Professional Documents
Culture Documents
Acknowledgement
Executive Summary
Chapter 1 Introduction
Chapter 2 Products
Chapter 3 Objectives and Rationale of the Project
Chapter 4 Review of Literature
5.4 Analysis
B) SWOT Analysis
I am obliged to all the people which includes my managers and mentors and my
colleagues for co-operation during the internship. My increased spectrum of knowledge
in this field is the result of their content supervision and direction that has helped me to
absorb relevant and high quality information.
I would like to thank my faculty guide Ms. sharma for her guidance and enriching my
thoughts in this field from different perspectives.
Last but not the least, I feel indebted to all those persons and organizations who/which
have provided helped me directly or indirectly in successful completion of this study.
rohit
Executive Summary
Against the milieu of rapid urbanization and a changing socio-economic scenario, the
demand for housing has grown explosively. The importance of the housing sector in the
economy can be illustrated by a few key statistics. According to the National Building
Organization (NBO), the total demand for housing is estimated at 2 million units per year
and the total housing shortfall is estimated to be 19.4 million units, of which 12.76
million units is from rural areas and 6.64 million units from urban areas. The housing
industry is the second largest employment generator in the country. It is estimated that
the budgeted 2 million units would lead to the creation of an additional 10 million man-
A year equates a century, knowledge compresses time and the information technology
sweeps the world, gathering momentum with each new application, soaring towards fresh
goal, rapidly opening vistas hitherto unknown. Here we are, in the 21st century.Years
Keeping the above philosophy in mind, this project is carried out with an objective to
identify the basic needs of the applicants and the process of Home Loans in Punjab &
Sindh Bank
Introduction
Punjab & Sindh Bankis Indias No. 1 Home Loans Provider. At Punjab & Sindh
BankHome Loans, it offers unbeatable benefits to ensure that the customers get the best
deal without any hassles. And Punjab & Sindh Bank makes it extremely easy for them
by offering
With varied offering of house loans and home finance, Punjab & Sindh Bank Home
Loans gives an opportunity to select the perfect loan as per the needs of the customers
Land Loans
Home Loan for NRI.Customers can also leverage their existing property to get
9
Operations Department It is responsible for punching end to end. It does NDC
according to the RBI norms and performs after sales services. It collects the Post Dated
Cheques.
Scenario then
Formidable competition
End to End delivery of the product through the DMA being done for the first time
11
Now Year 2007
1000 + locations
Weak HFI with high cost of funds & poor system would end up as DSA
HFIs with low cost of funds but poor system may turn out to be buyers of MBS
HFI with good systems in place but with high cost of funds need to look at
Securitization.
HFIs with Low cost funds and good systems would be the major players.
Low margins & High delinquency can increase the lending rate to
12
Products and Documentation
Products: We Offer:-
Variance MV Lending
Smart Fixed
2. Money Saver
7. Top Up Loan
13
8. Cross Sell to Auto loans
Products LAP / OD
Lap on Land
Features :-
1. There must be a plot number. The plot must be properly demarcated by fencing
or boundary wall.
14
2. There must be change in transaction within last 10 years. The title must
be changed.
is not considered.
8. Case can be made on Income Basis or Repayment Track Record (RTR) of all
kinds of loans i.e., auto loans, medical equipment loans, personal loans.
9. LAP on Land can be given to all kinds of customers Salaried, Self Employed
15
Home Loans : Key Features
Loan to value (LTV) ratio is 85 %. This includes stamp duty, registration charges
and amenities.
Maximum Tenor : 20 years (15 years for SENP retail & non retail)
LTV Norms
In case of Resale :
16
LTV Norms > Rs.100 lacs
For Property value > Rs.100 lacs & <=Rs.200 lacs, the max LTV will be 80 %.
Property value > Rs.200 lacs, the max LTV will be 75%
Cap based on MV
For Property value > Rs.100 lacs & <= Rs.200 lacs, the max LTV will be 75%
Property value > Rs.200 lacs, the max LTV will be 70%
Also Valuation will be mandatory for all cases > Rs. 100 lacs.
17
MV Lending LTV Norms
MV Lending
transaction value. For example transaction in certain sectors are as given below
Location % of MV
Delhi 25 40 %
Banglore 60 65 %
LTV Based on the lower of the two : In case of purchase in ready / resale cases
65 % of the Market Valuation if the property is valued at more than Rs.50 lacs
2.100 % of agreement value / sale deed (with stamp duty paid) + stamp duty +
The cost of Amenities should not exceed 200 % of (Agreement Value / Sale Deed +
18
If Amenities Agreement is not on stamp paper, then that component of the loan amount
03 Years fixed gives option to customer to look at fixed rate for the first 03 years and
Fixed from the first date of disbursement based on weighted average rate
of interst.
