A Project Report on

“A COMPARATIVE STUDY ON HOUSING LOANS OF PUBLIC

SECTOR AND PRIVATE SECTOR BANKS”

Submitted to

Osmania University, Hyderabad-500007

in partial fulfilment of the requirements
for the award of the degree of

Bachelor of Business Administration (BBA)

Submitted By

P.JAGADEESHWAR REDDY
1217-20-684-019

Under the Guidance of

Ms. N. Gayatri- Associate prof.

Department of Management
Avinash Degree College, Secunderabad,
Hyderabad -500 003

2020-2023

INTERNAL GUIDE EXTERNALGUIDE

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 Avinash Degree College, Plot no 35, 35A,
SD Road, Adjacent tower, Secunderabad, Mandal:
Secunderabad, Dist. Hyderabad – 500003 ph.no 9030320088

________________________________________________________
Mig 18&19, Road No 1, KPHB PHASE,
Date:
Kukatpally,
Hyderabad,
CERTIFICATETelangana-500072.

This is to certify that the project work entitled “A COMPARATIVE STUDY ON

HOUSING LOANS OF PUBLIC AND PRIVATE SECTOR BANKS”, is the
bonafide work done by P JAGADEESHWAR REDDY, Roll No: 1217-20-684-
019, as a part of their curriculum in the Department of Management, Avinash Degree
College, Secunderabad, Hyderabad-500003. This work has been carried out under
my guidance.

Dr Krishnamayi Dr Srikantalahari Sagi

GUIDE EXTERNAL EXAMINER HEAD OF DEPARTMENT PRINCIPAL

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 Avinash Degree College, Plot no 35, 35A,
SD Road, Adjacent tower, Secunderabad, Mandal:
Secunderabad, Dist. Hyderabad – 500003 ph.no 9030320088

________________________________________________________
Date:

CERTIFICATE

This is to certify that the project entitled “A COMPARATIVE STUDY ON

HOUSING LOANS OF PUBLIC AND PRIVATE SECTOR BANKS”,
submitted to the Osmania University, in partial fulfilment of the requirements for the
award of the Degree of Bachelor of Business Administration (BBA), is a bonafide
record of original project work done by P.JAGADEESHWAR REDDY (Reg.
No.1217-20-684-019) during the period of Feb-2022 to May -2022 her / his study in
the UG Department of Management, Avinash Degree College, Hyderabad,
Telangana- 500003. Under my supervision and guidance, the project has not
previously formed the basis for the award of any Degree, Diploma, Associate ship,
fellowship, or other similar title to any other candidate of any University. The Project
represents entirely an independent work of the candidate.

Project Guide

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 Avinash Degree College, Plot no 35, 35A,
SD Road, Adjacent tower, Secunderabad, Mandal: Secunderabad, Dist.
Hyderabad – 500003 ph.no 9030320088

_______________________________________________________________________________

DECLARATION

Date:

I, P.JAGADEESHWAR REDDY (1217-20-684-019) hereby declare that the

project entitled “A COMPARATIVE STUDY ON HOUSING LOAN OF

PUBLIC AND PRIVATE SECTORS BANKS”, submitted to the Osmania

University, in partial fulfilment of the requirements for the award of the Degree of

Bachelor of Business Administration (BBA) is a bonafide record of original project

work done by me during the period of Feb - 2023 to May – 2023, under the

supervision and guidance of Ms. N. Gayatri - Associate prof and it has not formed

the basis for the award of any Degree, Diploma, Associateship, Fellowship or other

similar title to any other candidate of any University.

Signature of the Candidate

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 ACKNOWLEDGEMENT

This project is the end of my journey in obtaining my BBA Degree. At the

end of my project, it is a pleasant task to express my thanks to all those who
contributed in many ways to the success of this study and made it an unforgettable
experience for me.
I sincerely record my thanks to Mr. AVINASH BRAHMADEVARA the
Chairman and Mr. B. SANTHOSH Director of Operations of Avinash Degree
College, Secunderabad, and other members of the management committee for
encouraging me to take up this UG program in this reputed Institution.
I am grateful to our Principal Dr Srikantalahari for providing us the opportunity
and platform to work on the project and providing all the necessary facilities for the
successful completion of this work.

I express my humble gratitude to Head of the Department Dr Krishnamayi

for guiding, supporting, and inspiring me during my project work.

I am happy to express my gratitude to my Project Guide Ms. N. Gayatri-

Associate prof and my parents, friends, respondents and the almighty.

P JAGADEESHWAR REDDY

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 CONTENTS
Certificates 2-3
Declaration 4
Acknowledgement 5
Contents 6
List of Tables 7
List of Chart 8

Chapter Title Page No.

I INTRODUCTION 10-17
II REVIEW OF LITERATURE 18-23

III INDUSTRY PROFILE /CONCEPT OF THE TOPIC 24-40

IV ANALYSIS AND INTERPRETATION OF DATA 41-62

V FINDINGS, SUGGESTIONS AND CONCLUSION 63-65

WEBLIOGRAPHY 66-67

APPENDIX 68-72

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 LIST OF TABLES

TABLE NAME OF THE TABLE PAGE.NO

4.1 AGE 42

4.2 GENDER 43
4.3 MARITAL STATUS 44
4.4 OCCUPATION 45
4.5 EDUCATIONAL QUALIFICATIONS 46
4.6 REASON FOR TAKING HOME LOAN 47
4.7 TYPE OF BANK, LOAN TAKEN FROM 48
4.8 PERIOD REQUIRED TO PASS A LOAN 49
4.9 AWARNESS REGARDING DOCUMENTATION OF 50
HOME LOAN
4.10 PROBLEMS DURING PROCEDURE OF HOME LOAN 51
4.11 TYPES OF PROBLEMS FACED DURING 52
DOCUMENTATION
4.12 TENURE OF THE LOAN 53
4.13 TYPE OF INTEREST RATE CHARGED ON LOAN 54
4.14 TYPE OF INTEREST CHARGED ON LOAN 55
4.15 PROCESSING FEES CHARGED 56
4.16 CHOICE FOR PUBLIC /PRIVATE BANK TO GET 57
HOME LOAN
4.17 SATISFACTION FOR SERVICE PROVIDED BY THE 58
BANKWHILE OBTAINING HOME LOAN
4.18 PRINCIPAL AMOUNT OF LOAN 59
4.19 MODE OF INSTALLMENT 60
4.20 INCOME LEVEL AFFECTS TAKING OF HOME 61
LOAN
4.21 INCOME LEVEL DOES’NT AFFECT TAKING OF 62
HOME LOAN

