ashutosh project
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TABLE OF CONTENTS
PARTICULARS PAGE NO.
LIST OF TABLES
3
CHAPTER 1: INTRODUCTION
SELECTION OF TOPIC
OBJECTIVE OF STUDY
RESEARCH METHODOLOGY
BANKING SECTOR IN INDIA
4-9
CHAPTER 2: COMPANY PROFILE 10-14
CHAPTER 3: REVIEW OF LITERATURE
INTRODUCTION TO CREDIT APPRAISAL
TYPES OF HOME LOAN
DATA COLLECTION
15-45
CHAPTER 4: FINDINGS & ANALYSIS 46-53
CHAPTER 5: CONCLUSION, SUGGESTIONS AND LIMITATIONS 54-58
BIBLIOGRAPHY
BOOKS AND JOURNALS
WEBSITES 59
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ACKNOWLEDGEMENT
I take this opportunity as privilege to express my deep sense of gratitude to all the
people connected with this project for their continuous encouragement, invaluable guidance
and help for completing the present research work. They have been a source of inspiration tome and I am indebted to them for initiating me in the field of research.
I am deeply indebted to Ms. Shilki Bhatia, my research guide, Delhi Institute of
Advanced Studies, Delhi without her help completion of the project was highly impossible.
I take this opportunity as privilege to articulate my deep sense of gratefulness to the
Deputy Manager, and the staff of SBI for their timely help and positively encouragement.
I wish to express a special thanks to all teaching and non-teaching staff members, Delhi
Institute of Advanced Studies, Delhi for their forever support. Their encouragement and
valuable guidance are gratefully acknowledged. I would like to acknowledge all my family
members, relatives and friends for their help and encouragement.
Place: New Delhi
Date: Ashutosh Kumar
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LIST OF TABLES
TABLE NO. TITLE OF THE TABLE PAGE NO.
TABLE NO. 1.1
TABLE NO. 1.2
TABLE NO. 1.3
TABLE NO. 1.4
TABLE NO. 1.5
TABLE NO. 1.6
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CHAPTER 1:
INTRODUCTION
INTRODUCTION
SELECTION OF TOPIC
OBJECTIVE OF STUDY
RESEARCH METHODOLOGY
BANKING SECTOR IN INDIA
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INTRODUCTION
The responsibility to provide Housing finance largely rested with the Government of India till
the mid-eighties. The setting up of National Housing Bank (NHB), a fully owned subsidiary
of the Reserve Bank of India (RBI) in 1988 as the apex institution marked the beginning of
the emergence of housing finance as fund based financial service in the country. It has growth
in the volume and depth with entry of number of specialized financial Institution / Companies
in the public, private and joint sectors, although it is at an early stage of development.
The Banking Industry has been undergoing some fundamental changes in its approach to
banking. There has been a perceptible shift towards Customer Relationship Management
(CRM) mainly arising out of the element of intensive competition infused into the industry by
the arrival of private players. With the free economy reforms government permitted private
players to inter in banking business along with existing nationalized Banks.In 2002 government allowed foreign banks to enter in Indian Market. The concept of retail
banking introduced with the increase in no of banks, private players introduce especially this
concept. The banks are segmenting their portfolio into different segments like Personal
Banking, Retail Banking, Corporate Banking, Agri. Banking and Investment banking. In
Retail Banking, banks are concentrating on SME (Small and Medium Entrepreneur(s) and
Individual finance like Vehicle finance, Housing finance etc. As large no of customer can be
tap with diversification of risk as it evolved lower risk than corporate banking. All banks are
increasing their exposure to this area.
Credit has done a thousand times more to enrich mankind than all the gold mines in the
world. It has exalted labour, stimulated manufacture, and pushed commerce over every sea.
Credit provided by banks is an important driver of national economy. In olden days when
commercial banking had not taken the present shape, individuals or families traditionally
involved in money lending as source of finance. Present days economy is vastly different
from old economy. Due to industrialization, need for finance change drastically. With change
in population as well as industrialization demand and supply increased more over the sources
of supply no longer confine to the area where the demand exists with the improvement in
transport and communication system the demand can be easily met by suppliers made fromsources located in fair flung areas.
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SELECTION OF TOPIC
The Banking Industry has been undergone some fundamental changes in its approach to
banking. There has been a perceptible shift towards Customer Relationship Management
(CRM) mainly arising out of the element of intensive competition infused into the industry by
the arrival of private players. With free economic reforms government permitted privateplayers to enter into the banking business along with the existing nationalized banks.
In 2002 the government allowed Foreign Banks to enter into the Indian Market.
The concept of retail banking introduced with the increase in number of banks, the private
players especially introduced this concept. The banks are segmenting their portfolio into
different segments like Personnel Banking, Retail Banking and are concentrating on Small
Medium Enterprise individual finance like housing finance, vehicle finance, etc as large
number of customers can be taped with diversification of risk as it evolved lower risk than
corporate banking. All banks are increasing their exposure to this area.
OBJECTIVE OF THE STUDY
The Credit Manager plays a crucial role in increasing banks profitability as the major portion
of funds are utilized by bank for the purpose of lending of loans and advances to get more
return on account of the Interest reducing risk in financing.
Objectives of the study:
To study the appraisal process of Home Loan proposal.
To understanding the process and key issues in sanctions.
To understand the process and key issues in disbursement.
To study the restricted areas of credit of the bank.
To analyze the performance of the bank regarding sanction, disbursement.
To find out the causes of rejection of proposals.
To analyze performance of bank.
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INTRODUCTION TO BANKING SECTOR IN INDIA
Banking Sector in India
Immediately after Independence, the government of India initiated measures to play an active
role in the economic life of the nation. In pursuance of this policy, government adoptedIndustrial Policy Resolution in 1948 in which it envisaged a mixed economy. From now
onwards, government decided to play an active role in different segments of an economy
including banking and finance. The Government of India, in a major step nationalized
Reserve Bank of India in 1948. In 1949, the Banking Regulation Act was enacted which
empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in
India. Government in order to have firm grip over this sector nationalized the private banks
first in 1969 and later in 1980. With the second dose of nationalization, the GOI controlled
around 91% of the banking business of India. After this, until the 1990s, the nationalized
banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.
In the early 1990s the then Narsimha Rao government embarking on a policy of
liberalization, gave licenses to a small number of private banks, which came to be known as
New Generation tech-savvy banks, which included banks such as Global Trust Bank, UTI
Bank, (now re-named as Axis Bank), ICICI Bank and HDFC Bank. This almost kick started
the banking sector in India, which has seen rapid growth with strong contribution from all the
three sectors of banks, namely, government banks, private banks and foreign banks.
FDI in Banking Sector
The next stage for the Indian banking has been setup with the proposed relaxation in the
norms for Foreign Direct Investment, where all Foreign Investors in banks may be given
voting rights which could exceed the present cap of 10%, at present it has gone up to 49%
with some restrictions.
Present Situation
In the present situation, banking in India has attained fair amount of maturity in terms of
supply, product range and reach-even though reach in rural India still remains a challenge for
the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian
banks are considered to have clean, strong and transparent balance sheets relative to other
banks in comparable economies in its region. Since Indian economy is witnessing stronggrowth the demand for banking services, especially retail banking, mortgages and investment
services are expected to be strong. One may also expect M&As, takeovers, and asset sales.
Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is
with the Government of India holding a stake), 29 private banks (these do not have
government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign
banks. They have a combined network of over 53,000 branches and 17,000 ATMs.
According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75
percent of total assets of the banking industry, with the private and foreign banks holding
18.2% and 6.5% respectively.
Banking Structure in India
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The commercial banking structure in India comprises:
Scheduled Commercial Banks and Unscheduled Banks, The banks which are included in the
second schedule of Reserve Bank of India (RBI) Act, 1934 is called scheduled bank. RBI in
turn includes only those banks in this schedule which satisfy the criteria laid down vide
section 42 (6) (a) of the Act.For assessing the performance of the bank, the Reserve Bank of India categories the bank as
public sector banks, old private sector banks, new private sector banks and foreign banks
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CHAPTER 2:
COMPANY PROFILE
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ORGANISATION PROFILE
1.1 EVOLUTION OF BANK
The origin of the State Bank of India goes back to the first decade of the nineteenth century
with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806. Three years later,
the bank received its charter and was re-designed as the Bank of Bengal (2 January 1809). A
unique institution, it was the first joint-stock bank of British India sponsored by the
Government of Bengal. The Bank of Bombay (15 April 1840) and the Bank of Madras (1
July 1843) followed the Bank of Bengal. These three banks remained at the apex of modern
banking in India till their amalgamation as the Imperial Bank of India on 27 January 1921.
Primarily Anglo-Indian creations, the three presidency banks came into existence either as a
result of the compulsions of imperial finance or by the felt needs of local European
commerce and were not imposed from outside in an arbitrary manner to modernize India'seconomy. Their evolution was, however, shaped by ideas culled from similar developments
in Europe and England, and was influenced by changes occurring in the structure of both the
local trading environment and those in the relations of the Indian economy to the economy of
Europe and the global economic framework.
BUSINESS
The business of the banks was initially confined to discounting of bills of exchange or other
negotiable private securities, keeping cash accounts and receiving deposits and issuing and
circulating cash notes. Loans were restricted to Rs.1 lakh and the period of accommodation
confined to three months only. The security for such loans was public securities, commonly
called Company's Paper, bullion, treasure, plate, jewels, or goods 'not of a perishable nature'
and no interest could be charged beyond a rate of twelve per cent. Loans against goods like
opium, indigo, salt woolens, cotton, cotton piece goods, mule twist and silk goods were also
granted but such finance by way of cash credits gained momentum only from the third decade
of the nineteenth century. All commodities, including tea, sugar and jute, which began to be
financed later, were either pledged or hypothecated to the bank. Demand promissory notes
were signed by the borrower in favor of the guarantor, which was in turn endorsed to the
bank. Lending against shares of the banks or on the mortgage of houses, land or other real
property was, however, forbidden. Indians were the principal borrowers against deposit ofCompany's paper, while the business of discounts on private as well as salary bills was
almost the exclusive monopoly of individuals Europeans and their partnership firms. But the
main function of the three banks, as far as the government was concerned, was to help the
latter raise loans from time to time and also provide a degree of stability to the prices of
government securities.
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MAJOR CHANGE IN THE CONDITIONS
A major change in the conditions of operation of the Banks of Bengal, Bombay and Madras
occurred after 1860. With the passing of the Paper Currency Act of 1861, the right of note
issue of the presidency banks was abolished and the Government of India assumed from 1
March 1862 the sole power of issuing paper currency within British India. The task ofmanagement and circulation of the new currency notes was conferred on the presidency
banks and the Government undertook to transfer the Treasury balances to the banks at places
where the banks would open branches. None of the three banks had till then any branches
(except the sole attempt and that too a short-lived one by the Bank of Bengal at Mirzapore in
1839) although the charters had given them such authority. But as soon as the three
presidency bands were assured of the free use of government Treasury balances at places
where they would open branches, they embarked on branch expansion at a rapid pace. By
1876, the branches, agencies and sub agencies of the three presidency banks covered most of
the major parts and many of the inland trade centers in India. While the Bank of Bengal had
eighteen branches including its head office, seasonal branches and sub agencies, the Banks of
Bombay and Madras had fifteen each.
IMPERIAL BANK
The Imperial Bank during the three and a half decades of its existence recorded an impressive
growth in terms of offices, reserves, deposits, investments and advances, the increases in
some cases amounting to more than six-fold. The financial status and security inherited from
its forerunners no doubt provided a firm and durable platform. But the lofty traditions of
banking which the Imperial Bank consistently maintained and the high standard of integrity it
observed in its operations inspired confidence in its depositors that no other bank in Indiacould perhaps then equal. All these enabled the Imperial Bank to acquire a pre-eminent
position in the Indian banking industry and also secure a vital place in the country's economic
life.
When India attained freedom, the Imperial Bank had a capital base (including reserves) of
Rs.11.85 crores, deposits and advances of Rs.275.14 crores and Rs.72.94 crores respectively
and a network of 172 branches and more than 200 sub offices extending all over the country.
FIRST FIVE YEAR PLAN
In 1951, when the First Five Year Plan was launched, the development of rural India was
given the highest priority. The commercial banks of the country including the Imperial Bank
of India had till then confined their operations to the urban sector and were not equipped to
respond to the emergent needs of economic regeneration of the rural areas. In order,
therefore, to serve the economy in general and the rural sector in particular, the All India
Rural Credit Survey Committee recommended the creation of a state-partnered and state-
sponsored bank by taking over the Imperial Bank of India, and integrating with it, the former
state-owned or state-associate banks. An act was accordingly passed in Parliament in May
1955 and the State Bank of India was constituted on 1 July 1955. More than a quarter of the
resources of the Indian banking system thus passed under the direct control of the State.
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ORGANISATION STRUCURE
VISION OF SBI
CUSTOMER SATISFACTION
MISSION OF SBI
We will be prompt, polite and proactive with our customers. We will speak the
language of young India. We will create products and services that help our customers
achieve their goals. We will go beyond the call of duty to make our customers feel valued.We will be of service even in the remotest part of our country. We will offer services to those
abroad as much as we do to those in India. We will imbibe state of art technology to drive
excellence.
VALUES OF SBI
We will always be honest, transparent and ethical. We will respect our customers and
fellow associates. We will be knowledge driven. We will learn and share our learning. We
will never take the easy way out. We will do every thing we canto contribute to the
community we work in. we will nurture pride in India.
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CHAPTER 3:
LITERATURE REVIEW-
INTRODUCTION TO CREDIT APPRAISAL
TYPES OF HOME LOAN
DATA COLLECTION
__________________________________________________
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INTRODUCTION TO CREDIT APPRAISAL
WHAT IS CREDIT?
You are granted credit when an organization or individual makes a sum available for you toborrow.
There are two main types of credit.
Home loans, or mortgages, and personal or shop loans are linked to a specific item or
items for example, a new kitchen, or a house
Revolving credit on payment cards can give you access to a fixed amount of money
that you can spend as you wish, in a wide range of retailers and other outlets
Repayment
Loans are normally repaid in regular installments over an agreed period of time. Mortgages,or home loans, can be repaid in variable installments but most personal loans specify fixed
repayments of approximately equal amounts. If you want to make another major purchase
when you have finished paying off one loan, you need to negotiate a new loan. Revolving
credit means that you always have access to the amount of your line of credit that remains
unspent. And every time you pay off some of the outstanding amount, that proportion of your
credit limit becomes available for you to spend again.