At the end of 03 years it will move to FRR on immediate reset date which could
19
Part Fixed & Part Floating
Combination of two should be minimum of Rs.1 lac and each tranch should be of
Rs.50000/-
Process
Common HLD
the loans.
Eligibility
Based on the combination of the loan EMI for the other loan would be considered
20
Fixed with MMC
A new product variant for Home Loans with a variation in Fixed rate of interest with
Salient features :-
Fixed MMC rates can be offered for Home Loans & Balance Transfer of Home
Loans only.
Fixed MMC rates can be offered only to Resident Indians. Thus, Home Loans
The Fixed MMC rate can be offered only for new sanctions. Conversion from
fixed ROI to Fixed MMC rate and vice versa would not be allowed.
All Fixed MMC rate loans would be booked under the following scheme
Finnone/ APS :
New format of the sanction letter for Home loans with Fixed MMC
A new Home Loan Document (agreement) with the following mentioned on the
top cover With Money Market Condition Clause for Fixed Rate of Interest.
21
EMI Under Construction
Features :
Customers pay EMI from the first disbursement on total sanctioned amount.
22
EMI Rs.8056.00
Revised Tenure 124 months
Full & Final after 03 months
Balance Principal O/s 673721 + 300000 = 973721/-
Revised Tenure 233 months
Maximum Tenure 240 6 = 234
23
Step Up Repayment Facility (SURF)
Concept SURF
a) Primary
b) Secondary
c) Tertiary
The installments will increase beginning from the least in Primary & the
highest in Tertiary.
Rs.625/-per lacs
Types of SURF
Category I
Category II
Category I
1 worksite list)
24
Category II
Benefits :SURF
Enhanced Eligibility
Opting for SURF could raise the eligibility by up to 30% above the eligibility in a
Rs.17.07 lacs , Enhanced Eligibilty Rs.22.14 lacs & Increase in Eligibility 30%.
25
Features : SURF
a) Salaried
Not Eligible :
Deviations / Re schedulements
a) No Deviations permitted
b) No Re Schedulements permitted.
Documents SURF
Agreements
b) Amendatory Agreement
26
Income Tax Benefits
portion.
27
Land Loans : Key Features
Maximum Tenor : 20 years (15 years for SENP retail & 10 years for SENP non-retail)
LTV Ratio : 85% of the cost, if allotment is directly from Development Authority
Provided land has been purchased in last one year OR 100% of estimated
28
In Spoke Loactions
First disbursement would happen only after the construction has reached
plinth level.
75% of land cost can be given provided land has been purchased in the last 01
year.
29
Office Premises Loan : Key Features
LTV Ratio :
Eligible Entities :
NRIs
Other Norms :
30
Maximum of 30% of the cost of the property.
Property, etc.
LTV + FOIR (Non retail) : Subject to maximum of 120% for residential and 105% for
Other norms : Loan can be availed only against the self occupied property.
31
Balance Transfer
Purpose : Take over of housing loans taken from other HFC / Bank at a higher rate than
current rate.
LTV : 85%
charges + fee payable to ICICI HFC subject to applicable LTV norm, calculated on the
cost of property.
32
Outstanding Principal statement from existing HFC / Bank
Bank
Legal verification
to collect original docs & mortgage release letter from HFC / Bank.
Original receipt required from HFC / Bank for the amount disbursed
landowner.
GOVERNMENT.
33
34
Top Up Loan
the borrower.
Entitled Borrowers : Borrowers for the Top up loan must be the same as the existing
ICICI loan
Home loan
NRP
(Loan available on fully disbursed cases & NIL post disbursement pending documents)
35
Home Improvement Loan
Eligible Entities :
Salaried
SEP
SENP
Eligible Improvements : Being completed within 12 months from the date of first
disbursement
36
Lease Rental Discounting
Purpose : Enable the consumer to raise funds (and increase liquidity) against future
85% of the NPV of furure expected rentals discounted at the applicable ROI
( net of TDS)
Eligible Entities :
Salaried
SEP
37
No Income Proof Loan
LTV Ratio : For loan amount > Rs.25 lacs, LTV 60% of COP or 65% of MV
(whichever is lower)
Method I II III IV
MV (%) 40 50 60 65
COP (%) 75 70 65 60
Documentation :
a) Current Account
b) Savings Account
38
Maximum number of transactions 10 per month
EMI not to exceed 10% of the average monthly bank credits for the last 06
months
Average balance on 10th, 20th & 30th for last 06 months should be greater than
02 times EMI.
