less outstanding balance among other banks. The public sector banks got high balances due to large customer base, not proper recovery process and lack of modernisation of activities. The private sector bank ICICI bank is having more balance due i.e. 33% as compared to standard chartered bank.

Page 45

CHAPTER 4

Page 46

CHAPTER - 5 ANALYSIS OF CUSTOMER SATISFACTION LEVEL

The customer is king of market. The bank can perform its activities effectively & efficiently if it gains reputation among customers. The analysis is based on the responses given by customers through questionnaires. Table 5.1 Reasons for getting the home financed Sr.No.

Number of Reasons

Percentage

a.

Non-availability availability of funds

36

b.

Reluctancy to pay cash in one go

35

c.

Tax benefit

24

d.

Any other

5

Percentage of customers

40 35 30 25 20 15 10 5 0 Non-availability availability of funds

Reluctancy to pay cash in one go

Tax benefit

Any other

Fig 5.1 Reasons for getting the home financed

Interpretation To interpret the response of the questions, the figures shows that most of the customers find the problem in availability of funds i.e. 36% and very

Page 47

less number of customers found problem in paying cash in one go is 35%, customers get housing loan for tax benefits is 24%. This was the expected response because a large number of people find a problem of availability of funds which works as an obstacle in owning a dream home. In today's life, people hardly earn both means and ends of life and they don't have much of money to buy a home or a land to construct house because of cost of property. So, they take the advantage of home loans provided by different banks at different terms feasible to the customers. There are very less number of people, who don't own home even when they have sufficient funds and they take the advantage of home loans because they don't want to pay huge cash in one go. On the basis of study, it is concluded that most of people lack of money in fulfiling their dreams and few of them were reluctant to pay cash in one go and wanted to pay their home loans slowly in installments. Table 5.2 From which of bank you have got your home financed Name of Banks

Percentage of customers

ICICI Bank

55

Punjab National Bank

15

Standard Chartered Bank

07

State Bank of India

20

Any other

03

To understand the response more effective and closely, it has been showed diagrammatically as follows :

Page 48

Percentage of customers

60 50 40 30 20 10 0 ICICI Bank

Punjab National Bank

Standard Chartered Bank

State Bank of India

Any other

Name of bank

Fig. 5.2 From which of bank you have got your home financed

Interpretation The analysis showed that a large number of customers prefer ICICI Bank as compared to others. The data shows that 7% of customers took loan from Standard Chartered Bank, 20% of customers from State Bank of India 15% customers took loan from Punjab National Bank, 55% of customers took loan from ICICI Bank and a 3% of customers fall under the category of 'Any other' which included State Bank of Patiala, Canara Bank, Punjab and Sind Bank, etc. The data shows that most of people prefer private sector banks aas compared to public sector banks. This is because of the extra services provided by private sector banks. However, there is less difference in figures of State Bank of India and Punjab National Bank. But there is considerable difference in figures of the two private sector banks i.e. ICICI bank and Standard Chartered Bank. As ICICI is the market leader in the home loans sector. This may be the reason for such difference in Standard Chartered Bank's percentage and ICICI Bank's percentage. Another reason for the preference of ICICI Bank may be their specialized services in home loans, more amounts of loans, and efficient query handling.

Page 49

However, the analysis showed that the people prefer ICICI Bank for home loan because of their services and excessive feat features ures of home loans as compared to other banks. Table 5.3 Sources of information about Home Loans Scheme Sources of information

Percentage of customers

Newspapers

49

Magazines

16

Banners/Hoardings/Pamphlets

11

Word of mouth

20

Any other source

04

50 Percentage of customers

45 40 35 30 25 20 15 10 5 0 Newspapers

Magazines

Banners

Word of mouth

Any other source

Fig 5.3 Percentage of sources of information about Home Loans Scheme

Page 50

Interpretation The data shows that around 20% of customers got information from source of 'Word of Mouth' which includes information from friends, relatives, colleagues etc. 49% of customers got information from newspapers, only 16% of customers from magazines and 4% of customers got information about home loans

schemes

under

'Any

other

source'

and

11%

through

Banners/

Hoardings/Pamphlets Table 5.4 Giving importance to the factors which influence the choice of bank Percentage of customers Factors

