Professional Documents
Culture Documents
Project Repoort On "Sbi Home Loan": Submitted To: Mrsshweta Sharma H.O.D. (U.B.S)
Project Repoort On "Sbi Home Loan": Submitted To: Mrsshweta Sharma H.O.D. (U.B.S)
Project Repoort On "Sbi Home Loan": Submitted To: Mrsshweta Sharma H.O.D. (U.B.S)
on
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CONTENTS
ACKNOWLEDGEMENT
PREFACE
DECLARATION
LIST OF TABLES
LIST OF GRAPHS
CHAPTER NO.CHAPTER NAME PAGE NO.
1. INTRODUCTION 1-24
INTRODUCTION OF TOPIC 1-15
INTRODUCTION OF COMPANY 16-24
2.REVIEW OF LITERATURE 25-28
3. RESEARCH METHODOLOGY 29- 34
3.1 RESEARCH DESIGN
3.2 OBJECTIVES OF THE STUDY
3.3 SCOPE OF THE STUDY
3.4 DATA COLLECTION
3.5 LIMITATIONS
4. ANALYSIS & 35-39
INTERPRETATIONS
5. CONCLUSION &50-53
RECOMMENDATIONS
BIBLIOGRAPHY
ANNEXURE
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ACKNOWLEDGEMENT
I owe a great many thanks to a great many people who helped and supported me
in my project report. My deepest thanks to Lecturer, Shwetasharma the Guide of
the research report for guiding and correcting various documents of mine with
attention and care. She has taken pain to go through the report and make
necessary correction as and when needed.
.
Also, I am thankful to Mrs. Shweta Sharma (H.O.D, UBS) for being the
inspiration and providing us with all the resource required for the research report.
My heart says a bundle of thanks to Miss Deeptifor her unflagging effort to be a
good helper in my research report.
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PREFACE
Loans have to be paid back one day. Had this been realized by all, how nice life
would have been on this Planet. It would not have prompted the poet to say
“Neither be a Lender, nor a Borrower Be.” Alas! Given the realities in life, this
could remain at best a wishful thinking.
So their business is to lend and lend more. Their proficiency; skill; competency are
all tested in how much they lend and how much they RECOVER and how quickly.
Suffice it would be to state that this can be likened to the vigour and strength
with which one goes about after fully recovering from any ailment. It is agreed by
al beyond doubt “Recovery” is essential and get “recovery” is very essential.
We know right form the appraisal stage up to the actual repayment stage the
banks need to be careful. We also know that once the money is in the hands of a
borrower, attitudinal changes take place. The borrower, with some few
exceptions may be, feels a bit more complacent as after all it is not this “own
money” which is at stake. Therefore an attempt is made here to put all that we
know already proper perspective.
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DECLARATION
This work has not been previously submitted to any other university
for any other examination.
Date:
Place:
----------------------
(Munna Prakash
Singh)
ROLL NO. 1107133
BBA-5 t h Sem
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CHAPTER – 1
INTRODUCTION
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INTRODUCTION
The word ‘bank’ it derived from the word ‘bancus’ or ‘banque’ that is
French.
There was other of the opinion that the word ‘bank’ is originally derived from the
German word ‘back’ meaning joint for which was Italianized into ‘banco’. But
whatever be the origin of the ord bank as Prof. ramchandraRao says.” It would
trace the history of banking in Europe from middle ages.”
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common in Rome. From these the poor citi zens received loans
without paying interest, against security of land for 3 or 4 years.
During the early periods, although private individual mostly did the
banking business, many countries established public banks either for
the purpose of facilitati ng commerce or to serve the government.
This is true not only in the case of India but also of other countries.
Although, the business of banking is as old as authenti c history,
banking insti tuti ons have since than changed in character and content
very much. They are developed from a few simple operati ons
involving the sati sfacti on of a few individual wants to the complicated
mechanism of modern banking, involving tslowly seeking employment
and thus providing the very life blood of comer
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SBI HOME LOAN
If you are planning to buy a home, then it is debatably one of the biggest financial
decisions in your life. Taking a home loan can involve lots of stress because it
requires a lot of investment of money. Each and every man has a definite goal to
become an owner of his own home. This is the most amusing and stirring point of
their lives. Therefore there are many people who splurge their time in looking for a
home loan but they avoid frittering time for exploring their home loans. In fact
getting a home loan is very easy nowadays. There are a lot of public and private
financial sectors which provide home loans to different customers based on their
credit.
There are a variety of home loans which are based on different recent conditions.
Different types of home loans include mortgage loans, home equity loans etc.
Home equity loans are those loans which keep the home as a surety or a guarantee.
In fact, it is also known as second mortgage. There are different advantages
involved in taking a home loan. Such advantages include low rate of interest and
deduction of taxes. Mortgage loans are classified into two categories. These
categories are conventional or government loans and fixed rate loans or adjustable
rate loans.