RTR of 12 months if EMI of existing loan is more than 25% of the proposed
EMI
39
Income Surrogate Banking Product
2. Loan Amount
3. Term Max.10 years (Term should not exceed propertys residual age)
5. Min Property Value Rs. 15 lacs (as per technical valuation)across all
cities.
6. LTV
7. Bank Statement
ii) Photocopies of updated bank statements for the last one year
co-applicants.
40
9. Business to have continuity for the last 3 years.
11. CC accounts EMI to be less than or equal to 10% of the inward flow
12. Other accounts EMI to be less than or equal to 15% of the inward flow
into the bank a/c and average balance to be more than 1.5times the EMI in
41
Adjustable Rate Home Loan
Eligible Products :
Home loan
Land Loan
NRI
OPL
LAP
BT
Top Up
Monthly reducing
Date of change : 1st day of each quarter (as per calendar year)
42
1. Negative amortization
Portfolio
Fixed to fixed 1.75% 1.75%
Fixed to floating 1.75% 1.75%
Floating to fixed 1.75% 1.75%
Floating to floating 0.5% 1.75%
Change in ROI on account 1.75% 1.75%
fixed
43
THIRD PARTY PRODUCT
Property Insurance : Same Tenure & cover commences after completion of work
Loan Shield
44
Unemployment due to retrenchment
Any illness pre-existing or repoted within 90 days or loss of job within 90 days
not covered.
45
Home Assure Prudential (Group Policy)
Product Feature
Part / Under Construction : Cover can take 0/1/2 + tenure of the loan.
46
OBJECTIVES AND RATIONALE OF THE PROJECT
Main objective:
To find out the utility of Home Loans in general public and analyze the number of
customers applying for Home Loans in ICICI. To learn the process of Home Loans.
The basic necessity of general public is food, clothing and SHELTER. So , for
the fulfillment of the last need ICICI has introduced many products according to
Economic Growth of the country is predicted by its Infrastructure and Real Estate.
Therefore, ICICI has made easy by granting loans by easy methods and normal
rates.
have his/ her own house through home loans which facilitates deduction in
Income Tax.
All the NBFCs are interested in granting Home Loans because it is of large
amount .
It is the only type of loan which is coordinated and continued from the time of
47
Personal Objective :
I choose this project in order to have the detailed study of the topic Home Loans
To have the practical knowledge because in future every second person will be in
ITRs, Legal and Technical study of any property and even profile check.
48
REVIEW OF LITERATURE
THE BUSINESS PROCESS THE ICICI WAY
Business model
a) DMA Network
b) Counselor Teams
c) Relationship Managers
Processing and appraisals are done in house and on-site to reduce TATs
a) Superior service
b) Excellent products
The person who has to ensure that we fulfill every promise that we make to the
customer
49
Risk Containment Unit (RCU) Process
a) Pre-Sanction Stage
b) Pre-Disbursement Stage
verification a) Residence FI
b) Employment FI
Property verification
This FI Shoot is done of all the applicants and co-applicants. The office FI
Operation Process
50
Sanction Process
b) NDC Check
Disbursement Process
a) NDC Check
c) Preparation of Cheque
d) Storage of Dockets
Sanction Process
Normally, it would take 4-7 days for the sanction process from the date of receipt of
Banks representative visits the customer and explains the loan product
Now customer provides the bank with Income and Personal documents as
Documents are credit appraised and decision taken on the sanction of the loan
Bank delivers the offer letter along with a list of legal documents required.
51
CUSTOMER
DMA/COUNSELLOR
BSM
RO FIRE FI
RCU FI AGENCY
RECEIVES FI
BCM
COPS DEDUP
Disbursement Process
Normally, it would take 4-7 days for the disbursement process from the date
Banks representative visits the customer and collects the Legal Documents.
52
Customer
DMA
RO
BCM
53
Firstly, starts the work of Relationship Officer
Purpose : To provide Single Point contact to the customer and handhold him through the
Enrolment
Ensure entry of new DME leads and updation of existing leads in CMS
Ensure Welcome Letter is sent to all new customers at the time of login.
