Home Loans Of Hdfc Bank Research Report Finance 2017.docx

A RESEARCH PROJECT ON

“HOME LOANS OF HDFC BANK” Submitted in Partial Fulfillment of the requirement for the award of the degree of MASTER OF BUSINESS ADMINISTRATION (MBA)

Submitted To: Submitted by: Ms. Punjika Rathi (Faculty Incharge)

VAISHALI CHAUDHARY MBA (Sem. 4th) Roll No. 1614370057

Department of MBA IMS Engineering College, Ghaziabad Affiliated to A.P.J Abdul Kalam Technical University, Lucknow Session 2017-18 1

IMS Engineering College, Ghaziabad – Delhi NCR A NAAC ACCREDITED INSTITUTION (Approved by AICTE & Affiliated to Dr. A.P.J Abdul Kalam Technical University, Lucknow)

CERTIFICATE

This is to certify that Ms./Mr VAISHALI CHAUDHARY Roll No. 1614370057 is a bonafide student of MBA 4th semester during session 2017-18. The Research Project Report entitled A STUDY ON HOME LOANS OF HDFC BANK has been prepared by him/ her in partial fulfillment for the award of degree of Master of Business Administration of Dr. A.P.J. Abdul Kalam Technical University, Lucknow (formerly UPTU Lucknow).

MS. Punjika Rathi

Dr.Monica Verma

(Faculty In charge)

Head-MBA

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ACKNOWLEDGEMENT

With immense pleasure, I would like to present the research report for the study of home loans of HDFC bank. It has been an enriching experience for me to work on a project in real life scenario which would not have possible without the goodwill and support of the people around. As a student of DR. APJ ABDUL KALAM TECHNICAL UNIVERSITY, LUCKNOW. I would like to express my sincere thanks to all those who helped me during my practical training programme.

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TABLE OF CONTENT Chapter No. 1.

Chapter Name

Page No. 5

INTRODUCTION 1.1 Introduction to home loan

6

1.2 Profile of HDFC Bank

8

1.3 Loan procedure at HDFC 1.4 Risk capturing mechanism

14 15 16

1.5 Documents involved in evaluation 2.

LITERATURE REVIEW

19

3.

Objectives and Research Methodology

37

3.1 Objectives of the study

38

3.2 Scope of the study

38 39

3.3 Research design 4.

Data analysis and Data Interpretation 4.1 Perception of people

43 44 47

4.2 Satisfaction level 4.3 Problems faced by customers

49

5.

Findings

50

6.

Recommendations

52

7.

Limitations

55

8.

Conclusion

57

9.

Bibliography

59

10.

61

Annexure

4

CHAPTER 1

INTRODUCTION

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1.1 INTRODUCTION TO HOME LOAN 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.

HDFC-(Housing Development And Finance Corporation) Home Loan, India have been serving the people for around three decades and providing various housing loan according to their varied needs at attractive & reasonable interest rates. Owing to their wide network of financing, HDFC Housing Loans provides services at your doorstep andhelps you find a home as per your requirements. 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 consumer 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 nose-diving by 50 basis points. The HDFC Bank and Standard chartered bank has become the first player in this sector to announce a housing loan for a 20 years period. Floating rate No doubt it will enhance the end cost 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.

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HDFC also provides with Home Improvement Loan for internal and external repairs and other structural improvements like painting, waterproofing, plumbing and electric works, tiling and flooring, grills and aluminium windows. HDFC finances up to85% of the cost of renovation (100% for existing customers).Current status is that HDFC reduced home loan rates by 50 basis points for all its existing customers.

The various benefits of home loans arising to the customers are:-



Home Loan is secured Loan with lower interest rate



Home loans amount totally depends on the requirement



20 years is the maximum loan tenure offered for home loan.



You can go for Home Loan Balance Transfer



Increases the probability of acquiring a house. Many, especially in India will not be able to buy a house will full cash readily available. This is where home loan creates an opportunity for low-class and middle-class community to have a home of their own.



This helps in capital appreciation; there is no doubt property prices have boomed in the past 5 years. Investment in home is always a safe and smart move. The value of land always increases and thus appreciation for your investment can be visibly seen within few years.



Applicants can avail tax benefit from home loans. Under Section 80CCE of the Income Tax Act, 1961 repayment of principal up to Rs 100,000 on home loan is subject for tax deduction. Once all prescribed conditions are met, this benefit can be availed. 7

Disadvantages of Home Loan



Home Loan you need some Cosigner



Tenure of Loan is long period.

1.2Profile of HDFC Bank About HDFC BANK, HDFC Bank was incorporated in August 1994, and, currently has an nationwide network of 2,544 Branches and 9,709 ATM's in1,399 Indian towns and cities.

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.

HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in 8

mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment.

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over 1416 branches spread over 550 cities across India. All branches are linked on an online real–time basis. Customers in over 500 locations are also serviced through Telephone Banking. The Bank also has a network of about over 3382 networked ATMs across these cities.

The promoter of the company HDFC was incepted in 1977 is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment.

The shares are listed on the Bombay Stock Exchange Limited and The National Stock Exchange of India Limited. The Bank's American Depository Shares (ADS) are listed on the New York

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Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's Global Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange.