So if you have a credit limit of Rs.1, 000/-, spend Rs.30/- and repay Rs.100/-, you have
Rs.800/- available to spend. Whatever type of loan you choose, be certain to make your
repayments on time, or you can face financial penalties.
Interest
In order to cover the lending risk and to make a profit on their money, lenders generally
charge interest on loans and revolving credit. You must remember this when you are
calculating your repayments.
For example, if you borrow Rs.100 and interest is payable at an annual rate of ten per cent,
the total cost is Rs.110. This is known as simple interest. It is rarely charged on borrowings.
Compound interest is more common. It means that interest is charged on the interest at
regular intervals.
For example if you owe Rs.100 and are charged ten per cent compound interest each year,
at the end of year one you will owe Rs.110. In year two, the lender will charge ten per cent of
this sum and add it to the outstanding amount, so you will owe Rs.121, and so on. Interest
may be compounded after any period a day, a week, a month and so on.
With fixed repayment loans, the amount of interest is worked out in advance and added into
the repayments. There is often a penalty if you want to repay the outstanding amount earlier
than agreed.
With revolving credit, you can repay as much or as little as you want, at any point. You can
often avoid paying any interest at all if you repay the total amount you have borrowed on the
date when the first repayment is due.WHAT IS APPRAISAL?
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Appraisals are needed to accurately determine the value of the loan and also inspect the
property's condition. An appraisal report is only good for 90 days and most mortgage
companies will require a certified appraiser.
General Appraisal MethodsThe appraiser obtains an estimated value through the interpretation of the market. Theappraiser collects data pertinent to a report, such as the site, amenities and the physical
condition of the property. Through considerable research and data collection of both general
and specific, the appraiser arrives at the final estimated value.
The three common approaches to arrive at the estimated value, which are derived from the
market, are:
1. Cost Approach: The cost to make the improvements as of the date of the appraisal,
minus the Physical Deterioration, the Functional Obsolescence and the Economic
Obsolescence. The remainder is added to the Land Value.
2. Comparison Approach: Uses other "bench mark" properties of similar size, quality
and location that have been recently sold and compares it to the subject property.
3. Income Approach: A key principal in determining the value of income producing
properties and has little importance in residential type properties. This approach is
used to get an objective estimate of what a cautious investor would pay based upon
the net income the property produces.
WHAT IS CREDIT APPRAISAL?
It is the process of appraising the credit worthiness of a loan applicant. Factors like
age, income, number of dependents, nature of employment, continuity of employment,
repayment capacity, previous loans, credit cards, assets, liabilities etc. are taken into
account while appraising the credit worthiness of a person. Every bank or lending
institution has its own panel of officials for this purpose.
The documents submitted by the applicant are verified by the panel of
officials / the appraisal committee.
The committee checks the genuineness of the documents and confirmswhether the applicant will be able to repay the loan installments or not.
After the verification of the documents the appraisal committee
approves the loan application and then submits the / apprises the loan
application to the sanction committee for loan sanction.
After the appraisal of the loan to the sanctioning committee in case the
sanctioning committee finds any fraud documents then both the
applicant as well as the appraisal committee is held responsible.
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LEGAL APPRAISAL
In a legal appraisal the documents submitted by the applicant are verified by the
lawyer to confirm whether the holder would be able to generate a mortgage in favour
of SBI or not.
TECHNICAL APPRAISAL
It is considered as the most important document stage of the appraisal process. In this
stage the applicants original documents are verified. All other information provided
by the applicant is asked to submit documents regarding guarantees.
The documents needed change depending upon whether house is being purchased or
constructed. Banks carry out technical appraisal to safeguard the applicants interests
before and after the property selection. The officer of the technical appraisal even
conducts checks at various stages of construction to ensure quality of materials used to
safeguard the borrowers interest.
The loan amount can be disbursed entirely or in installments. The disbursement
amount is generally dependent on factors such as own funds available, and the extent
of completion of construction. The disbursement amount is calculated using formula:
RD=AV*CC/100*PC/100+LC/100-(BC-CM)
Where:
RD=recommendation for disbursement in Rs.
PC=Progress of construction in % points
AV=Aggregate value= LC+CCLC=Land component
BC=Borrowers contribution
CM=cumulative disbursement.
CALCULATION OF EMI
Housing loans are long term loans that are repayed in equated monthly installments
(EMI). Each of which includes repayment of interest as well as the principal amount.
EMI payments generally start after the loan has been fully disbursed or after 12
months from the date of first installment. The EMI is determined on the basis of theloan size, interest rate and loan period. An approximate value of EMI can be arrived at
using the following formula:
EMI=1/12(Lr (1+r)^ n/ (1+r)^ n-1)
Where:
L=Loan
r=rate of interest in decimal
N=loan period.
FEATURES OF THE PRODUCT
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TYPES OF HOME LOANS AND FEATURES OF THE PRODUCT
I. SBI-Flexi Home Loans
A customized product designed to enable borrowers to hedge their Home Loan
against unfavorable movement in interest rates. The product gives a one time
irrevocable option to choose one of the three customized combinations of fixed
and floating interest rates and also to choose the order in which the fixed and
floating rate will be availed.
Minimum Loan Amount: Rs.5 lakhs
(Other terms and conditions as applicable to regular Home Loans)
II. SBI-MaxGain Home Loans
An innovative and customer-friendly product to earn optimal yield on yoursavings and minimize interest burden on Home Loans, with no extra cost.
The loan is granted as an Overdraft facility with the added flexibility to operate
your Home Loan Account like your SB or Current Account.
The product serves to minimize interest cost by enabling to park surplus funds in
SBI-Max Gain (with the benefit to withdraw the surplus funds whenever you
require), specially in the wake of low yields from other deposit/ investment
avenues.
Minimum Loan Amount: Rs.5 lakhs
(Other terms and conditions as applicable to regular Home Loans)
III. SBI-Realty Home Loans
A unique product for a loan to purchase a plot of land for house construction.
The loan is available for a maximum amount of Rs.1 crore and with a
comfortable repayment period of upto 25 years.
You are also eligible to avail another Housing Loan for construction of house on
the plot financed above with the benefit of running both the loans concurrently.
(House construction should commence within 2 years from the date of availment
of SBI-Realty Housing Loan)
(Other terms and conditions as applicable to regular Home Loans)
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IV. SBI-Freedom Home Loans
A revolutionary product designed for customers who are on the look out for a
source of finance for a property they want to invest in without mortgaging the
same. All you have to do is pledge any financial security that you have and you
will get a Home Loan for your dream home.
For those who do not want to pay stamp duty for mortgage of their property or
go through the hassles of creation of mortgage.
You also have an option to take the loan by way of mortgage of the property and
pledge financial securities in lieu of margin money.
Repayment is highly customized, giving you the option to repay through regular
EMIs or through maturity proceeds of the securities pledged.
(Other terms and conditions as applicable to regular Home Loans)
V. SBI-OPTIMA ADDITIONAL HOME LOANS
Innovative and value added products extended to existing Home loan borrowers
with a satisfactory repayment record of 3 years and whose loan is Standard
Asset, with a view to reinforce the customer loyalty and to maintain long term
relationship with the borrowers. In case of take-over of Home Loans from other
Banks/HFCs, the borrower should have fulfilled the above conditions with the
present Bank/HFC.