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 LIST OF FIGURES

TABLE NAME OF THE TABLE PAGE.NO

4.1 AGE 42
4.2 GENDER 43
4.3 MARITAL STATUS 44
4.4 OCCUPATION 45
4.5 EDUCATIONAL QUALIFICATIONS 46
4.6 REASON FOR TAKING HOME LOAN 47
4.7 TYPE OF BANK, LOAN TAKEN FROM 48
4.8 PERIOD REQUIRED TO PASS A LOAN 49
4.9 AWARNESS REGARDING DOCUMENTATION OF 50
HOME LOAN
4.10 PROBLEMS DURING PROCEDURE OF HOME LOAN 51
4.11 TYPES OF PROBLEMS FACED DURING 52
DOCUMENTATION
4.12 TENURE OF THE LOAN 53
4.13 TYPE OF INTEREST RATE CHARGED ON LOAN 54
4.14 TYPE OF INTEREST CHARGED ON LOAN 55
4.15 PROCESSING FEES CHARGED 56
4.16 CHOICE FOR PUBLIC /PRIVATE BANK TO GET 57
HOME LOAN
4.17 SATISFACTION FOR SERVICE PROVIDED BY THE 58
BANKWHILE OBTAINING HOME LOAN
4.18 PRINCIPAL AMOUNT OF LOAN 59
4.19 MODE OF INSTALLMENT 60
4.20 INCOME LEVEL AFFECTS TAKING OF HOME LOAN 61
4.21 INCOME LEVEL DOES’NT AFFECT TAKING OF 62
HOME
LOAN

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 ABSTRACT
Owning a home is one of life biggest aspirations of a person. Home loans are the most easily
accessible financial supplement to purchase a person’s dream home. A resident or non-resident
individual who is planning to buy a house in India can apply for a home loan at the banks or
Housing Finance Institutions. Once the maximum amount to put into the property has been
decided, the Housing Finance Institutions or Banks will let the customer know that how much
he/she is eligible for and this helps to plan out the budget. In other words when you want to
own a home and cannot afford to pay the amount in lump sum, you can pay it in monthly
installments with an interest rate. There are number of companies and banks offer cheap loans
at a low interest rate. Loan is offered to a borrower to purchase or build a new house on the
basis of his/her eligibility and the bank lending rules. Government gave encouragement for
house finance subsidiaries by offering number of tax concessions to individuals with the overall
encouragement given to this sector, a number of players entered in housing finance. One of the
most important benefits of taking a home loan is the interest rate that is allowed on the home
loan. Nowadays, many banks provide the facility of loan at different interest rates. The main
point in loan is the interest rate. The main purpose of this comparative study the procedure of
home loan in public and private sectors bank.

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 Chapter - 1
INTRODUCTION

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 INTRODUCTION

A home is a comfort zone of each and every individual. It is not only the
comfort zone of every individual, but it’s place where one wishes to live every day. Nowadays,
home loan is in high demand, as middle class people are unable to purchase the home. To fulfill
this increasing demand of people, many banking sector and financial institutes are providing
housing loan facility. The home is the basic necessity of every individual so the home loans are
available at lower interest rates, for meeting the demand of every individual. When an
individual purchases a home, he/she is unable to pay the whole amount and some peoples pay
a very little amount, so fulfill the demands of people the home loan facility is provided.
The term loan is defined as debt. Similar to the other debt
instruments, a loan shows the redistribution of assets periodically, within the loan givers and
borrowers. The money is paid back in same installments generally, but also according to the
borrowers will or condition, sometimes. Surety cannot be provided on the beginning of loan
systems, but it can be predicted that the idea of lending and borrowing came along with the
notion of ownership. Many types of loans were seen to be used by Greeks and Romans along
with the mention of monetary loan in The Bible. ▪ The “Indentured loan” being one of the
earliest forms of loans in 19th century came with the disadvantages to the poor, as in “slave
labor”.
The home loan is taken for the purchase of the house which is the dream of every
individual. The duration of this loan is longer. The home loan is granted for the 80% of the
property and in some cases it reaches to 85-90%. Furthermore, in India, there are two types of
banks that are: Public sector banks and Private sector banks.
Public sector banks are defined as the banks in which more than 50% stacked is owned by
Government. The nationalized banks are the Public sector banks. Private sector banks are
defined as the banks in which stake belonged to the Private Shareholders. In India, there are 29
Private sectors banks and 27 Public sectors banks.

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Public Sector Banks: The banks that are controlled by Central Government are known as
public sector banks. Nationalized banks are also known as public sector banks. The formation
of nationalized bank is done by combining a bank with its assets into public ownership.
Private Sector Banks: They are owned by the private lenders. The private banks are also
operated by private promoters who are given the power to control according to the market
forces. Generally, the private banks are seen as multinational organizations with overseas
operations. These banks avails loan at low interest rates. There are 21 private banks in India at
present. The private banks are controlled by the private owners. All the private banks have to
register themselves under the Indian Companies Act. Private banks are having latest
technologies.

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OBJECTIVES:

The following objectives represent the whole of our research work.

⮚ To analyze the home loan schemes of private sector and Public sector banks.
⮚ To study whether income level affects preference towards home loan.
⮚ To study the service provided during the procedure of obtaining home loan by private
sector and Public sector banks.

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SCOPE OF THE STUDY:

Scope of the study is limited to Private sector banks and Public Sector banks. While the foreign
bank is excluded from the study as the policies and regulations of foreign banks are different
from the other Indian banks. It is used to get first- hand knowledge about the home loans
facilities of Private and Public banks in India. The scope of the present study is to known about
the procedures of home loan, the problems faced by the customers while taking loans from
either public or private banks, to known about the awareness of the home loan facility in Indian.

The study of this kind will help the respondents to get the ideas
about the various problems and the ways to deal with the problems that arise while taking a
home loan.

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RESEARCH NEED

A comparative study on home loans of public and private sector banks can provide valuable
insights to individuals who are looking to avail of a home loan. A comparative study on
home loans of public and private sector banks can help individuals make an informed
decision when taking a home loan, as it provides them with valuable insights on interest
rates, loan eligibility, processing fees, customer service, and loan repayment options.

Here are some reasons why such a need of the study:

Interest rates: One of the most important factors to consider when taking a home loan is
the interest rate. A comparative study can help individuals understand the interest rates
offered by both public and private sector banks, and how they differ from each other.