On May 23, 2008, the amalgamation of Centurion Bank of Punjab with HDFC Bank was formally approved by Reserve Bank of India to complete the statutory and regulatory approval process. As per the scheme of amalgamation, shareholders of CBoP received 1 share of HDFC Bank for every 29 shares of CBoP.

The merged entity now holds a strong deposit base of around Rs. 1,22,000crore and net advances of around Rs. 89,000 crore. The balance sheet size of the combined entity would be over Rs. 1,63,000crore. The amalgamation added significant value to HDFC Bank in terms of increased branch network, geographic reach, and customer base, and a bigger pool of skilled manpower.

In a milestone transaction in the Indian banking industry, Times Bank Limited (another new private sector bank promoted by Bennett, Coleman & Co. / Times Group) was merged with HDFC Bank Ltd., effective February 26, 2000. This was the first merger of two private banks in the New Generation Private Sector Banks. As per the scheme of amalgamation approved by the shareholders of both banks and the Reserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank. HDFC Bank offers a wide range of commercial and transactional banking services and treasury products to wholesale and retail customers. The bank has three key business segments: 10

Wholesale Banking Services – The Bank's target market ranges from large, blue–chip manufacturing companies in the Indian corporate to small & mid–sized corporates and agri– based businesses. Retail Banking Services – The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one– stop window for all his/her banking requirements. Treasury – Within this business, the bank has three main product areas – Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio. HDFC Securities (HSL) and HDB Financial Services (HDBFSL) are its subsidiaries.

Services offered by the company:

Personal Banking 

Accounts & Deposits



Loans



Cards



Forex



Investments & Insurance 11

NRIBanking



Accounts & Deposits



Remittances



Investments & Insurance Loans Payment Services

Wholesale Banking 

Corporate



Small & Medium Enterprises



Financial Institutions & Trusts



Government Sector

Home Loans offered by HDFC Bank encompasses a wide range of loan options which are subject to various parameters like term of loan, financial status of the individual seeking loan and the purpose of loan. Owing to these diversifications, HDFC Home Loans have grown in popularity over the years. DFC Bank, India, announced the arrival of the new generation, technology driven commercial banks in India. HDFC Bank in India was set up in August 1994 with the approval of Reserve Bank of India. The bank was promoted by Housing Development Finance Corporation Limited, a premier housing finance company of India (set up in 1977). 12

Loans for Resident Indians:

With HDFC Home Loan, one can buy a self-contained flat in an existing or proposed cooperative society, in an apartment owner's association or even an independent single-family or multi-family bunglow anywhere as in India. DFC Home Loans are easy to arrange and can be customized according to the individual's needs and repayment capabilities.



This category can be further subdivided into:



Home Loans



Home Improvement Loans



Home Extension Loans



Short Term Bridging Loans



Land Purchase Loans



Professional Loan or Loan for Non-residential Premises



Home Equity Loan

Loans for Non Resident Indians

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Like Resident Indians, HDFC Home Loans feature similar categories of loans for Non Resident Indians as well. They include: 

Home Loan



Home Improvement Loan



Home Extension Loan



Land Purchase Loan

Advantages of HDFC Home Loans



An individual can undergo a Home Loan Counseling where HDFC shares its experiences of providing Home Loans for 29 years.



Wide range of products which offers multiple choices to an individual to choose the loan plan that suits him/her the best.



Multiple Repayment Options gives a customer a wider scope of repayment according to his/her financial situations.



Wide network of financing also enables the individual to get his/her loan sanctioned from a place of his/her choice and also pay the installments duly no matter where he/she is.

1.3 THE LOAN PROCEDURE FOLLOWED AT HDFC The procedures involve in the disbursement of home loan by any bank entails the following steps:

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

Home loan application form is first submitted by the customer covering all details.



Checklist of requirements is requested for from the customer, and all documents are required to be submitted (copies), they are then verified whether the details are failed in correctly and whether all the documents are submitted.



Additional loans, if any are applicable. Many banks provide for supplementary loan as a part of the comprehensive home loan scheme.

1.4

RISK CAPTURING MECHANISM One of the important aspects in the home loan financing is to ensure that the loan seeker is worthy and credible. HDFC follows the credit score model to male home loan disbursements. Credit score model is a risk capturing mechanism, which is used to assess the risk perspective of the loan seekers. The prospective loan seeker is assessed on a number of parameters which helps in the evaluation of his profile and each parameter is assigned a score based on which the decision is taken. A score of 100 is fixed, and a score of 75 is considered to be good, score of 55 is considered above average and score of 25 to be average. The prospective loan seeker on a scale of 100 is expected to get 55 avail the home loan.

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1.5

DOCUMENTS INVOLVED IN EVALUATION OF HOME LOAN:

The documentation requirement for various categories of applicants depends on their status. For this purpose all HFIs segregate their employees in different categories. They are:



Salaried



Professional or Businessman

The criteria of evaluation changes according to their status. The general documents, which remain same for all the categories, are as follows: 1. Proof of age Any one of the following is considered for proof of age, they are:       

Passport Voter’s ID card PAN card Ration card Employer’s identity card School leaving Certificate Birth Certificate

2. Copy of bank statements for the last six months; 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 HFIs

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3. Copy of latest credit card statement.