The values of homes has doubled sensibly in recent times due to the rise in demand
and the rapidly increasing rates of interest for these home loans at the same time. It
is really good for those people who are interested in refinancing their home equity
loans so that the home equity loans save a lot of money for them. In fact, one more
added advantage they get is to pay lower monthly amounts to the concerned
bank.You should take enough care before you select the proper channel for home
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loan. Remember to ask all possible hidden charges involved in a home loan like
application, origination and withdrawal fees and hidden interests before taking a
loan. This is because you may lose your property or home in case you cannot repay
your loan amount.
The State Bank of India, or SBI, is one of the earliest banks of our country and still
respected by its competitive private counterparts. Like various other companies
financing for your Home loans, the SBI has developed its own Home loan policies.
The SBI Home loans have been formulated, especially with the knowledge of the
basic needs of our nation’s people and are quite thrifty.
The SBI Home Loan is available under various schemes and offers attractive
interest rates.
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The first and foremost thing that comes in a home loan process is organizing your
documents. It is highly recommended that you organize all your income statements
before you buy or refinance your home loan. You are required to provide two years
W-2 along with one month of paystubs if you are salaried. But if you are self
employed, you need to provide two years tax returns along with YTD profit and
loss statement.
The second most task which you should do in a home loan process is to get
qualified. This step can help you in a great deal to understand the amount which
you can borrow before you start a home loan process. You should get a pre-
approval rather than a pre-qualification before applying a home loan. Make sure
that that you find the maximum house you can buy rather than wasting time by
looking at properties which you can afford. This also helps you in getting a close
quickly as your loan is already approved.
One more thing you should keep in mind while in a home loan process is to shop
for loan programs and rates. You should compare different programs available
with different banks. It is true that shopping for a home loan can be difficult
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because there are so many programs from which you have to choose. Each of the
different programs has different interest rates, points and fees. You can take the
help of an experienced loan officer who can help you to make a right decision
which is best for you.
After the home loan gets approved, make sure to close the loan by properly signing
the final loan documents and review them properly. Don’t forget to check that the
loan terms and interest rates are same on the final documents which you were
promised.
SBI Home Loans come to you on the solid foundation of trust and transparency
built in the tradition of State Bank of India. SBI provides a Two Home Loan With
Different benefits and Schemes.
Purpose:
Purchase/ Construction of House/ Flat
Purchase of a plot of land for construction of House
Extension/ repair/ renovation/ alteration of an existing House/ Flat
Purchase of Furnishings and Consumer Durables as a part of the project cost.
Takeover of an existing loan from other Banks/ Housing Finance Companies
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Features:
• Interest charged on the daily reducing balance
• No penalty for prepayments made
• No hidden costs
• All the features of our product, including interest rates, are in the public domain.
• Loan sanctioned within 6 days of submission of required documents.
• Option to club income of your spouse and children to compute eligible loan
amount
• Provision to club depreciation, expected rent accruals from property proposed to
compute eligible loan amount
• Provision to finance cost of furnishing and consumer durables as part of project
cost
• Repayment permitted upto 70 years of age
• Free personal accident insurance cover upto Rs.40 Lac.
• Optional Group Insurance from SBI Life at concessional premium (Upfront
premium financed as part of project cost)
• ‘Plus’ schemes which offer attractive packages with concessional interest rates to
Govt. Employees, Teachers, Employees in Public Sector Oil Companies.
• Special scheme to grant loans to finance Earnest Money Deposits to be paid to
Urban Development Authority/ Housing Board, etc. in respect of allotment of sites/
house/ flat
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The procedure of applying SBI HOUSING LOAN :
1) LEGAL OPINION:
The legal clearances/ opinion of the flat/property which you are buying / staying
/constructing have to be obtained from an advocate from Bank panel.
2) VALUATION:
The Engineers valuation of the property and estimate for the construction to be
obtained with bank panel engineer. In case of takeover loans two panel engineer
valuation is required and the least value between them should be more than the
takeover amount.
3) ELIGIBILITY:
• Minimum age 18 years as on the date of sanction
• Maximum age limit for a Home Loan borrower is fixed at 70 years, i.e. the age
by which the loan should be fully repaid.
Example: To compute your eligibility, Take the Net Monthly Income (i.e. take
home salary) ADD the expected rental income from the property which you
propose to buy - i.e your Total Net monthly income, then take 50%/55% of the
total Net Monthly Income from which reduce your all existing loans EMIs if
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any,and from the balance of amount arrive at your eligibility.
Eg: if the 50% of your take home salary plus the expected rental income of the
property, i.e your total net monthly income is Rs.75000/- and your existing other
monthly loan commitments is Rs.25000/-, we take Rs.50,000/- (75000 -25000) as
provision for loan repayment for the present loan and calculate the eligibility.
The rate of interest for housing loans upto 50 lakh amount for a period of 15 years
for example say if it is 9% p.a. and the monthly EMI is RS.1014/- per lakh. To
arrive at the eligibility, we divide 50000/- by 1014/- and arrive at Rs.49.30 lakhs as
your eligible amount.