Loan eligibility: Another important factor to consider when taking a home loan is the
eligibility criteria. A comparative study can help individuals understand the eligibility
criteria of both public and private sector banks, and which bank has more relaxed criteria.

Processing fees: Processing fees can vary from bank to bank, and can impact the overall
cost of the loan. A comparative study can help individuals understand the processing fees
charged by both public and private sector banks, and which bank offers lower fees.

Customer service: Good customer service is important when taking a loan, as individuals
may need assistance throughout the loan tenure. A comparative study can help individuals
understand the quality of customer service offered by both public and private sector banks.

Loan repayment options: Repayment options can vary from bank to bank, and can impact
the overall cost of the loan. A comparative study can help individuals understand the
repayment options offered by both public and private sector banks, and which bank offers
more flexible options.

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RESEARCH METHODOLOGY

Population:
Private and Public sector Banks
Sample Size:
The sample size of 60 respondents is collected by the way of questionnaires.
Sampling Technique:
Random Sampling Technique: This technique is used when every person has an equal chance of getting
selected to be the part of the sample.

Methodology:
We are collecting data via google forms. The sample has been selected at random from
customers of public and private sector banks. We are using quantitative methods of data collection only.

Primary Data:
Primary data is being collected via google form-based survey which has been shared with
customers of public and private sector banks.

Secondary Data:
Secondary data has been collected from credible websites and official sources.

Tools and techniques used for analysis:

Tools: Google spreadsheets, Microsoft excel, etc
Techniques: Data analysis and interpretation

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CHAPTERIZATIONS

Chapter Ⅰ:
Introduction, Scope and Importance. This methodology involves population, sample size, sample techniques,
primary data, secondary data, chapter focuses on introduction of the housing loan of the public and private
sector banks, research methodology, tools and techniques used for analysis.
Chapter Ⅱ:
Literature review. This chapter focuses on an overview of the previously published works on of housing loans
of the private and public sector banks.
Chapter Ⅲ:
Industry profile. This chapter focuses on the information of housing loans of private and public sector banks.
Chapter Ⅳ:
Data analysis and interpretation. This chapter deals with collection of the data, analyzing and interpretating
the data with the help of survey and various statistical tools.
Chapter Ⅴ:
Findings, suggestions and conclusions. This chapter focuses on findings, suggestions and conclusions of the
comparative study on home loans of public and private sector banks.

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 CHAPTER-2
REVIEW OF LITERATURE

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 REVIEW OF LITERATURE

Introduction

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/her own
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.

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Review of other researchers:

1. S.V. Satyanarayan (2019), In their research comparing public and private housing finance
companies in India, the authors conducted research on the performance of public and private
housing finance companies over the course of ten years, from 2008-2009 to 2017-2018, and
compared the operational performance of these two types of companies.

2. Rekha. D. M (2019), In the course of their research, they have collected information about
the development and performance of home loans in India. Their primary goals are to get a
perspective of HDFC customers and become familiar with the problems they face.
3. Satish Manwani (2019), have compiled the facts on the influence of the elements that have
an effect on the level of customer satisfaction with the home loan program offered by ICICI
bank. The happiness of ICICI bank's client base is the topic that will be investigated in this
research. For the purpose of this survey, both primary and secondary data are being gathered.
The basic data come from a survey that included 200 samples.

4. Raju Kaur (2017), In the course of their research, they compared two financial institutions
located in Bathinda, Punjab: the State Bank of India and the Housing Development Finance
Corporation. In this research, there were a total of 100 people that participated in the survey.
This research makes use of both primary and secondary sources of information; the primary
data comes from a survey that was carried out in Bathinda, while the secondary data comes
from research papers and a variety of periodicals. This study is carried out in a very methodical
manner, and as a result, the goals that it set out to accomplish have been accomplished.

5. Dr. B.C (2017), has done research on the theoretical underpinnings of house loans. The
primary purpose of this research is to get a comprehensive understanding of the idea of a
house loan. The whole analysis is based only on secondary sources of information.

6. Murugan (2017), The purpose of this research is to get an understanding of the customer's
perspective on house loans. The main poll for this research includes feedback from 500
participants. This survey is carried out in a methodical manner, and their goals are successfully
accomplished.

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7. Gupta and Sinha (2015), In this research, a comparison was made between the State Bank
of India and the LIC housing finance businesses with regard to the availability of reduced
interest rates on house loans. The primary purpose of this comparative research is to get an
understanding of the elements that influence customers as well as the purchasing patterns of
consumers.

8. Chithra and Muthurani (2015), Within the scope of this research, the opinions of clients
about house loans offered by HDFC bank in Chennai were analysed. This research had a total
sample size of 85 people, all of whom were selected at random. According to the findings of
this survey, HDFC Bank is the most reputable bank, and the institution need to expand the
kinds of services it offers since doing so would bring about an expansion of its customer base.

9. Kshitija Sawant (2013), This research looked at the home loans offered by Kolhapur urban
Cooperative Bank as well as those offered by other banks. The primary purpose of this
research is to determine the challenges that are faced by individuals who get mortgage financing. In
this study of several banks, both primary and secondary data are gathered from the respondents. The
years 2004-2005 through 2008-2009 were used to compile the data for this research.

10. S. Rajalakshmi, (2013) have found that one of the most important benefits of taking a home
loan is the interest rate is that is allowed on the home loan. Fixed and variable interest rates
also available for home loans. Many financiers also offer home improvement loans at the same
interest rate as they offer the home loans.

11. Jasmine Tiwana and Jagpal Singh (2012) In their paper it is discussed about the regulatory
aspects pertaining to housing finance companies in the light of various directions and
guidelines issued by National Housing Bank National Housing Bank (NHB) an apex level
institution wholly owned by the Reserve Bank of India was set up in 1988 under National
Housing Bank Act 1987. It promotes housing finance institutions, issues directions and
provides finance and other support to the institutions.

12. Goyal and Joshi (2011), according to the findings of their study on the Social and Ethical
Aspects of the Banking Industry, banks are able to extend themselves as a social and morally
oriented association by simply handing out credits to organizations that are concerned with
social issues, moral issues, and the environment.

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13. Govinda Rao, (2011) says that Mortgage financing markets play an important role in
stimulating affordable housing markets and improving housing quality in many countries.
Unfortunately, they are often less developed in India. Most stem from the central dilemma
that the resources are always too limited and housing development heavily depend on the
financial institutions such as banks, credit corporations and development banks for the supply
of finance to meet their daily financial needs.