4. Passport size photograph

5. Signature verification by your bankers.

6.   

Proof of residence: Ration Card PAN Card Passport Rent agreement if any, if you are currently staying on rent



.

Allotment letter from your company if you are residing in company Quarters.

The documents required to be provided by the salaried class are as follows:     

Salary slips for the last one month. Appointment letter Salary certificate Retainer ship agreement, if appointed as consultant. From-16 issued by the employer in your name.

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HDFC offers:      

Attractive loan interest rates. Home Loan amounts starting from Rs.2 lacks and ends up to 20lakhs. Tern loans up to 20 years. Free personal Accident Insurance (Terms & Conditions). Insurance options for your home loan at attractive premium. Special 100% funding for select properties

CHAPTER -2

LITERATURE REVIEW 18

LITERATURE REVIEW

Housing finance all over the world are undergoing tremendous changes and have acquired great significance in the present day context of liberalization, globalization and modernization of the society. A good number of research works have been undertaken by individual researchers and institutions invariably dealing with different aspects of housing finance. A brief review of the major studies which are particularly pertinent for the present study is attempted here.

By analyzing the question of housing in the country, Ananda Bose, C.V (1996) emphasized the need for propagating cost-effective and environment friendly building technology. He also 19

underlined the need for bringing out a new design and construction culture, avoiding costs and eliminating wrong notions.

Lahiry, S.C (1996) observed that the rising cost has a dampening effect in the housing sector and the need of the hour is to promote low cost and environment friendly technology and use of indigenous products. He opined that the housing concept has undergone drastic changes and as 12 such the skills of the people to take-up new housing technologies have to be developed.

Kurana, M.L (1998) analyzed the magnitude of the housing problem, housing finance companies, legal aspects of housing cooperatives and procedural simplification of housing loans. He suggested the necessity for education and training for the members of the housing cooperatives and also the legal aspects including the adoption of model law formed by the Central Government.

Krishna, R.R and V.V.Ganesh Murthy (1998) observed the views that there is a vast scope for housing promotion in India and the banks and housing finance companies can play a vital role in the promotion of housing. They suggested that reduction in the housing loan interest and simplified procedure for sanctioning housing loan will boost the construction of houses.

Leelamma Kuruvilla (1999) throws light on National Housing Policy and new initiatives in housing finance. She suggested that the change in the legal frame-work, simplifying the 20

procedure for housing finance and the active involvements of the Government in the housing sector will definitely mitigate the housing problem.

Mohinder Singh (1999) states the magnitude of the housing problem in the country and various national housing policies of the Government. He reviewed the detailed statistical data and suggested the following: a) sufficient loan amount free from corruption and a low rate of interest, b) a country-wide survey to find out the real housing storage, c) standardization for low cost housing and d) regular monitoring and follow-up action.

Parimal.H.Vyas and Sandip.K.Bhat (1999) who analyze the major housing finance institutions, critical issues of housing finance, interest rates and the repayment techniques observed that the restructuring of housing finance institutions by developing appropriate marketing orientation programmes are necessary to face the challenges in the present day world of liberalisation and globalisation.

Sharma,A.K.(1996) highlights the fact that the challenges of homelessness and urban slums are largely the spillover problems of inadequate rural habitat. He stated that the housing is closely connected with growth of population, modernisation, poverty, development and information and the poor people of India, lack all basic facilities as they are incapable of meeting the rising cost of building materials. He also opined that Indians cannot solve the housing problem without a strong political will and properly designed strategies.

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Nair,K.N.S and S.G. Jayachandra Raj (1994) observed that Kerala stands unique in the realm of growth and development. But, even in the wake of state’s rapid expansion in the social sector, it is to be observed that Kerala projects a dichotomy picture of development comprising of feeble economic structure along with developed social culture.

Mathurn (1993) opined that the financial burden of investment in housing is generally very heavy when the owner does not have sufficient funds available to pay for the site and the entire cost of construction. Hence, he must make arrangements to obtain funds from some other sources.

Naik (1981) revealed that housing loans are usually advanced against the security of mortgage of land and the building to be constructed with the loan. Housing finance is therefore mortgage finance.

According to Harichandran (1989), the objective of the National Housing Policy include motivation to help people particularly the houseless to secure for themselves affordable shelter and to promote investment in housing in order to achieve a sustained growth of nation’s housing stock.

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Parekh (1988) reported that the future of housing finance is to enhance the loan origination process for housing throughout the country to develop an institutional network that would facilitate the origination process, to identify the potential resource base for the system as a whole and to simplify the legal system with respect to risk management of housing finance institutions.

Usha Patel (1996) explained that at present housing through bank finance was a part of bank’s priority sector lending. Besides, every nationalized bank is expected to allocate every year a specified percentage of deposits and plan for its deployment for financing direct as well as indirect housing programmes.

Thomas Paulose (1988) in his study narrated a true picture of housing policies and programmes in Kerala.

Deepak.Razdam (1990) reported that the sources of informal savings are seen to be cash and bank deposits, assets like jewellery, loans from friends and relatives and to a small portion of funds from money lenders. The Government plan to bring about appropriate changes in the 16 approaches of the existing financial institutions so as to make them more responsible and accessible to households.

