A

SUMMER TRAINING
REPORT
ON
COMPARISON OF HOME LOAN SCHEME OF
DIFFERENT BANKS

SUBMITTED TO
SUPERVISOR NAME

SUBMITTED BY

YOUR NAME

ACKNOWLEDGEMENT

Perfect is the famous saying and when a person get practical experience under the guidance of
expert of the respective field, the knowledge gained is priceless.

With the sense of great pleasure and satisfaction, I present this project report entitled
COMPARISON OF HOME LOAN SCHEME OF DIFFERENT BANKS completing a task successfully is
never a man efforts similarly completion of this report is the result of invaluable support and
contribution of number of the peoples in direct and indirect manner. In the light of foregoing, first
of all my heartfelt great fullness and thanks goes to Mr. SUMIT SURI as a MANAGER of HDFC
LIMITED for giving opportunity to work for his highly esteemed organization and for being a
constant source of inspiration and guidance throughout the project. Without his able support the
project would not have seen the light of the day.

At this juncture, I would also like to thank all the other team members of the HDFC LIMITED.
Without their indispensable cooperation, the project wont have been completed within the
stipulated time period. Finally I would like to thank the staff of other home loan provider banks,
without whose cooperation in providing the data for the project would have been impossible.

PREFACE

Modern organizations are highly complex ad dynamics systems. They operate under very
turbulent social economic and political environment. They are required to reconcile several
incompatible goals. Conflicting roles and divergent interest they are also fraught with the use risk
and uncertainties, hence tactful management of such organization to plan to execute guide,
coordination and control the performance of people to achieve predetermined goals. Management
has to keep the organization vibrant moving and in equilibrium. It has to achieve goal which
themselves are changing it is therefore a problem highly complex and ticklish.

This information will be asset to marketing manager in making effective decisions. The
researchers are used to acquire and analyze information and to make suggestions to
management as to how marketing problems should be solved.

The marketing research is the process which links to manufacturer, dealers and individuals
through information in important part of curriculum of M.B.A. programme is project taken by the
students to institute under which he or she is studying, after completion of third semester of the
programme.

The objective of this project is to enable the students to understand the application of the
academics in the real business life. I am fully confident that this project report will be extremely
useful to the management.

INTRODUCTION

The roof over ones head and ground beneath ones feet count as the bare necessities of life.
Theres nothing quite like owing a home, however humble to give that warm and glowing feeling.
But when one buys a home, one has much more than a feel good purchase in mind! Its also a
crucial investment decision, perhaps the biggest spending decision of ones life. There are ample
opportunities today for young salaried investors to plan their moves early and buy a house at
right time- and at right price. In the process, not only do they fulfill that cherished dream of
owning a house, but also put themselves on the path to acquiring property that would meet the
needs and aspirations of their growing family, even as it leads to wealth creation. Every individual
aspires to own a home. But many either spend a lifetime saving to purchase a house or exhaust
money on monthly house rents

OBJECTIVE OF THE STUDY:

The main objective of the study is to find out the tariff changes charges by other banks in
comparison to HDFC bank.

The aim of the study is to help HDFC to know where it lacks in loans and how far the performance
of other banks is better so that HDFC figure out the common problems being faced by the
customers while dealing in the loan department so that further HDFC can improve its
services and schemes offered by them to their customers.

PROFITABLE PROPOSITION

The overall demand in residential sector has grown by about 7-8% in the past few months as
compared to the same period last year. The growth is on account of two main factors:

One, income tax exemption.

Two, with no similar rebates available for individuals in the high income group, they are
creating a second asset.
Add to this the stable property prices over the last year and plunging interest rates, planning for
dream,] home could not have been better timed. Rock-bottom interest rates, standardization of
periodicity of interest calculation across lenders (which make it easier to compare loans), lower
interest charges, waiver of loan application processing fee and a customer friendly attitude is
reason enough to celebrate the ascension of the home loan consumer as the king.

In response, private players like ICICI Bank, IDBI Bank, Standard Chartered Bank and few others
too lowered their rates.

Market leader HDFC also brought down its interest rate to 10.25% very recently, to participate in
the interest rate war. If one is still not satisfied with the lowered loan rates theres more.

Most banks have changed the way the interest is calculated from annual rest to monthly rests.
Under the annual rest method, the EMIs (equal monthly installment) one pay through a year, are
factored in as part-repayment of the principal component only at the end of each year. In other
words one has to pay interest even on the installments one has paid until they are reduced from
the principal at the end of each year. Under monthly rests, the principal is lowered by the
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appropriate amount each month. The thumb rule being that the more frequently interest is
calculated, the better for the creditor.

HDFC added monthly rests on its fixed interest loans apart from annul rests. As a result the fall in
the EMIs on fixed interest loans (where the interest rate is constant for the entire tenure of the
loan, irrespective of the changes in the lending rates) is more pronounced than on floating rate
loans (where the loan interest rate varies with the changes in the interest rate). For example, the
EMI on a fifteen year fixed interest loan for Rs. 15 lakh has come down by Rs. 15 lakh has come
down by Rs. 840, the corresponding fall in the EMI on a floating rate loan is only 4165. apart from
lowering the cost of ones loan, the switchover to monthly rests has another advantage : it makes
it easier to compare loans.

HOME LOAN

Home loans are loans you have access to, depending on whether you want to buy or build a
house and can also be used to repair or extend an existing house.

Who can avail of these loans?

According to lending institutions, any Indian resident who is over 21 years of age at the
beginning of the loan and below 65at its maturity can avail of the loan. Salaried Employees as
well as Self- Employed citizens can apply. NRI Salaried and RBI Self Employed, under RBI
guidelines, can approach only nationalized banks and other HDFC for loans.

Why should one option for a loan to buy a house?

Taking a loan seems like a good option when the money at hand is insufficient to buy the house of
your dreams. Consider couples in their twenties and thirties. They enjoy a good income currently,
buy their accumulated capital isnt enough to purchase a house. Whereas a home loan can give
them access to capital their current earnings.
Also, if you take a 10 years old loan when you are thirty, you could repay it by the time youre
forty. So you dont have to be burdened with the interest and are free to plan your retirement
savings.

The Quantum of loan that one can avail of :

Loan sanctioned depend on your repayment capacity which is based on your current income
and your future repayment capacity. You would include your spouses name to enhance the loan
amount.The maximum loan can be sanctioned varies with each bank/institutions and ranges from
Rs.10 lakhs to Rs. 1 crore.

Benefits of taking a home loan:

A home loan is very different from a personal loan like a car loan for instance. You can utilize a
home loan for financing an asset that will hold its value and even appreciate over the period of
the loan. Though its price could fluctuate in the short terms, Total Estate will show capital
appreciation over the years. The value of your house generally while the loan remains constant. If
you had opted to wait, save up and buy a house, it would, in the long run cost you much more;
home loans also come with many tax benefits.

Tax benefits of taking a home loan:

The income tax authorities look with favor upon those servicing a housing loan from specified
financial institutions. And, it is up to you to be wise enough to take advantage of this.

Section 24 of the Income Tax:

Interest on loan till Rs.2.5 lakhs per annum is exempted from income tax (under section 23/24(1)
of the Income tax act).

Section 88 of Income Tax Act:

Financial Institutions, which give, home loans:

Leading Banks Housing finance companies

FINANCIAL IMPLICATIONS OF AVAILING A LOAN (SMALL OR BIG)

There are several expenses involved apart from repayment of the actual loan amount:

1.
Processing fees- A processing fee (PF) is charges at the time of submission of the
application form and covers expenses incurred for processing the application form. This fee has to
be paid upfront by the customer in some cases, it is non-refundable.
2.

Administration fees- to meet operating expenses.

3.
Pre-EMI- A simple interest calculated on the disbursement amount in case of a plot under
construction.
4.
EMI- The EMI is an abbreviated form of the equated money installment and is simply
referred to as monthly installment in common parlance. And, being a self-explanatory term that is
exactly what it is. The amount you will have to pay you financier every month when repaying your
loan. Being a monthly payment, at the end of the year, you would have paid 12 EMIs.

TYPES OF LOANS AVAILABLE

Broadly two types- fixed rate and variable rate loans; while the former deals with a fixed rate of
interest over the entire duration of the loan, the latter has the rate of interest changing according
to the fluctuations in the market.

LOAN THAT ONE CAN AVAIL

Up to 85-90% of the total cost based primarily upon the individuals payback capacity.

GENERAL CONDITIONS THAT GOVERN A HOME LOAN:

These are likely to vary with respect to the different types of housing loans:

 The maximum period of the loan is normally fixed by HFIs. However, HFIs do provide for
different tenors with different terms and conditions.
The Installment that you pay is normally restricted to amount 45% of your monthly gross
income.
You will be eligible for a loan amount, which is the lowest as per your eligibility. This is
calculated on the basis of your gross income and payback capabilities.
Some HFIs insist on guarantees from other individuals for due repayment of your loan. In
such cases you have to arrange for the personal guarantee before the disbursement of
your loan tasks place.
Most HFIs have a panel of lawyers who go through your property documents to ensure that
the documents are clear and are not misrepresented. This is an added benefit that you get
when you avail of a loan from an HFI.
You repay the loan either through Deduction against Salary, Post dated cheques, and
standing instructions or by Cash/DD.
WHAT ALL ONE CAN TAKE THE LOAN FOR?

There are different types of home loan tailored to meet ones needs heres all some of them.

Home purchase loan: This is the basic home loan for the purchase of new home.
Home improvement loans: These loans are given for implementation repair works &
renovation in a home that has already been purchased by the client.
Home construction loan: This is available for the construction of new home.
Home extension loan: This is given for expanding or extending an existing home for e.g.:
addition of an extra room etc.
Home conversion loan: This is for those who have financed the present home with home
loan & wish to purchase& move to another home for which some extra funds are required
through home on version loan ,existing loan is transferred to the new home including the
extra amount required eliminating the pre payment of the previous loan.
Land purchasing loan: this loan is available for the purchasing of land for both
construction and investment purpose.
Bridge loan: these are designed for those people who wish to sell the existing home &
purchase another one. The bridge loan help finance the new home, until a buyer is found
for the home.

HDFC BANK
INTRODUCTION

HDFC (Home Development Finance Corporation) Home Loan, India have been serving the people
for around 3 decades and providing various housing loan according to their varied needs at
attractive and reasonable interest rates. Owing to their wide network of financing, HDFC Home
Loans provide services at doorstep and helps you find a home as per your requirements.

COMPANY PROFILE

HDFC Limited founded in 1997 by Ravi Maurya and Hansmukh bhai Parekh, is an Indian NBFS
focusing on home loans. HDFC operates through almost 450 locations throughout the country
with its corporate head quarters in Mumbai, India. HDFC also has an international office in Dubai,
UAE with service associates in Kuwait. HDFC is the largest housing company in India for the last
27 years.
HDFC was amongst the first to receive an in principal approval from RBI to set up a bank in the
private sector, as a part of the RBIs liberalization of the Indian banking industry. It was
incorporated on 30th august 1994 in the name of HDFC Bank Limited, with its registration office
in Mumbai. HDFC began its operations as a scheduled commercial bank on 16 th January 1995.

ABOUT THE PROMOTER

HDFC, the promoter, is Indias premier housing finance company and enjoy an impeccable track
record in India as well as in international markets.

Since its inception in 1997, HDFC has maintained a consistent growth in its operation and
profitability. Its outstanding loan portfolio covers over a million dwelling units. HDFC has
developed significant expertise in retail mortgage loans to different market segment and also has
a large corporate client base in relation to its housing related credit facilities and its investment in
portfolio.

