CA-2: Research Methodology I

Course code: QTTM509

Submitted by: Submitted to:Mr. TANVEER KAJLA

GAURAV SHARMA
Registration no. - 12107299
Roll no. - RQ2143B38

1
 Annexure-V- Cover Page for Academic Tasks

Couse Code: QTTM509 Course Title: Research Methodology - I

Course Instructor: Mr. Tanveer Kajla

Academic Task No.: 2 Academic Task Title: Class Assessment

Date of Allotment: 01/10/2021 Date of Submission: 14/10/2021

Student Roll No: RQ2143B38 Student Registration No: 12107299

Evaluation Parameters:
The evaluation parameters are as under:
1. A specific area of research will be identified by the specific group. Preferably related to
economics and financial aspects.
2. Develop a research question that you would like to consider in this area. Consider what
you hope to prove/disprove by carrying out a statistical analysis learned in the classes
and consider whether a statistical analysis is achievable and/or appropriate to the data.
3. Think about where you will get data to carry out research in this topic. Some suggested
data sources are as under:
 CSO
 RBI Bulletin
 UNCTAD
 NSSO
 IRDA
 WHO
 World Bank
 NSSO
 MOSPI
 NSSO
(This is a tentative list of data sources and apart from these databases student can obtain the
data from other databases also). The student is required to incorporate at least 4-5 different
data sets for the assignment submission.
Assignment will be evaluated on the basis of :

Annexure-V- Cover Page for Academic Tasks

Couse Code: QTTM509 Course Title: Research Methodology - I

Course Instructor: Mr. Tanveer Kajla

Academic Task No.: 2 Academic Task Title: Class Assessment

Date of Allotment: 14/10/2021 Date of Submission: 14/10/2021

2
Student Roll No: RQ2143B38 Student Registration No: 12107299

Evaluation Parameters:
The evaluation parameters are as under:
4. A specific area of research will be identified by the specific group. Preferably related
to economics and financial aspects.
5. Develop a research question that you would like to consider in this area. Consider
what you hope to prove/disprove by carrying out a statistical analysis learned in the
classes and consider whether a statistical analysis is achievable and/or appropriate to
the data.
6. Think about where you will get data to carry out research in this topic. Some
suggested data sources are as under:
 CSO
 RBI Bulletin
 UNCTAD
 NSSO
 IRDA
 WHO
 World Bank
 NSSO
 MOSPI
 NSSO
(This is a tentative list of data sources and apart from these databases student can obtain
the data from other databases also). The student is required to incorporate at least 4-5
different data sets for the assignment submission.
Assignment will be evaluated on the basis of :
a. Short Introduction (3 marks)
b. Note on data and research question(3 marks)
c. Descriptive statistics (Appropriate Graphs and Tables) (4 marks)
d. Appropriate tools and technique used (10 marks)
e. Conclusion and Recommendations (10 marks)
*Conclusion should be based on the components of (b), (c), and (d).

Learning Outcomes:
A clear understanding required on the part of students that how they understood the concepts
related to correlation, regression and index numbers.

Declaration:

3
I declare that this Assignment is my individual work. I have not copied it from any other
student’s work or from any other source except where due acknowledgement is made
explicitly in the text, nor has any part been written for me by any other person.
Student’s Signature: Gaurav Sharma

Evaluator’s comments (For Instructor’s use only)

General Observations Suggestions for Improvement Best part of assignment

Evaluator’s Signature and Date:

Marks Obtained: Max. Marks:

4
PEER RATING

Registration Roll number Name of the Rating Consent

number student (Out of 10) provided

12107165 RQ2143B37 Gargi Pathak 9 Yes

12107520 RQ2143B40 Andru. Vinyasri 7 Yes
12107299 RQ2143B38 Gaurav Sharma 8 Yes
12107477 RQ2143B39 Shivam Mishra 6 Yes

5
 ANALYSIS OF OPERATIONS OF HDFC
LOANS APPROVAL/SANCTION AND LOAN
DISBURSEMENT
USING CORRELATION, REGRESSION AND INDEX
NUMBER

