50375594 22712301 comparative study of home loans of pnb and sbi bank

8/3/2019 50375594 22712301 Comparative Study of Home Loans of Pnb and Sbi Bank

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COMPARATIVE STUDY OF HOME LOANS OF PNB

AND SBI BANK.

A dissertation submitted to Gurukul college of

commerce

in partial fulfillment of the requirement for the award of degree of

BCom in banking & insurance

Submitted by:

MAKARAND SATAM

Supervisor:

Prof. Nitin aagarwal

(lect,lpu)

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TO WH OM S O E VER IT MAY C ONCE R N

This is to certify that the project report titled C o m parat ive study of h o m e loans of

PNB and SBI carried out by Miss , D/o has been accomplished under

my guidance & supervision as a duly registered BBA(Hons) student of the ,,,

. This project is being submitted by him/her in the partial fulfillment of the

requirements for the award of the BBA(Hons) from Lovely Professional University.

Her dissertation represents her original work and is worthy of consideration for the

award of the degree of BBi(Hons)

(Name & Signature of the Faculty Advisor)

-Title:

Dare:

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DECL A RATI O N

I , 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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Ac k n o wl e dg e m e n t

First of all my sincere gratitude goes to my academic supervisor Miss,

lecture, lovely professional university,phagwara,who helpd andguided me

for this work. Her conversation and encouragement will always be

remembered. In many stages of project, her proudful expertise and

professional knowledge provided crucial and key injection to the

technical solution.

I also would like to thanks all the staff members of the

department, for their cooperation and support during this work.

Finally, I wish to thank my family and friends for their encouragement and

support

that accomplishment me throughout the research work.


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TA BL E OF COT EN TS

Page

no.

6-11

12-28

Chapter

CHA P TER 1

Section

1.1 Introduction to Subject

1.2 Objective, Need, Scope & Methodology

CHAP TER 2

Section

2.1 Introduction to Company

2.2 Overview of the industry (History, Growth, Landmarks, major players and

their market share)

2.3 Profile of the organization

2.4 Companys history

2.5 Recent achievements and milestones

2.6 Product range of the company/industry

2.7 Performance of the company over the last few years(Statistical Profile)2.8 Financial status of the organization

2.9 Future prospects/ plans

29-35 CHAP TER 3

Survey of Literature

36-65 CHAP TER 4

Interpretation

66 CHAP TER 5

Section

5.1 Conclusion

5.2 Limitations

67-69

70-72

CHA P TER 6

References

CHA P TER 7

Questionnaire

5


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CHAP TE R 1

1.1 S ection

I N T R O D U C T ION TO S U B J E C T:

Home loans work like any other debt. That is, loans are simply specific

money that

we borrow from a bank, a private lender, or some other type of lender.

Afterwards, we must repay our debts with interest. However, unlike other

types of loans, home loans are different in several respects. Owning a

piece of land or property is a lifetime

dream for every individual. There are many home loans provider in the

market.

There are different type of home loan i.e.

Home Purchase Loans

Home Improvement Loans

Home Construction Loans

Home Extension Loans

Home Equity Loans

Land Purchase Loans Bridge Loans

Home purchase loans: These are the basic forms of home loansused for purchasing of a new home. With about a million home lendersand mortgage brokers it's becoming a tough challenge as the days are

progressing. But at the same time, when the sites are coming up with allthe latest tools and relevant information for us, and with all suchconveniences, obtaining a home purchase loan or mortgage has

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become really pretty simple. However, at the same time though,we may be flummoxed to look so many attractive rates and offers in the

market, not to forget the hidden costs associated with each of them.

H o m e i m prov e m e nt lo a n: Home improvement loans are usedto finance improvements and add on to the existing set of credentials of beauty on your owned house, recently purchased property or rented

accommodation. Home improvement loans are used to maintain or

enhance the value of your house.

In general it includes: repairs, remodeling, energy-related items

(permanent in nature), repairs, a new kitchen, a new bathroom, terrace,

an extension or general property improvements. Luxury items andfireplaces are generally not eligible, though. Many improvements in

landscape and even swimming pools are nowadays considered to be apart of home improvement.

H o m e c o n st ru c ti on lo a n: Home construction loans are used tofinance for the construction of our newly acquired home or if we are

planning to build a home.

The factors include in calculations for house

building costs? Design of the house Construction cost Financing Cost

Buildable site

All the above mentioned costs will help us to determine the amount we

may need to borrow. For example, besides calculating the construction

costs, we may also be required to consider the total expenditures to

develop the site in order to build. Each site is unique requiring differentexpenditures so this specific rupee amount will vary from site location tosite location.

Payment:Before the house starts getting build, we will be required topay a deposit to your builder as well as paying a deposit for the land if we

are buying land. As work progresses you will need to make paymentsto the builder. Certain loans can be structured for progress payments to

be made during construction.


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Home extinction loan

Home extension loans are used by customers to get loans from the

banks to extend their houses, by adding more rooms, kitchens, washrooms, terraces, or any other rooms for your growing family. It may

also be used to enclose open balcony/terrace space, or constructing aPuja ghar.


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Maximum Amount of Home

Extension Loans:

Banks generally offers about 70-85% of the total amount of homeextension as loan. The amount of loan sanctioned also depends on a

number of factors such as the age of the applicant at the time of loan,

tenure of the loan, repayment capacity of the borrower; his/her credit

history etc.

H o m e e qu ity lo a n:

Home equity loans helps customer to encash the market value of the

commodity by taking a loan by mortgaging the property. So, Home

equity loans are availed by customers, who wish to mortgage his/herproperty to the bank for taking some loan for some other purpose. Then,

it's up to the bank's discretion to consider the market value of the

property and accordingly decide how much to pay to the customer.

Both the residential as well as non residential property can be

considered for the approval of the loan, provided the mortgager is a

licensed title holder and the land is free form any kind of dispute.

Home equity loans don't restrict one to use the loan money in specificinvestments. It might also be used in marriage, higher education,medical expenses, etc. However it should not be used in any illegal or

speculation purposes.

Lan d pur chase lo an :

Land Purchase loans are used by customers who wish to purchase a plot

of land for commercial or residential purpose. Everyone has his/herdream perfectly sketched in his souls and so is his ambition to get his

house erected on the exact location he dreamt that to be. If you havefound and shorlisted the piece of land, and have arrived here for finance,

you have come to the best place you could have arrived in the web.

Now, that you have decided to purchase a land as an investment or for

your own dream home, you will realize that a land purchase loan is one

you will cherish.

Loans that are strictly for land purchase can be as scarce as good

residential plots. While many lending firms around the nation compete

to provide mortgages for the purchase of a house on a lot, only local

institutions typically will be interested in lending for an empty lot.


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Br idge lo an :

Bridge loans are designed for people who wish to sell the existing homeand purchase another one. The bridge loans help finance the new home,

until a buyer is found for the home. Bridge loans are used by customersas an effective vehicle to capitalize on a purchase opportunity. It can be

considered as a short term financing scheme which is generally expected

to be paid back, within the range of 6-36 months, till the time the

borrower gets more permanent and lower cost financing.

So, bridge loans, (or swing loans as they are otherwise said) is a short

term loan provided by various banks like Bank of India, Citibank,ICICI etc. often used for commercial real estate purchases, retrieve real

estate from foreclosure.

Bridge loans in corporate finance are called gap financing, and are used

to cover the time between redemption of issuance of one bond and its

replacement by a new issue. They can also be operating loans forperiods between LOI and acquisition, or quiet period and IPO.

Bridge loan may contain a decent proportion of prepaid interest,

sometimes as much as six months. If the home gets sold before that

time, you may receive interest payments back, but if it hasn't sold, you

may be required to continue payments.


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1 .2 S ect ion

OBJECTI VES

To study the cost of home loans provided by the bank.

To know that which bank provide batter loan schemes.

To analyze the home loan scheme by PNB and SBI banks.

To know the consumer perception about the home loan of PNB and

SBI.

SCOPE OF THE STUDY: This study is analysis and comparison of home

loans provided by the SBI and PNB banks. It is helpful in analysing the

home loan service provided to the customer and their comparison.