Take 55% of this for total loan EMI provision i.e: 55,000/-
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4) FUNDING:
SBI funds 80% loan of the project cost which includes the cost of undivided
share of the flat /construction cost, Car Parking, KEB & BWSSB deposits, VAT &
service taxes, maintenance cost & Registration expenses subject to your eligibility
as calculated above whichever is lower.
Loan Amount
• 40 to 60 times of NMI, depending on repayment capacity as % of NMI as under –
1. Income of your spouse/ your son/ daughter living with you, provided they
have a steady income and his/ her salary account is maintained with SBI.
2. Expected rent accruals (less taxes, cess, etc.) if the house/ flat being
purchased is proposed to be rented out.
3. Depreciation, subject to some conditions.
4. Regular income from all sources
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5) INTEREST RATES:
The bank charges the interest on its home loan schemes at fixed rate rate of interest
and the floating rate of interest on the following basis:
1. Floating interest rate - The floating interest rate is connected to State Bank
Advance Rate and the amount of interest charged is 8% at floating rate.
2. Fixed interest rate: The rate of interest under fixed interest rate for the first
year is 8% and 9.5% at a fixed rate for subsequent period.
Example1: SBI Easy Home Loan – For Loan amount uptoRs. 50 Lacs( WITH
MAXGAIN FACILITY)
Interest rate during the first year (i.e. till first anniversary date from the date
of first disbursement) is fixed at 8% p.a.
Interest rate during next two years is fixed at 8.5 % p. a
Interest rate after three years may be Fixed or Floating as per the borrower’s
choice made at the time of sanction. If floating rate option is chosen, then
the rate will be 2.75% below SBAR.
If fixed rate option is chosen, then the rate will be 1.25% below SBAR
prevailing on the third anniversary date from the date of first disbursement,
and shall have a reset frequency of 5 years from the third anniversary date of
the loan. Fixed interest rate shall be subject to force-majeure clause.
Example2: SBI Advantage Home Loan – For Loan amount above Rs.50 Lacs:
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Interest rate during the first year (i.e. till first anniversary date from the date of
first disbursement) is fixed at 8 % p.a.
Interest rate after three years may be Fixed or Floating as per the borrower’s
choice made at the time of sanction. If floating rate option is chosen, then the
rate will be 1.75% below SBAR. If fixed rate option is chosen, then the rate will
be 0.75% below SBAR prevailing on the third anniversary date from the date of
first disbursement, and shall have a reset frequency of 5 years from the third
anniversary date of the loan. Fixed interest rate shall be subject to force-majeure
clause.
SBI lays down certain rules and regulations pertaining to the repayment of loans.
The loan applicants can repay the amount in the form of equated monthly
installments and the repayment is allowed up to the age of 70 years. The maximum
repayment period for the applicants aged below 45 years is 25 years and for the
applicants above the age of 45 years the maximum period is 15 years.
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7)EXPENSES:
8)PRE-CLOSURE PENALTY
No penalty if the loan is precolsed from own savings/windfall gains for which
documentary evidence is produced by the customer. In case, such proof is not
produced by the borrower, penalty @2% on the amount prepaid in excess of
normal EMI dues shall be levied if the loan is preclosed within 3 years from the
date of commencement of repayment.
9) DOCUMENTS REQUIRED:
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ADVOCATE Check List : ( Prepare separate set )
ENGINEER Check List : (Kindly take the Engineer Telephone Nos from
the bank to co-ordinate with him for inspection of your property)
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1) Allotment Letter & detail split up cost of the project.
2) In case of completed projects, a letter from the builder stating that the
property is
3) Letter from the builder/seller the property is not mortgaged to any bank/
financial
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From the Applicant / Co- applicant and Guarantor, if any:
(In case the applicant/co-applicant/guarantor are into business, then last three
years Income tax returns/balance sheet with one year bank statement of their
business account is required)
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Proof of Identity - Copy of Passport/IC/PIO card (Passport with Visa
stamped thereon)
Valid work permit
Employment contract. An English translation duly attested by
employer/consulate/SBIs foreign branches/offices, Embassy in case of any
other language
Last salary certificate/slip in original and copy of identity card issued by the
current employer/proof of income in case of self employed
professionals/businessmen
Details of previous employment
Bank Account statement/passbook for the previous six months. Overseas
Bank Account Statement/Passbook showing salary and savings, if any
Proof of residence (driving license / utility bills etc.)
Copy of Continuous discharge Certificate (CDC)- for applicants employed
in the merchant navy
Notarized Power of Attorney in respect of applicants who propose to
authorize a third party to execute the documents/complete the mortgage
formalities/avail the loan instalments.
other documents as required by the Bank
IMPORTANT: All the above documents to be self attested. Also bring the
originals of the above documents for additional attestation by bank. (verification of
originals by bank)
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Guarantor details in the application with Assets & Liabilities duly filled in along
with the above mentioned documents are required.
Eligibility criteria of guarantor is: 80% of the net credit worthiness of the
guarantor should be more than the loan amount (takeover amount).
Important Note : The Title holders of the property should ONLY be the borrowers.