Most

Very

Importan

importan

importan

t

t

t

58%

24%

40%

(c) Low interest rates (d) Flexible

Less

Not

importan importan t

t

16%

1%

1%

51%

9%

-

-

32%

45%

23%

-

-

29%

31%

35%

3%

2%

(e) Personal dealings

36%

20%

24%

16%

4%

(f) Reputation and

32%

33%

27%

8%

-

(a) Less documentation (b) Speedy processing

repayment

credibility

Page 51

(g) Transparency and

34%

21%

26%

19%

-

29%

36%

29%

6%

-

reliability (h) Professional Management

Most important

Very important

Important

Less important

Not important

Percentage of customers

60% 50% 40% 30% 20% 10% 0% a

b

c

d Factors

e

f

g

h

Fig. 5.4 Importance to the factors which influence the choice of bank

Interpretation The data shows that almost all features were important to the customers. Some of the factors were not important for a few numbers of customers. The analysis showed that 'Less documentation' as 'Most important' for 58% of customers, 40% of customers quot quoted ed 'Speedy processing', 'Most Important' to them, 'Low Interest Rates' were 'Very Important' for 45% of customers. Most of people were neutral about repayment options, 36% of customers gave importance to credibility and transparency of services, 'Professional nal Management' was also of due importance to 36% of customers. So, the data shows the highest percentage given to the factors like

Page 52

less documentation, speedy processing in disbursement of loan, and low interest rates by the customers because the customers want to avail loan in less time, without much of formalities and at less cost.

That's why they give due

importance to factors like low interest rates, flexible repayment options etc. so that they can feel ease while getting loan and after the disbursement of loan in repayment of that loan properly. In today's age, customers seek more facilities and beneficial features from banks and they prefer a bank, which provides all these services at low cost. So, all the features are important to a customer. Table 5.5 Opinion about the services of different banks under study a.

ICICI Bank Percentage of customers agreeing

Services of banks

Strongly

Agree

Neutral

Disagree

agree

Strongly disagree

86%

10%

4%

-

-

67%

33%

-

-

-

c. Socially responsible

75%

10%

15%

4%

-

d. Customer care

20%

68%

8%

-

-

e. Query handling

20%

76%

4%

-

-

a. Professionally managed b. Reliable & transparent

Page 53

Strongly agree

Agree

Neutral

Disagree

Strongly disagree

Percentage of customers

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% a

b

c

d

e

Factor

Fig. 5.5( a) Opinion of customers about ICICI Bank

Interpretation Customers from ICICI Bank are quite satisfied from their services like query handling and customers care. They give neutral response regarding social responsibility of banks towards customers and professionally managed services. They don't give so good response to reliability and transparency services of banks. ' So, customer's satisfaction level towa toward rd ICICI bank's services is lightly satisfied.

Page 54

5.5 b. Punjab National Bank

Percentage of customers agreeing Services of banks

Strongly

Agree

Neutral

Disagree

agree a.

Professionally

Strongly disagree

60%

13%

27%

-

-

53%

47%

-

-

-

managed b.

Reliable & transparent

c.

Socially responsible

15%

10%

50%

25%

-

d.

Customer care

10%

28%

40%

25%

-

e.

Query handling

4%

20%

26%

-

-

Strongly agree

Agree

Neutral

Disagree

Strongly disagree

Percentage of customers

60% 50% 40% 30% 20% 10% 0% a

b

c Factors

d

e

Fig. 5.5( b) Opinion of customers about Punjab National Bank

Page 55

Interpretation The analysis reveals that the customers of PNB are less satisfy from their bank. They gave 60% to professionally managed services, 4% to query handling, 15% to social responsibility, 53% to reliability and transparency. In overall, the customer of Punjab National Bank were not fully satisfied by the services offered by it. 5.5(c) Standard charted Bank Percentage of customers agreeing Services of banks

Strongly

Agree

Neutral

Disagree

agree a.