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Muthuram,P (1999) opined that housing finance, particularly retail housing finance is acquiring great importance because of government’s incentives and stability in prices. Housing finance offers safe, secured, profitable and diversified asset portfolio.

Leland and Leo Greller (1977) in their study on Government schemes on housing stated that the housing boards and development authorities are the only responsible agencies to care for housing.

Keith and John (1980) brought out a new picture of housing problems. They said that public housing policy of one sort or another is obviously of great importance in advanced capitalist systems.

Ball (1980) reported that housing is unavoidably expensive to produce. Even the most minimal dwelling occupies land and relatively large amounts of materials and labour for its production.

Holmans (1987) stated that most people cannot afford to pay the full cost of suitable accommodation from income or savings, but neither have they postponed their consumption even if they cannot afford to buy outright.

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Paul Diamond, T (1998) observed the housing shortage in the country and highlighted the role of the HFIs in national housing. His observations include introducing flexibility in designing products and systems, development of mortgage market and development of suitable products to satisfy wide range needs of borrowers.

Whitehead (1983) observed that housing is essentially a private good with few externalities. Again, the advantages and disadvantages of housing largely accrue to the individual owner or user of the property, rather than to the community at large. Whitehead concluded that, housing is a readily marketable commodity suitable for private provision in a mixed economy. Hadly and Hatch(1981) advocated a change of emphasis away from the traditional objectives of state provided social services of uniformity, hierarchical, accountability and administrative standardization to a system relying on community based organization and designed for flexibility, accountability, to the consumer and dis professionalization.

Wilson and Aslam (1991) highlighted the problem of housing especially in Kerala. They made an attempt to assess the outflow of 18 money from the state for construction. The financial problems for salaried individuals in relation to investment on housing were also analysed.

Josen Alex (1991) made an attempt to analyze the attitudes of the people towards low cost housing. He also dealt with housing situations and problems and cost reduction aspects of lowcost houses. 25

RejiKumar (1992) in his study stressed the relevance of low-cost housing schemes, techniques and building materials. He also analyzed the technical feasibility and financial viability of the unit.

Kaul (1994) deals with a number of building materials and technologies which came up as a result of continuous R & D efforts in the country. He argued that by adopting such innovative methods of construction, cost of construction will come down and speed of construction will increase.

Narayan and MohanKumar (1994) presented a paper analyzing the housing problem from the resource base point of view and attempts to highlight the need for evolving contextual technologies that use locally available materials that can act as alternative to the presently popular building materials.

 HDFC comes at the top among all the institutions as far as loan sanctioned, disbursements and the loan outstanding are concerned, PNB has the last rank for both loans sanctioned and disbursed. However, the compound growth rate for the loan sanctioned, disbursement and outstanding has been highest in the case of LICHF.

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It stood at 26.49%, 30.89%, 36.16%. Against PNB showed the lowest compound growth rates of 18.62% and 19.90%, for the loan sanctioned and 52 disbursement over the same period. However, the compound growth rate of the loan outstanding in the case of PNBHF was higher than the growth rate of HDFC.

 The ratio of loan disbursed to loan sanctioned shows that the ratio of PNBHF showed the highest variations from 53.37% to 96.52 % over the given period, followed by LICHF for which the ratio varied from 56.88% to 95.65%. On the other hand, the ratio for HDFC showed the lowest range of variation from 81.07% to 88.19 in the same period.

 Number of housing units assisted by the selected institutions and its percentage to the total units financed during the year showed that HDFC and PNBHF financed more than 64% and less than 3% of the total units financed during the entire period of the study, respectively.

 HDFC has provided the highest proportion of loans to individuals. The highest variation in the composition of loan outstanding has been in the PNBHF. The loan outstanding to individuals in the case of HDFC ranged from 66.89% to 81.99% whereas it ranged from 89.58% to 100% for LICHF for the same period.

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 HDFC has been a major market share holder among the HFIs selected under study. PNBHF has disbursed less than 4% of the total loan disbursed by HFIs.

 It is found that during almost all the years under study, all the HFCs earned more than 80% of their interest income from the interest on housing loans.

 LICHF earned the maximum proportion of total income from the interest on housing loans. It was followed by PNBHF and HDFC.  As far as ratio of interest expense to total expenses is concerned, it ranged from 89.15% to 93.13% for HDFC over the period 1990-91 to 2002-03. It ranged from 65.74% to 92.45% for PNBHF and from 83.39% to 94.31% in case of LICHF over the same period.

 PNBHF spent in the range of 0.63% to 4.57% of the total expense on establishment over the period of the study which was the highest among all the institutions. LICHF spent the lowest proportion ranging from 0.42% to 0.89% on establishment expenses during the same period and the ratio showed a declining trend in the case of HDFC cover the same period.

Birla Institute of Scientific Research (1981)1 in its study makes a comparative assessment of the performance of public sector banks and major private sector banks since nationalisation. They 28

find that the performance of public sector banks is not satisfactory in rural development activities when compared to the private sector banks.

Jain, Pinson and Malhotra (1987)2 in their study “Customer loyalty as a construct in the marketing of bank services” feel that customer loyalty is a very useful construct. Their contention is that the human aspect of banking should be given utmost importance by the loyal segment for the marketing of bank services.