R E S E AR CH M ET HO DOL OGY

Design of Research:

The research will be exploratory in nature. A population of peoples who

take home loan from these banks will be considered for this study. I will

try to explore about the home loans which would make a difference in

the behavior of the consumer. Effort will be made to throw light on most

of the factors which have either indirect or direct effect on the behavior

of the consumer. I will also explore the impact of home loan on the

market share of the banks.

Sampling plan:

Population:

The study aimed to include the customers of SBI and PNB in

nawanshahr, to make a comparative analysis of home loan schemes of

these two banks..9


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Sample Size:

A Sample size of 100 respondents will be taken for the current study

because it is not possible to cover the whole universe in the

available time period. So it is necessary to take the sample size. In

100 respondents 50 respondents from PNB and 50 from SBI. The

sample will the peoples of age group lying between eighteen to

thirty years. The sample will be taken in the form of strata based on

age, sex, and income group.

Sampling technique:

The sampling technique will be probabilistic sampling more

specifically the random convenient and judgemental sampling will

be used. As in probabilistic sampling the select unit for

observation with known probabilities so that statistically sound

assumptions are supported from the sample to entire population so that

we had positive probability of being selected into the sample. I will

go for stratified random sampling as we are interested to study the

home loan by SBI and PNB banks, so we will make the strata on

the basis of age, occupation, income level, gender. And from each

strata we will go for random sampling.

Sources of Data:

I will use primary source of data that is structured questionnaire. As

these banks are established from so many years, so many researchers have

done research on this topic, so we will find secondary data also and also

use this data for the help of this research.

So, this research data will collected from the primary source andsecondary source.


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Our method of collecting the data is from the questionnaire that will be

filled by the respondent from the sample, it will be structured

questionnaire.

Tools and Techniques:

As no study could be successfully completed without proper tools &

techniques, same with my project. For the better presentation and right

explanation I used tools of statistics and computer very frequently and I

am very thankful to all those tools for helping me a lot. Basic tools which

I used for project are:

- BAR CHARTS

- PIE CHARTS

- TABLES

Bar charts and pie charts are very useful tools for every research to show

the result in a clear, simple way. Because I used bar charts and pie charts

in my project for

showing data in a systematic way. So I need not necessary for any

observer to read all the theoretical detail, simple on seeing the charts

anybody that what is being said.

Technological Tools:

MS

-WORD

MS-

EXCEL


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CHAP TE R 2

2 .1 S ection

INTROD U CTION TO COMPA N Y:

PUNJAB NATIONAL BANK :

PNB has over 4500 branches and offices bringing the Punjab National

Bank to your doorstep. Around 2400 offices come under the network

of Centralized Banking Solution or CBS. A need for centralized

banking system prompted PNB to go computerized and what

followed was the establishment of CBS in Punjab National Bank

branches in all the leading cities like Delhi, Pune, Chennai,

Mumbai, Ahmedabad, Chandigarh, Gurgaon, Hyderabad, Jalandhar,

Kolkata, Ludhiana, Nodal and Bangalore.

Internet Banking Services are provided to all customers in the CBS

branches. A branch and ATM locator is also available on the official

website of Punjab National Bank. For an overview of the annual report

or the bank profile, the site can be resourceful. The website also

provides info on the careers and recruitments at PNB and the exam

results. The careers at nationalized banks like PNB are the most sought

after one and candidates are selected on the basis of their exam result.

PNB topped the Best Paying Commercial Bank category with anoverall rating of

87.45% as evaluated by the SSS Retirement, Death & Funeral

Benefits Program.

STATE BANK OF INDIA:

State Bank of India (SBI) is India's largest commercial bank. SBI has a

vast domestic network of over 9000 branches (approximately 14% of

all bank branches) and commands one-fifth of deposits and loans of all

scheduled commercial banks in India. The State Bank Group includes a


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network of eight banking subsidiaries and several non-banking

subsidiaries offering merchant banking services, fund management,

factoring services, primary dealership in government securities,

credit cards and insurance.The eight banking subsidiaries are:State

Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad

(SBH).State Bank of India (SBI), State Bank of

Indore (SBIR),State Bank of Mysore (SBM),State Bank of Patiala

(SBP),State Bank of Saurashtra (SBS) and State Bank of Travancore

(SBT).

Today, State Bank of India (SBI) has spread its arms around the world

and has a network of branches spanning all time zones. SBI's

International Banking Group delivers the full range of cross-border

finance solutions through its four wings - the Domestic division, the

Foreign Offices division, the Foreign Department and the International

Services division.


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2 .2 S ection

OV ER VIEW OF T HE I NDUS TRY:

H IS T OR Y:

Banking in India has a long and elaborate history of more than 200 years.

The beginning of this industry can be traced back to 1786, when the

countrys first bank, Bank of Bengal, was established. But the industry

changed rapidly and drastically, after the nationalization of banks in1969. As a result, the public sector banks began experiencing numerous

positive changes and enormous growth. Then came the much- talked-

about liberalization and economic reforms that allowed banks to explorenew business opportunities and not just remain constrained to generating

revenues from mere borrowing and lending. This provided the Indian

banking scenario a remarkable facelift that only continues to get betterwith time. However, even today, despite the foray of foreign banks in the

country, nationalized banks continue to be biggest lenders in the country.

This is primarily due to the size of the banks and the penetration of the

networks.

The Indian banking system can be classified into nationalized banks,

private banks and specialized banking institutions. The industry is highlyfragmented with 30 banking units contributing to almost 50% of deposits

and 60% of advances. The Reserve Bank of India is the foremost

monitoring body in the Indian Financial sector. It is a centralized bodythat monitors discrepancies and shortcomings in the system.

Industry estimates indicate that out of 274 commercial banks operating inthe country, 223 banks are in the public sector and 51 are in the private

sector. These private sector banks include 24 foreign banks that have

begub their operations here. The specialized banking institutions thatinclude cooperatives, rural banks, etc. form a part of the nationalized banks

category.Opportunities

The Banking sector is considered the most lucrative option in todays job

market. In the industry, a position in Treasury or Forex is considered

right on top and this is followed by careers in Private Banking,

Investment Banking and Retail Banking. One could work in a variety of

areas in banking industry including Recurring Deposit

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account, banking officer, probationary officer, loan officer, assessor,personal loan officer, home loan officer, home loan agent, loan manager,

mortgage loan underwriter, loan processing officer, accountant, product

marketing and sales executive, and customer service executive among

others.

In the Financial Services, some of the important jobs include that of a

stockbroker who is essentially a person who buys and sells securities on

behalf of individuals and institutions for some commission. While some

brokers like to practice with individual clients others work forinstitutions. Brokers who work for institutional investors are often called

securities traders. Many prefer to work as dealers, advisors and securities

analysts. Security analysts are those who advise companies on

floatations of shares

as they are expected to have sound knowledge of capital markets.Investment analysts are the backbone of the financial services sector.They study the financial reports of companies, assess various statistical

information, profitability projections, compare financial results, survey

the industry as a whole and on the basis of the available information, and

finally conclude to a decision. Equity Analysts do jobs similar to

investment analysts and research the equity markets and make

predictions.

G r o w th :

The limit for foreign direct investment in private banks has been increased

from 49%

to 74%. In addition, the limit for foreign institutional investment in privatebanks is

49%. Liberalization and globalization have created a more challenging

environment in the banking sector as well as in the other segments of the

financial sector such as mutual funds, Non Banking Finance Companies,post offices, capital markets, venture capitalists, etc.

Research and Markets has announced the addition of 'Indian RetailBanking, 2006' to their offering. Indian Retail Banking continues toredefine the credit growth in the country. It grew by a whopping 44.4% in2005-06 to touch Rs 3,538 billion. This leap was despite the increase inrisk weight by RBI for housing and real estate loans during August, 2005.Housing, which constitutes more than 52% of all retail loans, grew at arobust rate of 44.35% during 2005-06. In order to help banks in India to

understandthe market and competition and plan future strategies, we have just come

out with an

Industry Insight on Indian Retail banking - 2006 edition.


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MA J OR P L A Y E RS:

The financial sector in India has become stronger in terms of capital and

the number of customers. It has become globally competitive and

diverse aiming, at higher productivity and efficiency.

Exposure to worldwide competition and deregulation in Indian financial

sector has led to the emergence of better quality products and services.