VI. PRASHASAN PLUS, TEACHER PLUS AND OIL PLUS
The above plus schemes offer Concessional interest rate of 0.25% below the
applicable interest rates on Home Loans to niche client groups like Government Employees,
Teachers, employees of public sector oil companies etc.
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Purpose
SBI-Optima Additional Home Loans
To meet expenditure towards major repair,
renovation, addition to their house/flat, purchase
of furniture, fixtures and consumer durables
SBI-Home line Special Personal LoansGeneral purpose loan to meet expenditure to meet
foreseen/unforeseen contingencies
Eligibility
SBI-Optima Additional Home Loans
18 times NMI (for salaried borrowers)/
1 times NAI ( for others) or
(i)25% of the original project cost of house/flat
(ii) 85% of the cost of repairs etc. or (iii) gapbetween 85% of the current market price of
flat/house and actual outstanding loan dues ,
Whichever is lower (EMI/NMI ratio of all loans
should not exceed 60%)
SBI-Home line Special Personal Loans18 times NMI (for salaried borrowers)/
1 times NAI (for others)
Interest Rates/processing fee
SBI-Optima Additional Home Loans As applicable to Home Loans
SBI-Home line Special Personal
Loans
Interest rates 50 bps above rates applicable to
the repayment tenure (floating rates only)
Processing fee : 0.50% of the loan amount
(including service tax)
Other Salient Features
Inbuilt provision for availment of the loans on the expiry of each bloc of 5 years, the
first bloc commencing on the expiry of 5 years from the date of sanction of original
Home Loan.
Original Home Loan and all SBI-Optima Home Loans/SBI-Home Line Personal
Loans can run concurrently
Comfortable repayment obligations Tenure of the loans equal to the residual
maturity of the original Home Loans -
DATA COLLECTION
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SBI HOME LOANS
Brings Your Dream House on Earth
At SBI we take extra care to build your dreams into reality. Providing unmatched support
through easy terms and adequate finances to fulfill your ambition / dream to own /
construct a house.
Purpose
i. Construction of a new house.
ii. Repair.
iii. Renovation.
iv. Alteration of the house.
v. Purchase of a plot for the construction of new house.vi. Purchase of a new house or flat.
vii. Purchase of existing house / flat.
Eligibility
Individual(s) with steady source of income including persons engaged in
agriculture & allied activities.
Salaried
Self employed professionals
Self employed non-professionals
Minimum age:21 years and above
Maximum age:
Loan to be fully repaid by the age of70 years
Loan amount
For Salaried persons For Business men / Professionals
36 times of Net Take Home Pay3 times the Net Income of Income Tax
return
Margin: 20% of Project Cost / valuation cost.
Security: Equitable mortgage on the plot / house / flat being purchased or the house / flat
being constructed / purchased / renovated.
Disbursements
-Direct disbursement of loan to vendor of the house/flat where building is ready forpossession.
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-For construction / renovation / extension of flat / house, disbursement is done in phases.
Repayment: In Equated Monthly Installments (EMIs) comprising of Principal and Interest in
a maximum period of 15 years including moratorium period.
Repayment Period: -Starting from the month following month of full disbursement of loan.
Maximum period including moratorium: Age upto 45 years 20 years
Age above 45 15 years
In case of joint borrowing 25 years
Processing charges:
Loan amount Charges
Up to Rs. 25,000/- Nil.
Rs25,001 to Rs. 2 lakhs Rs. 500/-
Above Rs. 2 lakhs 0.50%
Maximum Loan:
Loan eligibility is determined by EMI/NMI ratio, irrespective of borrowers age i.e. the loan
amount is decided by the repayment capacity of borrower(s), which comes out as a ratio of
EMI to NMI.
EMI/NMI Ratio:
Maximum Permissible Loan amount (MPLA) is subject to the following income-wise graded
ratio:
Net Annual Income EMI/NMI ratio
Upto Rs.2 lakhs 40%
Above Rs.2 to 5 lakhs 50%
Above Rs.5 lakhs 55%
Increase up to 5% in the above ratios may be permitted by the controller of Branch/
RACPC, which processes the loan application, depending on the family size and availability
of disposable surplus income.
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Monetary ceilings:
MPLA is also subject to following monetary ceilings:
Forrepairs / renovation: Rs 10 lakhs
[Loans above Rs.10 lakhs require prior administrative clearance of network GM]
For furnishings and consumer durables: 10% of the project cost or Rs.3 lakhs
whichever is less where check off facility or additional security or 3 rd party guarantee
good for the amount is available.
Income of spouse/son/ unmarried daughter and expected rental of proposed house can be
clubbed [subject to conditions]
Regular income from other sources (with proof) can be considered.
Total project cost:
Total project cost to include cost of land, additional amenities, insurance premium, stamp
duty & registration charges for purchase/construction of new or old property.
LTV Ratio:
i) Loans up to Rs. 1 crore 80% (i.e. 20% margin)
ii) Loans above Rs.1 crore 75% (i.e. 25% margin)
Interest:
-Loans at fixed / floating rates and combination of fixed and floating rates.
-Loans above Rs.1 crore at floating rates only.
-Interest rate concession for loans with LTV ratio of 75% or less.
Type of Loan:
-Term Loan.
Administrative approval:
No prior administrative clearance required.
For purchase of a house up to 10 years old no A/C required.
For >10 years old, controlling authority would be permitted
to grant administrative clearance. In all cases the life & condition of the house shall be such that the banks security
charge is not affected till full repayment of the loan.
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INSURANCE
Insurance of the house / flat covering all risk is necessary.
Inspection:
For standard assets: Initial inspection(s) at the time of disbursement/ release of installments during
construction.
Thereafter once every 3 years.
If repayments are in arrears for two successive months, inspection should be conducted
immediately.
For NPAs: At half - yearly intervals.
Inspections should be recorded in Inspection Register.
Property inspection is to be carried out and recorded at each stage of disbursement.
ELIGIBILITY CALCULATION:
PARTICULARS AMOUNT(RS)
Gross Monthly Income *****
Less: Deductions *****
Net Monthly Income *****
Less: Obligations *****
Maximum Amount For Repayment *****
A. Recent Modifications in SBI Home Loan Scheme
a. In Principle Approval:
In principle approval / sanction can be given prior to identification of a
specific house / flat / property by the prospective borrower to give him
greater flexibility in negotiations.
It is valid for the period of three months.
The borrower can select the property as per the eligibility or loan amount
he may get.
b. Takeover of Housing Loans:
In simple words Take Over of Housing Loan means to transfer the
housing loan from other financial institute / bank to SBI.
Take Over of Housing Loans may be considered highly selective after
due diligence and precautions, in cases where possession of the house / flat
has been taken, repayment of the existing loan has already commenced and
installments have been paid as per the terms of sanction, subject to the
conditions-
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Each case to be approved by the DGM of the module / Main branch only,
in consideration of large business interests / valuables connections.
The prospective borrower should address a letter to the institution through
whom the finance has been availed, that the institution would deliver the
title deeds direct to our bank branch upon receipt of the loan amount. The institution to confirm the above and that they are holding the EMI
over the property.