Professionally

Strongly disagree

72%

14%

14%

-

-

43%

14%

43%

-

-

managed b.

Reliable & transparent

c.

Socially responsible

14%

28%

43%

15%

-

d.

Customer care

72%

14%

14%

-

-

e.

Query handling

57%

22%

21%

-

-

Page 56

Strongly agree

Agree

Neutral

Disagree

Strongly disagree

80% Percentage of customers

70% 60% 50% 40% 30% 20% 10% 0% a

b

c Factors

d

e

Fig. 5.5(c) Opinion of customers about Standard Chartered Bank

Page 57

Interpretation The analysis shows that the customers of Standard Charted are averagely satisfied from their bank. They gave 72% to professionally managed services 57% to query handling, 14% to social responsibility, 43% to reliability and transparency, as highest satisfaction level. 5.5 (d)

State Bank of India Percentage of customers agreeing

Services of banks

Strongly

Agree

Neutral

Disagree

agree a.

Professionally

Strongly disagree

50%

25%

20%

5%

-

managed b.

Reliable & transparent

12%

58%

30%

-

-

c.

Socially responsible

14%

14%

71%

-

-

d.

Customer care

30%

65%

5%

-

-

e.

Query handling

25%

63%

12%

10%

-

Page 58

Strongly agree

Agree

Neutral

Disagree

Strongly disagree

80% Percentage of customers

70% 60% 50% 40% 30% 20% 10% 0% a

b

c Factors

d

e

Fig. 5.5(d) Opinion of customers about State Bank of India

Interpretation The customers from State Bank of India India,, also average satisfaction level. They gave 58% to reliability and transparency, 65% to customer care, 63% query handling and 25% to professionally managed services of banks. So, customer are not so much agree with the socially responsible services of the bank. They gave neutral response to this service. However, they were also disagree with some of the services of the bank.

Page 59

Table 5.6 Opinion of customers about home loan schemes 5.6 (a) ICICI Bank Percentage of customers agreeing Services of banks

Strongly

Agree

Neutral

Disagree

agree

Strongly disagree

a. Amount of loan

60%

35%

5%

-

-

b. Legal formalities

42%

45%

14%

-

-

c. Interest rates

32%

56%

12%

-

-

d. Repayment options

26%

64%

10%

-

-

e. Security demanded

20%

32%

48%

-

-

f. Installments

55%

40%

5%

-

-

g. Services of bank

45%

30%

18%

6%

1%

h. Processing for

55%

24%

18%

3%

-

sanction of loan

Page 60

Strongly agree

Agree

Neutral

Disagree

Strongly disagree

70%

Percentage of customers

60%

50%

40%

30%

20%

10%

0% a

b

c

d

e

f

g

h

Factors

Fig. 5.6( a) Percentage of satisfaction level of customers of ICICI Bank

Interpretation The analysis shows that the customers of ICICI bank gave 60 per cent of amount of loan and legal proceedings, 56% to interest rates, 45% to proceedings and services, 55% to installments. So, customer of ICICI bank didn't give response regarding the services ices of the bank except to the amount of loan and legal formalities.

Page 61

5.6 (b)

Punjab National Bank Percentage of customers agreeing

Services of banks

Strongly

Agree

Neutral

Disagree

agree

Strongly disagree

a.

Amount of loan

10%

60%

30%

-

-

b.

Legal formalities

25%

34%

31%

10%

-

c.

Interest rates

33%

48%

-

11%

-

d.

Repayment options

18%

30%

15%

17%

20%

e.

Security demanded

15%

35%

30%

-

-

f.

Installments

24%

48%

28%

-

-

g.