Reforms have changed the face of Indian banking and finance. Thebanking sector has improved manifolds in terms of capital adequacy, asset

classification, profitability, income recognition, provisioning, exposure

limits, investment fluctuation reserve, risk management, etc.

TOP 10 PLAYERS IN BANKING &

FINANCE State Bank of India

HDFC

bank

Citibank

ICICIBank

Punjab National bankUTI Bank

Hongkong & Shanghai Banking

Corp. Kotak Mahindra Bank

Sundaram BankOriental Bank of Commerce

TOP 10 PLAYERS IN INSURANCE

Life Insurance corporation ofIndia Bajaj Allianz General

Insurance ICICI Prudential

Life Insurance ICICI LombardGeneral Insurance Birla

Sunlife Insurance

Tata AIG General Insurance

New India Assurance Co.

Iffco Tokio General Insurance

Oriental Insurance Co.HDFC Standard Life Insurance


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2 .3 S ection

PR OFIL E O F TH E O RGA NISATIO N:

PROFILE OF PNB: The profile of the PNB shows superior banking

services in corporate, personal and international banking, industrial and

agricultural finance and finance of trade. Punjab National Bank boasts of a

varied clientele consisting of small and medium industrial units,

exporters, multi-national companies, Indian conglomerates and NRI. TheBank is changing outdated front and back end processes to modern

customer friendly processes to help improve the total customer experience.

With about 8500 of its own 10000 branches and another 5100

branches of its Associate Banks already networked, today it offers the

largest banking network to the Indian customer. The Bank is also in the

process of providing complete payment solution to its clientele with its

over 8500 ATMs, and other electronic channels such as Internet banking,

debit cards, mobile banking, etc.The objectives of the Company

are in line with objectives laid down by RBI for thePrimary Dealers:

Strengthen the infrastructure in the government securities market

in order to make it vibrant, liquid and broad based.

Ensure the development of underwriting and market making

capabilities for

Government Securities

Improve secondary market trading system, which would contribute

to price discovery, enhance liquidity and turnover and encourage

voluntary holding of Government securities amongst a wider

investor base Become an effective conduit for conducting open marketoperations.


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PROFILE OF SBI:

The SBIs powerful corporate banking formation deploys multiple

channels to deliver integrated solutions for all financial challenges faced

by the corporate universe. The Corporate Banking Group and the

National Banking Group are the primary delivery channels for corporate

banking products.

The Corporate Banking Group consists of dedicated Strategic Business

Units that cater exclusively to specific client groups or specialize in

particular product clusters. Foremost among these a specialized group is

the Corporate Accounts Group (CAG), focusing on the prime corporate

and institutional clients of the countrys biggest business centers. The

others are the Project Finance unit and the Leasing unit.The National

Banking Group also delivers the entire spectrum of corporate

banking products to other corporate clients, on a nationwide platform.

The bank is also looking at opportunities to grow in size in India

as well as Internationally. It presently has 82 foreign offices in 32

countries across the globe. It has also 7 Subsidiaries in India SBI

Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI Life

and SBI Cards - forming a formidable group in the Indian Banking

scenario. It is in the process of raising capital for its growth and

also consolidating its various holdings. Throughout all this change,

the Bank is also attempting to change old mindsets, attitudes and take

all employees together on this exciting road to Transformation.

In a recently concluded mass internal communication programme termed

Parivartan the Bank rolled out over 3300 two day workshops across the

country and covered over 130,000 employees in a period of 100 days

using about 400 Trainers, to drive home the message of Change


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and inclusiveness. The workshops fired the imagination of the employees

with some other banks in India as well as other Public Sector

Organizations seeking to emulate the programme.


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2 .4 sect ion

CO M P A NY HI ST ORY:

PNB HISTORY:

Punjab National Bank was established by Lala Lajpat Rai in the pre-

independence India in 1895 in Punjab, with Lahore as its head office.

Today it is the second largest public sector bank in India. It was

nationalized in 1969 along with 13 other major commercial banks. The

privatization started in 1989 when 30 per cent of its shares were offered to

the public and it was listed on the stock exchange.In 1992, PNB became

the first Philippine bank to reach P100 billion in assets. Later that year,

privatization continued with a second public offering of its shares.

In August 2005, PNB was fully privatized. The joint sale by the

Philippine government and the Lucio Tan Group of the 67% stake in PNB

was completed within the third quarter of 2005. The Lucio Tan Groupexercised its right to match the P

43.77 per share bid offered by a competitor and purchased the shares

owned by the government. The completion of sale is expected to

speed up the development of PNBs franchise and operational

competitiveness.

SBI HISTORY:

The origins of State Bank of India date back to 1806 when the Bank of

Calcutta (later called the Bank of Bengal) was established. In 1921, the

Bank of Bengal and two other Presidency banks (Bank of Madras and

Bank of Bombay) were amalgamated to

form the Imperial Bank of India. In 1955, the controlling interest in the

Imperial Bank of India was acquired by the Reserve Bank of India and

the State Bank of India (SBI)

came into existence by an act of Parliament as successor to the ImperialBank of India.


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Today, State Bank of India (SBI) has spread its arms around the world

and has a network of branches spanning all time zones. SBI's

International Banking Group delivers the full range of cross-border

finance solutions through its four wings - the Domestic division, the

Foreign Offices division, the Foreign Department and the

International Services division.


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2 .5 S ection

RE CE NT AC HIVE MEN TS AND MI LES TON ES :

PNB Rece n t achiev e m e nts and mi lestones

Punjab National Bank (PNB), has announced that it has completed 100%core banking implementation at all its 4604 branches and extension

counters through the Finacle Universal Banking Solution from Infosys,

on Sun infrastructure and the Oracle Database setting a significant

milestone for themselves and a new benchmark for the Indian banking

industry.

Completed in November 2008, 4 months ahead of schedule, the bankimplemented industry-leading Finacle core banking solution from Infosys

across its operations running a flexible, and scalable database platform

from Oracle and innovative servers from Sun Microsystems

With an increasingly dynamic business and regulatory environment,

PNB sought to not only achieve automation, but also centralize

operations, standardize branch processes, achieve high scalability forfuture business growth, provide flexibility of creating innovative

banking products to its lines of business, and at the same time, reduceoverall costs.

The visionary zeal and the futuristic view of the Banks top management

in the year

2007-2008 incubated the idea of introduction of a Centralised Banking

solution. The bold and innovative thought culminated into the CBSarchitecture with Finacle application on Oracle Database and Sun

hardware platform with Solaris Operating System.

With Finacles agile and future proof technology, the bank today hasover 22,500 concurrent users. The solutions scalability has also enabled

the banks scalability to be the best in the country with the number of

peak transactions at 3.5 million.

Finacle core banking platform also provides the bank with exceptional

agility for product innovation and improved flexibility of operations.With seamless integration of delivery channels such as ATM and

internet banking solutions, PNB is able to provide 24X7 services to

customers at a reduced transaction cost.

PNBs choice of the Oracle Database has provided the banks IT

infrastructure with robustness, management features, security and

scalability as well as performance requirements to service 3.5 million


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transactions and 22500 concurrent users a significant achievement inthe Indian banking industry. In addition, the Oracle Database will help

PNB take control of its enterprise information, gain better business

insight, and quickly and confidently adapt to an increasingly changing

competitive environment.

With secure, highly available and scalable grids of low-cost servers

and storage, Oracle customers can tackle the most demanding

transaction processing, data warehousing, business intelligence and

content management applications.

The 100% implementation of Finacle Core Banking Solution shall enable

PNB to further reduce operational costs and revenue leakage whileimproving productivity of branches, introduction of new and innovative

products and visibility of business. The anywhere anytime banking

facility will enable the bank to offer products for every segment of the

customer.

PNB long-standing and progressive partnership also highlights Finacles

leadership in large scale banking transformation, the solutions futureproof technology and powerful capabilities. India is a strategic market for

Finacle and we look forward to closely collaborating with Punjab

National Bank for their future growth plans.


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S B I R E C E NT A C H I V E M E N T S A ND M IL E ST O N E S :

AWARDS:SBI has been the proud recipient of the ICRA Online Award -8 times, CNBC TV 18, Crisil Award 2006 - 4 Awards, The Lipper

Award (Year 2005-2006) and most recently with the CNBC TV - 18

Crisil Mutual Fund of the Year Award

2007 and 5 Awards for our schemes.