Sanction
Resolve with customer all enquiries raised by CPA / BCM on the Sanction file
Make Sanction Call to all customersand inform them regarding all disbursement
Sancction Letters
Disbursement
Inform customer about the pending documents, if any, as per the legal report
54
Next is Branch Credit Manager
Purpose : To provide credit decision for snction and disbursement in order that
the commitment to the customer on turnaround time is fulfilled
Sanction
Check the Sanction file for Credit compliance and eligibility norms and authorize
sanction
Coordinate with the higher authority for the cases that require approval
Disbursement
Impart training to Back office and DMEs regarding policy and process changes
55
What is Contact Management System ?
56
Flowchart
Add Contact
Fix Appointment
Remainder for Customer
Update Diary
NO
DME Meets
The
Customer
YES
NO
Customer
Interested
YES
All NO
Documents
Collected
YES
Sanction Process
57
Benefits of CMS
Availability of Information
Structured Planning
Introduction to Credit
58
Things to look at in credit
d) Cellular repayments
59
In case of salaried look at Fixed & Variable Income
b) Mandatory contribution
c) Additional Contribution
Stability of Income
In case of Salaried
60
In case of Self Employed
61
Family Background
Family
No. of dependents
Appreciation of Insurance
62
Geographical Restrictions
Customer Residence / Property not in Negative Area. Customer does not belong to
Geographical limits.
63
Customer Profile
Employees working with Trust should be approved & noted by the Policy & Risk.
AGE
There will be cases where the co-applicant who is the owner of the property
does not fit into the above categories. In these situations the age criteria is
relaxed as follows:
64
Customer Profile
Age Proof
Passport
Driving license
Birth Certificate
Election ID
65
School / College passing Certificate (printed format with personal details of the
Domicile certificate
Age proof is waived for all applicants whose income is not considered for
eligibility. However, age proof is mandatory for applicants below 20 years age &
Negative Profile
HUF
Politicians
Class 4 employees
66
Garment Exporters
Watchmen
Tour Operators
Cable Operators
Film stars
Bar Owners
Builders
If Existing Loans are not being considered proof for the same.
certificate.
67
68
Documents Required
Salaried
Not more than 02 or 01 cheque bounces in case of normal and worksite cases
respectively
Age Proof
salary Form16
Mode of Repayment
EMI
Auto Debit
ECS
Pre EMI
Auto Debit
69
Payment Cycle
The file logins from the Credit Department to Operations Department with 2 types
of documents
b) Dedup It is a software which has all the past data of all the customers
who have applied for home loans previously which helps trace any
defaulter.
70
NDC is done by the DEO as per the NDC checklist.
If there is any discrepancy the file is sent to Credit Department for re-credit with
reasons of hold.
If the file is clear and there is no discrepancy, then the data is entered in finnone
Now, CAM authorizes the transaction i.e., Maker Checker which means the
Finally when the case is clear, a Loan Account Number (LAN) is generated
which is the primary key to identify the case for the bank.
Now, at the end of the day the files are dispatched to Regional Operations.
Swap of Cheques.
Foreclosure
Part Payment
71
NOC + Document Collection
When the file reaches the Regional Operations it is login at two places:
a) Processing Cell
b) Storage Cell
In processing cell
If the cheque is clear, entry is done in the account otherwise, the case is rejected.
a) Customer papers which are retained till the term of loan is completed.
b) Bank papers are shedded after some time i.e.,3 years or so.
Types of Disbursement:
72
lacs and disbursement is done as and when the PF cheque is released.
granted in installments.
increase or decrease the amount of loan sanctioned, then again the file
Individual (HNI) who takes loan more than 20 lacs. In this type of
Disbursement the file and docket both are done side by side.
Contents of Docket :
Loan Agreement There are 2 copies of loan agreement, one for the abnk and
the second for the customer (including the stamp papers with stamp duty as per
Disbursement Memo It captures the entry of all financial details & entry is
done in Finnone.
Legal & Technical Deviation Sheet This is signed by the person who takes all
73
Cheque Submission Form It is for the acknowledgment taken from the customer
as per how many cheques have been issued and received and the entries are done
so as to avoid any future misunderstanding between the bank and the customer.
Pop Sheet It contains all the contents of the docket to avoid misplacement of
Over The Counter Sheet (OTC) It is to exchange the deed with the cheque.
PDC Pouch / Pre EMI Pouch It contains all the entries of cheque details.
Technical Report It shows the valuation of the property and the estimate taken
by the architecture.
Punching Process:
And all other contents are checked, verified and entered with the help of Pop
Sheet.
Finally the cheque is cut and directly handover to the customer or through Over
74
the counter (OTC)
Operations (CO).
Banking of Cheques
Realization of Cheques.