The disbursement of the loan should be made direct to the institution and
their receipt kept along with the documents.
The agreement to mortgage should be taken.
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DOCUMENTS OF HOUSING LOAN
Documents play an important role for the approval of the loan. Unless and until all the
documents are submitted by the applicant and are properly verified by the responsible
authority the loan cannot be apprised i.e. documents are very important for the appraisal ofhome loan.
The documents required for the appraisal of Home Loan are divided into two stages which
are as follows:
A. PRE-SANCTION / CREDIT DOCUMENTS
These documents are required for the approval / sanction of the housing loan. They are
required for the analysis of the credit worthiness of the applicant. They help to understand the
financial strength and weakness of the applicant i.e. what amount of loan should be
approved? Whether the applicant will be able to repay the loan installments or not?
26
DOCUMENTS
PRE-SANCTION
DOCUMENTS
POST-SANCTION
DOCUMENTS
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The documents are as follows
COMMON DOCUMENTS
27
PROCESSIN
G FEE
CHEQUES
NET WORTH
SUPPORTIN
G
DOCUMENT
S
PERSONAL
ASSETS &
LIABILITY
STATEMENT
IDENTITY &
RESIDENTA
L PROOFCOMMON
DOCUMENT
S
APPLICATIO
N FORM
WITH
PHOTO
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DOCUMENTS AS PER OCCUPATION
SALARIEDSELF- EMPLOYED
PROFESSIONALS
SELF EMPLOYED
PROFESSIONALS
Last three months salary-slip.
Educational qualification
certificates & proof of
business existence.
Educational qualification
certificates & proof of business
existence.
Form 16Last three years Income Tax
returns.Business profile.
Net worth supporting
documents
Net worth supporting
documentsNet worth supporting documents
Employers CertificateCertificate copies of Wealth
Tax Returns, if applicable
Certificate copies of Wealth Tax
Returns, if applicable
Details of previous
employmentBrief write-up on profession Brief write-up on business.
Latest Income Tax Return, if
applicable.
Certified copies of Income
Tax.Certified copies of Income Tax.
Processing fees cheques. Processing fees cheques. Processing fees cheques.
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DOCUMENTS RELATED TO PROPERTY
PURCHASE OF HOUSE /
FLAT
CONSRUCTION /
EXTENSION & REPAIR
OF HOUSE / FLAT
CO-OPERATIVE
HOUSING SOCIETY
Agreement of sale.
Detailed cost estimate by
approved Architect/Civil
Engineer/Chartered
Engineer/Valuers.
Bye-laws of the Society.
Letter of allotment. Certificate of Membership.
Receipt of payment made to
the vendor.
Certificate stating the
number of shares held by
the member.
Power of attorney, if
applicable.
No Objection Certificate for
loan and mortgage fromSociety.
No Objection Certificate for
loan and mortgage from
lesser / builder, if
applicable.
Letter of allotment
Development agreement if
applicable.
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ANALYSIS OF INOME DOCUMENTS
1) Salary Slip Analysis
Name of the Applicant whether matches with the salary slip or not?
Designation Name of the Employer
Is the latest salary credit as per the salary slip
Are the salary credits in the bank statements as per the salary slip
Is the salary fixed or variable
Any regular deductions reflecting in the salary slip.
2) Understanding Bank Statements
In case of Salaried, number of credits to be checked Fixed & Variable
In case of Self Employed check the average balance for liquidity Large credit or debit entries
Recurring debits on account of loan repayment
Inward Cheque bounces
Outward Cheque bounces
Stop Payment / Minimum Balance charges
3) Form 16 Salaried / Form 16A Other than salaried
Name & address of the employer
Name and designation of the employee
Details of the salary paid / other income
Details of the tax deducted
Information of Housing loan availed
Information on Mediclaim, pension policy etc
Information on other savings like PPF, NSC, Mutual funds etc.
4) Understanding Profit & Loss Account
Expense heads
Trend in Profitability & Sales over the years
Depreciation charged
Any unusual expenditure
5) Why do we require a Balance Sheet?
To understand the business of the customer in terms of-
Owners involvement
Profitability of the business
Asset base
His Customer Base & Liquidity
His Suppliers
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6) What to read out of Schedules?
Understanding the list of his Customers
Understanding the list of his Suppliers Understanding the value of assets as on date
Understanding various loans availed by the loan applicant
POST- SANCTION / LEGAL DOCUMENTS
Once the loan gets sanctioned the banks needs certain documents for security. The documents
prepared are legal documents which are as follows-
1. Declaration by the borrower.
2. Documents relating to repayment :
Where Check-off is available:
a) Irrevocable Letter of Authority from employee (on standard format).
b) Letter of undertaking from employer (on Banks standard format).
c) Irrevocable Letter of Authority where applicant himself is drawing and
Disbursing Officer (on Banks standard format) or in other cases PDCs or
standing instructions wherever required may be obtained.
3. Memorandum of Term Loan Agreement for Housing Loan.
4. Guarantee Agreement, if applicable.
5. Mortgage Deed to be executed by the borrower.
6. Agreement to Mortgage, pending creation of mortgage.
7. Documents in connection with pledge of other securities, where applicable.
8. Arrangement letter.
9. A single consolidated stamped affidavit and Indemnity sworn before Magistrate/
notary public.
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IMPORTANCE OF THE DOCUMENTS
1) Declaration by the borrower:
Declaration by the borrower agreeing to construct the house within the stipulated
period in case of loan granted for purchase of plot of land.2) Memorandum of Term Loan Agreement for Housing Loan:
It is the agreement related to the term for which the loan has been taken i.e. number of
years of repayment, amount of loan, EMI, etc.
3) Guarantee Agreement:
Guarantee agreement is the agreement signed by the guarantor giving guarantee of
repayment of loan in case of default by the borrower.
4) Mortgage Deed to be executed by the borrower:
It is the document related to the mortgage of the property constructed or purchased.
5) Agreement to Mortgage, pending creation of mortgage:
Agreement to mortgage is prepared in case if the property to be mortgage is in
incomplete state.
6) Documents in connection with pledge of other securities:
In case where the property to be mortgage is of less value than required then other
property or investments such as bonds, insurance policies, etc, are used to cover the
risk.
7) Arrangement letter:
Arrangement letter is a letter which consists of all the terms and conditions related to
the loan. The term of loan, interest rate, EMI, repayment period, rate of interest
margin, disbursement, insurance and other terms and conditions such as non-availment of loan against same property, restrictions related to entering into any
agreement related to the sale of same property, etc.
8) Consolidated stamped affidavit and Indemnity:
Declaring non availment of other loans against the same property / from otherfinancial institutions (in lieu of No Dues Certificate), delivery of original
documents of title etc.
To cover risk for Home loans below Rs.1 cr., where the search report coversonly a period of 15 years and which does not reveal any encumbrance (instead
of obtaining non encumbrance certificate for 30 years) Undertaking that construction is as per sanctioned building plan (plan is to beenclosed to the undertaking.
To enable the Bank to initiate criminal proceedings against borrowers if theydeclare incorrect, false or misleading information (to mitigate risks on account
of multiple financing/ submission of fake / forged title deeds etc).