With its tremendous brand equity, the strong reputation in the Indian and international financial
services market, large shareholder base and unique consumer franchise, HDFC was ideally
positioned to promote a bank in the
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Indian environment. HDFC (together with its fully owned subsidiary HDFC Investment Limited)
owns about 31 % of the equity. They had started with a strategic alliance with the Natwest group
in UK with 20% equity, which has divested later on. The bank has also signed a memorandum of
understanding for strategic business collaboration with chase Manhattan Bank in Feb. 2, 1999.
BUSINESS PHILOSOPHY

The mission of the HDFC Bank is to be world class Indian bank. This would imply a bank that
would meet various financial needs of its customers in a convenient and cost effective manner at
international standard of service.

The bank seeks to achieve the status of a preferred organization among its major constituentscustomers, shareholders, regulators, employees, suppliers etc. while maintaining the highest
level of integrity and corporate governance.

The business philosophy at HDFC bank is based on four core values: operational excellence,
customer focus, and product leadership and people competitors.

The Bank faces the strong competition in all of their principal lines of business. Their primary
competitors are large public sector banks, other private sector banks, foreign banks and in some
product areas, non-banking financial institutions.

WHOLESALE BANKING

Principal competitors in wholesale banking are public and new private sector banks as well as
foreign banks. The large public sector banks have traditionally been the market leaders in the
commercial lending. Foreign banks have focused primarily on serving the needs of multinational
companies and the Indian corporations with cross- border financing requirements including trade,
transactional and foreign exchange services, while the large public sector banks have extensive
branch networks and large local currency funding capabilities.

RETAIL BANKING

In retail banking, their principal competitors are the large public sector banks, which have much
larger deposit bases and branch networks,, other new private sector banks and foreign banks in
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case of retail loan products. The retail deposit shares of the foreign banks are quite small in
comparison to the public sector banks, and have also declined in the last five years, which we
attribute principally to the competition from new private sector banks. However, some of the
foreign banks have a significant presence among non-resident Indians and also compete for nonbranch based products such as auto loans and credit cards. They face significant competition
primarily from foreign banks. In provision of debit cards and also expect to face competition from
foreign banks when we begin offering credit cards. In mutual fund sales and other investment
related products, their principal competitors are brokers and foreign private banks.

TREASURY

In treasury advisory services for corporate clients, the compete principally with foreign banks in
foreign exchange and derivatives trading as well as SBI and other public sector banks ion the
foreign exchange and money market business.

LOANS

HDFC brings back you a wide range of loans to cater your financial needs.
The bank offers the following loans:

1)
2)
3)
4)
5)
6)
7)
8)

Personal loans.
Consumer loans.
Auto loans
Loans against shares
Loans against RBI bonds
Loans against insurance policy
E- Instant loans give the facility of loans approval in the 60 second on the internet.
HDFC has offices spread all over the country. This extensive network helps HDFC in
providing services to large and well spread out clients. This network of interconnected
offices (on data circuits) helps HDFC to process application for purchase of property
anywhere in India. HDFC has further established an office in Dubai and service associates
in Kuwait, Oman and Quarter to make to easier for Middle East based non-resident Indians
to apply for loan to HDFC-India.

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9) HDFC is pioneer of housing finance in India and has been a leader in business for the last
23 years. HDFC has vast experience and a very committed and skilled staff to handle
housing loan applications and solving customer problems.
HDFC LOAN SCHEME PURPOSE

HDFC Limited offers loans for the following purposes:

Land purchase
Home construction/purchase
Home extension
Home improvement loans
Short-term bridge loans
Non-resident premises loans for professionals.

LOAN AMOUNT

You can avail of maximum of up to 85% of the cost of the property, including the cost of the land.

LOAN TENURE

You can repay the loan over a maximum period of 20 years under both FRHL and ARHL.
Repayment will not ordinarily extend beyond your age of retirement (if you are employed) or on
your reaching 65 years of age, whichever is earlier. However, HDFC will endeavor to determine
the repayment period to suit your convenience.

RATE OF INTEREST

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The rate of interest of HDFC is 8.75%.under the monthly rest option, interest is calculated on
monthly rests. Principal repayment is credited at the end of every month.

At HDFC you have the choice between the normal FRHL and the innovative ARHL. Alternatively
you can also avail the part of the loan under FRHL and balance under ARHL.
HDFC also offers you the option to switch between schemes for the nominal fee. Interest rates on
ARHL will be linked to HDFCs Retail Prime Lending Rate (RPLR) which currently is 16.75% .The
rate on your loan will be revised every three months from the date of first disbursement, if there
is a change in RPLR, i.e. the interest rate on your loan may change. However, the EMI on the
home loan disbursed will not change. (if the interest rate increases, the interest component in an
EMI will increase and the principal component will reduce, resulting in an extension of the term of
the loan, and vice versa when the interest rate decreases).customer will be provided with an
annual statement indicating the details of the interest and principal payment made during the
year.

SECURITY

Security for the loan normally is first mortgage of the property to be financed and/or such other
collateral security as may be necessary. Interim security may be required, if the property is under
construction. Collateral or interim security could be assigned to HDFC of life insurance policies,
the surrender value of which is at least equal to the loan amount, guarantees from sound and
solvent guarantors, pledge of shares and such other investments that are acceptable to the
HDFC.

Loans from HDFC are available even if you are availing a housing loan from your employer. HDFC
has already entered into arrangements with several employers enabling employees to avail of
loans both from the employer as well as HDFC for the same property. Please do ensure that the
title of the property is clear, marketable and free from encumbrance. To elaborate there should
not be any existing mortgage, loan or litigation which is likely to affect the title to the property
adversely.
DOCUMENTS/SUPPORTING DOCUMENTS TO BE ATTATCHED:

FOR ALL THE APPLICANTS:

1) Allotment letter of the co-operative society/association of the apartment owners.

2) Copy of approved drawings of proposed construction/purchase/extension.
3) Agreement for sale/sale deed/detailed cost estimate from architect/engineer for the
property to be purchased/constructed/extended/renovated.
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4) If you have been in your present employment/business or profession for less than a year,
mention an a separate sheet details of the of the occupations for previous five years,
giving position held, reason for change and period of same.
5) Applicable processing fees.
6) Proof of residence: attested copy of any one of the following:
a) Ration card
b) Passport
c) Driving license
d) Voters identity card
e) Current telephone bill/electricity bill/gas bill
7) Proof of identity: attested copy of ay one of the following:
a) Passport
b) Driving license
c) Voters identity car5d identity card issued by the employer (if employed in
state/central government)
d) PAN card
8) Certificate of loan outstanding issued by the lender (for refinance cases only)
9) Any other information regarding your repayment capacity that is necessary and will assist
HDFC in appraising the loan proposal.
ADDITIONALLY

IF YOU ARE EMPLOYED:

1) Verification of the employment form with only part I filled in.

2) Latest original salary slip/salary certificate showing all deductions.
3) If your job is transferable, permanent address where correspondence relating to the
application can be mailed.
4) A letter from your employer agreeing to deduct the EMI towards the repayment of the loan
from your salary. This will expedite the processing of your loan application.
5) Your updated original bank pass book/s or original bank statement/s showing salary and
saving entries for the last six months.
6) A photo-copy of your Form-16 (issued by your employer) for the last assessment year.
IF YOU ARE SELF EMPLOYED:

1) Balance Sheets and Profit & Loss Accounts of the business/profession along with copies of
individual income tax returns for the last three years certified by the Chartered Accountant.
2) A note giving information on the nature of your business/profession, form of organization,
clients, suppliers, etc.
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3) Copies of individual tax chalans for the last three years

4) Copy of advance tax chalan (if any)
5) Your updated original Bank Pass Book/s or Original Bank Statement/s showing saving s
entries for the last twelve months.
TAX BENEFIT

You are eligible for certain tax benefits on principal and interest components of a loan under the
Income Tax Act, 1961.

ELIGIBILITY

The repayment capacity as determined by the HDFC will help in deciding how much we can
borrow (the cost of the property or Rs.1crore whichever is lower). Repayment capacity takes into
consideration factors such as income, age, qualifications, number of dependents, spouses
income, assets, liabilities, stability and continuity of occupation and saving history. And, of course,
HDFCs main concern is to make sure you can comfortably repay the amount you borrowed.

ABOUT THE PRODUCT

HDFCs Home Loans offers you various unique benefits and are easy to arrange and repayable in
easy monthly installments. The terms of the loan can be structured according to the customer
requirement.

Home loans can be applied for by either individually or jointly. Proposed owner of the property, in
respect of which the loan is being sought, will have to be co-applicants. However, the coapplicants need not be co-owners. Loans can avail up to a maximum of 85% of the cost of the
property (including the cost of the land). HDFC lends up to a maximum of Rs. 10000000 on a
home loan to an individual. You can repay the loan over a maximum period of 20 years. They
determine the loan amount after evaluating the repayment capacity of the individual. HDFCs
main concern is to help individuals comfortably repay the borrowed amount.

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SUPERIOR PROCESSING CAPACITY:

HDFC has over the years invested substantially into the computer systems and training. This has
enabled HDFC to respond to customer needs and build up capabilities to approve loan on the spot
or disburse them fast.

BRANCH NETWORK:

HDFC has offices spread all over the country. This extensive network helps HDFC in providing
service to large and well spread out clients. This network of interconnected offices (on data
circuits) helps HDFC to process applications for purchase of property anywhere in India. HDFC has
further established an office in Dubai and service associates in Kuwait, Oman, Qatar, Bahrain and
Saudi Arabia to make it easier for Middle east based non-resident Indians to apply for the loan to
HDFC-India.

EXPERIENCED TRAINED STAFF:

HDFC is a pioneer of housing finance in India and has been a leader in the business for the last 25
years. HDFC has vast experienced and very committed and skilled staff to handle housing loan
applications and solving customer problems.

FREE COUNSELLING:

HDFC believes that it is in the business of providing solutions to an individuals need for owing a
house, and not just in the business of providing finance. Keeping this in mind HDFC will provide
free counseling to on how and where to buy a house in India (property services) or what are the
prices and trends in the real estate market or what precautions one should take before buying a
house. This service is offered at any of the HDFCs offices.

LEGAL AND TECHNICAL GUIDANCE:

HDFC has qualified legal and technical staffs who liaise with developer to collect and scrutinize
the property documents and permissions. We have master files of most projects being developed
by the reputed developers. It has always been HDFCs endeavor to protect the interest of the
borrower, as we believe that the buying a house is one of the most Important decisions in this life.
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FLEXIBLE (CUSTOMIZED) REPAYMENT SCHEMES:

Keeping in mind the fact that each individual has unique problem requiring unique solution, HDFC
has developed various repayment options like Step Up Repayment Facility (SURF), Flexible Loan
Installment Plan (FLIP) Balloon Payment plan and Structured Repayment Plan.

STEP UP REPAYMENT FACILITY

HDFC Ltd has a hitherto with you, right through .This statement HDFC proves time and Again by
developing close relationship with individual customers and by constantly
Developing and marketing in the market new and innovative products that increase the
Comfort level of the customers. Along the same philosophy HDFC came up with Step Up
Repayment Facility which once again reassures customers that HDFC helps you achieve your
dream.

This facility is especially helpful to those customers who want to get a loan on an amount
that is not falling within the permissible limit of their repayment capacity. It also is in line with
HDFCs aim to provide greater degree of personalization in service and the tools. Hence there can
be the situation wherein the applicant is not in the position to pay the required EMI which is
calculated by the ILPS (Individual loan processing system).HDFC in this case offers to let the
applicant use one of the two plans to repay the loan amount.

The EMI Chooser 1

In this plan the applicant gets the advantage from HDFC to select the amount that
he wants to pay as his fist EMI. This means that HDFC will let the applicant decide
what amount he can comfortably pay to HDFC in the first term of his Loan Repayment Schedule.
The system will calculate the next two EMIs for the next two terms

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The customer can hence decide when he wants to repay the maximum amount of the Loan to
HDFC and when he wants to repay minimum leftover or remaining amount of the loan in the form
of still smaller EMIs.