75
Types of Appraisals
There are basic two types of appraisals done to investigate about the cases that are
Technical Appraisal
Construction Structure
Mixed Structure
An Overview
Methods of Valuation
76
Market
Income
Cost
Methods of Valuation
Method of Comparison
Residual Method
Method of Comparison
Property Rate is worked out on other similar properties that have been sold in near
past.
77
Things to Observe while visiting a site:
Verify Amenities & Assess their True Value through Materials at site.
How Do We Fund ?
Structure Base
b) Bungalow or Flat
Builder
a) Track Record
b) Projects Completed
Lending
a) Stage of Construction
b) Cost Involved
c) Security
78
Adherence to Process
Technical Executive
Quality of Construction
Accessibility
Negative Area
Plan Validation
a) Check Frauds
Building Rules Critical Rules (please provide hand outs of the critical building
rules)
79
APF Process
Technical Manager
Fire Legal
Fire Technical
Entire legal and technical due diligence is done in one single stroke.
Total Value of the property and amount of constructed area coming up in the
market is known.
Better control
Better TAT
80
Turn Around Time / Amenities Valuation
Valuation not to include Stamp Duty and Registration Charges or Water and
Electricity Charges.
Legal Appraisal
Sanction Stage
81
Technical appraisal of the property financed.
Legal Appraisal
Transfer of Property
Living person conveys his interest , right or title to one or more person(s)
Trust.
Inheritance
Gift
Government Allotment
Purchase
Exchange
Partition
Release
Sale Deed
82
Agreement for Sale
Allotment letter
Lease deed
Gift Deed
Probated Will
Develop Agreement
Deed of Exchange
Deed of partition
Release Deed
Concept of Contract
misrepresentation or mistake.
Competence to Contract
permission of Court.
83
84
Property Documentation
1. Types of Transactions
2. Classification of Documents
Transaction type
Builder
Society
Self Construction
Resale Transaction
Classification of Documents
85
Property Documentation
86
Situation : Self Construction
Land Related Documents Same as individual title documents
Government Land Records Extracts from Registrars office
Mutation Entries
Plans & Permission Approved plans, NA permission, ULCA permission,
Tax Receipts, Commencement Certificate, Occupation
Certificate, Land use certificate, Building permission,
Possession Certificate, Location Certificate.
Individual Title Documents Sale Deed of the land, RR, Letter to Sub registrar
previous title documents, Land Layout.
87
Know Your Customer (KYC) compliance
(A) The matrix of the documents that are required to be collected for resident
individual borrowers is as below, any one document from each of the document
category would be required :
88
connection book. connection book.
@ The passport $ driving license as above should be current i.e., the same should not
be expired.
Clarification :
A single document can be accepted provided it serves the requirement for multiple
proofs and the current residential address is same as on the proof submitted for
individuals. Thus, the preferred document for the Photo Id, Residence Address & Age
Proofs is Passport / Election Id / Driving License.
For reference the list of documents accepted as Age Proof is given below
89
personal details of the personal details of the personal details of the
applicant handwritten are applicant handwritten are applicant handwritten are
acceptable) acceptable) acceptable)
Salary Slip (if Salary Slip (if Salary Slip (if
date of birth is date of birth is date of birth is
mentioned) mentioned) mentioned)
Domicile Domicile Domicile
certificate certificate certificate
Ration Card Ration Card Ration Card
Document category
Identity Proof In case the customer is a NRI
Adress Proof A copy of at least one of the following Address proog outside
or within India :
a. Utility Bill
b. Driving license
c. Residential Permit (Government Issued Identity Card)
d. Credit Card Bills
e. Rent Receipt
f. Overseas / Indian bank Statement
90
The address proof must match with the communication address
mentioned on the application form.
In case of non individual applicants, KYC will also be required for the partners /
directors / promoters who would be required as the co applicants and also all authorized
signatories.