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PROCESS OF HOME LOAN
The process of housing loan consists of three stages. All the three stages play a vital role in
fulfilling the requirements of housing finance of the bank.
The three stages are as follows-
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PRE-SANCTION
DISBURSEMENT
SANCTION
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FLOW CHART SHOWING THE CREDIT APPRAISAL IN HOME LOAN
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36
Approval by the sanctioning
officer
Visit / inspection by the
appraisal officer (if necessary)
Recommendation of loan
proposal to higher authority
Checking the genuineness of
the builder, property to be
purchased)
Verification of documents
submitted by the applicant
Submission of documents with
application form
Obtaining search report &
valuation certificate by
empanelledlawyer &valuer.
Preparation of security
documents by bank.
(Hypothecation &mortgage)
Asset verification by the
disbursement officer
Commencement of
disbursement
Repayment
PRE-
SANCTIO
N STAGE
SANCTIO
N STAGE
DISBURSE
M-ENT
STAGE
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iv. Place: Builder-
To establish the genuineness, track record and reputation in terms of timely
completion of quality projects.
Procedure: check-a. With a few reputed builders in the area.
b. With a few of the owners of their complete projects to ascertain quality of
construction, timely delivery and conveyance of the ownership issues.
c. With the concerned industry body i.e. Chamber of Housing Industry /
Builders Forum etc.
d. With the builders bankers.
v. Place: property proposed to be purchased-
Procedure-
a. Independent and surprise visit is to be made to the property.
b. Identify the property based on details in title documents.
c. Landmarks for reaching and identifying the property to be recorded.
d. Accessibility / approachability i.e. all modes of transport / car / two wheeler
only / others.
e. Ensure that proper access is available to the property i.e. roads etc.
f. Comments of the locality i.e. whether residential / commercial /
underdeveloped / trouble prone.
g. Comment whether the area is posh / upper middle class / middle class / lowerclass / slum area.
h. Discreet enquires with the owners / occupants of neighboring houses in
respect of the ownership of the property, information on any pending disputes
/ litigation etc.
i. Ensure that the property is kept in good and tenantable condition.
j. Ascertain whether the property is rented out and, if so, for how long and the
rentals p.m. Whether leased to an institution for occupation of its employees
or rented out to an individual / business concern.
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The following items have been taken out of the preview of pre-sanction inspection by the
Banks staff wherever the services of outsourced agencies are available:
i. Visit to the residence of the applicant,
ii. Visit to the residence of the guarantor,iii. Visit to the office / work place of the borrower.
Formats standardized:
In addition to the above procedures, the following formats to be used are also
standardized for the pre-sanction and sanction process to ensure uniformity and effective
compliance of instructions by operating functionaries and to minimize possibility of
frauds during pre-sanction stage:
Pre-sanction inspection sheet
To be kept with documents. (Separate format to be used
for recording pre-sanction visits by Banks staff where
outsourced agencies are engaged).
Control Card
Control card will serve as a check list of compliance of
various processes / procedures, carrying brief details of
the loan, including details of post sanction inspection, to
be kept with documents.
Appraisal format
With a view to ensuring uniformity in appraisal of HLs
and compliance with extant instructions, standard
appraisal format introduces.
Letter forwarding BC / DD to
the Builder / Seller
Standard forwarding letter introduced to safeguardBanks interest and ensure proper delivery of BC / DD
to seller / builder.
Control reportStandard Control Report to ensure uniformity in
reporting a sanction.
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B. SANCTIONING STAGE / PROCESS.
SEARCH REPORT
The sanctioning process in case of home loans starts with the preparation of a search
report. In case of loans amounts below Rs. 1 crore, the bank can take a limited risk bymaking a search for a period pf 15 years, instead of 30 years. if the search made for 15
years does not reveal any encumbrance, then the risk has to be covered by
incorporating the relevant clause in the consolidated stamped affidavit. In case of
properties belonging to government, local authorities, empanelled lawyer should
furnish the search report for 30 years. Where this search report reveals encumbrance
on the property which is detrimental to the Banks interest, immediate steps are to be
taken to either avoid granting the loan or advise the borrower to rectify the defect in
the title, if it is possible.
RISK OF MULTIPLE FINANCING/ SBMISSION OF FAKE TITLE DEEDS
A consolidated stamped Affidavit of Declaration and Indemnity is to be obtained from
prospective borrowers covering various points including non availment of other loans
against the same property, delivery of original documents of title, undertaking that
construction is as per sanctioned building plan etc to enable the bank to initiate
criminal proceedings against them if they declare incorrect, false or misleading
information.
The sanctioning authority should verify the current CIS data base to avoid multiple
financing. This will also enable them to know the repayment obligations of other
loans availed by these borrowers from other branches under other schemes also,
which are not disclosed in the loan applications.
Branches/RACPCs should access CIBIL data base, wherever required, to trace credit
facilities, if any availed by such borrowers from other banks in the centre [opinion
report from these Banks should be obtained regarding nature and conduct of the
facilities, before sanction].
(iv) RACPCs/ Branches can use the service of verification agencies who run 'de-
dupe' tests with other Banks' data too.
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ASSET VERIFICATION AND QUALITY OF LOAN PROCESS
Controlling Offices are to scrutinize every month, at least 5% of the loans sanctioned by a
branch/ RACPC during the previous month, with a view to ascertaining the quality of
pre-sanction processes, loan appraisal, and documentation. This may be done either by
asking the branches/RACPCs to submit photocopies of the relevant papers/documents
or by visiting the branches/RACPCs concerned. Services of Concurrent Auditors may
also be used for this purpose at the RACPCs. Asset verification, in case of at least 5%
of the loan accounts sanctioned during the previous quarter, may be arranged by the
controlling office during each quarter.
I. Disbursement Stage / Process.
It is a stage where the cheques of sanctioned amount of loan are handed over to the
borrower or to the concerned person.
To prevent misuse of funds, disbursement should be made only in phases co-relating to
the actual progress made in the construction e.g. at stages like completion of plinth,lintel level, roof, etc. Before disbursement, the proper end-use of funds should be
ensured by visit to the sites. Branches may insist on a certificate from engineer /
architect of the borrower confirming stage wise completion of the project.
As regards loans for repairs/renovation/construction, etc, Branches should satisfy
themselves about the estimated cost of labor and other charges and after obtaining
certificate(s) of qualified engineers/architects as concerned necessary.
As far as possible it is made directly to the suppliers / builders as per the progress of the
work only after complete execution of documents and creation of valid mortgage.
The process of disbursement is as follows-
Disbursement of cheques
This is the final step in the disbursement stage. The operational manager prepares the cheques
along with the letter which is handed over to the borrower.
The disbursement of cheques is done in accordance with the stage of construction as reported
by the technical advisor. The cheques is disbursed in two ways as follows-
i. DISBURSEMENT IN ONE STROKE
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DISBURSEMENT
ONE STROKE
DISBURSEMENT
STEP-WISE
DISBURSEMENT
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In case of purchase of property which is in ready stage the payment is made in full
to the concerned party from whom the property is being purchased. The property
such as flat / fully constructed house etc. which are ready for acquisition comes
under this case.
Also the property which is proposed for re-sale comes under this case where theborrower needs to make full payment to the seller.
ii. STEP-WISE DISBURSEMENT
a. In certain cases where the work is carried out in stages such as the
construction of house the disbursement is done in phases. The bank requires
documents such as the engineers or architects completion certificate and the
quotation and bills of material to be purchased for disbursement of the
cheques.