The EMI Chooser 2

This plan is an extension of the aforementioned plan .In this plan HDFC helps the Applicant by
letting him choose two EMIs .This means that the Applicant can select the amount that he wants
two pay for both the First and the Second terms of his repayment schedule. This translates into
more help and more convenience to the applicant. However the benefits of these plans dont stop
here.

The Applicant can also allocate the term length for which he wants to pay what amount
This translates into a great advantage to the Applicant .He can now link

1. His current salary

2. The rate of average increment,
3. His existing and expected obligations,
4. His existing and expected expenses
5. The length of the term among others.

HDFC can hence assist the Applicant in developing a much more personalized loan plan as
compared to its competitors in the Housing Loan market.

The Applicant can also save money by using these plans .This is because the total Outflow in case
of a regular plan is more as compared to these special plans. The Applicant will hence obtain
more benefit in case of Prepayment and elsewhere.

C.
All Loans from HDFC Ltd are subject to Tax exemption and be treated as Rebate. Hence
HDFC lets the customer save their hard earned money.

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FLEXIBLE LOAN INSTALMENT PLAN (FLIP)

Another First of its kind product from HDFC .This is also to assist the Applicant to easily secure a
loan in the following condition. FLIP is used when the applicant and co-applicant want to jointly
repay the loan. There is however a problem in the situation which would otherwise not allow the
loan to be sanctioned. There are two applicants hence two incomes .Therefore in the joint
payment they can combine their income to repay the loan .Let there be Mr. A and B who want to
take a loan for 14 years .A is the father and B is the son of A .Now consider the situation in which
A and B want to take a loan and jointly repay it .But A is 52 years old and B is only 25 .Hence A
will retire after 8 years and will not be repaying the EMI but B can continue to repay the loan. In
that case although there will be a problem at other places but in HDFC this is solved by taking
different incomes in the terms. Hence the income that will be considered earlier will be the
fathers income and at his retirement or at any other selected stage of repayment we will begin to
consider only the income of the son.

The advantage of FLIP in terms of the Applicant is that of joint payment, personalization, easy
repayment, and freedom from many possible problems. In the Illustration the father is going to
pay only for 105 months and after that we are to consider the sons salary only for the next
remaining 60 months.

PARI PASSU/SECOND MORTGAGE ARRANGEMENT:

HDFC has a tie-up with a large number if public sector organizations and banks which enable us
to offer loans to your employees with the flexibility of their spouse also availing a loan from
his/her own employer.

SAFE DOCUMENT STORAGE FACILITIES:

HDFC has state of art storage facilities which are theft and fire proof, at various locations where
loan and property documents are stored. In this way valuable documents are stored safely over
the period of the loan and are released almost immediately after a customer repay his loan.
ELECTRONIC MAIL:

HDFC through its E-mail services can promptly respond to queries. In addition, HDFC can
promptly send its application form cum brochure and other detail on its loan products by e-mail to
interested individuals. For Non-resident Indians our interactive website offers another means of
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contacting us. In our effort to reach out globally dispersed Non-resident Indians, we will
continuously enhance our website.

HOME CONVERSION LOAN:

HDFC offer the option of a home conversion loan to its existing customer who are interested in
moving to a new house. Through this scheme the customer can apply to have their existing loan
transferred towards the purchase of the new home. Customers may also apply for an additional
loan amount for the purchase of the new house. This gives the customers the option of selling
t6heir existing house if they wish to, without having to repay their old loan

APPLICATION CAN BE MADE BEFORE SELECTING THE PROPERTY:

Individuals may make an application for the loan even if the property has not been selected or
the construction has not commenced. HDFC can provide assistance in locating an appropriate
house to such customers.

HOME IMPROVEMENT LOANS:

As an exclusive offer to its existing customers HDFC offers Home Improvement Loan up to 100%
of the improvement cost as compared to the home improvement loans up to 70% of the
improvement cost offered to the general public.

FEE:

A processing fee of 0.5% of the loan amount applied for rs.5 per rs.1000 of the loan applied for is
payable when the application form is submitted to HDFC. This fee is in the respect of costs
incidental to the application. For example:

Loan applied for

fees

Rs.20000

Rs.100

Rs.100000

Rs. 500
21

On approval of the loan, a loan offer is made to you on acceptance of the offer. You have to pay
an administrative fee of Rs.0.5% of the loan approved. You can also pay the processing fee and
administrative fee upfront i.e. 1% of the loan at the time of submission of the loan application
itself. This fee is in respect of the costs incidental to the application. Taxes as applicable will be
charged on the fees collected.

CHARGES:

For Fixed Rate Home Loan (FRHL) an early redemption charge of 2% of the amount being prepaid
is payable, if the amount being repaid is more than 25% of the opening balance. However under
Adjustable Rate Home Loan (ARHL) option early redemption charges of 2% is payable only in case
of commercial refinance. You may be required to submit the copies of your Bank Statements or
any other documents that HDFC deems necessary to verify the source of prepayment.
You can make payment for fees and charges by cheque marked payees account only drawn on
a bank in a city where HDFC has an office or by demand draft (payable at par to HDFC).

HOW TO APPLY

Customer can either download (in PDF format) the application form or get the application form by
E-mail. Alternately the customers can collect the application form from any of your nearest HDFC
offices. Customer need to submit it along with supporting documents and processing fee at any
HDFC office that is convenient to the customer. Customers can make payments by the cheque
marked payees account only drawn on a bank in a city where the HDFC has an office, by
demand draft (payable at part to HDFC) or by cash. Customer can make an application at any
time after they have decided to acquire a house even when the house has not been selected or
construction has not commenced.
HDFC will consider your application, make enquiries as it deems necessary and convey its
decision to you. On acceptance of the offer, you will have to pay an administrative fee for the
loan approved. Customer can take the disbursement of the loan after the property has been
completed and you have invested your own contribution in full (own contribution is the total cost
of the property less HDFCs loan). The loan will be disbursed in full or in suitable installments
(normally not exceeding three in number)taking into account the requirement of the funds and
the progress of the construction, as assessed by HDFC and not necessarily according to the
builders agreement.

22

23

Application Form
Processing Fees
Documents Requirement
Personal Discussion
Investigation verification
Sanctioning of Loan
Acceptance of Loan
Disbursement of Loan

Application Form:
It is the 1st document which bank will be using as base for sanctioning the loan. It generally includes your personal
information, contact details, property details, total (various)costs involved in buying property, loan amount required,
your income details, tenure required. The application has to be accompanied with Processing fee check, read on.
Processing Fees:
As you will be given a Loan Application Form, you will be asked to deposit a processing fees along with filled
Application form and documents. This processing fees varies from bank to bank. (Tip negotiable to wave this fees.)
Caution: Please check with your bank that up to when(Time Frame) the processing fees is valid, based on your final
disbursement of loan is scheduled to happen after the validity, (Generally its the case with new/under constructed
projects/societies) then its possible that to disburse the loan amount you have to give the processing fee again to
banks

to get loan disbursed.

Documents:
Based on the loan application you have to submit the documents as per our page Documents required for Home
Loan.
Personal discussion:
This will happen more or less on the same day/simultaneously when you submit your documents. Bank will try to
probe the reason for buying the property. Try to divert the discussion towards your qualification so that with
age/time your income will grow and you could pay more EMI. Bank also tries to verify during the discussion that, the

24

mentioned items in the application form are correct. These days this activity has become the primary activity once
you meet the bank official.
Investigation verification
Many people do apply for home loan. Many are not even eligible for same. In order to check this, banks verify you
personally. They try to visit your companys office and meet you personally in office. Often they visit your residence as
well. No harm, cooperate fully in this activity. This will bank increase surveyor confidence on you rather
Loan sanctioning/Loan sanctioning letter:
After the above few steps the bank will give you the loan sanctioning letter. It has the details of the amount of loan
sanctioned by bank. Final loan amount sanctioned and your loan eligibility are two different things. Once you know
what you are eligible to get, you can decide on the loan amount. Just because you are eligible for a huge sum does not
mean you should borrow heavily. The loan sanctioning letter is an important document, keep it safe, may be useful if
there is any dispute.
what are all the points you need to check in the letter?
Loan sanctioned amount
Interest rates (Fixed or floating and related to which reference rate e.g. Base Rate)
Tenure of Loan
EMI Amount, mode of payment (Cheque or ECS)
Conditions/Charges on prepayment of loan
Special scheme if any available.
Validity of the Loan sanctioning letter (Generally 6 months)
Any other terms and conditions.(Read carefully into the fine print)
Acceptance of Sanction Letter:
If agreed to all the conditions of the loan, return the same by signing on the letter (duplicate copy) to Bank.
Note 1: If there is any thing missing or Interest rate on the letter is the same that was discussed and agreed upon, If
no, bring this to Banks notice.
Note2: Loan sanctioning and loan disbursement are 2 different process.
You can get 2 crore sanctioned but may not be able to disburse same because of improper papers of property. Bank
will sanction loan by seeing your credit worthiness/ability to repay, but will disburse the loan by seeing your property
and its appropriate papers. Once you sanction the loan, immediately start collecting original property papers, as
without them you cant get the loan disbursed.
Loan disbursement/Property Assessment: Once you get the loan sanctioned now you have to get the loan disbursed.
For disbursing the loan you have to submit all the property papers, payment receipts in original to bank which will be

25

kept as security for loan amount given to you. All the papers will be kept by bank till the loan is fully repaid. Bank will
do the following with the papers.
a. Legal Check:
Every bank conducts a legal check on your documents to validate their authenticity. Hence, Sometimes it helps to buy
property from a reputed developer since they know the process inside out, and keep all the documents upfront.
Home loan is also the cheapest way to get the property assessed by an individual as Property documentation in India
is still non-transparent.
Thus home loan assures that the property you are buying has all the legal titles clear, and your investment is safe.
b. Technical check:
Banks take utmost care in their plan to finance the property. They send an expert to visit the premises you intend to
purchase.
In case of under construction property
Stage of construction is the same as that mentioned in the demand given to you by the builder.
Quality of construction and Satisfactory progress of work.
Layout of flats and property is within permissions granted by the governing authority.
The builder has the requisite certificates to start construction at the site.
Valuation of the property in relation to other deals in the surrounding areas.
In case of ready/resale construction
External / internal maintenance of the property.
The age of the building.
Quality of construction.
Surrounding area (development).
Whether the builder has received the requisite certificates for handing over possession of the flat.
There is no existing lien or mortgage on the property.
Valuation of the property in relation to other deals in the surrounding areas.
These inspections are carried out to protect consumer interests in terms of construction quality, adherence to local
laws, approved building plans, etc. A technical inspection also lets the bank understand the progress of construction
so as to release the staggered disbursements.
Signing the home loan agreement: All borrowers need to sign the home loan agreement. The original property
documents have to be handed over to the bank at this stage. Check the details of the agreement, and see that there are
no hidden charges/conditions that may prove to be costly later.

26

Disbursement of loan: Now the big day has come where in you are now eligible for the loan disbursement to the
builder, re seller (for resale flats), society or the development authority. But this will happen only if all the papers
relating to the property are proper and as per bank requirement, All receipts of payments have been submitted in
original and loan agreement have been executed.

RESEARCH MYTHODOLOGY

Research methodology is an important part of every project. Because it helps in knowing how to
select the representative sample from the world or the general population, the right research
tools and techniques to complete the research.
The study of the consumer behavior is important because he is the king. The research process is
based upon survey method, so in order we go to service provider and services user which is the
customers.
The research involves the following steps:

Define the problem and research objective: The problem and objective is to assess
the services offered by the various service providers and what the customer wants.
Developing the research plan: The second stage of the research methodology is to
develop a research plan. The research plan designed to take the decision on the data
sources, research approaches, research instruments, sampling plan and contact methods.
Survey research: It was a descriptive research.
Research instrument: The use of an effective research instrument is very important
because through this instrument we collect data in this project through observations and
personal interview were conducted.
Personal interview: as we were doing direct selling we interacted with my customers and
asked about their views in selecting a service and what are their wants and expectations
from a service provider.
Sampling plan: After finalizing the research approach and instruments a sampling must
be designed.
Sampling unit: Data have been collected from banks.
Sampling size: It has been collected from four banks.
Sampling procedure: what process should be used to collect the sample. So,
representation sample, convenience sampling is used.
Collect the information: After completing all the steps, the data are collected from
different sources.