91
92
Repayment Track Record Based lending
Auto loans
Product Highlights
Opportunities to give home loans to approved list of auto loan customers
Should have serviced for a minimum period of 12 months
Or RTR should not have been closed before 12 months back
Product can be offered for
a) Home loans
b) Home premises only for doctors
c) HL for SEP & SENP
Minimum Maximum Loan : Rs.5 Rs.25 lacs
Product Features
RTR of commercial vehicles not acceptable
a) Scorpio / Qualis
b) Sumo / Tata Indicab
Multiple lending on same RTR not
acceptable Lending to Directors / Partners
a) Based on RTR of the firm / Pvt Ltd. company
b) Director / Partner > 76% should come as Co-applicant / Guarantor
c) Stake to be verified by CA / CS or Returns of ROC
Loan To Value as per product norms
All other norms as per the product category
Customer Segment
Resident Indian
1. Salaried
2. Self Employed Professionals
3. Self Employed Non Professional
93
Target Segment
Self Employed
Salaried Professional /
Non
fesional
Already having Auto Loans with Punjab & Sindh Bankand other
Institutions
Product Working
Eligibility
1. Minimum Seasoning 12 months
2. Seasoning EMI Multiplier
>12 months 1 times of the current EMI for Auto
loan
>18 months 1.25 times of the current EMI for Auto
loan
Parameters
1. EMI in arrears (current) Nil
2. Defaults Peak not more than 30 days
RTR Health
For 12 months RTR 0 Cheque bounces in 12 months
For 24 months RTR Maximum 02 cheque bounces
For 36 months RTR Maximum 03 cheque bounces
Loan Amount in lacs Auto loan EMI *1.25/ EMI factor per lac
for the loan tenure
Example 1
Mr. Rakesh has Accent loan paying EMI Rs.15000/-
Loan Amount in lacs 15000*1.25 / 927 = Rs.20.22 lacs
94
PROCESS OF RTR
PROCESS
Research Methodology
95
RESEARCH METHODOLOGY
Research Design: The Research Design can be grouped under 2 sectors i.e., Primary
source and secondary sources.
Research
Design
Primary Secondary
Source Source
Questionnaire
Other than these primary and secondary sources the study of various cases of the
applicants by going through the files guided to make an analysis and findings regarding
the status of Home Loans in the current scenario. Even by assisting the Credit
Processing Analyst, the analysis and findings were approved by them.
Sample Design:
96
Research Tools and Questionnaire:
QUESTIONAIRE:
2. PROFESSION:
3. LOAN AMOUNT:
4. TENURE:
6. MODES OF PAYMENT:
(a) ECS (b) PDCs (c) DAS (d) SI (e) Any other
7. PROPERTY MORTGAGED:
10. LOAN TAKEN FROM ANY OTHER BANK, IF YES WHICH BANK AND
FOR WHAT PURPOSE:
97
Analysis:
In last 10 years the rate of growth in the number of applicants have been at a faster pace
because the individuals have vast knowledge about the benefits of Home Loans.
Year No. of Applicants
2002-03 7,73,562
2003-04 9,65,291
2004-05 13,42,097
2005-06 15,27,945
2006-07 17,95,048
2007-08 19,84,164
Secondly, the applicants applying for Home Loans were of young age as compared to
past 10 years. Then the applicants ranging above 45 years were more in number
applying but now there are applicants of even 25-30 years. The tenure to repay the loan
has also decreased because of the increase in Income Obligation ratio.
But since last 1-2 years there is a stable percentage of individuals applying for it because of
the increase in the rate of interest and strict norms of RBI. They are as follows:
a) Rate of Interest will be less for people in minority.
b) Applicants applying for more than 50 lacs who are High Net Individuals (HNI) are
provided with some percentage of rebate.
c) Applicants taking loan for the second time for Home loans are under strict
supervision and verification.
This is done because the customers take loans for investing money by taking HL
and enjoying the redemption and deductions.
Bank has even introduced Know Your Customer (KYC) documents which constitutes of
all the personal and professional details of the applicants and the co-applicants applying
for home loans which helps the bank to get the information about the customers and
judge the purpose of applying for HL.
98
FIVE FORCES OF PORTERS MODEL OF ICICI
SUPPLIERS
POWER
BARRIERS THREAT OF
TO ENTRY RIVALRY SUBSTITUES
Supplier Power
Increased Dependence on IPOs
There is a growing dependence of corporates on broking houses with the rising
number of IPOs coming to the market.
Buyer Power
Lack of Expertise Curtails Bargaining Power
Retail investors often lack the knowledge and expertise in the financial sector that calls
them to approach the broking houses.
Low Product Differentiation Proves Beneficial
The retail broking services provided by the various companies is homogeneous with very low
product differentiation. This allows customers to enjoy a greater bargaining power.
Degree of Rivalry
Move towards consolidation
Lot of brokerage companies are moving towards consolidation with the smaller ones
becoming either franchisees for the larger brokers or closing operations.
Increased Focus of Banks in Retail Broking
Various foreign banks like ABN Amro and others are planning to enter the Indian
retail brokerage industry.
Online Trading Competes with Traditional Brokerage
There is an increasing demand for online trading due to consumers growing
preference for internet as compared to approaching the brokers.