If the agreement is on the joint names (maximum three persons), then the Sale deed
also should be on the joint names and the loan also will be on the joint names. The
same is also applicable for take over loans. i.e. Joint Owners then Joint name in
the loan application / Single Owner then Single name in the loan application.
In order to entertain and listen to the customer grievance and complaints on home
loan process prescribed by the bank the SBI bank provides wholesome of options
to the customers. For further details and to post your query on SBI Home loan you
can call on the SBI customer care toll free number - 1800 180 1290
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Types of Home Loans from SBI
The different forms of SBI Home loans under which the bank may provide finance
to the individual are:
1. ‘SBI-Maxgain’ Home Loan: The SBI Maxgain Home Loan enables the
borrower to avail the loan as an overdraft.
Features:
Park your surplus funds and withdraw the same whenever required.
Earn optimal yield on your savings, at no extra cost.
Get a Home Loan as an overdraft on your account.
Minimize interest on the home loan.
Maximize income in the wake of low yields from other deposits and
investments.
Enjoy flexibility to operate your Home Loan account like a Savings or
Current account.
2. ‘SBI-Freedom’ Home Loan: SBI Freedom Home Loans are meant for Non
Resident Indians and offer the borrowers with the option to pledge securities
such as bank deposits for taking the loan.
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Feature
Enjoy the added advantage to select the order in which the fixed and floating
rates will be availed.
3. ‘SBI-Realty’ Home Loan: SBI Realty Home Loans are aimed at meeting
the fund requirements of borrowers for purchasing a plot of land.
Features:
Enjoy low margin, high loan eligibility with a maximum of Rs.20 lacs*
Avail easy repayment period of up to 15 years.
Avail another Home Loan to construct a home on the plot.
Enjoy the benefit of running both the loans concurrently.
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Ensure that you construct the house within 2 years from the date of availing
the Home Loan.
4. ‘SBI-Flexi’ Home Loan: SBI Flexi Home Loans offer the option of a one
time irrevocable option comprising a combination of fixed and floating
interest rates.
The schemes that are provided by SBI Home loans allow full transparency among
the bank and the customer and are conducted in such a manner, in which the
individuals do not have to go through much of a hassle. The most interesting aspect
about SBI Home loans is that they do not have any upper boundary on the
maximum amount, with which we would be able to build or buy a new house for
ourselves. Even the eligibility criteria is broadened in case of SBI Home loans, as
to apply for it you simply have to be an adult, i.e. above 18 years, or you must be
having a income source that is steady.
The SBI Home loans generally cover up to 90% of the total amount that we have to
pay for having a new house, and it enables us the liberty to repay the entire loan
and the interest till we are of 70 years. Like many other home loan policies the SBI
Home loans also provide the Free Personal Accident Insurance cover for their
clients.
Along with all such facilities, the SBI Home loans provide us with exclusive
benefit packages that may cover several things, ranging from the ATM-Debit card
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to be used internationally to SBI Classic or International Credit card. There are
also other features along with these, which may include 50% concession on the
remittance charges or for outstation cheques being collected and the option of
doing online banking. Thus, many individual prefer to go for SBI Home loans than
any other services, because of the smooth functioning assured.
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CHAPTER 2
REVIEW
OF
LITRETURE
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Review of literature helps a researcher to get acquainted with his/her selected
research problem and also may provide some guidelines in selecting a proper
research methodology. It is also helpful in finding out the research gaps in the
existing literature. This will help the researcher in fine-tuning his/her research
problem and methodology. Another advantage of reviewing in the existing
literature is that in cases where the research problems are similar, the conclusions
and findings may be easily compared. This will help the researcher in determining
whether his/her findings are possible or not. The literature under review may be of
two types: (i) concerning the conceptual and theoretical framework. (ii) the
empirical literature dealing with the studies made in the past which are similar to
the one that the researcher intended to undertake. The basic outcomes of such
review will be the knowledge as to what data are available for analytical purposes,
which will help the researcher to specify his/her own research problem in a more
meaningful way. Thus, review of literature is helpful in formulating the research
problem and also helps the researcher in deciding about the most appropriate
methodology to be used. While comparing the results of the earlier studies with
his/herown results, care must be taken to verify whether the objectives and
methodology are similar. While reviewing the earlier studies a researcher has to
state the objectives of the study, describe the concepts and definitions used, the
methodology employed and the important findings and conclusions of the study.
The researcher is supposed to make a critical review of methodology used by the
earlier researcher of the methodology if any.
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The researcher should improve his methodology in light of this. In the following
paragraphs several similar studies undertaken earlier are reviewed keeping in mind,
the following aspects: 1) The objectives, 2) Area of study with reference year, 3)
Research methodology used and 4) Major findings and conclusions.