Services of bank

14%

35%

30%

8%

13%

h.

Processing

38%

48%

24%

-

-

for

sanction of loan

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Strongly agree

Agree

Neutral

Disagree

Strongly disagree

Percentage of customers

60%

50%

40%

30%

20%

10%

0% a

b

c

d

e

f

g

h

Factors

Fig. 5.6.( b) Percentage of satisfaction level of customers of Punjab National Bank

Interpretation On the basis of data the customers of Punjab National Bank give average satisfaction level to their services. They gave 60% to the amount of loan and legal formalities and 55% to the security provided, 48% to the installment interest rates and proceedings. So the customers of PNB did not fully satisfied by different home loan schemes offered by bank.

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5.6 (c) Standard Chartered Bank

Percentage of customers agreeing Services of banks

Strongly

Agree

Neutral

Disagree

agree

Strongly disagree

a.

Amount of loan

59%

31%

10%

-

-

b.

Legal formalities

31%

45%

24%

-

-

c.

Interest rates

14%

52%

24%

10%

-

d.

Repayment options

26%

30%

44%

-

-

e.

Security demanded

18%

34%

48%

-

-

f.

Installments

50%

43%

7%

-

-

g.

Services of bank

55%

31%

10%

2%

2%

h.

Processing

30%

13%

27%

30%

-

for

sanction of loan

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Strongly agree

Agree

Neutral

Disagree

Strongly disagree

Percentage of customers

60% 50% 40% 30% 20% 10% 0% a

b

c

d

e

f

g

h

Factors Fig. 5.6( c) Percentage of satisfaction level of customers of Standard Chartered Bank

Interpretation According to the data, satisfaction level of customers of Standard Chartered Bank, they were satisfied with the amount, security, proceedings regarding the sanctioning of loan, services of the bank. They gave 30% to the proceedings of the home loans, 55% to services and the amount of loan provided, and security held for the loan amount, 50% to installments, 52% to interest rates etc. So, their satisfaction level was less for proceedings and av average for all other services.

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5.6 (d)

State Bank of India Percentage of customers agreeing

Services of banks

Strongl

Agree

Neutral

Disagree

y agree

Strongly disagree

a.

Amount of loan

38%

52%

10%

-

-

b.

Legal formalities

38%

52%

-

10%

-

c.

Interest rates

38%

48%

-

14%

-

d.

Repayment options

18%

30%

15%

17%

20%

e.

Security demanded

30%

55%

15%

-

-

f.

Installments

28%

48%

24%

-

-

g.

Services of bank

30%

35%

14%

13%

8%

h.

Processing

38%

48%

24%

-

-

for

sanction of loan

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Strongly agree

Agree

Neutral

Disagree

Strongly disagree

Percentage of customers

60% 50% 40% 30% 20% 10% 0% a

b

c

d Factors

e

f

g

h

Fig. 5.6(d) Percentage of satisfaction level of customers of State Bank of India

Interpretation According to the data the customers of State Bank of India give average satisfaction level to their services. They gave 52% to the amount of loan and legal formalities and 55% to security provided. 48% to the installments interest rates and proceedings. To they didn't show high satisfaction level to the proceedings of the banks due to some reasons.

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Table 5.7

Please give importance to the factors that influenced your choice of bank

5.7 (a) ICICI Bank

Percentage of Customers agreeing Important

Most

Very

Important

Important

40%

42%

18%

-

-

60%

25%

10%

5%

-

30%

55%

15%

-

-

25%

60%

10%

5%

-

(e) Personal dealing

55%

35%

10%

-

-

(f) Reputation and

45%

30%

15%

5%

5%

60%

40%

-

-

-

80%

12%

8%

-

-

(a) Less

Less

Not

Important Important

documentation (b) Speedy processing (c) Low interest rates (d) Flexible repayment

credibility (g) Transparency and reliability (h) Professional Management

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Most Important

Very Important

Important

Less Important

Not Important

Percentage of customer

80% 70% 60% 50% 40% 30% 20% 10% 0% a

b

c

d

e

f

g

h

Factors Fig.5.7 (a) Percentage of reasons that influence the selection of bank for customers of ICICI Bank

Interpretation The analyse shows that the customers of ICICI gave more important to professionally managed working, speedy work and personal dealing they don't give much importance to interest rate and reputation. This shows that customers of ICICI gave more importance to services of bank rather than low cost of working at the time of selection of bank.

