Theory Assignment 1.docx

Session: 2018-2019 Subject: Debt Recovery Management. Topic: comparison of different banks between their loan products, advances and documentation.

Theory assignment 1

Submitted to: Dr. Neetika Jain. Section: BBA (bfsi) “a” Submitted by: Akshay Rathi Enrolment no: 2017BBBF006

Introduction. Loans: A loan is a debt provided by an organization or individual to another entity at an interest rate, and evidenced by a promissory note which specifies, among other things, the principal amount of money borrowed, the interest rate the lender is charging, and date of repayment. ADVANTAGES

DISADVANTAGES

FLEXIBLE

STIRCT REQUIREMENTS

COST EFFECTIVE

REPAYMENT BURDEN

RETAINED PROFIT

IRREGULAR PAYMENT AMOUNTS.

TAX BENEFITS

-

Advances: An advance is a credit facility that is provided to an individual/corporation by the financial institution, bank, employer, friend, relative etc. Advances are generally for shorter term and will be recovered by the bank during a shorter period of time. Advances are commonly taken on an employee’s salary. ADVANTAGES

DISADVANTAGES

ECONOMICAL

FIXED BURDEN

FLEXIBLE

CHARGE ON ASSETS

NO INTERFERENCE IN MANAGEMENT

DIFFICULTY OF RAISING FINANCE

MAY ALSO SERVE LONG TERM PROCESSES

UNCERTAINITY

-

LEGAL FORMALITIES

DOCUMENTATION: Document means any matter expressed or described upon any substance by means of letter, figures or by one or more than these means intended to be used or which may be used for the purpose of recording that matter with an intension of producing the same as evidence. In common usage documents are related to written records for the purpose of evidence while lending the bank funds.

Importance:     

Transparency Risk reduction Efficiency Cost Syndication

Banks and chosen for the project.

Loans chosen for the project A home loan, or mortgage, is a secured loan that borrowers obtain in order to purchase a home. Because a home is the largest purchase many individuals will ever make, most borrowers utilize home loans to assist with their home purchase.

Money borrowed to finance education or school related expenses. Payments are often deferred while in school and for a six-month grace period after graduation. There are a variety of federal and private student loans available

A car loan is a personal loan that allows the potential buyer to pay the vehicle off in monthly payments instead of having to pay the full price all at once. ... To qualify for an unsecured loan the borrower must have a very high credit score and also issue a higher interest rate on the loan as well It is a type of unsecured loan and helps to meet your current financial needs. You don’t need any security/collateral while availing it. Personal loan gives you the flexibility to use the funds as per your convenience and need. Solution for instant cash and can be used for traveling, wedding, medical emergency, home renovation, or anything else. Gold loan is sanctioned by accepting the gold ornaments of the customer as pledge. Sanctioned on the basis of source of income and repayment capacity of an applicant.

Comparison charts for gold loan from different bank

Basis

Bank of baroda

HDFC Canara Indusland bank bank bank

Loan amount

Minimum –Rs. 25,001 Maximum – Rs. 20,00,000

Rs. 10,000 Rs. 10,000 to Rs. 2 Cr to Rs. 2 Cr

Eligibility

100001500000

ages of 18 Age – 18 and 75 to 75 years.

articles With salary which are more than 50k above 18 carats and age b/w All individuals 18-75 with KYC

Axis bank 50,000 and higher, available at low interest rates. Age – 18 to 75 years. All individuals with KYC

Interest rate

6.25%8.75%

9.70% onwards.

10.00% 16.10%

10.5% to 17%

9.00% 14.95%

Documentation charges

nil

199

nil

Nil

199

Processing fee

1% plus gst as applicable

1% of the loan amount

nil

Nil

Upto 2% of loan amount

Security

Gold mudra

Any metal ornaments

As per the bank norms

Gold mudras

Any metal ornaments

Repayment

6 months to three years

12-24 months

Upto 3 years

10-24 months

10-36 months

Comparison chart for personal loan from different banks

Basis

Loan amount

Types of loan

Bank of baroda

HDFC bank

Rs. 50,000 - Rs. 15,00,000

40% of gross annual income in case of nonsalaried class Home Home equity, equity , military short term payday, bad credit,