6
 LOAN APPROVAL AND LOAN DISBURSEMENT
HDFC BANK – HOME LOAN
INTRODUCTION
HDFC Bank Limited, headquartered in Mumbai, Maharashtra, is an Indian banking and
financial services firm. As of April 2021, HDFC Bank is India's largest private sector bank in
terms of assets and market capitalization. On the Indian stock exchanges, it is the third largest
firm by market capitalization. With approximately 120,000 people, it is India's tenth largest
employer.
 Credit cards
 Consumer banking
 Commercial banking
 Finance and insurance
 Investment banking
 Mortgage loans
 Private banking
 Private equity
 Wealth management
Factors that Influence Whether Your Loan Is Approved
Loans are no longer seen as a last choice for purchasing a desired smartphone or a dream
home. People have become less hesitant to ask for a loan, whether it's for a personal, vehicle,
school, business, or house, in the last decade or two, especially if they don't have a lump sum
available. Furthermore, Home and Education Loans offer tax benefits, lowering tax liability
and increasing cash in hand from pay income.
It also helps those banks that are making it easier for customers and prospective borrowers to
obtain loans by requiring less paperwork, performing quick eligibility checks, and offering
competitive interest rates. They've set up an online application and document submission
system for the approval process. If you're still worried about the loan application and review
process, here's a list of seven elements that will influence whether or not your application is
approved:
 Credit history:
Your credit history, which is based on your pattern of repaying previous debts, predicts your
future repayment behaviour. It allows the bank to determine whether you will be punctual
and consistent with your payments. Any previous defaults or delays are checked; the longer
the wait, the lower your score will be.
It won't help if you don't have a credit history because there is no basis for comparison, such
as no credit cards or loans taken out in the previous two years. However, you can avoid this
by keeping a credit card with no repayment defaults.
In general, a credit score of 700 to 800 is considered good. That implies you're more likely to
be considered a safe candidate with a clean credit history free of repayment defaults. A credit

7
score of less than 300, on the other hand, will raise the chances of your application being
denied. Credit bureaus, such as CIBIL, are a source of credit scores that banks use to
determine your creditworthiness.

 Work experience:
Your employment history and present engagement are taken into account by banks to verify
that your source of income is reliable. A bank needs to know that your company is financially
stable, with no history of unpaid wages or delays in paying employees. Your job's stability is
also important. As a result, compared to lesser-known private enterprises or self-employment,
government jobs have the added benefit of being viewed as safe.
Your chances are just as strong if you work for a prestigious organisation like a blue-chip
corporation. Doctors, CPAs, engineers, and lawyers are all considered safe professions. The
premise is that your ability to repay the loan is determined by your income, therefore it must
be constant and reliable. Banks prefer applicants who have worked in their current position
for a longer period of time since it indicates stability.
 Age:
Your age is significant since it indicates your financial stability. You begin working in your
twenties and have five or six years of experience by the time you turn thirty. So you're
financially secure and working your way up the corporate ladder to a higher pay. You'll have
fewer earning years to repay your loans as you advance in the next 20 or 30 years. As a result,
applying for a loan in your retirement years is likely to be denied.
 Income:
As previously stated, your income signifies your ability to repay. Banks consider previous
debt obligations, dependents, source, and length when determining your earning capability.
One of the numerous things the bank looks for in this situation is sufficient surplus after EMI
payments. If this is determined to be lacking, the bank assumes you're overextended and
likely to default. The bank, on the other hand, will consider you financially healthy if the
ratio is five times or more.
Similarly, many banks favour applicants who have filed and paid their IT returns over those
who may have submitted returns with no tax due since their income was not taxable.
If you can show additional sources of income, such as your spouse's salary, your eligibility
improves. This shows that you have a greater ability to repay your debt because you have
multiple sources of income. Joint loans are available for the same reason: when the
applicant's and co-monthly applicant's salaries are added together, there is enough money to
cover a larger loan.
 Repayment:
You have a better chance of getting the loan accepted if you choose a shorter repayment time.
Several banks prefer applications with a five-year payback duration. The score decreases
when the repayment duration is increased in five-year slabs — 10, 15, 20, and 25 years. So,
when it comes to getting a loan approval from a bank, the mantra is to keep it short.