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5.7 (b) Punjab National Bank

Percentage of Customers agreeing Most

Very

Important

Important

24%

38%

28%

10%

-

36%

42%

22%

-

-

(c) Low interest rates

30%

44%

-

26%

-

(d) Flexible

20%

28%

14%

16%

22%

(e) Personal dealing

12%

28%

36%

24%

-

(f) Reputation and

14%

32%

28%

10%

16%

54%

46%

-

-

-

60%

15%

25%

-

-

(a) Less

Important

Less

Not

Important Important

documentation (b) Speedy processing

repayment

credibility (g) Transparency and reliability (h) Professional Management

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Percentage of customer

Most Important 60%

Very Important

Important

Less Important

Not Important

50% 40% 30% 20% 10% 0% a

b

c

d

e

f

g

h

Factors Fig5 .7( b) Percentage of reasons that influence the selection of bank for customers of Punjab National Bank

Interpretation The analysis reveals that customers of Punjab National Bank gave high importance to reliability, professional management and speedy processing. Interest is also a factor of importance for them.

Other factor like personal dealing or less

documentation are also important for them. This shows that customer gave a mixed responses for the reason of selection of this bank.

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5.7 (c) Standard Chartered bank

Percentage of Customers agreeing Most

Very

Important

Important

30%

44%

26%

-

-

32%

16%

28%

24%

-

(c) Low interest rates

18%

50%

26%

6%

-

(d) Flexible

22%

34%

44%

-

-

(e) Personal dealing

70%

16%

14%

-

-

(f) Reputation and

54%

30%

10%

4%

2%

44%

10%

42%

4%

-

72%

14%

14%

-

-

(a) Less

Important

Less

Not

Important Important

documentation (b) Speedy processing

repayment

credibility (g) Transparency and reliability (h) Professional Management

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Most Important 80%

Very Important

Important

Less Important

Not Important

Percentage of customer

70% 60% 50% 40% 30% 20% 10% 0% a

b

c

d

e

f

g

h

Factors Fig. 5.7.(c) Percentage of reasons that influence the selection of bank for customers of Standard Chartered Bank

Interpretation On the basis of the data it can be understood that according to the customers of Standard Chartered the main reasons behind the selection of this bank is professional management and personal dealing. They gave 50% to interest and 44% to less documentation.. These also represent some of other reason for their customer the which force them to select this bank.

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5.7 (d) State Bank of India

Percentage of Customers agreeing Most

Very

Important

Important

36%

48%

-

12%

-

36%

44%

-

20%

-

(c) Low interest rates

38%

42%

-

16%

-

(d) Flexible

16%

26%

14%

20%

24%

(e) Personal dealing

24%

60%

14%

12%

-

(f) Reputation and

30%

32%

14%

14%

10%

10%

50%

40%

10%

-

40%

20%

20%

15%

5%

(a) Less

Important

Less

Not

Important Important

documentation (b) Speedy processing

repayment

credibility (g) Transparency and reliability (h) Professional Management

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Most60% Important

Very Important

Important

Less Important

Not Important

Percentage of customer

50% 40% 30% 20% 10% 0% a

b

c

d

e

f

g

h

Factors Fig 5.7( d) Percentage of reasons that influence the selection of bank for customers of State Bank of India

Interpretation As per the data the main reasons behind the choice of this bank by his customers are the low interest rates, speedy processing and reliability of the bank. Personal dealing and less documentation also proves to be important for them. So with this the cust customers omers of SBI puts near about equal weightage to each an every reason.