A Research Article entitled “Housing Credit Situation in Eighties” by Lall
Vinay (1984)
He has focused attention upon ‘formal factor’ (Permanent Construction) which
served mainly to the HIG and MIG, the loan meets only 47% of the price of the
house, forcing the borrowers to make very large down payments. Also the price of
a typical house was above 3 times the annual families’ income of the borrowers. In
spite of, the entire system of housing allocation and credit the supply of affordable
funds was much smaller than demand. Thus, large growth in urban population and
the historically low priority given to housing, supply falls very short of demand
and need. Therefore, not only that the volume of saving and investments should
increase but also larger volumes of capital should flow into housing. Also,
accessibility and terms and condition of housing credit will determine the long
term redistribution performance in housing.
The Research Study entitled “Housing in the New Millennium: A Home
Without Equity is Just a Rental with Debt” by Joshua Rosner (2001)
He studied the prospects of the U.S. housing / mortgage sector over the next
several years. Based on his analysis, he believes that, there are elements in place
for the housing sector to continue to experience growth well above GDP. However,
he believes that 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:
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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 /
overvaluation 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
32
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.
A research article entitled “Home Ownership Risk Beyond a Subprime Crisis:
The Role of Delinquency Management” by Jaco Melissa B. (2002)
She concluded 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 self-sufficiency, to generate
positive social psychological states, and to develop stable neighborhoods and
communities. Home ownership and mortgage obligations do not inherently further
these objectives, however and sometimes undermine them. The most visible
triggers of the recent surge in subprime delinquency have produced calls for
emergency foreclosure avoidance interventions (as well as front-end regulatory
fixes). Whatever their merit, she 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
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terms, better origination practices cannot eliminate the need for delinquency
management. 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 her 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.
A research article entitled “Housing Problem and Public Action: Continued
Incompatibility Experience from a South Indian State” by M. Mahadeva
(2004).
In this article, the author has analysed the nature and distribution of the housing
problem in Karnataka and examined how the state has addressed this issue. In
particular, it considers the strategies adopted during the 90s and identifies a
number of failures including the task force on housing. Some of the major
weaknesses, pertaining to incidence by type and by rural-urban areas, on
approaches, on financial requirements and issue of development and
redevelopment are examined to propose alternative policy strategies to effectively
address the housing problem in the state. From the analysis it is found that
Karnataka is not an exception to the general rule that housing strategies, which
were evolved over decades, have not taken the direction expected. By and large,
the sect oral policies pursued were only ad hoc without a clear focus. Lack of
comprehensive policy to guide housing development on equity principle together
with ad hoc approaches, have failed to deliver housing benefits and develop critical
housing inputs on a sound footing with equal opportunities for all need based
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policy interventions hassle free input delivery mechanism existing housing
shortage and rural-urban disparities substantially. Unfortunately, this did not
happen. Thus, policy issues like what policies are needed for the state of Karnataka
to guide housing development, increasing the housing supply to the poorer and
marginalized sections, mobilizing the needed financial resources and a host of
other issues in addressing the housing problem emerge.
A study entitled “Performance of Housing Finance Companies” by Brar
Jasmindeep et.al. (2005)
The objectives of this study were: to study the operational performance, and the
financial performance of the selected institutions. The study covers three
institutions viz. HDFC, LIC & PNB. The study is based on secondary data that
have been collected from the annual reports and web sites of the institutions
selected under study. It covers the period from 1990-91 to 2002-03. The
performance of the selected institutions has been studied by using percentages,
compound growths rates and various ratios.
Findings of the study are:-
HDFC comes at the top among all the institutions as far as loan sanctioned,
disbursements and the loan outstanding are concerned, PNB has the last rank for
both loans sanctioned and disbursed. However, the compound growth rate for the
loan sanctioned, disbursement and outstanding has been highest in the case of
LICHF. It stood at 26.49%, 30.89%, 36.16%. Against PNB showed the lowest
compound growth rates of 18.62% and 19.90%, for the loan sanctioned and
disbursement over the same period. However, the compound growth rate of the
loan outstanding in the case of PNBHF was higher than the growth rate of HDFC.
The ratio of loan disbursed to loan sanctioned shows that the ratio of PNBHF
showed the highest variations from 53.37% to 96.52 % over the given period,
35
followed by LICHF for which the ratio varied from 56.88% to 95.65%. On the
other hand, the ratio for HDFC showed the lowest range of variation from 81.07%
to 88.19 in the same period.
Number of housing units assisted by the selected institutions and its percentage
to the total units financed during the year showed that HDFC and PNBHF financed
more than 64% and less than 3% of the total units financed during the entire period
of the study, respectively.
HDFC has provided the highest proportion of loans to individuals. The highest
variation in the composition of loan outstanding has been in the PNBHF. The loan
outstanding to individuals in the case of HDFC ranged from 66.89% to 81.99%
whereas it ranged from 89.58% to 100% for LICHF for the same period.
HDFC has been a major market share holder among the HFIs selected under
study. PNBHF has disbursed less than 4% of the total loan disbursed by HFIs.
It is found that during almost all the years under study, all the HFCs earned
more
than 80% of their interest income from the interest on housing loans.
LICHF earned the maximum proportion of total income from the interest on
housing loans. It was followed by PNBHF and HDFC.