27

 Analyze the information: After the data is collected they are analyzed to know the
findings. The data is then tabulated to develop the frequency distribution.
Present the findings: As the last step, the findings are presented that are relevant to the
major marketing decisions.

28

ANALYSIS OF DATA

The home loans provided by the banks are more or less same at the basic level. The banks
generally try to go ahead of other banks in terms of attracting number of customers to their
countries. For this they are trying to offer some unique services as per the unique requirements of
the unique important customers.

COMPARITIVE STATEMENT OF HOME LOAN

PARTICULARS

HDFC

ICICI

PNB

SBI

ROI(FIXED)

14%

1 -5 Yrs. -16%

Up to 5yrs-9.25%
(up to 20 lakh)

Year 1 - 8%
Year 2 & 3 - 9%

5 - 10 Yrs. - 16 %
10 -15 Yrs. - 16%
15 -20Yrs-13.75%

&
10% (above
lakh)

20

5 to 10yrs-10%
(up to 20 lakh)
&
10.25%
20 lakh )

(above

10 to 20 yrs10.50% (up to 20
lakh)
&
10.75%
20 lakh)

29

(above

ROI(FLOATING)

Up
30lakh8.75%

to

1 - 5 Yrs.- 16 %
5 - 10 Yrs.- 11.25
%

30
lakh50lakh-9%

10 - 15 Yrs.-16 %

Above50lak
h-9.25%

15 - 20 Yrs- 16 %

Up to 5yrs-8.75%
(up to 20 lakh)

Year 4 onwards -

&

up to
9.25%

9.50% (above 20
lakh)

50 lakh-

over 50
9.75%
5 to10yrs-9%
(up to 20 lakh)
&
9.50%(above
lakh )

20

10 to20yrs-9.25%
(up to 20 lakh)
&
9.75% (above 20
lakh)

PROCESSING FEE

0.5%

0.5%

0.5%

0.5%

PENALTY

2%

2%

2%

2%

TENURE

25 years

15 years

20 years

25 years

MINIMUM AGE

21

25

25

25

MAXIMUM AGE

60

55

55

55

30

lakhs-

COMPARISON OF MAJOR PLAYERS

The markets for home loans have been sizzling in India. The spurt in growth in recent years and
the prospect of continued buoyancy in demand have attracted many players to the industry
which till a couple of years back had two major players- HDFC and LIC Housing Finance. The result
is cut-throat competition, which has benefited the loan seekers. The home loan market has grown
at a compounded rate of over 40% over the last four years. And from what industry experts
believe that there is a little chance that there will be any significant decline in the growth rates
going forward. So what have been the key factors in triggering of this high growth period?
There are several reasons for the same on the demand side:-

Faster rise income as compared to property prices, thus making housing more affordable.
Decline interest rates, which have greatly reduced the cost of borrowing (both on interest
and capital).
Then there are factors on the supply side too which have supported this growth:-

More competition in the housing finance sector resulted in companies charging lower
interest rates, sometimes even at the cost of spread (i.e. profit margin)

31

 The fee for getting the home loan has reduced dramatically over the last couple of years.
From over 2% of the loan amount to as long as 0.25% (some companies are known to wave
of the fee entirely). Housing Finance Companies have introduced several new products to
meet the needs of wide variety of customers. One such scheme, the Step up Loan, where
EMIs increases as the income of the individual increases has been a big hit with the
individuals just starting off with their careers.
One other factor is increasing collaboration between Housing Finance Companies and
builders. Such partnership minimizes the service and funding related issues significantly
thus making it easier to buy property.
One innovation in the housing finance sector has been the introduction of floating rate home loan
simply put the cost of such home loan or the interest rate not fixed during the tenure of the loan.
Instead interest rate is benchmarked against some index/ indicator. So as the benchmark rate
moves up or down, the cost of your loan too changes, at some predetermined frequency (usually
once a quarter).

Ideally loan seekers should opt for a floating rate home loan when it is expected that the interest
rate will decline going forward. Fixed rate loans should be preferred when the interest rates are
expected to rise.

But is the choice that simple? In todays environment when there is a lot of talk about rising
interest rate, should investor shun floating rate home loan. Altogether is there still some merit in
this instrument? In the last one year, there was a trend of floating rate home loans being more
popular as compared to the fixed rate loan. As of now, this trend is continuing says Mr. Suresh
Menon , GM (Mumbai region), HDFC Limited.

There are three important issues which one needs to consider before opting for one type of a loan
over the other: First, an important determinant of what you go in for should be the long term expectation
of interest rate. For example if you (or the experts) expects the rates to rise for the next
one year, but then decline gradually over the next several years a floating rate product
may be preferable. The other option for going in for a fixed rate product and then switching
at the end of the year will entail costs (there could be penalty of 1%-2% of the outstanding
loan amount) and may not make financial sense. Moreover floating rate home loans do not
change the rate of interest every quarter (even though they review the rate every quarter).
Mr. Menon points out The attraction of a floating rate home loan is that it does not attract
a part prepayment charge. This could appeal to individuals who get lump sum bonuses
which they can use to reduce their loan exposure.
Second, the issue whether fixed rate home loan are actually fixed rate. When considering
a fixed rate home loan over floating rate of home loan a strong selling point is that if
interest rate were to rise dramatically you will be protected. Apparently the reality is
somewhat different. It seems that companies that have given out fixed rate home loans
32

can revise their rates upwards in exceptional circumstances (significant rise in interest rate
for one) so if you think interest rate will remain rage bound over the near term and decline
over the long term, you are still better off with the floating rate product.
Third, a fixed rate loan is generally priced higher as compared to the floating rate product.
This holds true in the current environment where the fixed rate loan is at a higher interest
rate as compared to the floating rate loan. The difference is currently about 0.25% to 21%.
So if you expect that interest rate are likely to move up, but only to the extent of this
differential, then you should ideally be in different between the two types of loan. The
deciding factors then should be when you think the rates will increase and also the long
term expectations of interest rates.
As always there is no one answer to whether you should go in for floating or a fixed rate home
loan. If you are a person with very little appetite for risk or negative surprises, opt for fixed rate
home loan. But in case you can take on some risk a floating rate home loan is worth a look.

Five steps to take a right loan:-

1) Gather data on interest rate. Get interest rate information from more than one source and
get the same information from each so you can compare the offers.
2) Get information on fees. Find out about processing fees, administration charges and other
costs that may be involved in taking the home loan. A written statement of all the fees
from the housing finance companies will ensure that there will be no surprises later on. Use
the lowest amount of fees to negotiate with the other lenders.
3) Get pre-approval letter. This gives you substantial leverage as you are then seen as
serious buyer by the seller of the property. Also, having the letter in your hand will set a
limit to the amount of money you can commit to the property. This will help in identifying
the right property.
4) Bargain for a lower rate of interest. Housing finance will reduce their rack rates for
customers with the good credit record. A bargain deal will easily fixed a home loan at
significantly lower rates (at times you can get a discount of as high as 0.50 percent). Here
again get a confirmation of the rate (and for how long it will remain fixed) via a letter.

5) Watch out for a predatory lending. Dont include false information on your home loan
application to get quick approval. Also do not borrow more money than you need or can
afford.
A floating interest rate allows customer to take advantage of interest rate movements. They get
immunity from adverse movements and read the benefits of any fall in interest rate but a floating
rate loan makes sense only when interest rate are high so that they can take advantage of
possible fall. But predicting interest rate movement could confound even seasoned market
watchers.
33

If they are looking for a home loan, be prepared to cough up a pretty sum as down payment. The
RBI, in a recent meeting with the bankers cautioned banks against lending 100% of the property
value. That is because of increasing competition in home loan some banks have been funding
even 110% of the agreement value. This means your loan not only pay for the property, it helps
with the stamp duty and registration charges and even furnishing. Its being sweet deal so for, as
borrower not only need have no access to other funds, they also get tax breaks.

The RBIs position is that lending such sums will remain additional risk for the bank. In case of
default, the bank may not have sufficient collateral security to recover dues and may have to
write off the additional borrowings. However, the bankers do not seen unduly worried. Non
performing assets in the housing segment are quite low below 1% and that, say bankers, is due to
the higher asset quality.

SWOT ANALYSIS OF HOUSING FINANCE INDUSTRY

STRENGTHS

1)
2)
3)
4)

The industry has been witnessing very fast growth rate, which is 6% growth in the first
Quarter of 2002-2003 as against 3-5% growth recorded in the first quarter of 2001-2002
The market faces a high demand curve, thoroughly mismatched by a low supply curve
Investment is based in assets that are securities & those that have historically appreciate
rapidly.
5) Tax benefit & other facilities provided on loan repayments.
WEEKNESSES
1) The foreclosure rules of court of law such as provision regarding the ownership of not more
than one house (in Delhi) binds the industry.
2) The healthy of an HFC depend upon its ability to mob up low cost funds.
3) AN HFC is unable to tap the rural market due to lack of proper retrieval procedures so
whilst
4) The rural market offers a higher rate of return; it has a higher risk & default rate.
5) Many legal impendent exist, deferring purchase of certain types of property beyond a
6) Certain extent thereby negatively impacting weak mortgage laws, resulting in an increase
in risk compo ending this.
OPPORTUNITIES
34

1) The housing industry faces a severe shortage of houses. The total demand for houses is
Expected to touch around 19.40 million units by the year 2003 of these 12.8 million
2) Dwelling units (65-98%) would be in rural areas & 6.6 millions dwelling units (34.02%) in
urban areas.
3) While the loan facility is backed by the security of property this sector represent a low
margin But on the low margin but on the same line low risk segment. The address this
4) Market the ones lies on the HFCS to device bold & innovative alternatives like mortgage
Based securities use of method such as door to door collection of installments assessing
the Creditworthiness of the prospective client and providing for group securities.
5) The roles of NHB in refinancing & providing regulation of housing finance system.
6) The governments initiatives to promote the sector & its contribution in uplifting the sector.
THREATS
The industry faces increased competition as more & more foreign backs & Housing
Companies are providing loan facility.

Finance

SWOT ANALYSIS OF HDFC HOME FINANACE

STRENGTH

1) Save substantial interest.

2) Prepay whenever the customer.
3) Reduce their loan outstanding.
4) Access the surplus finds anytime.
5) Use surplus funds to invest when the right opportunities arises.

WEAKNESS

Product is very good but it is mainly suitable for higher income group & is not suitable for the
Middle income group

OPPORTUNITIES

35

There is ample scope for financing flats & apartments for the salaried class in the higher income
Group.

THREATS

1) Nationalized banks like SBI, Union Bank, PNB.

2) Private Banks likes HDFC & standard chartered & Citi Bank with its home credit scheme.

ICICI HOME FINANACE COMPANY LTD

Consumer friendly housing finance company

36

HISTORY

ICICI home finance company ltd was incorporated on May 28, 1999 as 100% subsidiary of ICICI
Personal Financial Services Limited (ICICI PFS). ICICI finance company Ltd was set up with
objective of providing long term housing loan to individual and corporate. The company was
registered on March 302000 with National Housing Act, 1987 in terms of Housing Financing
Companies (NHB) direction, 1989 with effect from May 3, 2002, ICICI home finance has become a
100% subsidiary of ICICI bank Ltd.