14. Dr. Ashok K.M, (2011) Housing scarcity and lack of decent housing is an international
phenomenon. About 25% of the world’s population does not have sufficient shelter and live
in sub-human conditions. According to the planning commission the shortage of dwelling
units are expected to reach 41 million. In order to rectify this mismatch between demand and
supply the government encouraged the housing finance institution and banks (public and
private) for bridging the resource gap.

15. Kumar and Gulati (2010), overseen with the primary emphasis being placed on the
sufficiency of the Indian community banks' holdings We used the operational cross-sectional
data that was collected from public and private area banks in the United States during the
financial years 2005-2006 and 2006-2007. In the Indian local saving money sector as a whole,
it has been determined that industry possession is incapable of becoming a competitive
advantage.

16. Naveen K. Shetty (2009), examined the significance of microfinance in relation to the
accomplishment of monetary inclusion. The research focuses on the impact that the widening
gap that was developed after and the supply of monetary administrations in India, which are
tempting the growing population of the country to avoid the official monetary credit
framework, have had on the housing advance market.

17. Vibha Batra (2009), analyzed the growth trends in the domestic mortgage market, the
financial performance of Housing Finance Companies (HFCs) over financial year 2009 and
the current financial year. A significant increase followed by a decrease in interest rates,
slowdown in economic activity, correction in property prices in most geographies, and the
introduction of “8% home loan schemes” have added interesting dimensions to the Indian
mortgage finance market in the recent past.

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18. Pushpangadharan’s (2002) study on “The quality of customer service in public sector banks”
also shows that public sector banks lag behind private sector banks in customer service. The
parameters he used in the study are facilities and amenities, speed in completing transactions
and providing deposit related and credit related services. The customers of public sector banks
are not much satisfied with branch managers’ and employees’ attitudes. The public sector
banks are very poor in respect of customer feedback system and redress of grievances.
19. Vidhayavathi. K (2002), found out in her investigation of the performance of housing finance
institutions on some of the selected business factors and by the means of an opinion survey
on the home loan seekers and came to the conclusion that apart from interest rate
advertisement, service quality, courtesy, and speed of various other important sectors
affecting the growth of the housing finance industry.
20. Leelamma Kuruvilla (1999), studies on the National Home Policy as well as the most recent
developments in housing finance. She suggested that the modification in the legitimate casing
work, modifying the strategy for the housing money, and the dynamic contributions of the Government
in the housing division would moderate the housing problem.

21. D Mishra (1997), makes a study on the performance of commercial banks in India choosing
relevant parameters like quality of service, risk management, profitability etc. His conclusion
is that the banks should try to increase quality, balance risk management, and optimize
profitability in order to survive and succeed. He identifies four challenges for the bank namely
competition, credit, customer and control.

22. Sarkar and Das (1997), make a comparison of the performance of the three bank sectors -
public, private and foreign - for the year 1995-1996. These banks are compared in terms of
profitability, productivity and financial management. They find that the public sector banks
are very poor in performance on the basis of these variables than the other two sectors.

23. Govindarajalu (1996), in his article “by banks and policy makers for the development of
banking sector. Satisfaction and dissatisfaction with bank services” views that the Indian
banks have lost the quality of customer service. The dissatisfaction of customers with bank
services is an important issue to be considered.

24. R Jayakumar (1993) in his study of “Performance of private sector banks in Kerala” makes
a comparative examination of performance of public sector banks and private sector banks in
Kerala. He finds that in Kerala private sector banks perform better than their public sector
counterparts.
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 CHAPTER-3
INDUSTRY PROFILE

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HOME LOANS
A home is usually the single most expensive purchase that a person will ever make. Few people,
however, have enough money to pay for a home in its entirety up-front. Instead, most choose to
take out a home loan, which is also called a mortgage. This entails borrowing money from a
financial institution (such as a bank) to buy the house and then spreading out the repayment of
the loan over a long period of time. That period is often 30 years. The lender also charges the
borrower a fee called interest, which is a certain percentage of the amount of the loan.
A borrower repays a home loan on a monthly basis. Usually the payment is the same amount each
month for the life of the loan. The amount of the payment is determined by several factors: the
amount of the loan, the term (time span) of the loan, and the annual percentage rate (APR; the
percentage charged by the lender each year on the amount of the loan).

HISTORY OF LOANS

The term loan is a type of debt. Like all debt instruments, a loan entails the redistribution of
financial assets over time, between the lender and the borrower. In a loan the borrower initially
receives an amount of money called the principal amount. The amount of money is paid back in
regular instalments or partial repayment on an annual basis each instalment being of the same
amount.
There is no certainty about how the loans started, but one can easily assume
that ever since the concept of ownership came into existence people have been practicing lending
and borrowing. Various forms of lending are found to be existing in ancient Greek and Roman
times and even the bible mentioned monetary loan. However, the modern history of loan started
much later. In the history of loans, the “Indentured loan” was one of the earliest forms of lending
which was practiced in the middle of the ages till the 19 th century by the land owners and rich
people who allowed poor people in need of money to borrow in exchange of indentured servitude.
The borrower had to work for several years to clear their debt. They had no rights and were
considered by many rich people as “Slave labour”. However, money lenders played an important
part in the history of loans and both the English word “Bank” and “Bankrupt” have origin in the
Italian money lenders.

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TYPES OF BANKS:

Public sector banks

Nationalized banks are also known as public sector banks. A nationalized bank is formed by
taking a bank and its assets into the public ownership. The national government of the country
holds the ownership of nationalized banks. In nationalized banks the government controls the
bank. This could refer to taking control of the public shares, change in management and new
corporate strategy. Government carries out nationalization in order to meet certain goals like:
⮚ To bring the regional equality.

⮚ To expand the spectrum of banking facilities in a uniform manner.

⮚ To provide banking facility in less developed regions.

⮚ Nationalization sought to find the monopoly control of big industrialists on the system.

⮚ It aimed at giving more credit to sectors that required to be prioritized.

⮚ To raise the confidence of public in banking system.