R Jayakumar (1993)3 in his study of “Performance of private sector banks in Kerala” makes a comparative examination of performance of public sector banks and private sector banks in Kerala. He finds that in Kerala private sector banks perform better than their public sector counterparts.

Delvin James (1995)4 makes a case study of the retail banking services in UK using First Direct, a subsidiary of Midland Bank. He concludes that banks can increase their market share through proper communication and prompt delivery of their products.

Govindarajalu (1996) 5 in his article “Satisfaction and dissatisfaction with bank services” views that the Indian banks have lost the quality of customer service. The dissatisfaction of customers with bank services is an important issue to be considered by banks and policy makers for the development of banking sector. 29

Sarkar and Das (1997)6 make a comparison of the performance of the three bank sectors public, private and foreign - for the year 1995-1996. These banks are compared in terms of profitability, productivity and financial management. They find that the public sector banks are very poor in performance on the basis of these variables than the other two sectors.

D Mishra (1997)7 makes a study on the performance of commercial banks in India choosing relevant parameters like quality of service, risk management, profitability etc. His conclusion is that the banks should try to increase quality, balance risk management, and optimise profitability in order to survive and succeed. He identifies four challenges for the bank namely competition, credit, customer and control.

Gaganjot Singh (1998)8 in his study “New innovations in banking industry – a study of new private sector banks” views that the new private sector banks in India are using better technology and are offering better services to the customers. The new private banks have emerged as a model to the banking industry in terms of service levels, ambience, technology etc. As the public sector banks have already established a huge customer base, they become complacent and are slow to become customer friendly. They are also less innovative in the use of technology-assisted customer service. Because of their huge customer base they feel that they can withstand competitions from new generation banks.

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N. S. Varghese (2000)9 is of the opinion that new generation private sector banks with their latest technology are able to implement e-banking and are highly preferred by investors in the stock market. He also points out that prominent new generation private sector banks like HDFC and ICICI have entered into internet banking through which greater convenience is offered with lower transaction cost.

The study carried out by P Verma (2000)10 is in tune with the findings of Varghese. Analysing the impact of information technology on new generation banks Verma feels that new generation banks are far ahead of traditional public sector banks. He finds that information technology is posing a threat to the public sector banks. He observes that the business per employee of major public sector banks in India is a mere fraction of the business per employee of new generation banks. So the public sector banks have to improve their productivity and efficiency to compete with the new generation banks which are fully computerized. But Eapen Varghese (2001)11 finds no such difference between the services rendered by public sector and private sector banks.

Mini Joseph’s (2001)12 view is that new generation banks have created a spirit of competition in the banking industry by fully utilizing the facilities and amenities available from technology and computerization, and by accepting customer satisfaction as the core aspect. For preventing the erosion in the market share of old private sector banks and public sector banks, they are also providing quality service now in a competitive spirit.

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AnanthaSwamy (2001)13 makes an appraisal of the performance of different bank groups in India in the backdrop of competition, deregulation and changes in the field of banking. He classifies banks into public sector, old private sector, new Review of Literature 20 private sector and foreign banks. His focus has been on profitability, NPA, contingent liabilities, spread etc. for the last five years and arrives at the conclusion that the new private sector banks are performing better than the banks in other sectors.

Jamal and Naser (2002) 14 makes a study on “The factors influencing customer satisfaction in the retail banking sector of Abu Dhabi”. He collected the necessary data using structured questionnaire. Customer response to questionnaire shows that the customer expectations from the bank and service quality provided by the banks are the major determinants of customer satisfaction. Their investigation on factors influencing customer satisfaction in the Pakistan retail banking sector15 also reveals that service quality is the important determinant of customer satisfaction.

P. D. Jeromi (2002)16 who studied “The trends and issues of bank credit in Kerala” finds that the absolute rate of growth of credit is reasonably good. But in relation to deposits, per capita credit, credit per account, disbursement by all India Financial Institutions the level of credit is lower. He also observes that more attention should be given to mobilization of deposits than to expansion of credit.

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Pushpangadharan’s (2002)17 study on “The quality of customer service in public sector banks” also shows that public sector banks lag behind private sector banks in customer service. The parameters he used in the study are facilities and amenities, speed in completing transactions and providing deposit related and credit related services. The customers of public sector banks are not much satisfied with branch managers’ and employees’ attitudes. The public sector banks are very poor in respect of customer feedback system and redress of grievances.

BharathiPathak (2003)18 makes a study of “The financial operations of new generation private sector banks in India”. Five banks (Indusind bank, Centurion bank, HDFC bank, ICICI bank and UTI bank) are taken up for financial analysis for a period of five years from 1996-97 to 2000-01. Their financial performance is studied under four different parameters – financial, operating, profitability and productivity. His conclusion is that the working of all banks is satisfactory but HDFC bank comes at the top closely followed by ICICI bank.

Bikram De (2003)19 makes a study on the effects of ownership on bank performance. He compared old private sector banks and new generation banks in terms of profitability, efficiency, liquidity etc.

Gilotra (2003)20, in his study on retail lending, views that the success of retail lending of a bank depends on factors like marketing efficiency, proper appraisal and follow-up. He also finds that

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HDFC has become very excellent in housing finance solely due to the long term strategies adopted by them.