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PROBLEMS FACED BY CUSTOMERS IN AVAILING HOME LOANS

There are everything in the world has good or bad points. No doubt banking industry has made many efforts to enhance the customer satisfaction but customer still faced some problems. These are high lightened as below: 1)

The customer does not have proper knowledge about different home loan products so they face problem in making a good deal.

2)

There are procedural delays, which harass the customers lot. This will crush the curtsy of customers to avail the home loan.

3)

The attitude of bank employees some times non cooperative and it creates a hurdle in building trust and Confidence among customers about banks.

4)

The banks do not take into account the paying capacity of customers. So some customers are not able to get amount of loan needed by them. So above discussed are the problems which faced by customers

while availing home loans.

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CHAPTER 5

Page 77

CHAPTER - 6 CONCLUSION & FINDINGS

This is the last chapter of this project report. In this project report the summary of the whole project has been covered how the whole project was carried out and the analysis was made. This project is based on the “Disbursement of home loans by commercial banks”. This topic covers the objective of studying the customer satisfaction level and comparative study of disbursement of home loans by commercial banks. So first of all objectives were received to carry out this project. To study the topic under research the secondary as well as primary data was collected secondary data was collected from the banks providing home loans through personal visit to their offices, information provided them in reports,

sites

of banks

etc.

The primary data was

collected

through

questionnaires. On the basis of collected data an analysis was made on the disbursement procedures and services in regards of it and also a discussion was made on the satisfactions level of customers availing home loans from these banks. The detailed study of these aspects of home loans revailed that in what way banks can attract most of the customers towards them. The private sector banks are attracting consumers by providing door-step services and by establishing their franchise to service their customers. These banks have gained a lot as compared to public sector banks. While studying this project a lot of problems were faced in data collection from banks as well as customers due to their non-cooperation and ignorance and a lot of efforts were made to remove such limitations in the study. To conduct the project more effectively and efficiently, first of all detailed study of home loans was made i.e. regarding its benefits and limitations, eligibility criteria and procedure of disbursement.

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Then according to topic considerable review of literature was made as mentioned in chapter II. The review of literature was made to facilitate the further study on the topic by taking help of findings of the previous researchers or experts relating same field. The most important part of the project was research methodology which has been covered in chapter No. 3. In this various aspects like research design scope of the study. Objectives of the study, data collection techniques are used and the limitations of study are discussed. In the chapter No. 4 i.e. Disbursement of home loans by commercial banks the data collected is presented in tables and diagrams. To make comparative study on the topic 4 banks namely ICICI Bank, Punjab national Bank, Standard chartered Bank and State Bank of India are taken into account. However, after collecting data, an analysis was made to know the results on the basis of collected data on the basis of data the Punjab National Bank is having large number of customer base with high loan disbursement and recovery of loans. But the standard chartered bank showed less outstanding balance which presented in percentage form in the diagram. To know the customer satisfaction level primary data is collected by questionnaire. The data was collected on the basis of responses were given by respondents. But it was very difficult to collect data because people were noncooperative and ignorant about home loan. On the basis of data the ICICI bank is emerging at higher position as compare to Standard chartered bank and other public sector banks on ground of professionally managed services, reliable & transparent system, easy query handling etc. The problem faced by customers while availing home loans also revailed by this project. This analysis was the basis of the suggestions on final results. Finally the whole research was carried out in a systematic way to reach at exact results. The whole research and findings were based on the objectives. However, the study had some limitations also such as lack of time, lack of data, non-response, reluctant attitude and illiteracy of respondents, which

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posed problems in carrying out the research. But proper attention was made to carry out research in proper way and to make accurate suggestions for the banks which may beneficial for banks to enhance their customer base.

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SUGGESTIONS However, on the basis of the collected data and the analysis along with detailed discussion made in conclusion of this report, some suggestions can be made to the banks which will be helpful to them in improving their services. These suggestions have been discussed as follows: 1.