The major nationalized banks are as follows:

1. Punjab national Bank
2. Union bank of India
3. State bank of India
4. Central bank of India
5. Indian overseas Bank
6. Bank of Baroda

26
Private sector banks

Private sector banks are owned by the private lenders. The private banks are also managed and
controlled by private promoters and these promoters are free to operate according to the market
forces. The interest rates of private banks are costly as compared to public sector banks. Banking
has been originated in the form of private banking an individual or in partnership. The second
type includes incorporated banks that are specialized in wealth management especially for high
net-worth individuals and are supposed to be the first banks that were formed to manage the
finances operations. These banks are not incorporated. In U.K. and Switzerland, these banks have
been existing since a long time. A private bank can also refer to a private sector bank or a bank
that is not owned by the government.
The major private sector banks are as follows:

1. ICICI Bank
2. YES Bank
3. AXIS Bank
4. HDFC Bank
5. IDFC Bank

27
Functions of Banks: Banks act as intermediaries between those who have surplus money
and those who need it. To receive deposits and to advance loans are thus the two main functions
of all commercial banks. In short, they borrow to lend. They borrow in the form of deposits
and lend in various forms of advances. Besides, there are other incidental functions which have
developed according to the needs of society. Some of the most essential functions of
commercial banks are as follows:

1. Mobilizing savings: Financial system mobilizes saving from many diverse individuals and
invest in project which enables economic growth.
2. Facilitating the exchange of goods and service: A financial system facilitates transaction
in the economy, by providing the mechanism to make and receive payment.
3. Facilitating trading diversification and management of risks: Financial system helps to
manage risk with individual firm by investing in a diversified portfolio of innovative projects.
4. Giving Loans: But receiving of deposits is not the whole story about a bank’s functions. If
that were so, how could a bank pay interest? Hence, after collecting money by way of deposits,
a bank invests it or lends it out. Money is lent to businessmen and traders usually for short
periods only. This is so because the bank must keep itself ready to meet the demands of the
depositors, who have deposited money for short periods.

5. By Creating a Deposit: Cash credit is another way of lending by the banks. When a person
wants a loan from a bank, he has to satisfy the manager about his ability to repay, the soundness
of the venture and his honesty of purpose. In addition, the bank may require a tangible security,or it
may be satisfied with the borrower’s personal security. Usually, such security is acceptedas can be easily
disposed of in the market, e.g., government securities or shares of approved concerns. Then details about
time and rate of interest are settled and the loan is advanced. A borrower rarely wants to draw the whole
amount of his loan in cash. Usually, he opens a currentaccount with that amount the bank, if he already
has not got an account with this bank. Now itis exactly as if that sum had been deposited by him. This
is how a deposit is ‘created’ by a bank. That is why it is said “every loan creates a deposit.” A cheque
book is given to the borrower with the right to draw cheques up to the full amount of the loan, but
interest is chargedon the whole sum even though only a part is withdrawn. After the period, for which
the moneyhas been borrowed, is over, the borrower returns the amount with interest to the bank. Banks
make most of their profits thus by giving loans.
6. Remitting Funds: Banks remit funds-for their customers through bank draft to any place
where they have branches or agencies. This is the cheapest way of sending money. It is also
quite safe. Funds can also be remitted to foreign countries.

28
7. Providing Locker Facilities: Implies that commercial banks provide locker facilities to its
customers for safe keeping of jewellery, shares, debentures, and other valuable items. This
minimizes the risk of loss due to theft at homes.

8. Discounting of Bill: Discounting of bill is a process of settling the bill of exchange by the
bank at a value less than the face value before maturity date. According to Sec. 126 of
Negotiable Instruments, “a bill of exchange is an unconditional order in writing addressed by
one person to another, signed by the person giving it, requiring the person to whom it is
addressed to pay on demand or at fixed or determinable future time a sum certain in money to
order or to bearer.”
The facility of discounting of bill is used by the organizations to meet their
immediate need of cash for settling down current liabilities.

Types of home loans:

1. Home loan for improvement: These loans are given for implementing repair work and
renovation in a home that has already been purchased by the customer. It may be requested for
external works like structural repairs, waterproofing or internal works like tiling and flooring,
plumbing, electrical work and painting etc.
2. Home extension loan: Home extension loans are given for expanding or extending an
existing home. For example, addition of an extra room. For this kind of loan, customer needs
to have requisite approvals from the relevant municipal corporations.
3. Home purchase loan: These are the basic home loans for the purchase of a new house.
These loans are given for purchase of a new or already built flat / bungalow / row-house.
4. Stamp duty: These loans are sanctioned to pay the stamp duty amount that needs to be paid
on the purchase of property.
5. NRI home loan: This is a special home scheme for the non-resident Indians (NRI) who
wishes to build or buys a home or land property in India. They are offered attractive housing
finance plans with suitable reimbursement option by many banks in the country.
6. Land purchase loan: Land purchase loans are available for purchase of land for both home
construction or investment purposes. Therefore, customers can grant this loan even if customer
is not planning to construct any building on it in the near future.
7. Home construction loan: These loans are available for the construction of a new home.
These documents required by the banks or banks granting customer a home construction loan
is slightly different from the home purchase loans.

29
Types of interest rates:
There are two basic kinds of interest rates. Interest rate also called adjustable rate or floating
rate.

● Fixed interest Rate: The rate of interest is fixed either for the entire tenure of the loan or for a
certain part of the tenure of the loan. In case of a pure fixed rate loan, the EMI remains fixed
for the entire duration irrespective of whether the bank increases or reduces its interest rates
and irrespective of RBI mandated changes in interest rates. If interest rates move up over the
years, a fixed rate EMI becomes very attractive as you pay far lower than the market rate. The
interest rate cannot be changed during the loan tenure period. This is known as a fixed home
loan rate. The interest rate remains constant during the whole loan repayment period. Fixed
interest rates
for mortgage are normally higher than a floating home loan rate and here the borrower should
repay the loan amount in equal EMIs.

The main advantage of having a fixed interest rate is in spite of any changes occurring or a
sudden rise of interest rates for mortgage in the market, the borrower can pay the same EMIs
until the loan is paid off. These types of interest rates benefit people who wish to repay the
equal EMI payments and plan their financial future accordingly in order to achieve financial
security. When planning your finances for your new home, don’t forget house insurance. You
can also take out refinancing loans with fixed rates.

Besides the advantages there are also disadvantages of choosing a fixed interest rate. The
borrower will generally have to pay 1.5% to 2% more interest than they would on a floating
home loan. Due to the market fluctuations, if there are any decreases in the bank house loans
interest rates then the borrowers who preferred fixed interest rates would not get any chance of
decreasing their EMIs.

30
● Fluctuating interest Rate: As the name suggests, the floating rate of interest varies with
market conditions. EMI of a floating rate loan changes with RBI mandated changes in interest
rates (and with changes in bank’s internal interest rate) from time to time. If market rates
increase, your repayment increases. When rates fall, your dues also fall. This type of interest
rate can change or fluctuate during the loan tenure period and it is known as a floating home
loan rate. It is also known as an adjustable interest rate or variable interest rate.