R.Kumar (2003)21 in his study “Retail banking growth drivers and analysis of associated risks” views that banks should review the retail loan portfolio at periodical intervals in a structured manner for identifying the risks and upgrading the strategies for the reduction of risk.

V.S. Murthy (2003)22 in his study views that in India the banking industry has very high competition particularly in the retail sector. In this competition only the fittest will survive. It is expected that the banks are well equipped to succeed in the retail journey.

Qamar (2003) 23 has done a comparative study on the “Profitability and resource use efficiency in scheduled commercial banks in India”. He finds that efficiency of new private banks and foreign banks is better though marginally than the old private sector banks and public sector banks.

Velayudham (2003)24 in his article “Banking for corporate new directions” reminds banks to ensure that for a balanced asset portfolio retail banking has to go along with wholesale banking. Besides, for better management of customer’s needs and consultative selling of products, commercial banks should have customer relationship management department.

34

Filomina’s (2004)25 survey on expectations of customer from retail banks shows that none of the banks are able to meet the diverse needs of customers. As a result the customers are not so loyal to a particular bank and go for multiple banking. Customers are aware of the variety of products and services that are available in the banking sector and demand them from their banks. The aggressive banking of new generation banks make customers dislike them.

Groeneveld and Wagemakers (2004) 26 in their article “Retail banking strategies in Europe” analyse retail banking strategy with special emphasis on retail banking in the broadest sense of the word. He finds that many banks rediscovered retail banking after the collapse of investment and corporate banking activities and the fall in the stock prices in the last few years. The retail banking strategies in general and the strategic positioning of Rabobank group in particular are described in the study.

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CHAPTER – 3 OBJECTIVES AND RESEARCH METHODOLOGY

36

3.1 OBJECTIVES OF THE STUDY

 The main objective of the study is to know the customers perception about home loans of HDFC housing development Finance Corporation limited.  To study the satisfaction level of customers about home loans.

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

3.2 SCOPE OF THE 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. 37

3.3 RESEARCH DESIGN The research design refers to the overall strategy that you choose to integrate the different components of the study in a coherent and logical way, thereby, ensuring you will effectively address the research problem; it constitutes the blueprint for the collection, measurement, and analysis of data.

A research design is the set of methods and procedures used in collecting and analyzing measures of the variables specified in the research problem research. The design of a study defines the study type (descriptive, correlational, semi-experimental, experimental, review, metaanalytic) and sub-type (e.g., descriptive-longitudinal case study),research problem, hypotheses, independent and dependent variables, experimental design, and, if applicable, data collection methods and a statistical analysis plan. Research design is the framework that has been created to find answers to research questions.

Type of research design:

i.

Exploratory research

Exploratory research on the other hand seeks to generate a

posteriori

hypotheses by

examining a data-set and looking for potential relations between variables. It is also possible to

38

have an idea about a relation between variables but to lack knowledge of the direction and strength of the relation. If the researcher does not have any specific hypotheses beforehand, the study is exploratory with respect to the variables in question (although it might be confirmatory for others).

The advantage of exploratory research is that it is easier to make new discoveries due to the less stringent methodological restrictions.

Here, the researcher does not want to miss a potentially interesting relation and therefore aims to minimize the probability of rejecting a real effect or relation; this probability is sometimes referred to as β and the associated error is of type II. In other words, if the researcher simply wants to see whether some measured variables could be related, he would want to increase the chances of finding a significant result by lowering the threshold of what is deemed to be significant.

The results of exploratory research are not usually useful for decision-making by themselves, but they can provide significant insight into a given situation. Although the results of qualitative research can give some indication as to the "why", "how" and "when" something occurs, they cannot reveal "how often" or "how many". Exploratory research is not typically generalizable to the population at large.

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Social exploratory research "seeks to find out how people get along in the setting under question, what meanings they give to their actions, and what issues concern them. The goal is to learn 'what is going on here?' and to investigate social phenomena without explicit expectations.

"This methodology is also at times referred to as a grounded theory approach to qualitative research or interpretive research, and is an attempt to unearth a theory from the data itself rather than from a predisposed hypothesis.

Even as children we have a natural curiosity about the world around us. We ask questions like: Why is the sky blue? Why do birds fly? Questions like these are often the foundation of exploratory research because they reveal our desire to understand the world around us.

Exploratory research (or ER) is an examination into a subject in an attempt to gain further insight. With ER, a researcher starts with a general idea and uses research as a tool to identify issues that could be the focus of future research.

Look at how ER is used in business. For instance, let's say you own a bakery called The Cupcake King. If you wanted to improve your sales, but weren't sure where to start, you might employ ER to find out the areas of your business that need improvement.

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It's important to note that the point of exploratory research is not to gain a definitive answer, like you would with a math problem. For instance, you know that no matter how many different ways you look at the math problem 1 + 1, the answer is always.

Exploratory Research Methods

You may wonder how you can explore a topic if there is little information about it. There are several methods that are used in exploratory research. Researchers may use primary or secondary research, or a combination of both types of research.