99
Barriers to Entry
Entry of Foreign Players
New forms of trading including T+2 settlement system, dematerialization etc are
strengthening the retail brokerage market and attracting foreign companies to enter
the Indian industry.
Threat of Substitutes
Alternative Investment Options
Various alternative forms of investment including fixed deposits with banks and
post offices etc act as substitutes to retail broking products and services.
100
SWOT ANALYSIS
Strength
Advanced Technology
Providing innovative products and technology
Leverage technology to satisfy customer
demands. Add value to share holders.
Weakness:
Too many subsidiaries
High cost of funds
Opportunities:
Higher capital base
First mover advantages
Threats:
Competition from other industry rivals like HDFC.
Concern over NPA despite provisioning
Thus, ICICI has been able to use technology to provide value added service to its
customers during the last few years. For ICICI, technology is an integral part of
their business. However, their overall progress could have been smoother but for
certain internal and extraneous factors and also a pressure on spreads due to a
competitive market.
101
Comparative study of Punjab & Sindh BankLtd. and HDFC Bank
Even their offices reflect their attitudes. ICICI Bank's headquarters in suburban Mumbai is a huge,
imposing edifice in glass and granite. HDFC Bank's office in central Mumbai is comparatively
smaller and more sedately furnished. The two banks have carried forward their style statement in
their approach to business. Punjab & Sindh Bankthinks big, is all for growth and hungry for
market share. HDFC Bank is more conservative and cautious, grows at a measured pace,
without taking any undue risks.
ICICI Bank's assets in the retail space stand at Rs 56,000 crore (Rs 560 billion). In comparison,
the tally for HDFC Bank is Rs 18,000 crore (Rs 180 billion). Punjab & Sindh Bankalso leads
HDFC Bank in almost every segment they are present in. But that's just the current update.
Punjab & Sindh Bankbegan its retail banking venture in mid-1999. By January 2000, it had
moved on to introducing home loans, car loans, personal loans and credit cards. Realising the
need for a bigger retail deposit base, the bank started building a branch and an ATM network.
The acquisition of Bank of Madura in March 2001 added 263 branches, many of them in cities
where Punjab & Sindh Bankdid not have a presence.
The merger of the erstwhile financial institution ICICI Limited with the bank in April 2002, gave it
a ready-made corporate clientele. The flip side was that Punjab & Sindh Bankhad Rs 10,000
crore (Rs 100 billion) of restructured assets for which it had to make provisions.
On the other hand, HDFC Bank kick started its operations in 1995 with a focus on corporate
banking, targeting the top-end of the market.HDFC Bank ventured into retail lending in 1998, a
year before ICICI Bank. But in products like credit cards, it was slow to get off the mark. For
instance, its credit cards were launched only two years ago. By then Punjab & Sindh Bankhad
been present in the credit card business for nearly three years.
However, HDFC Bank was handicapped because it could not sell home loans (because its
parent HDFC was in the business), though it has been originating them in the past one-and-a-half
years. For ICICI Bank, home loans are 46 per cent of its retail assets.
A banking consultant observes that Punjab & Sindh Bankis far more aggressive. Though ICICI
executives do not admit it, industry sources observe that ICICI's pricing has been far more
competitive, which probably brought it more customers.
According to some industry experts, growth for Punjab & Sindh Bankmay have come at the cost of
quality.
Punjab & Sindh Bankdenies this.
Both players targeted the same customer -- the upper-middle class. The marketing channels
used by both, including direct sales agents (DSAs), were the same. Yet, there was a difference.
In the past two years, the bank has spent less than Rs 100 crore (Rs 1 billion) on advertising
and publicity (In comparison, ICICI has spent Rs 185 crore). HDFC Bank says that its spends
have always focused on other channels such as direct sales and phone banking rather than
mainstream advertising.
102
Better pick-up
The numbers tell the story. ICICI Bank's retail deposits are nudging Rs 60,000 crore (Rs 600
billion) and in FY06, it grew its deposits by 47 per cent compared with the industry deposit growth
of 14 per cent. HDFC Bank's retail deposits are about Rs 23,000 crore (Rs 230 billion). Even in
home loans, Punjab & Sindh Bankcommands 30 per cent of the market, having eaten into
housing finance pioneer, HDFC's share.
Even in the number of customers Punjab & Sindh Bankleads by a distance (See table: Share
of the wallet). Nearly 14 million customers bank with ICICI Bank, while the number for HDFC
Bank is less than half (6.4 million). Punjab & Sindh Bankhas issued 3 million credit cards -- that
is more than twice the number of HDFC Bank's credit card users. However, industry observers
point out that ICICI Bank's effective users for credit cards may not be high.