A floating home loan rate will depend on the market and economic conditions of the country.
If there is a sudden change in the market and the interest rates increase, it affects the borrowers
who chose to pay floating interest rates. The floating interest rates and the EMIs will be lowered
in case there the interest rates in the market are decreased. This product offers a lower interest
rate than fixed interest rate loans. You can also apply for a refinancing home loan with a floating
rate plan.

When a borrower chooses to take floating home loan rates, they will see a sudden change in
the market, i.e. if there is a hike in the interest rates, the borrower has two options:

• To increase the EMI payment and keep the tenure constant

• To increase the tenure period and keep the EMIs constant.

For instance, if the borrower chooses the first option, then they should spend more on EMIs
following the market conditions where the bank house loans tenure will be constant. If the
borrower chooses the second option, then there will be no change in EMIs but the bank house
loan tenure will increase and it will result in a longer loan repayment period. In both cases, the
borrower will pay more from their pockets. We recommend that you use our loans calculator
to calculate the monthly instalments. With adjustable rates mortgages, borrowers who might
have planned to clear their loan amount could deal with difficulties due to the rise of interest
rates for mortgage. Some banks also call these adjustable rate of home loans. Here the interest
rate is linked to a benchmark rate. Some banks use their prime lending rates as the benchmark
rate while some banks have specific benchmark rates that they use for home loan purposes.
Typically, the interest rate applicable to customer loan tends to be a certain percentage below
this benchmark rate. (This is the current trend. Nothing stops the bank from having a low
benchmark rate and quoting the applicable interest rate as a certain percentage above the
benchmark rate. In fact, this is the trend worldwide.) The benchmark rate of a bank called Retail
Prime Lending Rate (RPLR) by the bank) or BPLR (Base Prime Lending Rate) is 10.25% per
annum. The bank may currently quote the interest rate for a twenty-year home loan at 2% below
its RPLR. Therefore, the rate applicable for customer loan currently becomes 8.25% per annum
31
(which is 2% less than 10.25%). The applicable interest rate for customer loan will henceforth
be governed by the movement in the RPLR. If RPLR goes up, the applicable interest rate on
customer loan will go up and similarly, the applicable interest rate will go down if the RPLR
goes down.

Steps involved in taking home loan:

1. Application Form

Filling up the application form is the first step towards the home loan. The look of application
form may differ from bank to bank, but nearly 80 per cent of the information they need is
similar. Most of this pertains to customer’s personal and professional information, details of
customer financial assets and liabilities and the details of the property (if finalized) including
the estimated cost and the means of financing the same.
While submitting the application form, each bank would ask for
documents to establish customer income. This will need to be backed up by proofs such as
copies of last three years’ income tax returns (along with copies of computation of income /
annual accounts, if any), Form 16 / Form 16A, last three months’ salary slips and copies of the
last six months’ statements of all customer active bank accounts in which customer salary /
business income details are reflected. Along with the application form and the credit
documents, banks will charge processing fee. This fee varies from bank to bank, but is usually
around 1 to 2 per cent of the total loan amount. Most banks have flexible fee structures, and it
is advisable that customer negotiate hard to find out the bank’s minimum fees though it is
unlikely that a bank will agree to provide a loan without any upfront fee at all. Some banks
have zero upfront-fee loans but that advantage may be negated as their other charges such as
‘legal charge’ and stamp duty’ are normally higher. The bank statements are scrutinized for:
● Level of Activity
In case of self-employed persons, this gives information about the extent of their business
activities.
● Average Bank Balance
A customer relation is to be established with the bank after scrutinizing average bank balance
maintained in a savings bank account speaks volumes about the spending and saving habits of
any individual.
● Cheque Returns
A small charge debited by customer bank in the statement indicates that a cheque issued by
32
customer was returned by customer bank. Many such returns can have a negative impact on
customer loan sanction.
● Cheque Bounces
Cheque deposited by customer are returned by the issuer’s bank they will be visible in customer
bank statement and banks have specific norms as to how many such returns are acceptable in a
period of one year.
● Regular Periodic Payments
The existence of periodic payments to other finance companies/banks indicates an existing
liability and customer will need to provide full details to the lender.

● Customer Age
Proof of customer age, such as, license / passport / ration card / PAN card / Election Identity
Card will need to be submitted.
● Identification Proof
Same as above but with customer photograph. Sometimes the same document, if it contains a
photograph, the current residential address and the correct age can be the proof for all three
things.

● Customer Employment Details

If Customer Company is not well known, then a short summary about the nature of the
company, its business lines, its main customers, its competitors, number of offices, number of
employees, its turnover and profits may be needed. Usually, the company profile that is
available on the standard website of the company is enough.
● Customer Investments
This helps the bank to estimate customer ability to pay for the down payment as well as
customer savings habit.
2. Personal Discussion
Some banks insist on meeting customer after receiving the application form, and before the
loan sanction, together more details about customer that may not be mentioned in the
application form.
If the bank calls customer for personal discussion (this is normally to reassure them
of customer repayment capacity) make sure customer carry all the original documents
pertaining to the information provided on the application form. Banks process loans only after
they are convinced favorably about customer.

33
3. Bank’s Field Investigation
Every bank validates customer information, including customer existing residential address,
customer’s place of employment, CIBIL report, employer credentials (if customer’s work for
a small organization) and residence and office telephone numbers. This is normally done by
sending representatives to customer workplace or residence. These representatives are usually
employees of small firms to which the bank has outsourced this activity. The ability of these
personnel is uneven and the interaction with them may not always be smooth. Banks also do a
quick check on the references customers have provided in the application form.

4. Credit Appraisal and Loan Sanction

The bank establishes customer repayment capacity based on customer’s income, age,
qualification, experience, employer and nature of business (if self-employed). Based on these
parameters, customer maximum loan eligibility is worked out and the final loan amount
communicated to customer, then issues a sanction letter. This letter may either an unconditional
letter, or may have certain terms and conditions mentioned. Customer has to fulfill these
conditions before the loan is disbursed.

5. Offer Letter
Once the loan is sanctioned, an offer letter is sent mentioning details like loan amount, rate of
interest, whether fixed or variable rate of interest is linked to a reference rate, tenure of the
loan, mode of repayment, if the loan is under some special scheme, the details would be
mentioned, general terms and conditions of the loan and special conditions, if any.