Primary research is data that someone collects personally, usually from a group of people gathered specifically for the study. Primary research is collected through the use of interviews, focus groups, customer surveys, or any way that organizations are able to obtain feedback. For instance, social media and blogs are a great way for business owners to obtain customer feedback.

Secondary research is the analysis and synthesis of primary research that was compiled at a previous date. Secondary research can be gathered from marketing research data, magazines, old reports, or any other source where relevant information has been stored.

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DATA COLLECTION Primary data collection method is used because the study does not permit to apply observational method. In survey approach questionnaire method had been selected consisting of a sample size of 50 which is done randomly with the help of snow ball sampling technique.

CHAPTER – 4 DATA ANALYSIS & DATA INTERPRETATION

4.1 ANALYSING PERCEPTION OF PEOPLE Do you know about HDFC housing development finance corporation ltd.? Category Yes No

No. of respondents 41 9

42

Awareness about HDFC Ltd 18.00%

yes no

82.00%

From the table and graph it can be seen that  82% of the respondents are known about HDFC LTD.  18% of the respondents are not known about HDFC LTD.

Reasons for getting the home financed. S.NO. 1 2 3 4

NO. OF REASONS Non- availability of funds Reluctancy to pay cash in one go Tax benefits Any others

43

PERCENTAGE 36 35 24 5

PERCENTAGE 36

35 24 5

ai av n No

l

i ab

ds un f of il ty y nc a t c lu Re

to

as yc a p

h

in

e on

go x Ta

ts ef n be

s er th o y An

The figure shows that most of the customers find the problem in availability of funds i.e., 36% and vey less no. of customer found problem in paying cash in one go i.e., 35%, customer get home loan for tax benefit is 24%. Sources of Information about home loans scheme. Sources of information Newspaper Magazines Banners/hoardings/pamphlets Word of mouth Any other source

Percentage of customers 49 16 11 20 7

44

Newspaper Banners/hoardings/pamphlets Any other source

Magazines Word of mouth

19.42% 6.80% 47.57%

10.68% 15.53%

The data shows that around 20% of the customers got information from source of ‘word of mouth’ which includes friends, relatives, etc. 49% of the customer got information from newspaper, 16% of the customers got information from magazines, 11% from banners/hoardings/pamphlets.

4.2 SATISFACTON LEVEL OF CUSTOMERS Opinion about the services of HDFC LTD S.No.

Services

Percentage of customer agreeing Strongly Agree Agree

1 2 3 4 5

Professionally managed Reliable & transparent Socially responsible

Customer care Query handling

Neutral

Disagree

Strongly Disagree

86%

10%

4%

-

-

67%

33%

-

-

-

75% 20% 20%

10% 68% 76%

15% 12% 4%

-

45

-

-

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

strongly agree agree neutral disagree strongly disagree

g d nt le re ge re lin ib ca a a s d r p n n e an m ns po m ha o a s t y r y e s t r r ll cu & ue na lly q e o l a b si ci lia so fes e r o pr

Customers from HDFC LTD are quite satisfied from their services like query handling and customers social responsibility of bank towards customers & professionally managed services. They do not give so good response to reliability & transparency services of banks. So, customers satisfaction level towards HDFC LTD services is lightly satisfied. Opinion of customers about home loan schemes S.No.

Services of HDFC LTD

Percentage of customer agreeing Strongly Agree Agree

1 2 3 4 5 6 7 8

Amount of Loan Legal Formalities Interest rate

65% 42% 32% Repayment option 26% Security demanded 20% Installments 55% Services 45% Processing for 55% sanction of loan

Neutral

25% 5 % 45% 13% 56% 12% 64% 10% 32% 48% 40% 5% 30% 18% 24% 18%

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Disagree

-

Strongly Disagree

-

6% 3%

1% -

70% 60% 50% 40% 30% 20% 10% 0% s d n ts es ate es de on oa en ic l i ti tr ti n v l s m f r a a o op ll re se n em nt rm nt sta nte o d u o e i n f o y i l m cti ri t ay a m l ega an u p s c re se or gf n si es c o pr l of

n oa

strongly agree agree neutral disagree stongly disagree

The analysis shows that the customers of HDFC LTD gave 60% of amount of loan and legal proceedings and services, 56% to interest rates, 45% to proceedings and services, 55% to installments. So, customer of HDFC LTD didn’t give response regarding the services of the bank/ company except to the amount of loan and legal formalities.

4.3 PROBLEMS FACED BY CUSTOMERS IN AVAILING HOME LOAN. There are everything in the world has good or bad points. No doubt b a n k i n g i n d u s t r y / c o m p a n y h a s m a d e m a n y e ff o r t s t o e n h a n c e t h e c u s t o m e r s a t i s f a c t i o n b u t customer still faced some problems. These are high lightened as below:

1)

The customer does

not have

proper

knowledge

h o m e l o a n products so they face problem in making a good deal. 47

about different

2) There are procedural delays, which harass the customer’s lot. This will crush the curtsy of customers to avail the home loan. 3) The attitude of bank employees sometimes non cooperative and it c r e a t e s 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.

CHAPTER – 5

FINDINGS

48

FINDINGS

 Most of the people are not aware of the products of HDFC home loans.  HDFC LTD providing good services to their customers  Customer’s awareness is medium about HDFC products.  Some of the customers felt that the interest rates are somewhat high.  The customer does not have proper knowledge about products so they face problem in making a good deal.  The attitude of bank employees sometimes non-cooperative and it creates hurdle in building trust and confidence among customers about bank.