The architect gives the stage wise completion certificate such as-Completion
of-
i. Plinth area,
ii. Lintel level,
iii. Roof, etc.
In cases where the payment has to be given in installments then the
disbursement is also done as per the installments i.e. first installment, second
installment, etc.
Example of step-wise disbursement is as follows:
PARTICULARS AMOUNT (IN %)
1. At the time of preparing agreement to sale 10%
2. At the time of Plinth 10%
3. At the time of first slab 10%
4. at the time of second slab 8%
5. At the time of third slab 8%
6. At the time of forth slab 8%
7. At the time of fifth slab 8%
8. B. B. Works 10%
9. Outer plaster 10%10. Internal plaster 8%
11. At the time of flouring 5%
12. At the time of possession 5%
TOTOL: 100%
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E. REPAYMENT OF LOAN
Repayment of loan starts after the final disbursement of the loan.
If the disbursement is done in one stroke then the repayment starts immediately from
the next month.
If the disbursement is done step-wise then the maximum time for disbursement ofloan is 18 months. The disbursement starts from the 19 th month even if the project is
completed or not.
F. GENERAL CAUSES OF REJECTION OF PROPOSAL
Not every loan proposal that comes to the bank are approves certain cases gets rejected
because of some or the other reason. The common causes of rejection of loan are as follows:
I. Personal Profile:
a. Negative profile.
b. Dependants more then 5.
c. Age norms not met.
d. Negative references.
e. Manipulated / undisclosed facts, etc.
II. Documents / Property:
a. The credit documents not as per policy.
b. Technical norms not satisfied.
c. Legal documents not as per policy.
d. Fraud documents submitted.
III. Financial reasons:
a. Unsatisfactory credit history.b. Income norms not met.
c. Employment norms not met.
d. Poor financial condition.
e. Too many existing obligations.
IV. Geographical Reasons:
a. If the property is beyond the geographical limits.
b. If the property is in negative profile area.
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CHAPTER 4:
FINDINGS, ANALYSIS &
INTERPRETATION
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DATA REPRESENTATION AND ANALYSIS
Comparative Analysis
Though the schemes of all the four major competitors are more or less the same, there are somany areas with operational differences.
Comparative statements in respect of Housing Finance Activity for the year 2008-09:
ITEMS (%) BOBHFL SBI ICICI HDFC OTHERS
Disbursement 7 16 18 19 37
0
5
10
15
20
25
30
35
40
BOBHFL SBI ICICI HDFC OTHERS
DISBURSEMENT
BOBH
SBI
ICICI
HDFC
OTHE
Interpretation: The chart shows the percentage of disbursement of various financial
institutes and banks. From the above the share of State Bank of India is 16% out of total
disbursement which is less than ICICI & HDFC.
ITEMS (%) BOBHFL SBI ICICI HDFC OTHERS
45
ITEMS BOBHFL SBI ICICI HDFC
Time required for
Processing/Sanction
7 days 5 days 3 days 3 days
Guidelines followed N.H.B R.B.I N.H.B N.H.B
Periodicity of interest Annually Monthly Monthly Annually
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Recovery 98 99 95 98 90
RECOVERY
BOBHF
SBI
ICICI
HDFC
OTHER
Interpretation: The above chart shows the recovery of housing loans by various financial
institutes & banks. State Bank of India shows maximum recovery among all above.
ITEMS (%) BOBHFL SBI ICICI HDFC OTHERS
NPA 0.5 0.4 0.6 0.5 1
NPA
BOBHF
SBI
ICICI
HDFC
OTHER
Interpretation: The above chart shows the rate of Non-Performing Assets in various
financial institutes & banks. Since home loan comes in priority sector the rate of NPA is very
low almost negligible for all above mentioned.
(A)
Total
visit
(B)
Application
received
(C)
Not
eligible
(D)
Rejected
(E)
Withdrawn
(F)
Sanctioned
(G)
Pending
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No. of
Applicants
170 140 12 6 5 112 5
0
20
40
60
80
100
120
140
160
180
A B C D E F G
PARTICULARS
NO. OF APPLICANT
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YEAR
PARTICULARS 2006 2008 2009
PERSONAL
SEGMENT
4546 7171 7298
OTHERS 567 520 1183
TOTAL
ADVANCES
5113 7691 8481
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2006 2007 2008
OTHERS
PERSON
Interpretation: The above chart shows the figures of State Bank of India, Malviya nagar,
New Delhi. The amount of total advances is showing an increase since last 3 years. Even the
amount of loan in the personal segment is increasing which includes home loans, vehicle
loans, education loan, etc.
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YEAR
PARTICULARS 2006 2007 2008
HOUSING LOAN 3682 5593 5871OTHERS 864 1578 1427
TOTAL PERSONAL
SEGMENT 4546 7171 7298
(Figures in Lakhs)
0
1000
2000
3000
4000
5000
6000
7000
8000
2006 2007 2008
OTHERS
HOUSING LO
Interpretation: The above chart figures of housing loan among the total personal segment ofState Bank of India, Malviya nagar, New Delhi. The share of housing loan in the total
personal segment is maximum and is still increasing day by day.
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COMPARATIVE ANALYSIS
PARTICLARS STATE BANK
OF INDIA
ICICI BANK HDFC
1. PURPOSE Purchase/
construction/extension of old /
new house/ flat plot
of land for
construction of house.
For purchase of house
from builder / resale andconstruction / extension
of existing house.
For purchase of house from
builder / resale andconstruction / extension of
existing house.
2. RATE OF INTREST 8%- 11% 9.25% - 10% 9.25%-10.75%
3. LOAN AMOUNT
(i) Salaried
(ii) Self employed
500000 10000000
500000 20000000
200000 10000000
200000 20000000
200000 10000000
200000 20000000
4. ELIGIBILITY
CRITERIA
(i) Salaried
(ii) Self employed
1,20,000 p.a.
2,00,000 p.a
1,44,000 p.a
1,50,000 p.a
1,20,000 p.a
1,50,000 p.a
5. AGE CRITERIA
(i) Salaried
(ii) Self employed
18 60
18 70
21 65
21 65
21 to 58
21 to 65
6. TENURE 5 20 yrs 5 20 yrs 5 20 yrs
7. CURRENT
EXPERIENCE(i) Salaried
(ii) Self employed
2 yr3 yr
1 yr3 yr
3 yr3 yr
8. PROCESSING FEES 0.50% 0.50% Rs.10000/- or 0.5% of loan
amount(whichever is lesser)
+ Service Tax
9.PRE- PAYMENT
CHARGES
2% 2% (Full payment), No
Penalty (Part Payment).