● Acceptance Copy of the Offer Letter

If customer accepts the offer letter the bank will ask customer to sign a duplicate letter for the
same bank’s records.
6. Submission of Legal Documents
Once customer selects property, the bank requires customer to hand over the entire set of’
original documents pertaining to customer property so that it can keep them as security for the
loan amount given to customer. These documents would remain in the bank’s custody until the
loan is fully repaid.
● Legal Check
Every bank conducts a legal check on customer documents (including draft sale documents that
customer will be entering into with customer seller) to validate their authenticity. These

34
documents normally include:
⮚ The title documents of customer seller which prove the seller’s title including the chain
of title documents if he is not the first owner.
⮚ NOCs from the legal owners such as Cooperative Housing Societies, statutory
development authorities, or leaser of the land in the case of leasehold land.
NOCs are not required where the property is situated on freehold land and the entire land is
being transferred along with the structure. The banks send these documents to a lawyer on their
panel (either In-house or outsourced) for a thorough scrutiny. Some banks will charge a special
fee to cover these costs while some banks will ask customer to pay these directly to the
concerned lawyer though for most banks the upfront fee covers these fees as well. The lawyer’s
report either gives a go-ahead if the documents are clear, or it may ask for a further set of
documents. In the latter case, customers are expected to handover the additional documents to
the bank for a clear title.
Since property documentation in India is non-standard and non-transparent, it helps if customer
buy property from a reputed builder since the builder would know the process inside out, and
keep all the documents ready. In fact, the maximum customer service issue arises at this stage
because of a lack of standardization. Also, as per the laws of several states, there are heavy
transfer charges on sale of property and / or very heavy stamp duties. This has given rise to sale
of property by showing lower consideration than agreed for, with the balance being paid either
on an amenity agreement or in cash. Moreover, the concept of sale by executing ‘Irrevocable
Power of Attorney’ has gained ground especially in the National Capital Region.All this could
restrict the choice of customer lenders and may therefore increase the cost of theloan which
customer might want to keep in mind while finalizing these kinds of properties.
7. Valuation of Property
Valuation has become a key parameter in determining the loan amount that can be sanctioned
by the bank. The valuation process is quite subjective and dependent on the quality and ability
of the person sent by the bank for valuation. In many cases, the valuer determines the value of
the property at an amount that is lower than the documented cost of the property and this would
result in the loan amount being decreased since the bank funds a certain percentage of the cost
or valuation of the property whichever is lower. Now a day, valuation of property is determined
according to “Jantri Value”. Valuer could not exceed the value of property if valuer had proper
evidence for higher value.

35
8. Registration of Property Documents
After the legal and technical / valuation check, the draft documents as cleared by the lawyer
need to be finalized and signed and the stamping and registration of the documents need to be
done. Also, if any No Objection Certificates (NOCs) are pending this need be obtained in the
format approved by the bank’s lawyer.

9. Disbursement
The best part is when customer actually received the cheque. This happens once the bank has
ensured that the property is legally and technically clear and after customer has handed over all
the original documents pertaining to the transfer of ownership of property in customer favour,
having executed the necessary loan agreements with the bank. But at this stage, customer
should also provide documents to prove that customer have paid customer personal
contribution towards the property, since banks normally fund only up to 85-90 per cent of the
total cost of the house. In case customer are expecting money from other sources to fund
customer own contribution, customer need to provide sufficient evidence for the same. It is
only after submitting this proof that the bank will release part disbursement of the loan.
The cheque will be in
the name of the reseller (for resale flats), builder, society or the development authority. It is
only in exceptional circumstances, that is, if customer provides documents to support that
customer have made an excess payment from customer own account that the cheque will be
handed over to customer directly by the bank.
Usually, loans are disbursed on the basis of the stage of construction of the property. This would
mean that the disbursement could either be full and final (in the case of resale or ready
possession properties) or part disbursement (in the case of under construction properties). Each
option would have different disbursement processes. Customer should keep photocopies of all
documents / agreements / letters submitted to the bank to avoid any misunderstandings later.
Apart from home loan process, the following flow charts shows home acquisition process and
booking process which are important for a home loan buyer.

36
Determination of Loan amounts:
Loan eligibility is based on two separate calculations:
The amount of Loan repayment that a customer can afford to make every month.
A specified percentage of the cost of the property.
The amount of the loan sanctioned will be the lower of the two figures arrived at after
making these two calculations.
It is possible that while the customer’s income (and hence, customer’s ability to repay) could
make customer eligible for a higher loan, the bank will almost always cap the sanctioned loan
amount at 80 to 90 per cent of the property cost.

[i] Repayment Ability - The Most Important Determination

Customer’s ability to repay is based on income and expenditure pattern. For instants, if a
customer’s monthly income is ` 10,000 and his monthly expenses is ` 8,000the customer can
certainly pay ` 2,000 towards any potential home loan he can take. This amount can now be
used as the instalment amount and the customer’s eligibility can be reverse – calculated. The
larger customer’s repayment capability, the higher will be customer’s loan eligibility.
[ii] Determination of Income
Banks need to be sure about income stability of customer. Which is why, they may not consider
the following categories of income while calculating loan eligibility: Performance bonus,
medical reimbursements or leave travel allowance, as these are not certain, any case annual
perks are not available every month to help in monthly repayments. Some banks, however, are
willing to consider these amounts
either partially or fully as ‘income’. Overtime may be of temporary nature. Again, if the
overtime is shown as being received consistently for a long period of time, some banks may
consider at least a part of this as ‘income’. Interest income since the underlying investments on
which these incomes are earned may be liquidated to pay for customer contribution required
towards the cost of the house. But if a customer can convince some bank that the interest income
will remain even after customer have bought the house, the bank may be persuaded to include
the interest income while calculating loan eligibility. Conveyance or entertainment / other
allowances paid in cash through vouchers, unless customer regularly deposits the cash
reimbursement in his/her salary account. Banks will hesitate to consider it for a loan since they
have no document to verify whether such an allowance is indeed paid. Earnings from non-
verifiable sources such as tuition / tailoring are not considered as ‘income’ by the banks unless