As far as ratio of interest expense to total expenses is concerned, it ranged from
89.15% to 93.13% for HDFC over the period 1990-91 to 2002-03. It ranged from
65.74% to 92.45% for PNBHF and from 83.39% to 94.31% in case of LICHF over
the same period.
PNBHF spent in the range of 0.63% to 4.57% of the total expense on
establishment over the period of the study which was the highest among all the
institutions. LICHF spent the lowest proportion ranging from 0.42% to 0.89% on
establishment expenses during the same period and the ratio showed a declining
36
trend in the case of HDFC cover the same period.
The interest paid to loans funds showed much variation in the case of PNBHF.
The ratio for HDFC increased in the initial period but decreased later on. Among
all the institutions under study PNBHF paid the highest cost for raising loan funds.
The assets of LICHF constituted the highest proportion of outstanding housing
loans followed by PNBHF and HDFC.
During the period, investments comprised less than 25% of the total assets for
all the institutions. LICHF has a comparatively low ratio of investments to the total
assets the ratio of HDFC has been the highest over the same period. PNBHF
showed a considerably increasing trend in the earlier years but it declined in the
later years.
The net profit margin of PNB was higher than that of LICHF in the initial years,
but the ratio of LICHF shows improvement over PNBHF in the later period. In
the case of HDFC the net profit margin was in the range of 11.32% to 23.20%
over the period of study.
Return on net worth: - The ratio had considerable variation in the case of
PNBHF from 49.23% to 40.26%. The ratio also showed a comparatively little
variation and was at a reasonable level for both HDFC and LICHF during the
period of the study.
A Paper entitled “Retail Banking – Emerging Issue in Home Loan” by Rao K.
N. et.al. (2005)
In this paper the authors revealed that during 2002-03 housing loans by banks
grew at a hefty growth rate of more than 100%. The factors that contributed to this
aggressive growth in the portfolio of housing loans of banks and HFC are: Tax
intensives on repayment of principal and interest, rising income level of middle
class, falling interest rate, stable real estate prices, easy availability of housing
37
loans, low returns on the investment opportunities available in the market. They
also concluded that although there is strong growth in housing loans by financial
situations in India, we are still behind the developed countries in terms of housing
loans to GDP ratio. In India it is around 2.5% compared to 57% in the UK and
54% in the US. It shows that there is a vast scope for housing loans in India. One
economist has argued that every rupee spent on the housing sector will increase the
GDP by more than 75 paise. It also creates a labour intensive. Despite the immense
growth in housing loans there are certain challenges that the banks might face in
the time to come, e.g. falling rate of interest, rising mismatch in the assets and
liabilities of the bank, rising NPA in the housing loan portfolio, etc.
A Research Article entitled “Housing Loan Frauds in Banks: Some
Precautionary Measures” by Phogat M. (2006)
This article gives the measures for the housing loan frauds in banks. The author
concluded that housing for all envisaged 2 million houses every year out of which
0.7 million are in the urban sector. Government provided certain relief under
Income Tax Act. It motivated many people to avail housing loan. The author thinks
that different frauds committed on various banks can be divided into the following
two categories. i.e. Pre sanction and Post Sanction. KYC related due weakness in
pre inspection, Benami A/c, forged title deeds, by selling same flat to different
people, inflated salary certificate, filing of IT return for the last three years in one
lot and particularly by paying a nominal amount of tax, valuation of the property is
manipulated to manage margin money are post sanction fraud. The precautions
may be taken at the bank level to avoid the assurance of fraud i.e. KYC norms be
followed, main salary A/c should be verified, loan should be granted against the
flat / houses built by reputed builders only. An undertaking from the builders for
not been sold to any other person, search report of property to be conducted by the
38
advocate, original title deeds, property tax, electricity bill, kept on records.
Disbursement of loan should be made after spot verification, title deed should be
scanned through ultra violet ray machines before mortgage and bank should
independently verify the report and no middle man should be involved in the
process and entire KYC. So the author points out that above mentioned precautions
will enable the bankers to curb frauds and public money can be saved.
A Research Article entitled “Housing Finance in India – A Case Study of LIC
Housing Finance Limited” by Singh Fulbag et.al. (2006)
In this paper, the authors have studied 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 percentage and the compound annual
growth rates.
39
A Research Article entitled “Housing Loan Frauds: Are they Avoidable?” by
Padhi Manohar (2007)
This article addressed the key issues of housing loan frauds. Aggressive growth
in housing finance by the banks is for the reasons of Tax incentives on repayment
of principal and interest, rising income level of the middle class, affordable interest
rate, completion amongst banks and housing finance institutions, low returns on
other investments, low incidence of NPA, and housing as priority sector lending
for banks. Housing loans as a percentage of GDP, is 57% in UK, 54% in USA and
it is only 2.5% in India. It shows vast scope for housing loans in India. Increased
focus of banks in housing finance is also not free from fraud. Fraud is one of the
reasons for turning the housing loan account to NPA. The main reason for housing
loan turning NPA are loss of job, closure of the factory/company, illness of the
borrower, dispute between builder and borrower, over-finance to the borrower,
agents approaches the bank for section of housing loans in bunches, sections of
loan on fabricated documents without proper verification (Benami A/C,
submission of fake title deeds of immovable property, colored Xerox copy of the
title deed, subject of fake income certificate etc.) but the precautionary measures
prevent the frauds in housing finance like – pre-sanction appraisal, documentation
and creation of charge and post-sanction follow-up. The other preventive measures
like Identification of Borrower, Guarantor and Branch should insist opening of
bank A/C as per KYC Norm, pre sanction verification report, site verification,
existence of property, valuation of property photo of the immovable property,
approval of map and cost-estimate, scrutiny of title, end-use verification of amount
disbursed. Pay order should be issued in the name of banker, cross verification
with balance sheet document of title should be in DEMAT form, in case of large
40
value of loan bank approach sub registrar’s office to verify, Bank should develop
in-house expertise etc.