Canara Indusland

Axis

bank

bank

bank

Rs 50000rs 200000

10 month gross salary in case of salaried class

75% cost of the article whichever is less

Home equity, short term,

Home equity, second chance

Home equity, consumer, clean

Tenure

1-5 yrs

1-3 yrs

1-5 yrs

10-24 montths

1-3 yrs

Disbursal facility

available

Available

available

Available

available

eligibility

21-60 yrs, credit score300-850

21-75 yrs credit score300-900

25-75 yrs Credit score 350900

21-65 yrs credit score300-850

20-75 yrs credit score300-850

Interest rate

11.29%

12.45%

11.9%

11.84%

11.49%

Repayment

After 3 months and within 3 yrs

After 6 months and within 3 yrs

After 3 months and within 24 months

After 8 months and within 3 yrs

After 3 months and 24 months

prepayment

nil

5% of principal outstanding

No prepayment permitted until repayment of 12 EMIs

No prepayment charges.

2% of principal outstanding

Comparison of different banks for home loans Basis

Bank of Baroda

HDFC bank

Canara Indusland bank bank

Axis

Interest rate

8.408.85%

8.358.85%

8.4010.05%

8.359.25%

9.3510.5%

eligibility

Salaried individuals & Applicants above 21 years of age at the time of loan

Age of independent house should not be more than 25 years.

monthly income, fixed monthly obligation, current age, retirement age etc.

Source of income Savings and credit history, Work experience Age

Individually or jointly with a coapplicant(s).

Processing fee charges

Up to 1% of the Loan amount subject to minimum of Rs.10,000/-

0.5%(max. ₹10,000) + applicable tax

0.50% 1.00% of the loan amount

Upto 1.25% of Loan amount

Up to 0.50% of the loan amount or Rs.11,800 whichever is minimum

Tenure

8-30yrs

10-30 yrs

11-30yrs

8-30 yrs

10-30 yrs

Borrowing limits

3 lakhs- 15 lakhs

Depends on the income

3 lakhs- 20 lakhs

3 lakhs-15 lakhs

2lakhs20lakhs

MCLR rates

7.95%

16.15%

8.45%

8.20%

14.18%

Pre payment charges

2% on balance transfer else nil

2% on balance transfer else nil

nil

Nil

If balance transfer then 2% otherwise nil

bank

Comparison chart for education loan. Basis

Bank of baroda

HDFC bank

Bachelors and masters that include professional , technical courses conducted by institute like IIT & IIM and other basic details

Diploma, undergraduate , postgraduate, computer certificate courses, department of electronics. And other basic details.

Amount

Upto INR 10 lakhs

Upto INR 15 Lakhs

Upto INR 10 lakhs

INR 10-20 lakhs

INR 10-25 lakhs

Interest rate

If loan is less than 4 lakhs then no interest,& above 5%

Floating interest rate of 12.50%

No interest on less than 4, and above it 8%

Floating rates of 9.40%

9.40%11.60%

Repaymen t

Starts a year after the course is completed.

Starts a year after the course is completed or after the job of 1year

After the job of 6 months.

Margin

More than 4 lakhs- 5%

More than 4 lakhs- 5%

More than4 lakhs- 5%

Eligibility

Canara Induslan bank d bank Resident Indians, and individual s between age 16-35. And all the other basic details.

Quality and reputation of the institute from where the student wants to pursue the chosen course, and all the other basic details.

Axis bank Estimated salary a student might earn in future (an important determinan t of one's loanrepayment capacity) Credit history of applicants, and other basic details.

6 months after the course completion.

More than 4 lakhs- 5%

Starts a year after the course iscomplete d or after the job of 1year More than 4 lakhs5%

Expenses considered

All academic fee

course fee, exam fee, tuition

Required books& exam fee

course fee, exam fee, tuition

All academic fee

Comparison chart for the car loans. Basis Eligibility 

Bank of baroda

HDFC bank

Car Loan  eligibility depends on salary. Higher the income, higher the eligibility 85% of on-road price

UCO bank

DENA bank

Kotak bank

Interest rate

9.65% onwards

Car Loan  Car Loan  Car Loan  Car Loan eligibility eligibility eligibility eligibility depends depends depends depends on salary. on salary. on salary. on salary. Higher the Higher the Higher the Higher the income, income, income, income, higher the higher the higher the higher the eligibility eligibility eligibility eligibility 90% of ex100% of 85% of on85% of onshowroom exroad price road price price showroom price 11.50% – 9.5% – 15% 9%-12% 9.5% – 15% 13.75%

EMI per rs 1 lac

Rs.2056 2142

Rs.2088 2187

Rs.2076

Rs.2076 2018

Rs.2088

Processing fees

0.50% of Loan amount

0.4% of Loan Amount or Rs.10000, whichever is lower

1% of the loan amount maximum Rs.1500/-

Rs 500/irrespective of loan amount.