SBI Card reaches three million milestone: SBI Card, a joint venturebetween State Bank of India and GE Money, announced yet another

landmark achievement of crossing the three million cardholders-mark.Roopam Asthana, CEO-SBI Card, said, "This milestone is even moreremarkable as we have added one million cardholders in just ten months.Our objective is to accelerate the pace of growth by extending the

benefits to a broader range of consumers in Tier II cities, along withimproved value propositions for the urban affluent customers." SBI Cardrecently signed up Indian cricketer Yuvraj Singh as its brand ambassador.

SBI jo i ns Chinese bank to t ouch 1 0 ,000 b ranches:

Public sector State Bank of India on Sunday became only the secondbank in the world to have 10,000 branches when Union Finance

Minister P Chidambaram inaugurated its latest branch here.

Speaking on the occasion, Chidambaram said China's ICBC Bank was

the other bank to have 10,000 branches. Opening 10,000 branches was a

great feat. "It is not an easy milestone though the SBI was the bank of thegovernment and Indian people even before other banks were

nationalised," he said.

People all over the world, including the Chinese, would now know about

this small village where the 10000th branch of the SBI had been opened,he said adding they would be amazed by the bank's growth. The bank

should be proud of the achievement he said and wished that the bankopened one lakh branches.

The Minister said out of the over 100 crore people, seventy 75 per cent

did not have any type of insurance. Similarly, 50 per cent of the 11 crore

farmers did not have bank account. Banks should go to the people and

enroll them as account holders. 'That is what economists say is financial

inclusion,' he said.

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2 .6 S ectio n

P RODUC T R ANGE OF COMP ANY /IN DUSTRY:

The products and services provided by the SBI and PNB are in variousfields, such as:

Banking services

NRI services

International banking

Corporate banking

Agricultural banking

International banking

2 .7 S ectio n

P ERFOR MANC E OF COMP AN TY I N LAS T FIVE YEA RS :

PNB performance in last five years: 1st Quarter Net Income UP 48%

Year-on-Year Taking-off from a breakthrough performance in 2007 with

a registered net income of P1.5 billion, PNB continues to reap thebenefits from its efforts to strengthen core businesses, reduce non-

performing assets and manage costs. Net Income for the 1st Quarter of

2008 registered P457 million, up 48% from P308 million of the sameperiod last year. This performance bucks industry trends for the 1st

quarter of 2008 based on published income reports.

Even as the operating environment proved volatile where negative trendsare expected, PNB still managed to reflect a 136% growth in foreign

exchange gains year-on-year, from P242 million to P571 million. A

relentless focus in generating low-cost funds from deposits and otherfunding sources led to a reduction in total interest expense by as much as

27%. Total deposits closed firm at P180 billion.

Operating expenses were down 23% despite investments made in

systems enhancement and upgrading of facilities. The Bank has recently

implemented a new generation core banking system: Flexcube an end-to-end solution designed to automate both corporate and retail banking

businesses; and effectively in-source core overseas operations to its

global data center in the Philippines. PNBs Japan, Singapore, Hongkongand United States branches as well as the London subsidiary have

already been converted and the rest of the Bank is expected to go live

soon.


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As of March 31, 2008, PNBs consolidated total asset size remained strong

at P242

Billion, up P2.7 billion versus end-2007. With the significant

strengthening of its balance sheet over the past few years, PNB has been

able to concentrate on generating new client relationships in the corporatesegment, both in the large and SME categories. The contribution from the

consumer finance business has likewise continued to register accelerated

growth. Total consumer loans portfolio stood at P3.3 billion, up 25% from

end-2007. Combined new bookings for the 1st quarter 2008 already

reached the half-billion mark. PNBs Net Loans and Receivables closed

P77 billion.

As of March 31, 2008, PNBs Capital Adequacy Ratio under Basel II

remained formidable at 18.51%, still way above the 10% ratio requiredby the Bangko Sentral ng Pilipinas. Subject to appropriate approvals andclearances, PNB is going to the capital markets to raise a minimum of

P3 billion of Tier 2 Capital in preparation for its maturing subordinated

notes in February 2009.

PNB will emerge as the 4th largest domestic bank in the country in terms

of asset size once its planned merger with Allied Banking Corporation

(ABC) is completed. The respective Board of Directors of PNB and ABC

passed resolutions last April 30, 2008 approving the plan to merge the two

banks. This transaction is subject to the approval of shareholders andregulatory authorities and is expected to be completed by the 3rd quarter

of 2008.


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SBI performance in last five years: State Bank of India (SBI) is all

geared up to increase its business per employee and profit per employee

as it thinks that for SBI, these two parameters are among the lowest in

the industry.On one hand, the bank is trying to reduce its staff strengthwhich would eventually improve the ratios; but on the other, the bank

is also going flat out to increase its customer base.

"Our business per employee and profit per employee is one of the

lowest in the industry," SBI had recently said in a joint statement issued

by the management and unions.SBI's generates Rs 2.99 crore of

business per employee, while its profit per employee is just about Rs

2.17 lakh. By contrast, majority of the large public sector banks are

better in terms of both these parameters.

For instance, Canara Bank has a business per employee (BPE) of Rs 4.42

crore, while Union Bank of India's BPE is at Rs 4.36 crore and Bank of

Baroda's (BoB) Rs 3.51 crore. These are according to their respective

annual rep o rts for 2005-06.

On the other hand, Canara Bank's profit per employee (PPE) is also on

the higher side at Rs 3.02 lakh. The PPEs of Union Bank and BoB are at

Rs 2.66 lakh and Rs 2.13 lakh, respectively.

"Over the years, we have been steadily losing our marketshare from about

35% in

1970s to around 16% in 2006. Our vast network is failing to attract the

new and demanding young customers," SBI said in that statement,

which is addressed to all SBI officers and e m ploy ees andaimed at

changing their attitude towards customers.

22
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The statement was jointly signed by chairman OP Bhatt, managing

directors TS Bhattacharya and Yogesh Agarwal and top office

bearers of its officers and employees associations.

To address these issues, both the management and unions have agreed to

work hand in hand. They have appealed to the bank's staffs to go flat out

to increase its customer base."Let us be conscious of the customer's

overall needs rather than only the transaction at hand. Let us expand our

customer base," the statement read.

The bank has nearly 37 lakh savingsbank accou n ts in the Bengal

circle itself.Meanwhile, the country's largest and oldest bank has

offered an exit option scheme (EOS) to its employees. The bank has

some 2.1 lakh staffs, out of which nearly 1.4 lakh are clerical and

subordinate employees.
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Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04

Sales 14,265.02 11,537.48 9,584.15 8,459.85 7,778.94


Sources of funds

Owner's fund

Equity share capital 315.30 315.30 315.30 315.30 265.30

2 .8 S ection

FI NA N C I AL S T AT US OF T HE O RG AN IS A T I ON:

PNB financial status for last five years:

Annual results

Operating profit 10,029.21 7,149.74 5,721.06 4,683.04 4,056.84

Interest 8,730.86 6,022.91 4,917.39 4,453.11 4,154.99

Gross profit 4,006.24 3,230.64 2,874.77 2,707.21 3,120.86

EPS (Rs) 64.98 48.84 45.65 44.72 41

Balance sheet

Share application money - - - - -

Preference share capital - - - - -

Reserves & surplus 10,467.35 9,826.31 8,758.68 7,533.50 4,425.47

Loan funds

Secured loans - - - - -

Unsecured loans 1,66,457.23 1,39,859.67 1,19,684.92 1,03,166.89 87,916.40

Total 1,77,239.88 1,50,001.28 1,28,758.90 1,11,015.69 92,607.16

Uses of funds

Fixed assets

Gross block 3,699.64 2,247.74 2,106.92 1,875.65 1,645.93Less : revaluation reserve 1,535.70 293.85 302.38 312.49 321.04