A Research Article entitled “Reverse Mortgage - A Novel Financial Product
for Elderly People” by Bhattacharjee K. (2007)
A reverse mortgage is a home equity loan offered to senior citizens that permits
them to convert home equity into cash while they retain ownership. A reverse
mortgage works like a traditional mortgage loan, only in reverse direction. A
borrower does not make regular payments to a lender; instead he/she receives
payments from the lender. The first reverse mortgage loan launched by Dewan
housing in 2006. Reverse mortgage product name was “Saksham”. Then ICICI and
NHB launched a new product of reverse mortgage. Reverse mortgage can provide
a valuable income source for seniors who own property but lack liquid assets. So it
is mainly meant for home-rich senior citizens who are otherwise cash-poor. This is
precisely the scenario where reverse mortgage products can be a boon to senior
citizens and a business for the lenders.
A Research Study entitled “Housing Advances and Commercial Banks: A
Review” Authored by Vimala P. (2007)
The objectives of the study were:
1) To review the housing advances of commercial banks in Kerala.
2) To compare the performance of different bank groups in respect of housing
advances. The study covered a period of seven years from March 2000 to March
2006 and the secondary data are used in the study. For the purpose of the study,
commercial banks are grouped into four categories. The study revealed that there is
no significant difference in the growth rate of housing advances by different bank
groups in state. Kruskal Wallis (H-Test) was applied to arrive at this conclusion.
41
CHAPTER-3
RESEARCH
METHODOLOGY
42
RESEARCH DESIGN
Research objectives
43
Summer Internship Project gives a practical exposure and helps in acquiring the
on road skills.
First and foremost objective is to find out the reasons for using of Advance
Product from SBI.
To find out the services that other bank given to their customer.
To generate the leads through the survey.
To sort out the prospective leads from the data I have collected through the
survey.
To build the relation ship with the customers and to follow up them, make
sure that they are satisfied with the product.
To get more references from the customers and generate new leads by
following a chain process.
To make the customer aware of the benefits of the product and convince him
to go for SBI Advance Product.
44
45
Significance and scope
All the analysis and suggestions are based on the analysis of the both primary and
secondary data.
There fore the scope of the study revolves around the following aspects:-
46
DATA COLLECTION
Both the primary and secondary will be the sources of data collection but in this
study the data was collected mainly through primary sources. In primary sources
and Secondary sources we include:
COLLECTION OF DATA
47
Interview Questionnaire Company’s journal Books
(i) Primary Data: I had used Questionnaire and survey as primary data.
(ii) Secondary Data: I also collected data from internet, magazines, Newspaper
as secondary sources.
BOOKS
Detail of Borrower
Reason of Due amount
Reason for become NPAs
Commitment of Borrowers
Utilisation of Fund
Awareness of Loan
Detail of Loan
48
We personally contact to each and every defaulter and collect the whole data
which mention here for more information we attach Questionnaire here.
Data collect and bifurcate in different category as per their loan, which I
mentioned earlier, Home loan, Personal Loan, Education Loan, Vehicle Loan and
SBF.
49
CHAPTER 4
ANALYSIS
&
INTERPRETATION
50
For our Summer Project we got permission in RASMECCC Department of State
Bank of India, Rajkot. Our department is a Process department. But our main
work is to Survey and Recovery the NPAs.
This is a Head Office and they provide us Data of NPAs account. State Bank of
India have a 6 Branch in Rajkot. We got a Combine data of whole branch
Six Branch
Jagnath Plot.
Bhaktinagar.
Marketing Yard
Commercial Branch
Main Branch
Lakhaji Raj
Education Loan
Personal Loan
Home Loan
Vehicle Loan
SBF
51
I have provided near about 250 Account but only 150 NPAs account person can cover and
their list are under.
LOAN PROFILES
SBF 13 9%
Edu Loan
Vehicles 29 19%
Loan 17
11%
Per.Loan Home Loan
44 29% 48 32%
INTERPRETATION
52
Here, As per above chart if we see that we find that Home loan having more Defaulter. No.
of Borrower in Home Loan is 48 and Percentage is 32 %.