Rs. 3500 to Rs. 5500

Loan amount

Rs 50000 onwards

Rs.25,000 to Rs.2 crore

Rs. 1 lakh onwards

Rs. 1 lakh onwards

Rs.25,000 to Rs.2 crore

Preclosure fee

NIL to 5% of principal outstanding car loan amount

NIL to 5% of principal outstanding car loan amount

NIL to 6% of principal outstanding car loan amount

NIL to 4% of principal outstanding car loan amount

NIL to 4.5% of principal outstanding car loan amount

Preferred credit score

750 & above 700 & above 650 & above 650 & above 750 & above

INTRODUCTION TO ADVANCES OVERDRAFT : It is a facility provided by a bank to his client that he can withdraw a limited amount in excess of his original balances, For example if you have Rs.5000 in your account and you have been granted over draft facility of Rs. 10,000 you can now draw checques to Rs.15,000.

CASH CREDIT : Cash credit means that bank after deciding the amount of loan transfers the amount in an account. The customer is giving a cheque book of that account and he can withdraw any portion of the amount according to his needs. In practice cash credit is similar to overdraft, only difference is that current account is not needed in this case. The cash credit is granted against pledge or by pothecation of assets of the client.

DEMAND LOAN : Demand loans are the loans granted by banks for an agreed period of time. The whole amount of loan is transferred to the account of customer. He can withdraw it either in lump sum or instalments.

DISCOUNTING OF BILLS: By discounting bills of exchange, bank makes at payment to the holder or instrument before the date of maturity. Bank deducts an amount called discount for making early payments.

COMPARISON OF ADVANCES OVER DRAFT BANK OF BARODA 11%

KOTAK BANK

HDFC BANK

UCO BANK

DENA BANK

12 %

18% p.a.

15 %

14 %

Maximum limit of lending

INR. 5 Crore

3 crore

3 crore

5 crore

5 crore

securities

remitted by you against the demand for overdraft

remitted by you against the demand for overdraft

remitted by you against the demand for overdraft

remitted by you against the demand for overdraft

remitted by you against the demand for overdraft

BASIS Interest

CASH CREDIT FEATURES

SECURITIES PLEDGE

TERM OF FINANCE INTEREST

Separate Account: Usually the cash finance is provided in separate account. The bank transfers the funds in the credit account and cheque book is issued to the client. The bank can demand securities against the loan . Usually the cash credit is advanced against ledge or hypothecation of goods. Cash credit can be granted for short or medium terms. Interest is charged on the amount withdrawn by the client. It is charged on daily basis so client can save the interest expense by depositing money in the account at any time.

DEMAND LOAN SECURITIES INTEREST

REPAYMENT

The loan advanced is secured by way of mortgage of pledge. Interest is charged on the whole amount either quarterly, semi annually or annually. The loan is repayable within a fixed time period. However the bank reserves the right to call back the loan after one year.

Comparison chart for the documentation of home loan BANK OF BARODA

BASIS   

D



O



C 

U M E N

 

T A T I O N 

Passport size photographs Proof of identity, residence and age Proof of office/business address Bank statements of the last 6 months Copy of Income Tax Returns of the last 3 years Proof of investments such as insurance, fixed deposits or shares and stocks Payslips of the last 3 months for salaried persons For business owners/selfemployed persons: Verified copies of Balance Sheets, Profit and Loss accounts, IT Return, assessment orders, advance tax challans (for both company/firm and personal account) for the last 3 years Copy of documents related to the property to be purchased

KOTAK BANK      

 



Passport size photographs Proof of identity, residence and age Proof of office/business address Bank statements of the last 6 months Copy of Income Tax Returns of the last 3 years Proof of investments such as insurance, fixed deposits or shares and stocks Payslips of the last 3 months for salaried persons For business owners/selfemployed persons: Verified copies of Balance Sheets, Profit and Loss accounts, IT Return, assessment orders, advance tax challans (for both company/firm and personal account) for the last 3 years Copy of documents related to the property to be purchased