8
  Collateral:
The collateral you offer to the bank when you apply for a loan may make it easier and faster
for you to get approved. A high-value asset may result in more credit being sanctioned for
your use because the loan amount is a proportion of the assessed value of the collateral. The
asset could be transportable or immovable (land or a house) (vehicle, inventory, equipment,
investments, insurance policies, gold jewellery, art, and other such valuables). While personal
loans (including credit card balances) are unsecured, permission for a loan to buy a car or a
house, start a business, or study will not be granted unless suitable collateral is provided.
 Margin money:
In general, banks are willing to fund up to 80% of the loan's cost of purpose, with the
borrower responsible for the remainder. The bank, on the other hand, will not block you if
you can put in more than 10%-20%. Rather, it will recognise that you are willing to lower the
bank's risk of default by expediting your application. Your ability to make a down payment
will have a significant impact on your home, education, car, or business loan eligibility.
Aside from these top seven variables, your existing bank relationship is also important. Your
chances of securing a loan are better if you have been a customer for a long time, especially if
you have a clean credit history. Knowing your financial history aids the bank in determining
your present financial situation. Furthermore, certain institutions, such as HDFC Bank, allow
you to not only evaluate your eligibility but also apply for loans and share papers online.
Furthermore, pre-approved HDFC Bank customers can receive a loan disbursement in as
little as 10 seconds.
There are a few things you may do to expedite the loan disbursement process:
Obtaining a Personal Loan is simple. If you are a pre-approved HDFC Bank customer, the
loan can be disbursed in your account in as little as 10 seconds. Non-HDFC Bank customers
can acquire a loan in as little as four hours. You can also experience a stress-free repayment
approach with EMIs starting at Rs. 2,162 per lac.
 Choose the right product
It is critical that you choose the correct type of loan for your requirements. While a bank may
offer a variety of loans, Personal Loans are more easily and rapidly available than the others.
Customers who have been pre-approved by HDFC Bank can access loans in as little as 10
seconds after submitting an application.
 Keep the right documents handy
Whilst Personal Loans can be obtained with only a few documents, you must submit the
correct documents and have them on hand. The executive at your bank will be able to walk
you through the list of necessary documents. You can check the same information fast on the
internet. This will ensure that your loan disbursement process goes smoothly.

9
  Choose an amount you are eligible for
Make an application for a loan amount that you are qualified for. You could be tempted to
request for a larger loan to cover a variety of demands other than the emergency at hand.
However, if the amount exceeds your eligibility, it may take longer for your request to be
processed. To ensure a smooth disbursement, use the Personal Loan EMI Calculator to assess
your eligibility online in under a minute.

RESEARCH QUESTION
The final stage of the process of loan is disbursement. In order to determine the trend of loan
disbursement, once the home loan is sanctioned, is the primary aim of this analysis. Data used
is of HDFC Bank.
To begin with, the ideal procedure of taking a loan is – application, credibility check by the
bank, approval and disbursement. As far as HDFC Bank is concerned, the home loan is either
disbursed online or offline. The housing finance company will disburse the loan amount on
completion of the following stages:
1. The property has been technically appraised;
2. All legal documentation has been completed;
3. You have invested your own contribution in full (i.e. made the down payment).
However, it is interesting to note that there exists a possibility that in case the formalities
after receiving the sanction letter are not fulfilled or if the lender observes difficulty to carry
forward verification, the sanctioned loan is cancelled.
The data presented here is adopted from the Reserve Bank of India – Handbook of Statistics
on the Indian Economy 2020-21. To be precise, the source is Housing Development Finance
Corporation Limited.