Less : accumulated depreciation 1,384.12 1,237.92 1,076.69 910.42 746.08

Net block 779.83 715.98 727.84 652.74 578.81

Capital work-in-progress - - - - -

Investments 53,991.71 45,189.84 41,055.31 50,672.83 42,125.49

Net current assets

Current assets, loans &advances

4,380.84 3,980.80 3,762.79 3,101.44 3,261.18

Less : current liabilities &provisions

14,798.23 10,178.51 9,518.93 12,194.80 8,114.48

Total net current assets -10,417.38 -6,197.71 -5,756.14 -9,093.36 -4,853.30

Miscellaneous expenses notwritten

- - - - -

Total 44,354.15 39,708.10 36,027.01 42,232.20 37,850.99


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Income:

Notes:

Book value of unquotedinvestments

- - - - -

Market value of quotedinvestments

- - - - -

Contingent liabilities 1,04,055.87 74,700.48 58,739.31 47,047.19 32,229.85

Number of equitysharesoutstanding (Lacs)

3153.03 3153.03 3153.03 3153.03 2653.03

Profit loss account

Operating income 15,925.65 12,104.24 9,791.12 9,712.63 9,617.34

Expenses

Material consumed - - - - -

Manufacturing expenses - - - - -

Personnel expenses 2,461.54 2,352.45 2,114.97 2,121.23 1,654.06

Selling expenses 23.31 18.03 20.15 19.16 10.85


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Profit before tax 3,295.91 2,169.13 2,033.87 1,904.74 1,768.68


Sales - - 0.90 0.44 0.66

Adminstrative expenses 1,247.47 1,360.77 941.38 933.60 1,764.91

Expenses capitalised - - - - -

Cost of sales 3,732.33 3,731.25 3,076.51 3,073.99 3,429.82

Operating profit 3,462.46 2,350.09 1,797.23 2,185.53 2,032.53

Other recurring income 231.62 186.67 131.54 470.69 59.85

Adjusted PBDIT 3,694.08 2,536.76 1,928.77 2,656.22 2,092.38

Financial expenses 8,730.86 6,022.91 4,917.39 4,453.11 4,154.99

Depreciation 170.23 194.80 186.65 183.28 181.45

Other write offs - - - - -

Adjusted PBT 3,523.85 2,341.96 1,742.12 2,472.94 1,910.93

Tax charges 1,247.15 629.05 412.83 495.49 660.79

Adjusted PAT 2,047.63 1,539.33 1,436.66 1,409.50 1,108.45

Non recurring items 1.13 0.76 2.65 0.62 0.24

Other non cash adjustments - - - - -

Reported net profit 2,048.76 1,540.08 1,439.31 1,410.12 1,108.69

Earnigs before appropriation 2,064.28 1,723.57 1,439.31 1,410.12 1,108.69

Equity dividend 409.89 409.89 189.18 174.18 106.12

Preference dividend - - - - -

Dividend tax 69.66 63.11 26.53 23.48 13.60

Retained earnings 1,584.73 1,250.57 1,223.60 1,212.46 988.97

Cash flow

Net cashflow-operating activity 1,756.13 -10,144.34 14,961.44 1,073.53 529.29

Net cash used in investing activity -444.46 -159.41 -465.64 -349.83 -176.20

Netcash used in fin. activity 1,873.54 1,157.57 -793.13 1,544.81 390.24

Net inc/dec in cash and equivlnt 3,185.21 -9,146.17 13,702.66 2,268.51 743.33

Cash and equivalnt begin of year 15,645.52 24,791.69 11,089.03 8,820.51 8,077.19

Cash and equivalnt end of year 18,830.72 15,645.52 24,791.69 11,089.03 8,820.51

SBI financial status for last five years:

Annual results

Operating profit - - 0.35 -0.06 -0.03

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Sources of funds

Owner's fund

Equity share capital 15.00 15.00 15.00 15.00 15.00

Interest 24.67 21.36 21.29 21.30 21.30

Gross profit -24.63 -18.24 -4.79 -21.17 -20.35

EPS (Rs) -16.42 -12.17 -3.19 -14.13 -13.58

Balance sheet

Share application money - - - - -

Preference share capital - - - - -

Reserves & surplus -309.56 -291.32 -286.64 -265.66 -245.35

Loan funds

Secured loans - - - - -

Unsecured loans - - - - -

Total -294.56 -276.32 -271.64 -250.66 -230.35

Uses of funds

Fixed assets

Gross block 0.57 0.57 0.72 0.72 2.86

Less : revaluation reserve - - - - -

Less : accumulated depreciation 0.10 0.10 0.24 0.24 1.59

Net block 0.48 0.48 0.48 0.48 1.27

Capital work-in-progress - - - - -

Investments - - - - -

Net current assets

Current assets, loans & advances 11.44 16.30 23.98 24.38 32.15

Less : current liabilities & provisions 306.47 293.09 296.10 275.52 263.77

Total net current assets -295.04 -276.79 -272.12 -251.14 -231.62

Miscellaneous expenses not written - - - - -

Total -294.56 -276.32 -271.64 -250.66 -230.35

Notes:

Book value of unquoted investments - - - - -

Market value of quoted investments - - - - -

Contingent liabilities 0.22 0.21 0.22 10.40 10.40

Number of equity sharesoutstanding 150.00 150.00 150.00 150.00 150.00

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Income:


Profit before tax -18.24 -4.67 -20.98 -21.06 -25.29

(Lacs)

Profit loss account

Operating income 1.02 0.90 0.44 0.66 10.90

Expenses

Material consumed - - - - -

Manufacturing expenses 0.03 - - - -

Personnel expenses 0.12 0.09 0.14 0.20 0.72

Selling expenses - - - - 0.03

Adminstrative expenses 0.29 0.41 0.29 0.48 12.45

Expenses capitalised - - - - -

Cost of sales 0.44 0.51 0.44 0.68 13.20

Operating profit 0.58 0.39 0.01 -0.03 -2.30

Other recurring income 2.53 12.16 0.10 0.79 -

Adjusted PBDIT 3.11 12.55 0.11 0.76 -2.30

Financial expenses 21.36 21.35 21.36 21.30 28.66

Depreciation - - 0.01 0.02 1.02

Other write offs - - - - -

Adjusted PBT -18.24 -8.80 -21.26 -20.56 -31.98

Tax charges - 0.01 0.01 - -

Adjusted PAT -18.25 -8.81 -21.27 -20.56 -31.98

Non recurring items - - 0.01 0.08 -2.95

Other non cash adjustments - 4.13 0.27 0.17 9.65

Reported net profit -18.25 -4.67 -20.99 -20.31 -25.29

Earnigs before appropriation -312.32 -294.08 -289.40 -268.42 -248.11

Equity dividend - - - - -

Preference dividend - - - - -

Dividend tax - - - - -

Retained earnings -312.32 -294.08 -289.40 -268.42 -248.11

Cash flow

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Net cashflow-operating activity -4.89 5.65 0.08 -7.02 88.19

Net cash used in investing activity - - 0.01 0.85 29.46

Netcash used in fin. activity - - - -0.46 -131.50

Net inc/dec in cash and equivlnt -4.89 5.65 0.09 -6.64 -13.85

Cash and equivalnt begin of year 16.16 10.51 10.42 17.06 30.91Cash and equivalnt end of year 11.27 16.16 10.51 10.42 17.06


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2 .9 S ect ion

FU TU RE PL ANS:

PNB future plans:

PNB has initiated various steps in a bid to expand its operations in the

state of Kerala. These include opening new branches and increasing thenumber of its core banking solutions branches. PNB currently has 71

CBS branches in Kerala and has registered good growth from this region.

PNB in looking at increasing its international presence and in line withthis, the company is planning to set up offices in UK, Singapore, HongKong and Canada. The Canada office is likely to open very soon, while

the other locations are likely to commence operations by end of this fiscalyear.

PNB unvieled its plans to raise additional capital of Rs. 21,000

million to fund its business expansion plans for this current fiscal.

SBI future plans:SBI has set for itself an ambitious target of credit linking 1 million SHGsup to March2008.The Bank has started to leverage our vast SHG network for

various services beyond credit delivery.

The State Bank of India (SBI) has formulated a home-grown strategy

to merge its six associated banks with it within this fiscal.

SBI drawn up a home-grown strategy to carry out the merger programmeand we may take up such mergers one by one, or two at a time or in a

phased manner. SBI want

the future mergers to be as smooth as the merger.Post-merger, the

size of SBIs balance sheet will cr-oss Rs 12,00,000 crore and its

profitablity will increased.