OVERVIEW

ICICI home loans are at present available to customer in 150 cities/towns across the country.
Loans are offered for the purchase of new homes. Purchase of resale homes and home
improvement. Besides the companies also offers loans for commercial property and loans against
existing property. The loans are offers foe tenors up to 30 years. The company has also
introduced several customers friendly services such as door step services, know your loan on
phone facility and ICICI home search free property brokerage services. ICICI Personal Financial
Services Limited (ICICI PFS) formerly ICICI credit was one of the first four companies to obtain
registration as non banking financial banking companies(NFBc) from the reserve bank of India
(RBI)on sep 10, 1997 under the new section 45 I A of the RBI act ,1939.

During the year 1998-1999, there was a significant shift in the companys operations from
leasing and hire purchase to distribution and servicing the all the retail products for ICICI,
including two auto loans, consumer durable finance & another financial products. The company
has become a critical part of ICICIs retail strategy aims at offering a comprehensive range of
products &services to retail customers. In view of this reorientation of the business, the name of
the company was changed from ICICI Corporation Limited to (ICICI PFS) effective march 22, 1999.

ICICI
commenced its custodial services business in 1992 & played a pioneering role in the
business when it accepted the custodian role for the first ever GDR issue by an Indian corporate
(reliance industry Ltd). ICICI has a major market share in the segment act as custodian of 41
37

ADR/GDR issues & in the process, has established the relationship will all the major overseas
institutional investors including foreign institutional investors (FIIs) & as on the June 30,1999,
the value of asset held in our custody exceeded us 2 billion. At present, ICICI offers a full range of
custodial services for primary and secondary market operation pertaining to debt, equity, money
market instruments GDR/EURO issues conversion & GDR arbitrage to:
1) Overseas institutional investors like

a) FIIS
b) OCBS
c) OFFSHORE FUNDS
d) VENTURE FUNDS
2) Overseas government agencies.
3) Institutional looking for proprietary investment.
4) Mutual funds
5) Private investment companies
6) Large corporate
7) High net worth individual

As a value added services ICICI custodial services division assist the client in preparation,
submission & follow up for various applications by FIIS/OCB with SEBI/RBI

APPLICATION PROCESS OF YOUR HOME LOAN

Your search for the perfect home loan ends here at ICICI Bank Home Loans, even before your
have found the perfect property.

The moment you decide to buy a home, you can put in your application for a home loan. Yes, you
can apply for a home loan even before you have selected the property.

The property need not even be in the same city where you are residing. The only condition being
that ICICI Bank has Home Loans operations in both the cities.

38

Should there be a change in your financial status or plans, you can withdraw your sanction within
6 months of approval of your home loan.

However, we are always ready to assist our customers in the event of legitimate problems. And,
we might reconsider this if we find that there are satisfactory reasons for the delay.
And, neither would we charge you extra for this delay.

If it is refinancing you are interested in, it is possible within 6 months from the date of purchase of
property.

PERSONAL BANKING

At ICICI bank they are committed to making banking a pleasure. This commitment is manifested
in services they offer a wide range of account, investment scheme & facilities. Each services offer
their customer security, flexibility of operations & maximum returns.
The various services provided under this is as follow:
1) Maximum cash-saving account
2) Quantum fixed deposits
3) Quantum optima value added saving account
4) Money plus-current act
5) ATM
6) Treasure chest cocker facility
7) Power pay roll
8) Retail treasury instruments

CORPORATE BANKING

MOBILE COMMERSE

39

ICICI bank now brings back account & ICICI credit card to customers fingertips .with mobile
commerce customer can perform a wide range of query based transaction from their orange tm
(Mumbai) & Airtel (DELHI) mobile phone , without even making a call.

1) Access multiple accounts

2) Balance inquiry to the linked account
3) Cheque book request
4) Mini statement listing of last three transactions5) Request for account statements (by mail or
fax)

ICICI

1) Attractive IR
2) Door step service from enquiry stage till the final disbursement.
3) No guarantor required.
4) Can transfer your existing high interest rate loan.
5) Special 100% funding for special properties.

FACTORS AFFECTING YOUR LOAN AMOUNT

With ICICI Bank Home Loans, you can get a home loan suited to your needs. The home loan amount
depends on your repayment capability and is restricted to a maximum of 80% of the cost of the property or the
cost of construction as applicable. A number of factors are taken into account when assessing your repayment
capacity. Repayment capacity takes into consideration factors such as income, age, qualifications, number of
dependants, spouse's income, assets, liabilities, stability, continuity of occupation and savings history.
However, there are ways by which you can enhance your eligibility.

If your spouse is earning, put him/her as a co-applicant.

The additional income shall be included to enhance your
loan amount. In case of any co-owners they must
The final amount to be sanctioned will
necessarily be co-applicants.

depend on your repayment capacity.

However, what you ultimately are entitled to will have to conform within the limits fixed for each loan.
40

Also, when the company looks at the total cost, registration charges, transfer charges and stamp duty costs are
included.

Documents required for Home Loan Sanction

ICICI Bank Home Loans, Indias leading Home Loans Provider, offers attractive interest rates
and unbeatable benefits to ensure that you get the best deal. Keeping your convenience in
consideration, we ask you for minimal mandatory documents for the sanctioning of your home
loan, to keep the process totally hassle-free.

We require the following documents to sanction your home loan:

Sanction Documents Completed application form

Photograph
Fee Cheque
Photo Identity Proof
Age Proof
Signature Verification Proof
Residence Address Proof
Document for the Salaried
Last 3 months Salary Slip
Form 16
Bank Statement for the last 6 months from Salary Account
Repayment Track record of existing loans / Loan closure letter

Document for the Self-employed

Income Tax Return / Computation of Total Income / Auditors Report / Balance Sheet / Profit & Loss
Account certified by Chartered Accountant for last 2 years (3 years for Home Equity) (both for
41

business and personal of partners/directors)

Bank statement for the last 6 months from operating account
Repayment Track record of existing loans / Loan closure letter
Board Resolution in case of a company
Proof of existence
Office Address Proof

Photo Identity Proof, Residence Address Proof, Signature Verification Statement for all the main
partners / directors.

42

HOME LOAN

1) Customer must be at 21 year of age when the loan is sanctioned.

2) The loan must terminate before or when you twin 65 year of age or before retirement,
Whichever is earlier.
3) Customer must be employed or self employed with regular source of income

LOAN AMOUNT

43

 A number of factors are taken into account when assessing repayment capacity.
Customer income, age, number of dependents, qualification, asset &liabilities, stability and
continuity of customer employment. Business is one of them. However there are ways by
which you can enhance your eligibility.
If the customer spouse is earning put he/she as a co-applicant. the additional income shall
be included to enhance the loan amount. Incidentally, if there are any co owners they must
necessarily be co-applicant customer fiances income can also be considered sanctioning
the loan on your combined
Income .the disbursement of the loan, however will be done only after the submit proof of
Marriage. Providing additional security like bonds, fixed deposits & LIC policies may also
help to enhance Eligibility.
While there is no need for guarantor, it could be that having one might enhance your
credibility with us. If so, our loan officer would provide customer with positive necessary
details.
The final act to be sanctioned will depend on your repayment capacity. However, what
customers ultimately are entitled to will have to conform within the limits fixed for each
loan.
Also when the company looks at the total cost, registration charges, stamp duty, transfer
charges are also included.
HOMELOAN

We at ICICI bank understand the value of owing your house. Our affordable home loans can make
all the difference to their dreams of owing home.

FIND THE RIGHT HOME

Provide facility for search of free online property. A one stop shop for all their
Real Estate needs.

WHAT YOU GET

0% brokerage on first sale properties access the entire market under our roof site visits to the
properties short listed by you. Help in negotiating the best price. Help the legal documentation.
LISTINGS BELOW ARE THE STEP INVOLVED IN AVAILING OF A HOMELOAN

A person applies for a home loan

44

 The executive meets the applicant & briefs him the entire loan process,
requirements
& the various options available.
The applicant chooses a housing finance company (HFC) & handover the income
Document to the executive are the income documents are headed over to the HFC for
eligibility & approval.
The HFC verifies the documents & checks the repaying capacity, saving habits, tenure of
services etc. of the applicant & approves the loan amount.
After approval an offer letter is given to the applicant by the HFC, along with list of original
title documents that have to hand over to the HFC.
The applicant gives the original property title document to the HFC
The HFC scrutinizes the legal & the technical aspects of the original title document.
If the HFC is satisfy as to the legal & technical aspect of the document then the applicant is
called to sign the loan agreement

The loan disbursement schedule is decided by the HFC according to the stage of
construction (If property under construction) or a onetime payment is made if property is
ready for Possession.
The applicant gets possession of the property depending upon the level of completion of
the property.
The applicant can start paying the EMIs.

DISBURSEMENT

Customer loan will be disbursed after you identify & select the property or the home that
customer are purchasing and on their submission of the requisite legal documents.
While the customer may be under impression that the list of documents asked for it is rather
extensive. Each and every single document asked for will be verified & check to ensure their
safety. This may take some time but the banks want to ensure a clear title and will complete all
the legal & technical verification to ensure that they have full right to their home.
The 230 a clearance of the sellers or 371 clearance from the appropriate income tax authorities
(if applicable) is also needed on satisfactory completion of above, on registration of conveyance
deed and on the investment of your own contribution, the loan amount (as warranted by the
stage of construction) will be disbursed by ICICI.
The disbursement will be in favor of the builder/seller.

At ICICI Bank Home Loans, we disburse the loan amount after you identify and select the property
or home that you are purchasing and submit the requisite legal documents.
While you may be under the impression that the list of documents asked for is rather extensive,
please note that it is for your own good. Each and every single document asked for will be verified
and checked to ensure your safety.
45

This may take some time but we want to ensure a clear title and will complete all the legal and
technical verifications to ensure that you have full rights to your home.
Your loan will be disbursed after you identify and select the property or home that you are
purchasing
and
on
your
submission
of
the
requisite
legal
documents.
The 230 A Clearance of the seller and / or 37I clearance from the appropriate income tax
authorities (if applicable) is also needed.
On satisfactory completion of the above, on registration of the conveyance deed and on the
investment of your own contribution, the loan amount (as warranted by the stage of construction)
will be disbursed by ICICI Bank.

Disbursement Documents

Property documents (as per P&D for respective states and as asked by empanelled lawyers for
individual cases)
Facility Agreement
Disbursal Request Form
Cheque Submission Form for Pre EMI and EMI cheques
ECS or Auto Debit for ICICI Bank account holders or Post Dated Cheques for EMI / Pre EMI
Personal Guarantors Documents (PG Form, Photograph, Identity Proof, Address Proof, Signature
Verification and Income documents, if applicable)

In case of property is owned by a company

Memorandum of Entry
Form 8
NOC

AMOUNT

46

This largely depend on a no. of facts like ones age ,profession, salary, the city one reside is
among other such factors. it varies between 2.1lakh to 1crore depending on the lender- as the
rule of the thumb, depending on HFC one have to cough up 15% - 20% of the loan amount as the
down payment. For smaller amount, this may not be much. But for figure remaining into lakh this
could make loads of difference. For e.g. an apartment of costing Rs 10 lakh may get 85%
financing, so one will have to arrange for remaining Rs 15 lakh. If one takes this into amount the
additional thousands will definitely put a strain on ones finances
.

TENURE

Generally the maximum tenure of home loans is 15 years, with a few lenders offering tenure of
20 years or more. ICICI offers 15 year loan. The longer the tenure, the more one pay in total
interest but ones monthly payment will be less. So depending ones earning potential & bank
balance one can choose an appropriate tenure. An important requirement of most of the banks/
HFCs is that one pays up the entire loan before one retires. One can always prepay ones entire
loan amount before it is due. There is a trend to do away with the pre-payment penalty being
imposed by some lenders. So its best one checks on this as well.