Nonetheless, they concede that even with a discounted customer base, the numbers will still be
strong. Even in businesses like online trading where the risks are relatively low, Punjab & Sindh
Bankcommands a two-thirds marketshare.
The stock market has always valued HDFC Bank at a huge premium -- at the current price of Rs
585, HDFC Bank is valued at 3.5 times price to forward book (valuation based on estimated
book value in FY 06 of Rs 165). The multiple for Punjab & Sindh Bankthat quotes at Rs 415, is
just 2.1 (estimated book value Rs 194). The reason: the impeccable quality of HDFC Bank's
balance sheet. With NPLs of less than 0.2 per cent, compared with 2 per cent for ICICI Bank, its
books are definitely in far better shape.
HDFC Bank's operations are also more profitable -- its net interest margin at 3.2 per cent is way
higher than that of ICICI Bank's 2.4 per cent. Also, it is able to access deposits at a lower cost.
On an average, it pays an interest of 3.2 per cent while Punjab & Sindh Bankshells out 4.5 per
cent.
But round one of the banking sweepstakes has clearly gone to ICICI Bank.
103
RESEARCH FINDINGS:
The data collected through questionnaires with the help of Direct Sales Agent and Direct
Marketing Agencies has been of great importance to analyze many details regarding all the
captions that are there in the questionnaire of sample size 40. They are as follows:
Age: The applicants ranging between the age of 30 - 45 years are the ones who
have applied for Home Loans large in number, it is because they are financially
stable and sound. But now a days customers ranging between 25 30 are even
applying for Home Loans because they are aware of the benefits that can be
availed by applying for Home Loans.
Profession: Mostly, the Self Employed Non Professionals i.e., business persons
who are involved in their family business apply for Home Loans. Salaried are less
in number.
Tenure & Loan Amount: The tenure which the bank and the customer finally
arrives at is according to the eligibility of the applicant in consideration to his
a) Age As the bank itself assumes that is the person capable enough physically
and financially that hell be able to repay the loan in the fixed tenure.
b) Profession either the person is salaried which shows he has a fixed income per
month and thus the installments will be on time, if the applicant is SEP or SENP
then there can be any gain or loss and so the tenure and amount of loan is fixed
accordingly.
Product applied for: The most preferred products in Home Loans are:
104
There is no rebate in Income Tax.
Any other loan taken for the same property: Out of sample size 40, mostly
have not applied for any other loan simultaneously but through Credit
Information Bureau of (India) limited (CIBIL) and DEDUP records show that
at time of applying for HL customers itself take a check that they have already
repaid their dues of other loans.
Loan from any other bank: Out of sample size of 40 customers mostly have
not applied in any other bank but some number of applicants are customers of
any other bank.
Sources of information for the various home loan plans: Features launched
by the bank in different plans of HL is outsourced through Direct Sales agents
and agencies. And even some customers or can say general public prefers
bank as the most reluctant source of availing information.
99% of the applicants in sample size are satisfied by the services provided
by Punjab & Sindh BankLtd.
105
SUMMARY AND CONCLUSION:
The report made on ICICI Home Loans concludes by findings of various benefits to the
customer, government, builders and HFCs / Banks.
There is a growing tendency of investing at a younger age, increase in NRI demand in
real estate, increased urbanization, owning property now more economical than renting.
Government committed to simplifying Mortgaged Backed Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI)
Act 2002. There is tax benefit to the customers and rationalization of stamp duty.
Builders are now a days focusing on end users rather than Investors and there is
improvement in quality of constructions.
JUNE 2008
FILES LOGIN 100( Ist Disbursement) 49 ( Sub Disbursement) 52 ( Final Disbursement)
The graphs below shows the market leadership of ICICI as compared to HDFC and SBI.
Market leadership
30000
25000
20000 ICICI
15000 HDFC
10000 SBI
5000
0
2004 2005 2006 2007
106
Market leadership
Disbursement (in Rs.Crore)
20000
18000
16000
14000
12000 ICICI
10000 HDFC
8000 SBI
6000
4000
2000
0
2004 2005 2006 2007
Market Share
SBI
2007
2008 OTHER PSBs
LIC
2006 OTHER HFCs
2007 FBs
2005 Pvt Bks
HDFC
2006
2004 ICICI
StanChart
2005 0% 50% 100%
Citi
107
108
Bibliography:
BankLtd. www.ICICIBank.com
www.homeloans.com
109