If 25% of outstanding
amount is paid every year
till 3 years - No penalty,
otherwise 2% of outstanding
amount
10.DOCUMENTS
REQUIRED
(i) Salaried
(ii) Self employed
1) Application form
with photograph,
2) Identity &
residence proof,
3) Last 3 months
salary slip,
4) Form 16,
5) Last 6 months
bank salaried credit
statements ,6) Processing fee
1) Application form
with photograph,
2) Identity & residence
proof,
3) Age Proof
4) Latest 3 months
salary slip,
5) Form 16,
6) If current service is
less than 2 years thanprevious company
1) Application form with
photograph,
2) Identity & residence
proof,
3) Latest salary slip,
4) Form 16,
5) Last 6 months bank
statements,
6) Processing fee cheque
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cheque
1) Application form
with photograph,
2) Identity &
residence proof,
3) Education
qualifications
certificate & proof of
business existence,
Business profile,
5) Last 3 years
profit/loss & balancesheet,
6) Last 6 months
bank statements,
7) Processing fee
cheque
relieving letter,
7) Last 6 months bank
statements,
8) Processing fee
cheque
1) Application form
with photograph,
2) Identity & residence
proof,
3) Education
qualifications certificate
& proof of business
existence,
4) Business profile, Last
3 years profit/loss &balance sheet,
5) Last 6 months bank
statements, Processing
fee cheque
1) Application form with
photograph,
2) Identity & residence
proof,
3) Education qualifications
certificate & proof of
business existence,
4) Business profile, Last 3
years profit/loss & balance
sheet,5) Last 6 months bank
statements,
6) Processing fee cheque
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CHAPTER 5:
CONCLUSION,SUGGESTIONS &
LIMITATIONS
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RECOMMENDATIONS & SUGGESTIONS
1. The bank needs to satisfy customer needs that are complicated and difficult to
manage. A robust data warehouse should create wherefrom meaningful data on
customers, their preferences, their spending, patterns etc can be viewed.2. Business process re-engineering is key requirement of bank. Fast delivery of
services, less documentation, simplified process etc, is necessary.
3. It is spending more time on loan disbursement as compared to other private
sector banks. It can focus on measures to reduce this timely delay.
4. There should be strong risk management capabilities.
5. Leadership in market through differentiation and product innovation.
6. SBI can increase professional employment by bank and sells its loan schemes
to customer aggressively with the help of advertising media.
7. Continually invent new products and services to satisfy more customers.
8. Bank can upgrade interest rate according to market share.
9. SBI can provide Net banking services to its existing customers as well as
promotion stunt to attract new customers.
10. Insurance for life is optional for now but to minimize the risk life insurance
should be made compulsory.
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CONCLUSION
1. For the purpose of approving a loan credit appraisal plays a very important
role.
2. Home Loans being a trust area the rate of NPA is very low or negligible ascompared to the other loans. Thus, there is minimum risk for default in Home
Loan Finance.
3. There is heavy risk involved in funding of any property like double funding.
4. In case of the borrower lost his job or meets with accident, which results into
permanent disability & in case of the borrowers death the loan repayment
responsibility comes on his family. It is major problem.
5. Most of the customers prefer SBI because of low interest rates.
6. Documentation plays a very important role in the appraisal process.
7. Due to careful credit appraisal of loan the chances of default are reduced and
the repayment of loan almost 99%.
8. Recent modifications in home loans such as Take over of housing loan helps
the borrowers of other banks or financial institutes to transfer their loan to State
Bank of India and enjoy the benefit of low interest rates & In principle
sanction/approval helps the borrower to take advantage of finding property as
per his eligibility.
EQUATED MONTHLY INSTALMENTS FOR LOAN AMOUNT OF Rs.1,00,000
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No. of Months 6.75% 7.00% 7.25% 7.50% 7.75% 8.00% 8.25% 8.50% 8.75%
6 16,996 17,009 17,021 17,033 17,045 17,058 17,070 17,082 17,095
12 8,641 8,653 8,664 8,676 8,687 8,699 8,710 8,722 8,734
18 5,857 5,868 5,880 5,891 5,903 5,914 5,925 5,937 5,948
24 4,466 4,477 4,489 4,500 4,511 4,523 4,534 4,546 4,557
30 3,632 3,643 3,655 3,666 3,677 3,689 3,700 3,712 3,72336 3,076 3,088 3,099 3,111 3,122 3,134 3,145 3,157 3,168
42 2,680 2,691 2,703 2,714 2,726 2,738 2,749 2,761 2,773
48 2,383 2,395 2,406 2,418 2,430 2,441 2,453 2,465 2,477
54 2,152 2,164 2,176 2,188 2,199 2,211 2,223 2,235 2,247
60 1,968 1,980 1,992 2,004 2,016 2,028 2,040 2,052 2,064
66 1,818 1,830 1,842 1,854 1,866 1,878 1,890 1,902 1,914
72 1,693 1,705 1,717 1,729 1,741 1,753 1,766 1,778 1,790
78 1,587 1,599 1,612 1,624 1,636 1,648 1,661 1,673 1,686
84 1,497 1,509 1,522 1,534 1,546 1,559 1,571 1,584 1,596
90 1,419 1,431 1,444 1,456 1,469 1,481 1,494 1,506 1,51996 1,351 1,363 1,376 1,388 1,401 1,414 1,426 1,439 1,452
102 1,291 1,304 1,316 1,329 1,342 1,354 1,367 1,380 1,393
108 1,238 1,251 1,263 1,276 1,289 1,302 1,315 1,328 1,341
114 1,191 1,203 1,216 1,229 1,242 1,255 1,268 1,281 1,295
120 1,148 1,161 1,174 1,187 1,200 1,213 1,227 1,240 1,253
126 1,110 1,123 1,136 1,149 1,162 1,176 1,189 1,202 1,216
132 1,075 1,088 1,102 1,115 1,128 1,142 1,155 1,169 1,182
138 1,044 1,057 1,070 1,084 1,097 1,111 1,124 1,138 1,152
144 1,015 1,028 1,042 1,055 1,069 1,082 1,096 1,110 1,124
150 989 1,002 1,016 1,029 1,043 1,057 1,071 1,085 1,099
156 965 978 992 1,005 1,019 1,033 1,047 1,061 1,075
162 942 956 970 983 997 1,011 1,025 1,040 1,054
168 922 935 949 963 977 991 1,006 1,020 1,034
174 903 916 930 944 959 973 987 1,002 1,016
180 885 899 913 927 941 956 970 985 999
186 868 882 897 911 925 940 954 969 984
192 853 867 881 896 910 925 940 954 969
198 839 853 867 882 896 911 926 941 956
204 825 840 854 869 883 898 913 928 943
210 813 827 842 856 871 886 901 916 932
216 801 816 830 845 860 875 890 905 921222 790 805 819 834 849 864 880 895 911
228 779 794 809 824 839 855 870 885 901
234 770 784 799 815 830 845 861 876 892
240 760 775 790 806 821 836 852 868 884
LIMITATIONS
Following are the limitations for carrying out this project work:
The study was related to the Financial Services sector where the Financial Institution
did not given each & every information of their working procedure.55
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The study was related to Credit Appraisal System for specifically Home Loan, so
other Credit Appraisal System was not taken into consideration for the study.
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BIBLOGRAPHY
BOOKS
SITES
BOOKS:
Banking guide SBI group
promotions.
By G. Subramanian.
Personal segment loan products SBI Staff college Manual.
Research Methodology By C. R. Kothari.
SITES:
www.statebankofindia.com
www.sbi.co.in www.sbimf.com
www.onlinesbi.com www.sbici.com
http://www.statebankofindia.com/http://www.sbi.co.in/http://www.onlinesbi.com/http://www.statebankofindia.com/http://www.sbi.co.in/http://www.onlinesbi.com/