INTEREST RATE

Without doubt the most important parameter to factor into ones calculations. The interest rates
may vary from institution to institution. Repayment is in the form of EMIs (equated monthly
installment). The longer the tenure, the more one pays in interest, but ones monthly payment will
be less. The interest rate of ICICI is

Tenure

Interest Type

Interest Rate

.15 -20

Fixed

13.75 %

10 -15

Fixed

16 %

5 - 10

Fixed

16 %
47

1-5

Fixed

16 %

1-5

Floating

16 %

5 - 10

Floating

11.25 %

10 - 15

Floating

16 %

15 - 20

Floating

16 %

REFINANCE

This is concept that is yet to catch on in the home loan market but is bound to be a major service
in the months to come. Under this facility, one can take a new loan from another bank/HFC to pay
back another loan before its natural tenure. It gives one the opportunity of prepaying ones high
cost debt and get a lower cost one. In todays falling interest rate scenario one should use this
vehicle to lower ones debt payment as much as possible. The lender facilitates the shift by paying
the outstanding and transferring the asset to other portfolio.

MISCELLANEOUS CHARGES

The interest rates and EMIs are not only the cost factor. Never underestimate how much the
processing fee and administration fees amount to. A 0.5% administration fees and 0.5%
processing fee on say, a Rs.500000 loan would be Rs.5000. other timesit could be just one fee
(either administration or processing but could yet work out to be much more if it is considerably
higher at, say, 2.5% or 3%. The various other fees, which one is required to pay along with the
margin amount are:

INTEREST TAX:

This is tax payable on the interest paid on a home loan and not the principal. This is sometimes
included in the interest rate of the loan, or may be charged separately as interest tax.

PROCESSING CHARGE

48

It is the fee payable to the lender on applying for a loan. It is either a fixed amount not linked to
the loan or may be a percent of the loan amunt. The loan amount received by you can be less
than processing fee.

PREPAYMENT PENALTIES

When the loan is paid back before the nd of the agreed duration a penality is charged by some
banks or companies, which is usually between 1% and 2% of the amount being prepaid.

OTHERS

It is quite possible that some lends may levy a documentation or consultant charge.

ICICI BANK ANNOUNCES ITS BASE RATE, VALID FROM JULY 1, 2010

ICICI Bank has announced a shift in the existing benchmark rate from Floating Reference Rate
(FRR)/ I-BAR the Base Rate (I-Base). The same will be effective for all its mortgage products from
July 1, 2010.
The ICICI Bank Base Rate (I-Base) has been fixed at 7.50%. This is the minimum rate that ICICI
Bank will charge to its new customers.

BENEFITS

Some of our key benefits are:

Guidance through out the process
Home loan amounts suited to your needs
Home Loan tenure upto 20 years
Simplified documentation
Doorstep delivery of home loan papers
Sanction approval without having selected a property.
49

 Free Personal Accident Insurance (Terms & Conditions)

Insurance options for your home loan at attractive premium

50

PUNJAB NATIONAL BANK

INTRODUCTION

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 an
overall rating of 87.45% as evaluated by the SSS Retirement, Death & Funeral Benefits Program.

51

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. The Bank 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 the Primary
Dealers:

Strengthen the infrastructure in the government securities market in order to make it vibrant,
liquid and broad based.
Ensure the development of u nderwriting 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 market operations.

PNB HISTORY

Punjab National Bank of India 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
Group exercised 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.

52

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.

PNB RECENT ACHIEVEMENTS AND MILESTONES

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 bank implemented 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 for future business
growth, provide flexibility of creating innovative banking products to its lines of business, and at
the same time, reduce overall 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 CBS architecture with Finacle
application on Oracle Database and Sun hardware platform with Solaris Operating System. With
Finacles agile and future proof technology, the bank today has over 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 transactions
and 22500 concurrent users a significant achievement in the 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.20

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 while
improving 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 future proof technology and

53

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.

REGULAR HOUSING FINANCE SCHEME FOR PUBLIC

PNB reaches out to you with fast, friendly and most convenient home loans for:

Construction or purchase of house/ flat.

Purchase of house/ flat on First Power of Attorney basis from the original allottee
Carrying out repairs/ renovations/ additions/ alterations to existing house/ flat
Special Feature- To cover the loan outstanding, life Insurance cover is also available on
payment of one time premium which can also be financed by the Bank.
PRODUCTS

PNB Apna Ghar Yojana home loans are meant for construction or for acquisition/purchase of
house/flats. The minimum loan amount would be Rs.50000 and maximum loan amount depends
on the repayment capacity of the borrower. In case of joint application, income of borrowers /coborrowers is clubbed together for calculation of loan eligibility. The loan repayment is in Equated
Monthly Installments (EMI) over a maximum period of 20 years.
PNB Ghar Sudhar Yojana home loans are offered for up gradation, renovation or repair of
house/flat. It includes among others, internal and external repairs, water proofing, roofing,
flooring, electrical, woodwork etc. The loan amount ranges from a minimum of Rs 50,000 to a
maximum of Rs. 1000000. Borrower's minimum contribution will be 25% of the estimated cost of
repairs/renovations

INDIVIDUAL
For construction/purchase of house/flat: - 75% of the cost of construction of house or purchase of
house/flat. Cost of car parking up to the maximum extent of 5% of the cost of flat/house can also
be included in the cost of the project. For carrying out repairs/ renovations/ additions/ alterations:
- 75% of the estimated cost subject to maximum of Rs. 20 lacs.
Loan is available up to Rs. 20 lacs for purchase of Land/ Plot. Loan is available maximum up to Rs.
2 lacs for furnishing

PRODUCT RANGE OF COMPANY/INDUSTRY:

54

The products and services provided by the PNB are in various fields, such as:

NRI services
International banking
Corporate banking
Agricultural banking
International banking

ELIGIBILITY

Age of the applicant must be less than 60 years.

Existing home loan borrower can also apply provided their loan account is regular and no IR
irregularity persist.

DOCUMENTS NEEDED

1.
2.
3.
4.

Proof of identity
Proof of income
Proof of residence
Bank statement or Pass Book where salary or income is credited.

5. Education Certificate
6. Photos
7. Salary slips & form 16
8. Income tax return last 3 years along with balance sheets.
9. Assets liabilities statements.
10. Documents of property.
11. Estimate of construction.
12. Guarantor

FREEHOLD AND LEASEHOLD PROPERTY

55

The loan can be granted both for freehold and leasehold property.

In case of leasehold, loan can be granted on the basis of power of attorney basis from original
allotee where DDA/PUDA/HUDA permit conversion of leasehold into freehold property otherwise
advance is not permitted against plot purchased on Power of Attorney basis.

EXTENT OF LOAN

For construction/purchased of house/flat 75% of the cost of construction or purchase of

house/flat. For carrying out repairs/renovation/additions/alternation: - 75% of the estimated cost
subject to maximum of Rs. 20 lacs. Loan up to Rs. 20 lacs for purchase of land/plot
Loan is available maximum up to Rs. 2 lacs for furnishing

CHARGES

2%

Pre payment charges

Balance

Transfer

Charges

(incase of refinance)

2%

Part-payment Charges

Nil

Switching

Charges

(Fixed to Floating or vice-a-versa)

SPEED OF SANCTION OF LOAN

The loan will be sanctioned within 7 working days.

TENURE:
56

Nil

You can repay the loan over a maximum period of 25 years under both FRHL and ARHL in SBI .
Repayment will not ordinarily extend beyond your age of retirement (if you are employed) or on
your reaching 65 years of age, whichever is earlier.

RATE OF INTEREST

For repayment period

Fixed Option
loans(Upto
lac)

i) Upto 5 years

9.25

Floating
Floating Option
for Fixed Option for
Option
for for
20 loans(Above 20
loans(Upto 20 loans(Above 20
lac)
lac)
lac)
10.00

8.75

9.50

ii) Above 5 & upto 10

10.00
years

10.25

9.00

9.50

iii) Above 10 & upto 20

10.50
years

10.75

9.25

9.75

iv) Above 20 yrs & upto

10.75
25 yrs.

11.00

9.50

10.00

The interest rate can be fixed or floating

Option can be changed from fixed to floating and vice versa with flat charges of 2% fee on
balance outstanding.
Fixed interest rate be reset after a block of 5 year in respect of loans disbursed on or after
1.08.2006

DOCUMENTATION CHARGES
Rs. 1350 + Service Tax

57

UPFRONT FEE

For loans up to Rs. 300 lacs = 0.50% of the loan amount with a cap of Rs. 20,000/For loans above Rs. 300 lacs =0.90% of the loan amount
REPAYMENT

1. Loan is to be repaid in equated monthly installments within a period of 25 years or before the borrower attains
the age of 65 years.
2. Repayment of loan for repair/ renovation/ addition/alteration has, however been restricted to 10 years.
Father/Mother can also be made co-borrower in cases property is in single name of his /her son and also
clubbing of their income is permitted for determining eligibility criteria. Minimum 24 advance cheque should be
obtained as and when, 6 cheques remain, fresh lot to be obtained out of 24, 23 cheques should be of the amount
equal to the balance. Loan is to be repaid in EMI within a period of 25 years or before the borrower attains the
age of 65 years.
SECURITY

Mortgage of property for which finance is being given

In case of purchase of house/ flat from housing board/ society where mortgage cannot be created
immediately, a tripartite agreement shall be executed amongst the housing board/ society,
borrower and the Bank
In case of purchase of house/ flat on first power of attorney, additional security equal to 125% of
the loan amount by way of mortgage of some other property or pledge of bank's FDR/ LIC policy/
Govt. Securities, NSCs, KVPs, IVPs, / PSU Bonds etc. has to be provided

FEATURES

Loan can be sanctioned by branch/hub near to the present place of work/posting /residence of the
borrower.
Loan can be sanctioned even if property is in the name of wife/parents provided that the owner is
made co-borrower.
Loan can be granted for 2nd house in the same city.
Loan can be granted for purchase of house for rental purpose
For take over, permission of higher authority is not required.

IMPORTANT CONDITIONS LOAN CANNOT BE GRANTED:

58

 For construction in Un-authorized colonies.

If property is to be used for commercial purpose.
Without approved Map.

PRE- PAYMENT CHARGES

Nil- In cases where the loans are prepaid by the borrower from their own sources
Nil- In cases where the borrower shifts to other bank within 30 days from the date of
issuance of circular for upward revision in the rate of interest to be charged in his account
or change in other terms of sanction.
2 % - In cases where the account is taken over by some other Bank/ Financial institutions
by way of a ailment of loan from such bank/ financial Inst

DISBURSEMENT FOR HOME LOAN

a. For outright purchase of house/flat, the loan amount will be paid in lump sum to the
vendor.
b. For house/flat under construction, the loan amount will be dispersed in stages as per
progress of construction/demand by selling agency.

STATE BANK OF INDIA

INTRODUCTION

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
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 13 Indore
59

(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.

PROFILE
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 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.

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 Imperial Bank of India.
60

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.

SBI RECENT ACHIVEMENTS AND MILESTONES:

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 milestones:

SBI Card, a joint venture between State Bank of India and GE Money, announced yet another landmark
achievement of crossing the three million cardholders-marks. Roopam Asthana, CEO-SBI Card, said, "This
milestone is even more remarkable 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 with improved value propositions for the urban affluent customers." SBI Card recently signed up Indian
cricketer Yuvraj Singh as its brand ambassador.
SBI joins Chinese bank to touch 10,000 branches:

Public sector State Bank of India on Sunday became only the second bank 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 the government 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 bank opened 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.