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CHAP TE R 3

RE VIEW OF LI TE RA TU RE :

1) In august 2001 James B. Thomson and Ben R. C r aig had studiedabout the Federal Home Loan Bank Lending to Community

Banks,are Targeted Subsidies Necessary? The Gramm-Leach-Bliley Act of 1999 amended the lending authority of the Federal

Home Loan Banks to include advances secured by small

enterprise loans of community financial institutions. Three

possible reasons for the extension of this selective credit subsidy

to community banks and thrifts are examined, including the need

to: subsidize community depository institutions, stabilize theFederal Home Loan Banks, and address a market failure in rural

markets for small enterprise loans.

They empirically investigate whether funding constraints impact

the small- business lending decision by rural community banks.

Specifically, they estimate two empirical models of small-business

lending by community banks. The data reject the hypothesis that

access to increased funds will increase the amount of small-

business loans made by community banks.

2) In December 2006 Fulbag Singh and Reema Sharma had studied

about the housing Finance in India. Housing, as one of the three

basic needs of life, always remains on the top priority of any person,

economy, government and society at large. In India, majority of the

population lives in slums and shabby shelters in rural areas. Fromthe last decade, the Government of India has been continuously

trying to strengthen the housing sector by introducing various

housing loan schemes for rural and urban population. The first

attempt in this regard was the National Housing Policy (NHP),which was introduced in 1988. The National Housing Bank (NHB)

was set up in 1988 as an apex institutionfor housing finance and a wholly-owned subsidiary of Reserve

Bank of India (RBI). The main objective of the bank is to promote

and establish the housing financial institutions in the country as

well as to provide refinance facilities to housing finance

corporations and scheduled commercial banks. Moreover, for the

salaried section, the tax rebates on housing loans have beenintroduced. The paper is based on the case study of LIC Housing

Finance Ltd., which analyzes region-wise disbursements ofindividual house loans, their portfolio amounts and the defaults for

the last ten years, i.e., from 1995-96 to 2004-05 by working out

relevant ratios in terms of percentages and the compound annual

growth rates. A relevant chart has also been prepared to highlight
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the results.

3) In May 18, 2007 Michael LaCour-Little had studied about the EconomicFactors Affecting Home Mortgage Disclosure Act Reporting. The public

release of the 2004-2005 Home Mortgage Disclosure Act data raised anumber of questions given the increase in the number and percentage ofhigher-priced home mortgage loans and continued differentials acrossdemographic groups. Here we assess three possible explanations for theobserved increase in 2005 over 2004: (1) changes in lender businesspractices; (2) changes in the risk profile of borrowers; and (3) changes inthe yield curve environment. Results suggest that after controlling for themix of loan types, credit risk factors, and the yield curve, there was nostatistically significant increase in reportable volume for loans originateddirectly by lenders during 2005, though indirect, wholesale originations did

significantly increase. Finally, given a model of the factors affecting resultsfor 2004-2005, we predict that 2006 results will continue to show anincrease in the percentage of loans that are higher priced when finalnumbers are released in September 2007.

4) In may 1991 Stephen F. Borde had studied about the Isthe Savings and Loan Industry Facing Extinction? Thisarticle tells about the Saving and loan crisis. Proposedsolutions are discussed in the context of the industry as itcurrently stands. With a somewhat similar liability structure tothat of banks (mainly short-term deposits), the asset structureof S&Ls is quite different. Whereas banks assets consist ofshort-term loans, S&L assets consist largely of long-termloans, such as home ownership mortgages. Therefore, in theabsence of adequate hedging measures, S&Ls are morevulnerable to interest rate risk, which can lead to lower profitswhen interest rates rise.

5) In June 29, 2001 Joshua Rosner had studied about theHousing in the New Millennium: A Home Without Equity is Justa Rental with Debt. They studied about the prospects of theU.S. housing/mortgage sector over the next several years.Based on our analysis, we believe there are elements in placefor the housing sector to continue to experience growth wellabove GDP. However, we believe there are risks that canmaterially distort the growth prospects of the sector. Specifically,

it appears that a large portion of the housing sector's growth inthe1990's came from the easing of the credit underwriting process.Such easing includes:


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* The drastic reduction of minimum down payment levels from20% to 0%* A focused effort to target the "low income" borrower* The reduction in private mortgage insurance

requirements on high loan to value mortgages* The increasing use of software to streamline theorigination process and modify/recast delinquentloans in order to keep them classified as "current"* Changes in the appraisal process which has led towidespread overappraisal/over- valuation problems

If these trends remain in place, it is likely that the homepurchase boom of the past decade will continue unabated.

Despite the increasingly more difficult economicenvironment, it may be possible for lenders to further easecredit standards and more fully exploit less penetratedmarkets. Recently targeted populations that have historicallybeen denied homeownership opportunities have offered themortgage industry novel hurdles to overcome. Industryparticipants in combination with eased regulatory standardsand the support of the GSEs (Government SponsoredEnterprises) have overcome many of them.

If there is an economic disruption that causes a marked risein unemployment, the negative impact on the housingmarket could be quite large. These impacts come in severalforms. They include a reduction in the demand forhomeownership, a decline in real estate prices andincreased foreclosure expenses.

These impacts would be exacerbated by the increasing debtburden of the U.S. consumer and the reduction of homeequity available in the home. Although we have yet to seeany materially negative consequences of the relaxation ofcredit standards, we believe the risk of credit relaxation andleverage can't be ignored. Importantly, a relatively newmethod of loan forgiveness can temporarily alter theperception of credit health in the housing sector. In an effortto keep homeowners in the home and reduce foreclosureexpenses, holders of mortgage assets are currently recastingor modifying troubled loans. Such policy initiatives may for a

time distort the relevancy of delinquency and foreclosurestatistics. However, a protracted housing slowdown

could eventually cause modifications to become uneconomic

and, thus, credit quality


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statistics would likely become relevant once again. Thevirtuous circle of increasing homeownership due to greaterleverage has the potential to become a vicious cycle oflower home prices due to an accelerating rate of

foreclosures.6) In dec 2002 Melissa B. Jacoby had studied about theHome Ownership Risk Beyond a Subprime Crisis: The Roleof Delinquency Management. They studied that Publicinvestment in and promotion of homeownership and thehome mortgage market often relies on three justifications tosupplement shelter goals: to build household wealth andeconomic self-sufficiency, to generate positive social-psychological states, and to develop stable neighborhoodsand communities. Homeownership and mortgage obligationsdo not inherently further these objectives, however, andsometimes undermine them. The most visible triggers of therecent surge in subprime delinquency have produced callsfor emergency foreclosure avoidance interventions (as wellas front-end regulatory fixes). Whatever their merit, I contendthat a systemof mortgage delinquency management should be anenduring component of housing policy. Furtherance ofhousing and household policy objectives hinges in part on

the conditions under which homeownership is obtained,maintained, leveraged, and - insome situations - exited. Given that high leverage or triggerevents such as job lossand medical problems play significant roles in mortgagedelinquency independent of loan terms, better originationpractices cannot eliminate the need for delinquencymanagement.

One function of this brief essay is to identify an existingrough framework for managing delinquency. Legalscholarship should no longer discuss mortgage enforcementprimarily in terms of foreclosure law and instead shouldinclude other debtor-creditor laws such as bankruptcy,industry loss mitigation efforts, and third- party interventionssuch as delinquency housing counseling. In terms ofanalyzing this framework, it is tempting to focus on itsimpact on mortgage credit cost and access or on theabsolute number of homes temporarily saved, but myproposed analysis is based on whether the system honorsand furthers the goals of wealth building, positive socialpsychological states, and community development. Becausethose ends are not inexorably linked to ownership generallyor owning a particular home, a system of delinquency


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management that honors these objectives should strive toprovide fair, transparent, humane, and predictable strategiesfor home exit as well as for home retention. Although moreempirical research is needed, this essay starts the processof analyzing mortgage delinquency management tools in theproposed fashion.