YEAR LOAN APPROVAL/ LOAN DISBURSEMENTS

SANCTION
2011-12 90154 71113
2012-13 103260 82452
2013-14 115212 92455
2014-15 128061 105780
2015-16 118327 110374
2016-17 145836 145384
2018-19 166888 151837
2019-20 181280 150337
2020-21 193636 152902

10
Note:
 Data for 2020-21 are provisional.
 The figures mentioned are in INR (Crore).

TECHNIQUES AND TOOLS USED

While analysing the relation between the worth of loans approved/sanctioned and loans
disbursed, it can be stated that the former is an independent variable and the latter is the
dependent variable. This is so because the amount cannot be disbursed into the account of an
applicant without proper verification and authoritative approval. The presence of two
variables in quantitative measure provides a scope of applying the following tools for data
analysis:
1. Correlation – It is a technique used to analyse the strength and direction of the
relationship between the two quantitative variables. In this case the two variables are
loan sanctioned/approved and loan disbursement. The type of correlation evaluated is
simple correlation, that is, only two variables are chosen to study correlation between
them. The correlation between two ratio-scaled variables is represented by the letter
‘r’ and ranges between +1 and -1. It is also known as Correlation coefficient. The
value of r so obtained is scale free and hence, the interpretation of it is independent of
units of measurement.

2. Regression - The statistical technique that expresses the relationship between two or
more variables in the form of an equation to estimate the value of a variable, based on
the given value of another variable, is called regression analysis. The variable whose
value is estimated using the algebraic equation is called dependent (or response)
variable and the variable whose value is used to estimate this value is called
independent (regressor or predictor) variable. The linear algebraic equation used for
expressing a dependent variable (Loan disbursement) in terms of independent variable
(Loan approved/sanctioned) is called linear regression equation.

3. Coefficient of Determination – It indicates the proportion of total variance in the

dependent variable (Loan disbursement) that is explained or accounted for by the
variation in the independent variable (Loan approved/sanctioned). It is represented by
�2 .

4. Index Number – It serves as a yardstick for describing the average change taken place
over a period of time. It is expressed as a ratio and has no unit. Index numbers are
broadly classified into three categories: (i) price indexes, (ii) quantity indexes, and (iii)
value indexes.
In the following analysis, value index has been used as it yields price relative which is
in turn, helpful to understand and interpret changing business conditions. The method
used for the construction of price index is Single Price Index or Price Relative Index.

11
 ANALYSIS

YEAR LOAN APPROVAL/ LOAN

SANCTION DISBURSEMENTS
2011-12 90154 71113
2012-13 103260 82452
2013-14 115212 92455
2014-15 128061 105780
2015-16 118327 110374
2016-17 145836 145384
2018-19 166888 151837
2019-20 181280 150337
2020-21 193636 152902

Using the data mentioned above, the following graph has been obtained:

It can be clearly seen that there is a direct relationship between the two variables. A uniform
increase is observed from the 2011-12 to 2014-15. However, a downfall in the worth of loan
approved in the year 2015-16 has also resulted into a slow down in the observed value of loan
disbursed. After 2016-17, the amount disbursed for home loan purpose has remained constant,
despite of a steady increase in the amount of money sanctioned for home loan purpose by the
bank.
The method used for finding the correlation coefficient is the Scatter Diagram Method,
according to which, the type of relationship between the two variables has come out to be a
Positive Linear Relationship.

12
Interpretation:
From the scatter diagram above, it appears that there is a high degree of association between
the two variable values. It is because the points are very close to a straight line passing
through the points. This pattern of dotted points also indicates a high degree of linear positive
correlation.

13
CORRELATION ANALYSIS:
Column 1 Column 2
Column 1 1
Column 2 0.945537233 1

The above correlation analysis shows that there exists a strong correlation between loan
approval/sanction and loan disbursement. The value of r is approximately equal to 1, which
means it is a Perfect positive correlation. An increase in the value of loan approved is likely
to cause an increase in the value of loan disbursed by the bank for home loan purpose.