Main SBI Home Loan Schemes

SBI Realty : Purchase of plot of land

SBI Optima : Loan to existing home loan borrowers
61

 SBI Green Home Loan : For homes that fight against the adverse climate change, SBI
offers 0.25% concession in interest rate and waiver of processing fees
SBI Flexi : Combination of floating and fixed interest rate, in a pre determined ratio
NRI Home Loans : Loans for NRIs and PIOs
SBI Freedom : Pledging other financial security than mortgaging the house
SBI Max Gain : Operate your home loan account like your SB or Current Account

PRODUCT RANGE OF COMPANY/INDUSTRY:

The products and services provided by the SBI are in various fields, such as:
Banking services
NRI services
International banking
Corporate banking
Agricultural banking
International banking

SBI HOUSING LOAN

Features
SBI Home Loan provides no cap on maximum loan amount for the purchase/construction of
house/flat.
There is an option to club the income of the applicant's spouse and children to compute the
eligible loan amount.
The bank provides free personal accident insurance cover.
A complimentary international ATM cum Debit card is also provided by SBI.
On the spot "in principle" approval is a special provision for the applicant.
If all the required documents are submitted by the applicant, SBI Home Loan is sanctioned
within 6 days of the date of submission.
The applicant can also consider SBI's Home Loan as a Term Loan or as an Overdraft facility,
in case he/she wants to save on interest and maximize gains.
SBI Home Loan also provides free personal accident insurance cover up to Rs 40 Lakhs.
Repayment is permitted up to 70 years of age, which is an added advantage of SBI Home
Loan.
SCHEMES PROVIDED BY SBI

The Most Preferred Home Loan provider SBI Bank offers a Home Loan with Attractive Interest
Rates with Latest Schemes and Benefits. SBI also provides a Housing loan with different schemes.
Schemes
Are:62

1.
2.
3.
4.
5.
6.
7.
8.
9.

SBI
SBI
SBI
SBI
SBI
SBI
SBI
SBI
SBI

Easy Home Loan

Advantage Home Loan
Housing Finance Scheme
Happy Home Loans
Life Style Loan
Green Home Loan
Home Plus
Home Line
MY HOME CAMPAIGN

PRODUCTS

'SBI-Flexi' Home Loans are designed to enable borrowers to hedge their Home Loan against
unfavorable movement in interest rates and gives the customers a one time irrevocable option to
choose one of the three customized combinations of fixed and floating interest rates.
'SBI-Freedom' Home Loans are customized for high net worth individuals and offer benefits such
as 100 per cent finance of the project and no mortgage of the property, provided the individual
could show liquid securities such as LIC policies or NSCs.

ELIGIBILITY

The minimum age of the applicant is 18 years, on the date of the sanction of the loan. The
maximum age limit for a Home Loan applicant is 70 years. It is the maximum age limit, within
which the loan should be fully repaid. The applicant should consist of sufficient, regular and
continuous source of income for repaying the loan.

DOCUMENTS

Completed Application Form with one Passport Size Photograph

Identity Proof - the applicant can make use of his/her PAN Card/Voter ID/ Passport/Driving License,
for the purpose.
Residence Proof - the applicant can make use of his/her Recent Telephone Bill/ Electricity
Bill/Property tax receipt/Passport/Voters ID
Proof of business address in respect of businesspersons/ industrialists
Sale Deed, Agreement of Sale, Letter of Allotment, Non Encumbrance Certificate, Land/Building
Tax paid receipt etc.
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Copy of Approved Plan and approval from the Local Body

Statement of Bank Account/ Pass Book for last 6 months
INTEREST RATE

(SBAR is currently 11.75%)

Year 1 - 8% fixed
Year 2 & 3 - 9% fixed
Year 4 onwards - For loans up to 50 lakhs, 9.25% floating.
For loan amount over 50 lakhs, 9.75% floating
Eligibility Criteria & Documentation required for SBI Home Loan

Salaried

Self employed

Age

21years to 60years

21years to 70years

Income

Rs.1,20,000 (p.a.)

Rs.2,00,000 (p.a.)

Loan
Amount
5,00,000 - 1,00,00000
Offered

5,00,000 - 2,00,00000

Tenure

5years-20years

5years-20years

Current
Experience

2years

3years

Documentation

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 cheque

1)
Application
form
with
photograph
2)
Identity
&
residence
proof
3) Education qualifications certificate & proof
of
business
existence
4)
Business
profile,
5) Last 3 years profit/loss & balance sheet
6) Last 6 months bank statements
7) Processing fee cheque

Other Products from SBI (State bank of India)

1)
2)
3)
4)

SBI
SBI
SBI
SBI

Personal Loan
Card
Home Loan
Housing Loan

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LOAN TENURE

You can repay the loan over a maximum period of 25 years under both FRHL and ARHL in SBI .
Repayment will not ordinarily extend beyond your age of retirement (if you are employed) or on
your reaching 65 years of age, whichever is earlier.

PROCESSING FEE

FEES

RUPEES

Upto 5 lakh

Rs. 1000

5lakh-10lakh

Rs. 2000

10lakh-20lakh

Rs. 5000

20lakh-50lakh

Rs. 7000

50lakh-1crore

Rs.8000

1crore-5crore

Rs.10, 000

Above 5 crore

Rs.20, 000

PREPAYMENT CHARGES

If paid from own source- Nil,

In other cases- 2% on principal amount prepaid

LATE PAYMENT CHARGES

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If paid from own source- Nil,

In other cases- 2% on principal amount prepaid

REVIEW OF LITERATURE
Ben R. Craig had studied about 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 the Federal 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.

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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. From the 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 institution for 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 been introduced. The paper is based on the case study of LIC Housing Finance Ltd., which
analyzes region-wise disbursements of individual 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 the results.

3) In May 18, 2007 Michael LaCour-Little had studied about the Economic Factors Affecting Home
Mortgage Disclosure Act Reporting. The public release of the 2004-2005 Home Mortgage
Disclosure Act data raised a number of questions given the increase in the number and
percentage of higher-priced home mortgage loans and continued differentials across
demographic groups. Here we assess three possible explanations for the observed increase in
2005 over 2004: (1) changes in lender business practices; (2) changes in the risk profile of
borrowers; and (3) changes in the yield curve environment. Results suggest that after controlling
for the mix of loan types, credit risk factors, and the yield curve, there was no statistically
significant increase in reportable volume for loans originated directly by lenders during 2005,
though indirect, wholesale originations did significantly increase. Finally, given a model of the
factors affecting results for 2004-2005, we predict that 2006 results will continue to show an
increase in the percentage of loans that are higher priced when final numbers are released in
September 2007.

4) In May 1991 Stephen F. Borde had studied about the Is the Savings and Loan Industry Facing
Extinction? This article tells about the saving and loan crisis. Proposed solutions are discussed in
the context of the industry as it currently stands. With a somewhat similar liability structure to
that of banks (mainly short-term deposits), the asset structure of S&Ls is quite different. Whereas
banks assets consist of short-term loans, S&L assets consist largely of long-term loans, such as
home ownership mortgages. Therefore, in the absence of adequate hedging measures, S&Ls are
more vulnerable to interest rate risk, which can lead to lower profits when interest rates rise.

5) In June 29, 2001 Joshua Rosner had studied about the Housing in the New Millennium: A Home
without Equity is Just a Rental with Debt. They studied about the prospects of the U.S.
housing/mortgage sector over the next several years. Based on our analysis, we believe there are
elements in place for the housing sector to continue to experience growth well above GDP.
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However, we believe there are risks that can materially distort the growth prospects of the sector.
Specifically, it appears that a large portion of the housing sector's growth in the 1990's came
from the easing of the credit underwriting process. Such easing includes: * The drastic reduction
of minimum down payment levels from 20% 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 the origination process and
modify/recast delinquent loans in order to keep them classified as "current" * Changes in the
appraisal process which has led to widespread over appraisal/over-valuation problems If these
trends remain in place, it is likely that the home purchase boom of the past decade will continue
unabated. Despite the increasingly more difficult economic environment, it may be possible for
lenders to further ease credit standards and more fully exploit less penetrated markets. Recently
targeted populations that have historically been denied homeownership opportunities have
offered the mortgage industry novel hurdles to overcome. Industry participants in combination
with eased regulatory standards and the support of the GSEs (Government Sponsored
Enterprises) have overcome many of them. If there is an economic disruption that causes a
marked rise in unemployment, the negative impact on the housing market could be quite large.
These impacts come in several forms. They include a reduction in the demand for
homeownership, a decline in real estate prices and increased foreclosure expenses. These
impacts would be exacerbated by the increasing debt burden of the U.S. consumer and the
reduction of home equity available in the home. Although we have yet to see any materially
negative consequences of the relaxation of credit standards, we believe the risk of credit
relaxation and leverage can't be ignored. Importantly, a relatively new method of loan
forgiveness can temporarily alter the perception of credit health in the housing sector. In an effort
to keep homeowners in the home and reduce foreclosure expenses, holders of mortgage assets
are currently recasting or modifying troubled loans. Such policy initiatives may for a time distort
the relevancy of delinquency and foreclosure statistics. However, a protracted housing slowdown
could eventually cause modifications to become uneconomic and, thus, credit quality statistics
would likely become relevant once again. The virtuous circle of increasing homeownership due to
greater leverage has the potential to become a vicious cycle of lower home prices due to an
accelerating rate of foreclosures.

6) In December 2002 Melissa B. Jacoby had studied about the Home Ownership Risk beyond a
Sub prime Crisis: The Role of Delinquency Management. They studied that Public investment in
and promotion of homeownership and the home mortgage market often relies on three
justifications to supplement shelter goals: to build household wealth and economic selfsufficiency, to generate positive social-psychological states, and to develop stable neighborhoods
and communities. Homeownership and mortgage obligations do not inherently further these
objectives, however, and sometimes undermine them. The most visible triggers of the recent
surge in sub prime delinquency have produced calls for emergency foreclosure avoidance
interventions (as well as front-end regulatory fixes). Whatever their merit, I contend that a system
of mortgage delinquency management should be an enduring component of housing policy.
Furtherance of housing and household policy objectives hinges in part on the conditions under
which homeownership is obtained, maintained, leveraged, and - in some situations - exited. Given
that high leverage or trigger events such as job loss and medical problems play significant roles
in mortgage delinquency independent of loan terms, better origination practices cannot eliminate
the need for delinquency management. One function of this brief essay is to identify an existing
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rough framework for managing delinquency. Legal scholarship should no longer discuss mortgage
enforcement primarily in terms of foreclosure law and instead should include other debtor-creditor
laws such as bankruptcy, industry loss mitigation efforts, and third-party interventions such as
delinquency housing counseling. In terms of analyzing this framework, it is tempting to focus on
its impact on mortgage credit cost and access or on the absolute number of homes temporarily
saved, but my proposed analysis is based on whether the system honors and furthers the goals of
wealth building, positive social psychological states, and community development. Because those
ends are not inexorably linked to ownership generally or owning a particular home, a system of
delinquency management that honors these objectives should strive to provide fair, transparent,
humane, and predictable strategies for home exit as well as for home retention. Although more
empirical research is needed, this essay starts the process of analyzing mortgage delinquency
management tools in the proposed fashion.

7) In 1999 Yoko Moriizumi had studied about the Current Wealth, Housing Purchase and Private
Housing Loan Demand in Japan. Japanese households accumulate wealth for down payments at a
high rate. Therefore, current wealth plays an important role in home acquisition as public loans
whose direct mortgage lending is a strong support for home purchasers. We estimate the wealth
effect on private mortgage debt as well as housing consumption by applying a model where
mortgage debt demand is derived from house purchase decisions and is determined jointly with
housing consumption. We use a simultaneous equation Tobit estimation method. Wealth effects
on private mortgage debt, likelihood of borrowing, and housing consumption are not elastic. On
the other hand, a change in housing consumption affects the likelihood of borrowing elastically
much more than the private mortgage amount of borrowers. Housing and private mortgage
markets fluctuate very closely with the number of participants in the mortgage market. Therefore,
the number of housing starts is linked strongly to the private mortgage market.