HDFC BANK      

 



Passport size photographs Proof of identity, residence and age Proof of office/business address Bank statements of the last 6 months Copy of Income Tax Returns of the last 3 years Proof of investments such as insurance, fixed deposits or shares and stocks Payslips of the last 3 months for salaried persons For business owners/selfemployed persons: Verified copies of Balance Sheets, Profit and Loss accounts, IT Return, assessment orders, advance tax challans (for both company/firm and personal account) for the last 3 years Copy of documents related to the property to be purchased

UCO BANK  

 











Passport size photographs Proof of identity, residence and age Proof of office/business address Bank statements of the last 6 months Copy of Income Tax Returns of the last 3 years Proof of investments such as insurance, fixed deposits or shares and stocks Payslips of the last 3 months for salaried persons For business owners/selfemployed persons: Verifi ed copies of Balance Sheets, Profit and Loss accounts, IT Return, assessment orders, advance tax challans (for both company/firm and personal account) for the last 3 years Copy of documents related to the property to be purchased

DENA BANK    

 







Passport size photographs Proof of identity, residence and age Proof of office/business address Bank statements of the last 6 months Copy of Income Tax Returns of the last 3 years Proof of investments such as insurance, fixed deposits or shares and stocks Payslips of the last 3 months for salaried persons For business owners/selfemployed persons: Verifie d copies of Balance Sheets, Profit and Loss accounts, IT Return, assessment orders, advance tax challans (for both company/firm and personal account) for the last 3 years Copy of documents related to the property to be purchased

Comparison chart for the documentation of education loan BANK OF BARODA

BASIS  

D O



C U M E

 

N T A T



I O



N





Letter of admission Duly filled and signed loan application form 2 recent passport size photograph s Statement of cost of study PAN Card, AADHAR card of student and parent/guar dian Proof of identity and proof of residence IT returns or IT assessmen t order of previous two years of the coborrower Statement of assets and liabilities of parent/guar dian Proof of income of parent/guar dian

KOTAK BANK  

  









Letter of admission Duly filled and signed loan application form 2 recent passport size photographs Statement of cost of study PAN Card, AADHAR card of student and parent/guardia n Proof of identity and proof of residence IT returns or IT assessment order of previous two years of the co-borrower Statement of assets and liabilities of parent/guardia n Proof of income of parent/guardia n

HDFC BANK  

  









Letter of admission Duly filled and signed loan application form 2 recent passport size photographs Statement of cost of study PAN Card, AADHAR card of student and parent/guardi an Proof of identity and proof of residence IT returns or IT assessment order of previous two years of the co-borrower Statement of assets and liabilities of parent/guardi an Proof of income of parent/guardi an

UCO BANK  



 









Letter of admission Duly filled and signed loan applicatio n form 2 recent passport size photograp hs Statement of cost of study PAN Card, AADHAR card of student and parent/gu ardian Proof of identity and proof of residence IT returns or IT assessme nt order of previous two years of the coborrower Statement of assets and liabilities of parent/gu ardian Proof of income of parent/gu ardian

DENA BANK  



 









Letter of admission Duly filled and signed loan applicatio n form 2 recent passport size photograp hs Statement of cost of study PAN Card, AADHAR card of student and parent/gu ardian Proof of identity and proof of residence IT returns or IT assessme nt order of previous two years of the coborrower Statement of assets and liabilities of parent/gu ardian Proof of income of parent/gu ardian

Comparison chart for the documentation of car loan BANK OF BARODA

BASIS

KOTAK BANK

HDFC BANK

UCO BANK

DENA BANK

Passport ,

Passport ,

Passport ,

Passport ,

Passport ,

PAN Card ,

PAN Card ,

PAN Card ,

PAN Card ,

PAN Card ,

Voters ID card Driving ,License,

Voters ID card Driving ,License,

Voters ID card Driving ,License,

Voters ID card Driving ,License,

Voters ID card Driving ,License,

Driving License,

Driving License,

Driving License,

Driving License,

Driving License,

Voters ID card,

Voters card,

D O C U M E N T A

Statement of your bank account for the last 6 months , Passport size photographs: 2

T I

Income Proof: Latest Salary Slip, Form 16 ,

O N

I.T. Returns or Form 16 for the last 2 years

ID

Statement of your bank account for the last 6 months , Passport size photographs: 2 Income Proof: Latest Salary Slip, Form 16 , I.T. Returns or Form 16 for the last 2 years