REGRESSION ANALYSIS
YEAR LOAN APPROVAL/ LOAN
SANCTION DISBURSEMENTS
(X) (Y)
2011-12 90154 71113
2012-13 103260 82452
2013-14 115212 92455
2014-15 128061 105780
2015-16 118327 110374
2016-17 145836 145384
2018-19 166888 151837
2019-20 181280 150337
2020-21 193636 152902

Calculation Summary:
Sum of X = 1242654
Sum of Y = 1062634
Mean X = 138072.6667
Mean Y = 118070.4444
Sum of squares (SSX) = 10365605722
Sum of products (SP) = 8865264501.3333
Regression Equation = ŷ = bX + a
b = SP/SSX = 8865264501.33/10365605722 = 0.85526
a = MY - bMX = 118070.44 - (0.86*138072.67) = -17.27211
ŷ = 0.85526X - 17.27211

14
Hence, by using the regression equation,
ŷ = 0.86X - 17.27
the amount of money disbursed by the bank against the sanctioned home loans can be
calculated.
Interpretation:
Regression Statistics
Multiple R 0.946
R Square 0.894
Adjusted R Square 0.879
Standard Error 11330.167
Observations 9.000

The value of �2 , that is, Coefficient of determination, is a goodness-of-fit measure for linear
regression models. This statistic indicates the percentage of the variance in the dependent
variable that the independent variables explain collectively. It measures the strength of the
relationship between the independent and the dependent variable on a convenient 0 – 100%
scale.
As per the calculation, the value is 0.894 which is equal to 89.4%. It implies that the variable
x (Loan approval/sanction) can predict the actual value of the variable y (Loan disbursement).
As a result, 89.4% of the variation in the amount disbursed by the bank for home loan can be
accounted for, in terms of the amount approved by the bank.

15
INDEX NUMBER
Loan Approval/Sanction
YEAR LOAN APPROVAL/ RATIO PRICE INDEX or
SANCTION PERCENTAGE
RELATIVE
2011-12 90154 0.761905567 76.19055668
2012-13 103260 0.872666424 87.26664244
2013-14 115212 0.973674647 97.36746474
2014-15 128061 1.082263558 108.2263558
2015-16 118327 1 100
2016-17 145836 1.232482865 123.2482865
2018-19 166888 1.410396613 141.0396613
2019-20 181280 1.532025658 153.2025658
2020-21 193636 1.636448148 163.6448148

Taking 2015-16 as the base year, the following conclusions can be drawn with respect to the
worth of Loan approved or sanctioned:
 As compared to 2015-16, a decrease of 23.81%, 12.74% and 2.64% is evident for the
sessions 2011-12, 2012-13, 2013-14, respectively.
 Since 2014-15, there has been a substantial increase in the amount sanctioned for loan.
The highest increase is 63.64% for 2020-21.

Loan Disbursement
YEAR LOAN RATIO PRICE INDEX or PERCENTAGE
DISBURSEMENTS RELATIVE
2011-12 71113 0.644291228 64.4291228
2012-13 82452 0.747023756 74.70237556
2013-14 92455 0.837651983 83.76519833
2014-15 105780 0.958377879 95.83778788
2015-16 110374 1 100
2016-17 145384 1.317194267 131.7194267
2018-19 151837 1.375659123 137.5659123
2019-20 150337 1.362068966 136.2068966
2020-21 152902 1.385308134 138.5308134

Taking 2015-16 as the base year, the following conclusions can be drawn with respect to the
worth of Loan disbursement:
 As compared to 2015-16, a decrease of 35.58%, 25.3%, 16.24% and 4.17% is evident
for the sessions 2011-12, 2012-13, 2013-14, 2014-15, respectively.
 Since 2016-17, there has been a substantial increase in the amount sanctioned for loan.
The highest increase is 38.53% for 2020-21.