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CHAPTER – 6

RECOMMENDATIONS

50

RECOMMENDATIONS

1) To increase their customers, the HDFC LTD 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 HDFC LTD should m a k e prompt disbursement of loan amount to the customers so that they can buy o r construct their dream home as early as possible. 3) The HDFC LTD 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, inc a s e t h i s e x i s t s , t h e n , t h e s e s h o u l d b e c o m p l e t e d i n l e s s t i m e . T h i s w i l l b e h e l p f u l i n 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.

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5) HDFC LTD 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 HDFC LTD should soften their norms regarding the loan amount. 6) Create awareness: The Company has to take care of awareness creation about the products and services among the customers. 7) Charges: The Company has to reduce the mortality and administration charges. 8) The company has to reduce their interest rates on home loan products a n d services. 9) The company has to identify the potential customers.10) Company should consider the present competition and should act according to the customer needs. 11) The HDFC LTD should try to provide proper knowledge regarding their home l o a n schemes, even to people who don't know about such schemes and their b e n e f i t s especially in rural areas. So they should provide knowledge to the ignorant customers, e s p e c i a l l y i n r u r a l a r e a s a n d b a c k w a r d u r b a n a r e a .

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CHAPTER – 7

LIMITATIONS

53

LIMITATIONS



The study was restricted in understanding the home loan as concept so the practical implications of the study have been difficult.



The Take Over home loans of high interest rate for low interest rates and their inherent risks on the banks lending profile has not been undertaken in the study.



The mortgage home loans and its scope on the home loan lending portfolio were not studied as this would lead into a relatively new kind of home loan segment.

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CHAPTER – 8

CONCLUSION

55

CONCLUSION

 I n m y s t u d y w e c a m e t o k n o w t h a t m a n y p e o p l e ’s a r e i n t e r e s t e d t o t a k e a h o m e l o a n f r o m H D F C LT D t o c o n s t r u c t t h e i r h o m e .  Home loans have long period when compare to other personal loans and other loans. So peoples are confused to take a home loan.  Even though the interest rates are high peoples are willing to take a loan from HDFCLTD due to some reasons.  The interest rates also somewhat high when compare to other banks  The loan sanction process is low when compare to other banks.  For disbursement process is also it will take low time when compare to other banks.

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 a n d illiteracy of respondents, which posed problems in carrying out the research. But proper attention was made to Carry out research in proper 56

w a y a n d t o m a k e a c c u r a t e conclusion for the HDFC LTD which may beneficial for banks to enhance their customer base.

CHAPTER – 9

BIBLIOGRAPHY

57

BIBLIOGRAPHY

1.

http://www.hdfcindia.com

2. www.HDFCbank.com. 3. http://www.HDFCbank.com/pfsuser/loans/homeloans/hlhomepage.htm 4. http://www.hdfc.com.mv/faq.htm 5. Brochure of home loan from HDFC 6 . Dr. Rangrajan C. (2001),” A simple error correction model of house price” 7 . Berstain David(2008), “ Home equity loans and private mortgage insurance: recent trends and potential Implications” 8 . Godse (1983), “looking a fresh at banking productivity.” 9 . Kulkarni (1979), “ Development responsibility and profitability of banks.”

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CHAPTER – 10

ANNEXURE

59

Questionnaire: Part I: Demographic Information Name:

Age:

Gender:

Male

Female

Occupation: Professional

Self employed

Salaried

Land Labor

Others Education: Illiterate

Below SSC

SSC

HSC

Graduate

Post graduate

60

Annual Income: Below Rs. 2 lakh

Rs. 2 lakh – 4 lakh

Rs. 4-6 lakh Rs. 6 lakh & above Part II : perception and satisfaction of people 1

2

Have you ever taken loan before ? Yes Are you satisfied with the services provided? Highly satisfed

No Satisfed

Neutral

Dissatisfied

Highly dissatisfied 3

While taking home loan which things attract you the most? Interest rate

service provide

Payback period

Schemes

4

Others Even if the Interest rate is high for the personal loans, you will go for it?

5

Yes How much loan amount you took?

No

Less than 1 lakh 7

8

1-5 lakh

5-10 lakh more than 10 lakh Even if the interest rate is high for the home loan, you will go for it? Yes Do you own a home…?

No

Yes

No

If Yes, then, proceed… 9

Have you got it financed? 61

Yes 10

No

If Yes, then proceed… What is the reason for getting it financed? Non- availibility of funds Reluctancy to pay cash in one go Tax benefits

11

Any other From where have you got information about home loans schemes? Newspaper Magazines Banners/hoardings/pamphlets Word of mouth

12

Any other source What problem did you face while getting the home loan? Lack of knowledge Procedural delays and non cooperation Any other (please specify) …………………………..

13

Did you face any problem after sanction of loan? …………………………………………………………………………………………….. .

14

……………………………………………………………………………………………. What suggestions do you want to give for improvements in home loans Scheme? …………………………………………………………………………………………….. …………………………………………………………………………………………….. 62

63