Voters card,

ID

Voters card,

ID

Voters card,

ID

Statement of your bank account for the last 6 months ,

Statement of your bank account for the last 6 months ,

Statement of your bank account for the last 6 months ,

Passport size photographs: 2

Passport size photographs: 2

Passport size photographs: 2

Income Proof: Latest Salary Slip, Form 16 ,

Income Proof: Latest Salary Slip, Form 16 ,

Income Proof: Latest Salary Slip, Form 16 ,

I.T. Returns or Form 16 for the last 2 years

I.T. Returns or Form 16 for the last 2 years

I.T. Returns or Form 16 for the last 2 years

Comparison chart for the documentation of personal loan BAS IS D O C U M E N T A T I O N

BANK OF BARODA

KOTAK BANK

HDFC BANK

UCO BANK

DENA BANK

1. A completely filled & signed application form with photograph 2. Identity and Address proof 3. Income Proof 4. Processing fee cheque

1. A completely filled & signed application form with photograph 2. Identity and Address proof 3. Income Proof 4. Processing fee cheque

1. A completely filled & signed application form with photograph 2. Identity and Address proof 3. Income Proof 4. Processing fee cheque

1. A completely filled & signed application form with photograph 2. Identity and Address proof 3. Income Proof 4. Processing fee cheque

1. A completel y filled & signed applicatio n form with photogra ph 2. Identity and Address proof 3. Income Proof

Comparison chart for the documentation of gold loan BAS IS DOC1. UME NTA TION

1. 2. 3. 4. 5.

2.

BANK OF BARODA

KOTAK BANK

Two passport photograph

HDFC BANK

size 3. Two passport 4. Two passport 5. size photograph size photograph ID Proof such as 6. ID Proof such as Driving License Driving License11. ID Proof such 16. 7. as Driving Address Proof such 8. Address Proof License as Driving License , such as Driving 12. 17. License , 13. Address 18. Proof of land holding 9. Proof such as in case of agriculture 10. Proof of land Driving loan of more than Rs. holding in case License , 1 lakh . of agriculture 14. 19. loan of more 15. Proof of land 20. than Rs. 1 lakh . holding in case of agriculture loan of more than Rs. 1 lakh .

UCO BANK Two passport 6. size photograph 21. ID Proof such as Driving License 22. 23. Address Proof such as Driving 24. License , 25. Proof of land holding in case of agriculture loan of more than Rs. 1 lakh .

PROFILE OF THE BANKER :

       

Name – Prafull sethiya Age – 39 Chief Manager at UCO BANK ( Govt.of India Undertaking) Worked at Banking sector Former CHIEF Manager at UCO BANK Studied at army school Went to Army school Bikaner Lives in Bikaner , rajesthan

DENA BANK Two passport size photograph ID Proof such as Driving License Address Proof such as Driving License , Proof of land holding in case of agriculture loan of more than Rs. 1 lakh .

APPLICATION FORM FOR LOA

INTERPRETATION FROM “B” : We can interpret that the loan products offered by the UCO bank are same as the other banks and the interest rate are low as compared to other banks.It varies between 8.35% to 11% depending upon the loan product. Interest rate provided by the UCO bank are according to the guidelines provided by the RBI . Different types of accounts are also offered by UCO bank. Major heads of accounts are current account, saving account, fixed deposit account. Various kinds of accounts are there under the 3 major heads of accounts depending upon the age groups and types of customers. The interest rate on types of accounts varies between 3.5% to 6% depending upon the type of account. The interest rate on accounts are also according to the guidelines provided by RBI. UCO bank also provides various kinds of special schemes. The schemes differ for various age groups and different kinds of customers.

FROM “C” When I visited the UCO bank they told me about the documents required for getting loans and opening of various kinds of accounts. Most important of all documents is the KYC form. It is mandatory for all customers to submit all documents for getting loans and opening of accounts. Mainly address proof and identity proof are required both in case of loan and account.The loan documents required apart from the above mentioned are: • Loan application • Income tax return (3 years) • Balance sheet and P/L account (3 years) • Property documents The documents required for getting short term and long term loans are more or less similar. Only quotations of the property are required in case of long term loan. The procedure and documents that we have studied are similar to what bank practically follows.