8) Robert B. Avery and Allen N. Berger had studied about the Loan commitments and bank risk
exposure. They studied about the Loan commitments increase a bank's risk by obligating it to
issue future loans under terms that it might otherwise refuse. However, moral hazard and
adverse selection problems 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 that commitment loans tend to have slightly better than average performance,
suggesting that commitments generate little risk or that 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 private firms. They studied that, most loans are in the form of credit lines.
Empirical studies of line demand have been complicated by their use of data on publicly traded
firms, which have a wide menu of financing options. We avoid this problem by using a unique
proprietary data set from a large financial institution of loan commitments made to 712 privatelyheld firms. We test Martin and Santomero's (1997) model, in which lines give firms the speed and
flexibility to pursue investment opportunities. Our findings are consistent with their predictions.
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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 to smaller credit lines. Almost all firms convert unused
credit line portions into spot loans and take out new lines.

10) Faik Koray and Eric T. Hillebrand had studied about the Interest Rate Volatility and Home
Mortgage Loans. They studied that The U.S. economy has experienced substantial fluctuations in
real and nominal interest rates since the 1970s. This paper investigates empirically the
relationship between home mortgage loans and volatility in mortgage rates for the period
1971:02 through 2003:03. Contrary to common wisdom, we find a positive relationship between
mortgage rate volatility and home mortgage loans. Further investigation indicates that this is due
to volatility in the bond market. In times of high interest volatility, households disinvest in
government securities and invest in real assets, which yield a positive relationship between
mortgage rate volatility and home mortgage loans.

11) In november2000 Michelle J. White and Emily Y. Lin had studied about the Bankruptcy and the
Market for Mortgage and Home Improvement Loans. They studied that this paper investigates the
relationship between bankruptcy exemptions and the availability of credit for mortgage and home
improvement loans. We develop a combined model of debtors' decisions to file for bankruptcy
and to default on their mortgages and show that the theory predicts positive relationships
between both the homestead and personal property exemption levels and the probability of
borrowers being denied mortgage (secured) and home improvement loans. We test these
predictions empirically and find strong and statistically significant support when evidence from
cross-state variation in bankruptcy exemption levels is used. Applicants for mortgages are 2
percentage points more likely to be turned down for mortgages and 5 percentage points more
likely to be turned down for home improvement loans if they live in states with unlimited rather
than low homestead exemptions. These relationships also hold when we introduce state fixed
effects into the model.

12) In October 14, 2008 David P. Bernstein had studied about the Home Equity Loans and Private
Mortgage Insurance: Recent Trends & Potential Implications. They studied about the impact of
increased use of home equity lines and decreased private mortgage insurance (PMI) on mortgage
markets. The data confirms that in the years leading up to the mortgage crisis home buyers and
lenders have aggressively used piggyback loans to avoid taking out PMI on first mortgages.
Multiple-mortgage financing packages as a percent of newly originated mortgages (mortgages
originated within the previous five years) went from 14.8% in survey year 2001 to 21.5% in
survey year 2007. The multiple-mortgage percentage for seasoned mortgages (mortgages
originated more than five years prior to the origination date) also increased by a modest amount.
Further comparisons reveal a large decrease in the proportion of mortgages with PMI with the
largest decreases in PMI coverage occurring among newly originated multiple-lien packages. Data
from the SCF was used to compare five financial characteristics (credit card debt, installment
loans, consumer credit, home-owners equity, and liquid assets) for multiple-lien versus single-lien
households. The comparisons suggest single-lien households tend to have slightly stronger
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financial variables than multiple-lien households. The data does not support the view that
homeowners with multiple liens are less risky and should therefore be allowed to avoid PMI. The
reduced use of PMI and the increased use of home equity loans increased mortgage holder risk in
several different ways and was a contributing factor to the 2008 mortgage and financial crisis.
This change in lending and borrowing behavior is not a sub prime market problem.

13) In August 2007 Michael LaCour-Little had studied about the Home Purchase Mortgage
Preferences of Low- and Moderate-Income Households. Housing policy in the United States has
long supported homeownership, yet variation persists across income groups. This article employs
recent mortgage origination data to focus on the revealed preferences of low- and moderateincome (LMI) households in home purchase mortgage choice. I identify the factors associated
with conventional conforming, FHA, nonprime and specially targeted programs. Empirical results
show that individual credit characteristics and financial factors, including pricing, generally drive
product choice, with some variation evident when loans are originated through brokers. Results
also indicate that targeted conventional programs effectively compete with government-insured
products in the LMI segment.

14) In 24 October 2008 David C. Wheelock had studied about the Government Response to Home
Mortgage Distress: Lessons from the Great. They studied about the Great Depression was the
worst macroeconomic collapse in U.S. history. Sharp declines in household income and real estate
values resulted in soaring mortgage delinquency rates. According to one estimate, as of January
1, 1934, fully one-half of U.S. home mortgages were delinquent and, on average, some 1000
home loans were foreclosed every business day. This paper documents the increase in residential
mortgage distress during the Depression, and discusses actions taken by state governments and
the federal government to reduce mortgage foreclosures and restore the functioning of the
mortgage market. Many states imposed moratoria on both farm and nonfarm residential
mortgage foreclosures. Although moratoria reduced farm foreclosure rates in the short run, they
appear to have also reduced the supply of loans and made credit more expensive for subsequent
borrowers. The federal government took a number of steps to relieve residential mortgage
distress and to promote the recovery and growth of the national mortgage market. The Home
Owners Loan Corporation (HOLC) was created in 1933 to purchase and refinance delinquent home
loans as long-term, amortizing mortgages. Between 1933 and 1936, the HOLC acquired and
refinanced one million delinquent loans totaling $3.1 billion. The HOLC refinanced loans on some
10 percent of all nonfarm, owner-occupied dwellings in the United States, and about 20 percent of
those with an outstanding mortgage. The Great Depression experience suggests how foreclosures
might be reduced during the present crisis.

15) In March 2001 Tullio Jappelli and Maria Concetta Chiuri had studied about the Financial Market
Imperfections and Home Ownership: A Comparative Study. They explore the determinants of the
international pattern of home ownership using the Luxembourg Income Study (LIS), a collection of
microeconomic data on fourteen OECD countries. In most, the cross-section is repeated over time
and includes several demographic variables carefully matched between the different surveys.
This allows us to construct a truly unique international dataset, merging data on more than
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400,000 households with aggregate panel data on mortgage loans and down payment ratios.
After controlling for demographic characteristics, country effects, cohort effects and calendar
time effects, we find strong evidence that the availability of mortgage finance - as measured by
outstanding mortgage loans and down payment ratios - affects the age-profile of home
ownership, especially at the young end. The results have important implications for the debate on
the relationship between saving and growth.

16) In 10 December 2007 Irina Paley and Chau Do had studied about the Explaining the Growth of
Higher-Priced Loans in HMDA: A Decomposition Approach. The period 2004-2005 showed a
significant increase in Home Mortgage Disclosure Act (HMDA) rate spread reporting. Following the
Oaxaca (1973), Blinder (1973), and Fairlie (2005) decomposition techniques, this study identifies
the fraction of the increase due to the flattening of the yield curve. Even after controlling for
changes in borrower risk characteristics, the findings reveal that during 2004-2006, the flattening
of the yield curve explains a significant amount of the increase in rate spread reportable loans.
This is the case for both prime and sub prime originations.

17) In Feb. 1 2009 Vincent W. Yao and Eric Rosenblatt and Michael LaCour-Little had studied about
the unique paired loan dataset containing information on multiple conventional conforming
mortgage loans of households to examine home equity extraction decisions over the period 20002006. The main question addressed is how much households borrow when refinancing their
current mortgage debt in a cash-out transaction. We also provide estimates of the marginal effect
of certain borrower characteristics. Results contribute both to the literature on refinancing
behavior and the role of house price appreciation in providing funds that may be used for
consumer spending or other purposes.

18) In august2004 Mark Carey and Greg Nini had studied about the Corporate Loan Market
Globally Integrated? A Pricing Puzzle. We offer evidence that interest rate spreads on syndicated
loans to corporate borrowers are economically significantly smaller in Europe than in the U.S.,
other things equal. Differences in borrower, loan and lender characteristics associated with
equilibrium mechanisms suggested in the literature do not appear to explain the phenomenon.
Borrowers overwhelmingly issue in their natural home market and bank portfolios display
significant home "bias." This may explain why pricing discrepancies are not competed away, but
the fundamental causes of the discrepancies remain a puzzle. Thus, important determinants of
loan origination market outcomes remain to be identified, home "bias" appears to be material for
pricing, and corporate financing costs differ in Europe and the U.S.

19) In July 2005 Gwilym B.J. Pryce and Patric H. Hendershott had studied about the Sensitivity of
Homeowner Leverage to the Deductibility of Home Mortgage Interest. Mortgage interest tax
deductibility is needed to treat debt and equity financing of homes equally. Countries that limit
deductibility create a debt tax penalty that presumably leads households to shift from 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
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legislative change is complicated by the fact that lenders restrict mortgage debt to the value of
the house (or slightly less) being financed. Taking this restriction into account reduces 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 UK loans from the late 1990s.

20) In 1 NOVEMBER 2007 Marsha Courchane studied about The Pricing of Home Mortgage Loans
to Minority Borrowers: How Much of the APR Differential. The public releases of the 2004 and
2005 HMDA data have engendered a lively debate over the pricing of mortgage credit and its
implications regarding the treatment of minority mortgage borrowers. We provide a unique
empirical assessment of this issue by using aggregated proprietary data provided to us by
lenders and an endogenous switching regression model to estimate the probability of taking out a
sub prime mortgage, and annual percentage rate ("APR") conditional on getting either a sub
prime or prime mortgage. We find that up to 90 percent of the African American APR gap, and 85
percent of the Hispanic APR gap, is attributable to observable differences in underwriting, costing
and market factors that appropriately explain mortgage pricing differentials. Although any
potential discrimination is problematic and should be addressed, our analysis suggests that little
of the aggregate differences in APRs paid by minority and non-minority borrowers are
appropriately attributed to differential treatment.

21) In 1991 Susan M. Wachter and Paul S. Calemhad studied about the Community Reinvestment
and Credit Risk: Evidence from an Affordable Home Loan Program. This study examines the
performance of home purchase loans originated by a major depository institution in Philadelphia
under a flexible lending program between 1988 and 1994. We examine long-term delinquency in
relation to neighborhood housing market conditions, borrower credit history scores, and other
factors. We find that likelihood of delinquency declines with the level of neighborhood housing
market activity. Also, likelihood of delinquency is greater for borrowers with low credit history
scores and those with high ratios of housing expense to income, and when the property is
unusually expensive for the neighborhood where it is located.

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CONCLUSION

The Indian customer has come a long way from purchasing to fulfilling their needs from buying a
house customers now grab everything that comes their way but they do their own survey of
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optimum loans; same is the case with banks & housing loans. With innumerable choices before
him, the customer is needed then king. It is therefore imperative that if the bank has to succeed
in competitive world, it should be technological starry. Customer centric progressive driven by
highest standard of cooperative governance & guided by sound ethical values & above all should
have personalized customer services. There is scope of exploiting the vast middle income group
by releasing loans with special interest rate, which would be beneficial to both parties.

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RECOMMENDATION

The following suggestions are strongly recommended:

To broaden the customer base the vast middle income strata should be fully exploited.
Simplify the procedure, reduce service charges & demand only the basic essential proof.
Most banks are reluctant to advance loan to the service class. E.g. law years, police officers
etc. this aspect must be exploited.
Adoption of flexible & more lenient penalty should the
Customer fails to deposit the payment on time. The penalty should be case to case basis
rather than the same for the entire customer base.
Restriction to be reduced to bare minimum for loan advances & for repayment. For e.g.
offers Long term repayment facilities & have no age restriction to choosing repayment. The
maximum age for repayment could be increase to 65-70 years of age. Such facility will
grow fast retail segment of the bank.
Offer multiple repayment loans services. Class to be exploited by offering special reduced
Rates & linking the repayment from the source where the pay cheque to the employee is
issued. This need to undergo special contract with government organization to ensure
implementation.

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