Amount of Loan
Total O/S;
11796076
12000000
10000000
8000000
Recovery;
6000000 3088732
4000000
2000000
0
Total O/S Recovery
Interpretation
During my Summer Project I recovered Rs.30,88,732 and it’s a 26 % of the total Debt.
53
Account Become Regular
Interpretation
Here, as per above chart more amount in Education loan amount is Rs.13,80,900
and percentage is 44%.
54
PROJECT Findings:
From this project it is found that SBI advance product having the 1 st
place in the market at Bhubaneswar, there is a great opportunity to
compete with ICICI Bank & to retain its customer by fulfilling the
requirement of customer in SBI advance product.
It has been observed that approximately 85% correspondents are
using advance product of SBI and 15% are not using any type of
advance product of SBI in Bhubaneswar.
All of SBI customers are satisfied with the services provided by the
bank.
Many of these customers satisfied with the low interest rate and
longer repayment period of the advance product.
Most of the customers at Bhubaneswar prefer to take loan from SBI.
Approximately 43% of advance product users said that the service of
SBI in advance product is excellent.
A response from customer care is so clear & good.
Many customers have no time to call customer care so that they are
not able to know about the service & features of SBI advance
product.
Most customers are shifted from other bank’s advance product to SBI
because of hidden charges, high interest rate, less repayment period.
Government employees are more concern than private employees for
advance pr
CONCLUSION
55
Weare happy to getting opportunity to part of State Bank of India and also get
opportunity to tackle the NPAs Account.
During Our Summer Training we meet 150 clients of bank and get their
opinion the their problems. So, According to that duration we would like to
conclude that, Account become NPAs in many way sometimes, Sometimes
technical problem, Some times personal problem but these all problem will
be solved by few precautions which earlier we mentioned.
In any financial institution, NPAs are inevitable in the loan portfolio. But
efforts should be made to maintain a reasonable level of NPAs. Keeping in
mind the RBI plan to introduce the concept of “One quarter” for
identification of NPAs by 2004, it is a high time to go in for recovery drive
on a war-footing. While doing so, prevention of NPAs should not be
forgotten. These are the major challenges before banks which have gone in
for VRS. But sincerity and hard work along with professional approach on
the part of bank management may help in the fulfillment of challenges.
Towards this end, banks have to go long way.
If the nationalized commercial banks desire to stand in competition with
the private sector banks and the foreign banks, they should over a period of
time, be in a position to bring down NPAs to manageable proportion.
Moreover, the government should take measures to facilitate the efforts of
the banks in the recovery of the loans which currently taken inordinately
long time. If willful defaulters to delay the repayment of the loan use the
BIFR proceedings the relevant legal provision should be appropriately
amended. The fact that the NPAs are gradually going down generates hope
about the future of the banks, though we should keep in mind another
simple fact that in absolute amount, this has not happened.
56
CHAPTER5
Suggestion
&
Recommendation
57
Recommendation:
Customer awareness programme is required so that more people should
attract towards advance product.
If there are any kind of hidden charges than that must disclose to customer
before giving loan to them.
SBI must take some steps so that customers can get their loan in time. Like
phone verification by customer care that one customer is got their loan on
time or not .It must be before a certain date so necessary steps can be taken.
SBI should more concern about physical verification rather than phone
verification so it will avoid fraud or cheating.
Advance product selling agents must not give any type of wrong
information regarding advance product.
For the better service new offers would be require.
SBI customer care should more concern about the fastest settlement of
customer problems.
Before deducting or charging any monetary charge SBI must consult with
customer.
58
Agents should be trained, well educated & proper trained to convince the
people about different advance product.
It is the duty of the bank to disclose all the material facts regarding advance
product, like interest charged, repayment period, other types of charges,
etc.
Special scheme should be implemented to encourage both customer and
agents.
The bank should increase the period for repayment of loan.
SBI should more focus on Retaining existing customers.
SBI must focus on Segmentation based on customer knowledge Product
offering based on customer demand.
SBI must take feedbacks of customers regarding features & services.
59
Web Sites:-
www.sbi.co.in
www.rbi.org.in
www.google.com
Books:-
60
Questionnaire
General Information
3) Address :-
____________________________________________________
_____________________________________________
_______
_____________________________________________
_______
61
Ph.No.
(R)_____________________(O)______________________
4) Education : - □ Graduate
□ Under Graduate
□ Post Graduate
□ Others
5) Occupation : - □ Business
□ Professional
□ Others
______________________________________________
_______
_____________________________________________
________
62
7) Amount of Loan :-
_____________________________________________________
8) Annual Income :-
_____________________________________________________
Authority :-
______________________________________________________
63
Factors of becoming A/c NPA
Amount
:-___________________________________________________
64
□ Personal visit
22) Do you know that the bank can recover the loan by resorting to:
□ Bank’s right to enforce criminal proceedings. YES/NO
□ Month
65
24) When will you Repay the due amount
□ Week
□ Month
Loan :-
______________________________________________________
66
29 )Whether reminder Send by bank for the Non payment :- Yes/No,
If yes then ,
□ Notice
□ Telephonic call
□ Personal visit
67