To increase their customers, the banks should provide specialized services in this sector. These services can be such as proper guidance to the customer regarding the processing of loans, especially for the customers who are illiterate.

2.

To satisfy their customers and for good dealings in future, the banks should make prompt disbursement of loan amount to the customers so that they can buy or construct their dream home as early as possible.

3.

The Banks should use easy procedure, or say, less lengthy procedure for the sanctioning of loan to the customer. There should be less number of legal formalities, in case this exists, then, these should be completed in less time. This will be helpful in attracting more customers.

4.

Although the interest rates on specific norms, yet customers seek less interest rate which can lower their cost of house. So banks should try to lower their interest rates. Needles to say, that the bank which is having lower interest rates, have the maximum clients for loans.

5.

The public sector banks should improve their overall services to increase the number of customers

for home loans.

They should

recruit

professionals to provide such services and to satisfy the customers. 6.

The scheme of Punjab National Bank is quite beneficial for the persons who want to buy or construct their own home. But their scheme is not properly reachable to general public or in rural areas. That's why they have customers for home loans from their own staff or the account holders in their bank only. So, they should make the scheme more transparent and reachable to the common man so that they can avail the benefits of the

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scheme. 7.

Although ICICI Bank is a market leader in 'home loans' sector but they should innovate their services, viewing the- increasing competitions from other banks such as Standard Chartered Bank.

8.

The Standard Chartered Bank should fix the initial installments at lower rates as their customers face problems in paying high initial installment due to their financial problem. So, they should fix installments according to the repayment capacity of the customer. This suggestion may be applied to all other banks also.

9.

As the banks provide loan according to the repaying capacity of the customer and his/her eligibility. Due to which, some customers are not able to get amount of loan needed by them. So, the banks should soften their norms regarding the loan amount.

10.

The Banks should try to provide proper knowledge regarding their home loan schemes, even to people who don't know about such schemes and their benefits especially in rural areas. So they should provide knowledge to the ignorant customers, especially in rural areas and backward urban area

So, above are the main suggestions provided to the banks. By

considering these suggestions, the banks can strengthen their customer base in home loans sector. They should improve their services and reduce legal proceedings and should be friendly to their customers. All this will be helpful to satisfy their customers.

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REFERENCES

•

REVIEWS

Ø Berstain David(2008), “Home equity loans and private mortgage insurance: Recent Trends & Potential Implications”, Vol.3 No.2, August 2008, Pp. 41 - 53 Ø Dr. Rangarajan C. (2001), “A Simple Error Correction Model of House Price”. Journal of Housing Economics Vol. 4, No. 3,pp 27 – 34 Ø Fanning (1982), “The Demand for Home Mortgage Debt” Journal of Urban Economics, Vol 11 No 2, November, pp. 770-774 Ø Godse (1983), “looking a fresh at banking productivity”, Journal of Real Estate Literature, Vol. No. 13, Page 141 to 164. Ø Haavio, Kauppi(2000) , “Residential Lending to Low-Income and Minority Families: Evidence from the 1992 HMDA Data," Federal Reserve Bulletin,Vol no 80(2), December 2000 Pp-79-108 Ø Kulkarni (1979), “Development responsibility and profitability of banks” Journal of Economic Perspectives, Vol 9 No 1 ,pp. 26-32. Ø La courr, Micheal(2007) , “Economic Factors Affecting Home Mortgage Ø Disclosure Act Reporting” The American Real Estate and Urban Economics Association, Vol.2 No. 2 May 18, 2007, Pp. 45 -58 Ø La cour Micheal(2006) , “The Home Purchase Mortgage Preferences Of Lowand-Moderate Income Households”, Forthcoming in Real Estate Economics , Vol 18, No 4 , December 20, 2006, p. 585 Ø Narasimham Committee (1991), “Alternative Mortgage Products and Housing Consumption. Working paper Ø Ohja J (1987) “Productivity and profitability of Punjab sector banks in India, An international compassion”, State Bank of India monthly review, Vol 28, No78,July 1987, pp1013. Ø Vandell ,kerry D(2008), “Subprime lending and housing bubble:tail wag dog?” International Journal of Bank Marketing, vol 21,no 2, pp. 53-7

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Ø Varde and Singh, “prospects and problems of real estate of india”. International Research Journal of Finance and Economics,Vol. No. 11, Page 279 to 324.