16
CONCLUSION
Credit risk is most simply defined as the potential that a bank borrower or counterparty will
fail to meet its obligations in accordance with agreed terms. The goal of credit risk
management is to maximise a bank’s risk-adjusted rate of return by maintaining credit risk
exposure within acceptable parameters. Banks need to manage the credit risk inherent in the
entire portfolio as well as the risk in individual credits or transactions. Banks should also
consider the relationships between credit risk and other risks. The effective management of
credit risk is a critical component of a comprehensive approach to risk management and
essential to the long-term success of any banking organisation. For most banks, loans are the
largest and most obvious source of credit risk; however, other sources of credit risk exist
throughout the activities of a bank, including in the banking book and in the trading book,
and both on and off the balance sheet. Banks are increasingly facing credit risk (or
counterparty risk) in various financial instruments other than loans, including acceptances,
interbank transactions, trade financing, foreign exchange transactions, financial futures,
swaps, bonds, equities, options, and in the extension of commitments and guarantees, and the
settlement of transactions.

As far as the HDFC bank is concerned, there exists a positive relationship between the
amount sanctioned and the amount disbursed for home loans. However, in order to avoid the
risk of engaging with fraudulent parties, the bank cancels the approved amount and as a result,
disbursement does not take place. Lately, due to the economic crisis, the interest rate for
home loan has also been reduced by HDFC and it has come down to 6.7%.
As a result of the analysis, following are the key takeaways:
 Firstly, there is a positive linear relationship between the two variables – loan
approval/sanction and loan disbursement.
 Secondly, the two variables have a strong association as justified by the coefficient of
determination.
 Thirdly, over time, loan approval/sanction as well as loan disbursement worth has
shown a significant increase.
 Hence, it can be said that the credibility of people has enhanced over time with
reliable verification of data done by the bank.
 Moreover, the variance in the amount of loan disbursement can be calculated by the
variance in the amount of loan approval/sanction.
 The two variables hold a high degree of relativity.

17
RECOMMENDATIONS
Lending funds or borrowing funds, both comprise of risk and uncertainty. Banks are one of
the biggest sources of funds for individuals and when it comes to home loans, everyone
prefers to take a loan for investing into the property. When a person applies for home loan,
the banks check the credibility of the individual from all possible dimensions and only then
approve of the loan. Even the loan agreement letter mentions a lot of terms and conditions in
order to prevent possible frauds. Despite of such precautions, there are instances wherein the
bank rejects the disbursement of amount that has already been approved. The applicants
therefore feel embittered because even after receiving a loan sanction letter, which in itself is
a huge milestone, it is by no means the final word on loan disbursement.
In order to avoid such situations, following recommendations can prove to be helpful:
 The applicant must not rely on local evaluators of property, whereas, a learned person
should be concerned, before applying for the loan.
 The amount applied for should not exceed the actual valuation of the property.
 There should be no legal dispute with respect to the related documents.
 The applicant must not lie to the bank because a single negative field report can prove
to be a big hindrance in disbursement.
 The builder of the property should not be black listed or non-approved by the bank.
All the above conditions are very rare to happen because the people who are literate enough
understand the importance of trust. As seen from the analysis, the two variables are strongly
associated with each other which is a clear indication of the fact that the chances of
disbursement of loan after being sanctioned are very less. The main concern is the credit risk
management by the banks because of which the entire process turns out to be a complex one.

18
REFERENCES
 https://www.hdfcbank.com/personal/borrow/popular-loans/home-loan
 Reserve Bank of India – Handbook of Statistics on the Indian Economy 2020-21
 https://www.hdfcbank.com/personal/resources/learning-centre/borrow/everything-
you-need-to-know-about-a-personal-loan
 https://www.business-standard.com/company/hdfc-bank-4987/information/company-
history
 https://www.screener.in/company/HDFCBANK/

19