7) In 1999 Yoko Moriizumi had studied about the CurrentWealth, Housing Purchase and Private Housing LoanDemand in Japan. Japanese households accumulatewealth for downpayments at a high rate. Therefore, currentwealth plays an important role in home acquisition aspublic loans whose direct mortgage lending is a strong

support for home purchasers. We estimate the wealtheffect on private mortgage debt as well as housingconsumption by applying a model where mortgage debtdemand is derived from house purchase decisions and isdetermined jointly with housing consumption. We use asimultaneous equation Tobit estimation method. Wealtheffects on private mortgage debt, likelihood of borrowing,and housing consumption are not elastic. On the otherhand, a change in housing consumption affects the

likelihood of borrowing elastically much more than theprivate mortgage amount of borrowers. Housing andprivate mortgage markets fluctuate very closely with thenumber of participants in the mortgage market. Therefore,the number of housing starts is linked strongly to theprivate mortgage market.

8) Robert B. Avery and Allen N. Berger had studied about theLoan commitments and bank risk exposure. They studied

about the Loan commitments increase a bank's risk byobligating it to issue future loans under terms that it mightotherwise refuse. However, moral hazard and adverseselection problems

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potentially may result in these contracts being rationed or sorted.Depending

on the relative risks of the borrowers who do and do not receive

commitments, commitment loans could be safer or riskier on

average than other loans. the empirical results indicate thatcommitment loans tend to have slightly better than average

performance, suggesting that commitments generate little risk orthat this risk is offset by the selection of safer borrowers.

9) Sumit Agarwal,Souphala Chomsisengphet and John C.Driscoll had studied about the Loan commitments and privatefirms. They studied that, Most loans are in the form of creditlines. Empirical studies of line demand have been complicated by

their use of data on publicly traded firms, which have a wide menuof financing options. We avoid this problem by using a unique

proprietary data set from a large financial institution of loan

commitments made to 712 privately-held firms. We test Martin and

Santomero's (1997) model, in which lines give firms the speed andflexibility to pursue investment opportunities. Our findings are

consistent with their predictions. Firms facing higher rates and fees

have smaller credit lines. Firms with higher growth commit to

larger lines of credit and have a higher rate of line utilization. Firms

experiencing more uncertainty in their funding needs commit tosmaller credit lines. Almost all firms convert unused credit lineportions into spot loans and take out new lines.

10) Faik Koray and Eric T. Hillebrand had studied about theInterest Rate Volatility and Home Mortgage Loans . theystudied that The U.S. economy has experienced substantialfluctuations in real and nominal interest rates since the1970s. This paper investigates empirically the relationship

between home mortgage loans and volatility in mortgagerates for the period 1971:02 through 2003:03.Contrary to common wisdom, we find a positive relationshipbetween mortgage rate volatility and home mortgage loans.Further investigation indicates that this is due to volatility inthe bond market. In times of high interest volatilityhouseholds disinvest in government securities and invest inreal assets, which yield a positive relationship betweenmortgage rate volatility and home mortgage loans.

11) In nov 2000 Michelle J. White and Emily Y. Lin had studiedabout the Bankruptcy and the Market for Mortgage and HomeImprovement Loans. They studiedthat This paperinvestigates the relationship between bankruptcy exemptions


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and the availability of credit for mortgage and homeimprovement loans. We develop a combined model ofdebtors' decisions to file for bankruptcy and to default on theirmortgages and show that the theory predicts positiverelationships between both the homestead and personalproperty exemption levels and the probability of borrowersbeing denied mortgage (secured) and home improvementloans. We test these predictions empirically and find strongand statistically significant support when evidence fromcross- state variation in bankruptcy exemption levels is used.Applicants for mortgages are 2 percentage points more likelyto be turned down for mortgages and 5 percentage pointsmore likely to be turned down for home improvement loans ifthey live in states with unlimited rather than low homestead

exemptions. These relationships also hold when we introducestate fixed effects into the model.

12) In October 14, 2008 David P. Bernstein had studied aboutthe Home Equity Loans and Private Mortgage Insurance:Recent Trends & Potential Implications. They

studied about the the impact of increased use of home equity

lines and decreased

private mortgage insurance (PMI) on mortgage markets. Thedata confirms that in the years leading up to the mortgagecrisis home buyers and lenders have aggressively usedpiggyback loans to avoid taking out PMI on first mortgages.Multiple-mortgage financing packages as a percent of newlyoriginated mortgages (mortgages originated within theprevious five years) went from 14.8% in survey year 2001 to

21.5% in survey year 2007. The multiple-mortgagepercentage for seasoned mortgages (mortgages originatedmore than five years prior to the origination date) alsoincreased by a modest amount. Further comparisons reveala large decrease in the proportion of mortgages with PMIwith the largest decreases in PMI coverage occurring amongnewly originated multiple-lien packages. Data from the SCFwas used to compare five financial characteristics (creditcard debt, installment loans, consumer credit, home-ownersequity, and liquid assets) for multiple-lien versus single-lienhouseholds. The comparisons suggest single-lienhouseholds tend to have slightly stronger financial variablesthan multiple-lien households. The data does not support theview that homeowners with multiple liens are less risky andshould therefore be allowed to avoid PMI. The reduced use


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of PMI and the increased use of home equity loans increasedmortgage holder risk in several different ways and was acontributing factor to the 2008 mortgage and financial crisis.This change in lending and borrowing behavior is not asubprime market problem.

13) In aug 2007 Michael LaCour-Little had studied about theThe Home Purchase Mortgage Preferences of Low- andModerate-Income Households. Housing policy in theUnited States has long supported homeownership, yetvariation persists across income groups. This articleemploys recent mortgage origination data to focus onthe revealed preferences of low- and moderate- income(LMI) households in home purchase mortgage choice. Iidentify the factors associated with conventionalconforming, FHA, nonprime and specially targetedprograms. Empirical results show that individual creditcharacteristics and financial factors, including pricing,generally drive product choice, with some variationevident when loans are originated through brokers.Results also indicate that targeted conventionalprograms effectively compete with government-insuredproducts in the LMI segment.

14) In 24 oct 2008 David C. Wheelock had studied aboutthe Government Response to Home Mortgage Distress:Lessons from the Great. They studied about the TheGreat Depression was the worst macroeconomiccollapse in U.S. history. Sharp declines in householdincome and real estate values resulted in soaring

mortgage delinquency rates. According to one estimate,as of January1, 1934, fully one-half of U.S. home mortgages weredelinquent and, on average, some 1000 home loans wereforeclosed every business day. This paper documentsthe increase in residential mortgage distress during theDepression, and discusses actions taken by stategovernments and the federal government to reducemortgage foreclosures and restore the functioning of the

mortgage market. Many states imposed moratoria onboth farm and nonfarm residential mortgageforeclosures. Although moratoria reduced farmforeclosure rates inthe short run, they appear to have also reduced the


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supply of loans and made credit more expensive forsubsequent borrowers. The federal government took anumber of steps to relieve residential mortgage distressand to promote the recovery and growth of the nationalmortgage market. The Home Owners Loan Corporation(HOLC) was created in 1933 to purchase and refinancedelinquent home loans as long-term, amortizingmortgages. Between 1933 and 1936, theHOLC acquired and refinanced one million delinquentloans totaling $3.1 billion. The HOLC refinanced loans onsome 10 percent of all nonfarm, owner-occupieddwellings in the United States, and about 20 percent ofthose with anoutstanding mortgage. The Great Depression experience

suggests howforeclosures might be reduced during the present crisis.

15) In march 2001 Tullio Jappelli and Maria Concetta Chiurihad studied about the Financial Market Imperfectionsand Home Ownership: A Comparative Study. Theyexplore the determinants of the international pattern ofhome ownership using the Luxembourg Income Study

(LIS), a collection of microeconomic data on fourteenOECD countries. In most, the cross-section is repeatedover time and includes several demographic variablescarefully matched between the different surveys. Thisallows us to construct a truly unique internationaldataset, merging data on more than 400,000 householdswith aggregate panel data on mortgage loans and downpayment ratios. After controlling for demographiccharacteristics, country effects, cohort effects and

calendar time effects, we find strong evidence that theavailability of mortgage finance - as measured byoutstanding mortgage loans and down payment ratios -affects the age-profile of home ownership, especially atthe young end. The results have important implicationsfor the debate on the relationship between saving andgrowth.