Ø Brochure on home loans from ICICI bank Ø Brochure on Home loans from Standard Chartered banks. Ø Brochure on home loans from State Bank of India Ø Brochures on home loans from Punjab National Bank.

•

WEB PAGES ü www.allinfinance.com/credithttp://www.allinfinance.com/credit ü http://www.bseindia.com/downloads/HomeLoans.pdf ü http://www.business-standard.com/india/news/pnb-obc-hike-home-loanrates/283616/ ü www.ficci.com/general/new-addition/housing-highlights.pdf ü http://www.icicibank.com/pfsuser/loans/homeloans/hlratesandfees.htm ü http://www.indiahousing.com/standard-chartered-bank-home-loans.html ü http://www.statebankofindia.com/viewsection.jsp?lang=0&id=0,3,513

Page 85

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QUESTIONNAIRE Dear Sir/ madam I am Mehak Puri doing MBA from Lovely professional university . I m perpariing a project on DISBURSEMENT OF HOME LOANS BY COMMERICIAL BANKS . For this I have designed a Questionniare to know your views and satisfaction level of home loans .please fill the given as per your thinking and experiences with this. I will be thankful to you for this .

1.

Do you own a home Yes [ ]

No [

]

If Yes, then, Proceed.

2.

Have you get it financed? Yes [ ]

No [

]

If Yes, then, proceed

3.

4.

What is reason for getting it financed? 1.

Non availability of funds

[

]

2.

Reluctance to pay cash in on go

[

]

3.

Tax benefit

[

]

4.

Any other (please specify) .........................................

From which of the following banks you have got if financed? Standard Chartered Bank

[

] State Bank of India [

ICICI Bank

[

]

]

Any other (please specify) ...........................................

5.

From where have you got information about home loans scheme?

Page 87

(Check list) Newspapers

[

]

Magazines

[

]

Hoarding/banners

[

]

Word of mouth [

]

Any other (please specify) ...........................................

6.

What is your general opinion about the services of the bank. From where you have got home loans?

Strongly Agree Neutral agree

Disagree Strongly disagree

a. Professionally managed b. Reliable & transparent c. Socially responsible d. Customer care e. Query handing

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7.

Give your satisfaction level for the following of your home loan scheme?

Strongly Satisfied satisfied

Neutral

Dissatisfied Strongly dissatisfied

a. Amount of loan b. Legal formalities c. Interest rates d. Repayment option e. Security demanded f. Installments

g. Services of bank h. Processing for sanction of loan

Page 89

8.

Please give importance to the factors that influenced your choice of bank

Most

Very

Important

Important

Important

Less

Not

Important Important

(a) Less documentation (b) Speedy processing (c) Low interest rates (d) Flexible repayment (e) Personal dealing (f) Reputation and credibility (g) Transparency and reliability (h) Professional Management

9.

What problems did you face while getting home loans? a.

Lack of knowledge

b.

Procedural delays and non cooperation

c.

Any other (please specify) ........................................

10.

Did you face any problem after sanction of loan?

11.

What suggestions do you want to give for improvements in home loans scheme?

Page 90

_____

Name:

Age:

[

] 20-30 years [

] 30-40 years

[

] 40-46 years [

] above 50 years

Income:

Occupation: [

] Business

[

] Service

Any other (please specify) ............................................

Sex:

[

] Male

[

] Female

Address:

Phone No.:

THANKS

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