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16) In 10 dec 2007 Irina Paley and Chau Do had studiedabout the Explaining the Growth of Higher-Priced Loansin HMDA: A Decomposition Approach. The period 2004-2005 showed a significant increase in Home Mortgage

Disclosure Act (HMDA) rate spread reporting. Followingthe Oaxaca (1973), Blinder (1973), and Fairlie (2005)decomposition techniques, this study identifies thefractionof the increase due to the flattening of the yield curve.Even after controlling for changes in borrower riskcharacteristics, the findings reveal that during 2004-2006, the flattening of the yield curve explains asignificant amount of the increase in rate spread

reportable loans. This is the case for both prime andsubprime originations.

17) In feb 1 2009 Vincent W. Yao and Eric Rosenblatt andMichael LaCour-Little had studied about the uniquepaired loan dataset containing information onmultiple conventional conforming mortgage loans ofhouseholds to examine home equity extraction

decisions over the period 2000-2006. The main questionaddressed is how much households borrow whenrefinancing their currentmortgage debt in a cash-outtransaction. We also provide estimates of the marginaleffect of certain borrower characteristics. Resultscontribute both to the literature on refinancing behaviorand the role of house price appreciationin providingfunds that may be used for consumer spending or otherpurposes.

18) In aug 2004 Mark Carey and Greg Nini had studied aboutthe Is the Corporate Loan Market Globally Integrated? APricing Puzzle. We offer evidence that interest ratespreads on syndicated loans to corporate borrowers areeconomically significantly smaller in Europe than in theU.S., other things equal. Differences in borrower, loanand lender characteristics associated with equilibriummechanisms suggested in the literature do not appear to

explainthe phenomenon. Borrowers overwhelminglyissue in their natural home market and bank portfoliosdisplay significant home "bias." This may explain whypricing discrepancies are not competed away, but thefundamental causes of the discrepancies remain apuzzle. Thus, important determinants of loan origination


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market outcomes remain to be identified, home "bias"appears to be material for pricing, and corporatefinancing costs differ in Europe and the U.S.

19) In july 2005 Gwilym B.J. Pryce and Patric H.Hendershott had studied abot the The Sensitivity ofHomeowner Leverage to the Deductibility of HomeMortgage Interest.Mortgage interest tax deductibility isneeded to treat debt and equity financing of homesequally. Countries that limit deductibility create a debttax penalty that presumably leads households to shiftfrom debt toward equity financing. The greater the shift,the less is the tax revenue raised by the limitation and

smaller is its negative impact on housing demand.Measuring the financing response to a legislativechange is complicated by the fact that lenders restrictmortgage debt to the value of the house (or slightlyless) being financed. Taking this restriction into accountreduces the estimated financing response by 20 percent(a 32 percent decline in debt vs a 40 percent decline).The estimation is based on 86,000 newly originated UKloans from the late 1990s.

20) In 1 nov 2007 Marsha Courchane studied about ThePricing of Home Mortgage Loans to Minority Borrowers:How Much of the APR Differential. The public releases ofthe 2004 and 2005 HMDA data have engendered a livelydebate over the pricing of mortgage credit and itsimplications regarding the treatment of minoritymortgage borrowers. We provide a unique empirical

assessment of this issue by using aggregatedproprietary data provided to us by lenders and anendogenous switching regression model to estimate theprobability oftaking out a subprime mortgage, andannual percentage rate ("APR")conditional on gettingeither a subprime or prime mortgage. We find that up to90 percent of the African American APR gap, and 85percent of the Hispanic APR gap, is attributable toobservable differences in underwriting, costing and

market factors that appropriately explain mortgagepricing differentials. Although any potentialdiscrimination is problematic and should be addressed,our analysis suggests that little of the aggregatedifferences in APRs paid by minority and non-minority


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borrowers are appropriately attributed to differentialtreatment.

21) In 1991 Susan M. Wachter and Paul S. Calemhadstudied about the Community Reinvestment and CreditRisk: Evidence from an Affordable Home LoanProgram.This study examines the performance of homepurchase loans originated by a major depositoryinstitution in Philadelphia under a flexible lendingprogram between 1988 and 1994. We examine long-termdelinquency in relation to neighborhood housing marketconditions, borrower credit history scores, and other

factors. We find that likelihood of delinquency declineswith the level of neighborhood housing market activity.Also, likelihood of delinquency is greater for borrowerswith low credit history scores and those with high ratiosof housing expense to income, and when the property isunusually expensive for the neighborhood where it islocated.


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BUSINESS

MAN

GOVERNMENT

EMPLOYEE

HOUSE

WIFE

STUDENT

OTHER

CHAP TER 4

INT ERP RETA TI ON:

SBI: NO.50

1) What is your occupation?

Business man 15

Student 0

Government Employee 22

Other 0

House wife 9

25

20

15Series1

Series210

Series3

5

0

I nterpretatio n:-

o Total Number of Respondents was 46.

o 0 of our Respondents was Students.

o 22 of the Respondents were into government employees

o 15 of our Respondents were Businessman.

o 9 of our Respondents were Housewives.

o None of our Respondent belonged to the category of others.

o 4 respondents did not answer.

36


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2) From how many years you are associated with this bank?

Less than 1 year 10

1-5 years 24

More than 5 12

30

25

20Series1

15 Series2

10

5

0

Less than year 1-5 year more then 5

Interpretatio n:-

o Total Number of Respondents was 46

o 10 persons are associated less than 1 year

o 24 persons are associated from 1-5 years.o 12 persons are associated from more than 5 years.

o

3) How do you come to know about the home loan schemes ofthat bank?

News paper 18

Television 14


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Internet 10

other resources 4

20

18

16

14

12

10

8

6

4

2

0

News paper Television Internet Other

resources

Series1

Series2

I nterpretatio n:-


o 18 persons came to know from newspaper

o 14 persons came to know from television

o 10 persons came to know from internet

o 4 persons came to know from other resources

4) Are you aware of these type of home loans?

Home purchase loan 9

Home construction loan 18

Home improvement loan 6

Home equity loan 4

Land purchase loan 9

38


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20

1816141210 Series186420

I nterpretatio n:-


o Only 4 persons know home equity loan.

o Many of peoples know home construction loan.

o 9 peoples know home purchase loan.

o 6 peoples knowhome improvement loans.

5) Are you aware all terms and conditions of home loans?

Yes 40

No 6

39


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45

40

35

30

25

20

15

10

5

0

Yes No

Series1

I nterpretatio n:-


o Many of persons know all terms and conditions of home loan

i.e. 40.

o 6 persons had not know properly about all terms andconditions.

6) Are you satisfy with the interest rate charges byyour bank?

Strongly agree 12Agree 30

Disagree 4

strongly disagree 0


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63/113

16

14

12

108

6

4

2

0

Strongly agree Agree Disagree strongly

disagree

Series1

I nterpretatio n:-


o 12 among all consumers are strongly agreed by interest rate of

the bank.

o 30 among all consumers are agreed by interest rate of the bank

o 4 among all consumers are disagreed by interest rate of the

bank

o 0 among all consumers are strongly disagreed by interest

rate of the bank

7) Your bank offer which type of services?

Mobile banking 24

Net banking 15

Forex banking 7


64/113


65/113

30

25

20

15 Series1

10

5

0

Mobile banking Net banking Forex banking

I nterpretatio n:-


o 24 persons said that bank offer mobile banking services.

o 15 said that bank offer net banking services.

o Only 7 persons said that bank offer forex banking services.

8) Do you agree that your bank loan processing is fast?

Strongly agree 8

Agree 26

Disagree 9

strongly disagree 3

42


66/113

30

25

20

15 Series1

10

5

0


disagree

Interpretation:-


o 8 persons strongly agree that bank home loan processing is

fast.

o 26 persons agree that bank home loan processing is fast.

o 9 persons disagree that bank processing is fast.

o 3 persons strongly disagree that bank processing is fast.

9) Do you satisfy with the after home loan services provided by

your bank are best as compare to other bank?

Strongly agree 12

Agree 30

Disagree 4

strongly disagree 0


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43


68/113

35

30

25

20Series1

15

10

5

0


disagree

50375594 22712301 comparative study of home loans of pnb and sbi bank

Documents