37
business of this kind is carried on in a verifiable manner. Agricultural income, since this is non-
taxable and non-stable as well, most banks do not give this any weight age or give significantly
lower weight age. Rental income is being consistently received and shown in the income tax
(IT) returns and copies of the rental agreements are available, banks may consider part or whole
of this as ‘income’. If a customer is a salaried employee, some banks apply the normative
percentage on the gross salary, while some apply it on customer’s net salary. Having said that,
most banks go by gross salary as the net salary varies from month to month (deduction of
festival advances, medical reimbursements given, or grant of leave travel allowance that
month). These banks allow a smaller percentage of customer income as available for payment
of loan installment; while those applying it on net salary allow a higher percentage of the salary.
In case of customer is self-employed, the difference in eligibility norms can be glaring. Some
banks strictly consider only returned income, that too an average of last two or three years of
income, to smoothen out any sharp increases in reported incomes. Some banks will add full/half
of the depreciation to calculate the base income. Recognizing this, quite a few banks have
evolved eligibility norms that workaround these issues. Let us call these banks ‘self- employed-
friendly banks’. Some of the things they might have for calculating eligibility norms that are
self-employed friendly are:
● Considering customer’s ‘actual income’ as multiple of customer’s ‘disclosed income’.
● Estimating customer’s ‘actual income as a percentage of ‘gross receipts’ and ignoring
customer’s ‘disclosed income’.
● Clubbing the income of entities controlled by customer such as private limited
companies or partnership firms in which customer have substantial stakes or are a
partner by making such entities joint borrowers to the loan.

● Some banks do not consider that part of income which forms customer’s yearly
investment which is allowed as deduction under section 80C. This amount is not
considered as income. However, some banks have considered this as income if
investment is licensed by bank authority. Most foreign banks are ‘self-employed
friendly’ on the above lines. Most banks do empower local level officials with
discretionary powers to enhance loan eligibilities based on their subjective assessment
of customer’s true income.

[iii] Clubbing of Incomes of Relatives

Eligibility is also calculated by clubbing the customer’s income with that of his relatives. All
38
banks allow clubbing of the spouse’s income to work out the loan eligibility. In such cases,
they insist on making the spouse a joint borrower (or co borrower). The basic premise behind
using pooled incomes for calculating eligibility is that both parties will actually combine their
income and pay off all expenses (including the home loan instalment). However, banks are
selective in extending this concept of pooling of incomes to other relations. Some banks allow
parents, children and brothers to be joint borrowers.

[iv]Cost of the Property

The bank naturally wants customer to put in a contribution towards the cost of the house so that
customer has a stake in its continued maintenance. This also ensures that if the value of the
house goes down in future, the bank’s outstanding loan amount is lower than the market value
of the property. The amount the customer is expected to put in is called ‘margin money’ or
‘down payment’. Generally, bank gives loan amount of 85% to90% of the agreement valueof
the property. Even if a customer’s income is enough to justify a higher loan, the bank will give
a maximum loan based on its margin requirements.
● Age of the Building
The down payment can also vary depending on the age of the property. If the property is older,
the down payment requirement may be higher. Most banks have a cap on the maximum age of
the building at the end of the loan tenure. This would normally be fifty years. So if a customer
is buying a property on resale and the current age of the building is thirty-eight years, the
probability of getting a tenure higher than twelve years is very low despite the fact that the
customer may otherwise be eligible for a twenty-year loan. This reduction of tenure would
reduce the loan eligibility.
● Unaccounted Component
In some real estate transactions on a portion of the cost is not accounted for in any of the
documents related to the purchase. Thankfully, this practice is on the decline especially where
the property is bought from reputed builders. No bank takes this unaccounted amount in
calculating the cost of the property while determining the loan amount eligibility.
● Resale Value
The resale value of a property is taken into consideration before the bank lends money to buy
a property. It ensures that in the unlikely event of a default, should the bank need to dispose the
property to recover its dues, the bank is well covered to the extent of the home loan provided.
This is more of a problem in case of resale properties and lesser one in case of properties
39
purchased from reputed builders.

● Independent Valuation of the Property

Every bank has practiced that bank will not give a loan (or give the loan at a higher rate) when
the property is being bought from a relative. Also, the bank insists on an independent valuation
of the property and the maximum loan amounts are based on this valuation rather than on the
agreement value.

40
CHAPTER-4
DATA ANALYSIS
&
INTERPRETATION

41
1. AGE
Table 4.1
Age
Basis Responses Percentage
18 - 30 22 36.67%
31 - 40 13 21.67%
41 - 50 17 28.34%
51 - 60 7 11.67%
61 and above 1 1.67%
Total 60 100

Fig 4.1

Frequency
1.67%

11.67%
36.67%
28.34%

21.67%

18 - 30 31 - 40 41 - 50 51 - 60 61 and above

Interpretation:
Out of total respondents, majority of respondents belong to age group of 18 to 30 Years that
is 36.67%. After that 28.34% of the respondents belong to age group of 41 to 50 years
followed by 21.67% of the study was in the age group of 31-40 years. 11.67% of the
respondents were between the age group of 51-60, only 1.67% of the respondents were above
the age of 61 years.

42
2. GENDER
Table 4.2

Gender

Options Male Female Total

No of respondent 34 26 60

Percentage of respondent 56.67% 43.33% 100

Fig 4.2
Gender

43.33%

56.67%

Male Female

Interpretation:
About 57% of the respondents who have taken home loan are male and 43% of the
respondents are female.

43
3. MARITAL STATUS

Table 4.3

Marital status

Married Unmarried Total

No of respondent 38 22 60

Percentage of respondent 63.33% 36.67% 100

Fig 4.3
Marital Status

36.67%

63.33%

Married Unmarried

Interpretation:
From the above table 63% of the respondents who have taken home loan are married people
and 37% of the respondents are unmarried.

44
4. OCCUPATION

Table 4.4

Occupation

No of respondent Percentage of
respondent

Public 9 15%

Private 18 30%

Self employed 7 11.67%

Other 26 43.33%

Total 60 100

Fig 4.4

Occupation

15%

43.33%

30%

11.67%

Public Private Self employed Other

Interpretation:

About 43% of the respondents who have taken loan work at other which may be a business.
30% of the respondents who work in the private sector have taken home loan.

45
5. EDUCATIONAL QUALIFICATION

Table 4.5
Education qualification
No of respondent Percentage of
respondent
S.S.C 3 5%
H.S.C 13 21.67%
Graduate 29 48.33%
Post – graduate 11 18.33%
Other 4 6.67%
Total 60 100

Fig 4.5

Respondents

Other

Post - graduate

Graduate

H.S.C

S.S.C

0% 10% 20% 30% 40% 50% 60%

Interpretation:

From the above table 48% of the respondents are Graduate, 22% of the respondents who have
taken home loan have done HSC and 18% of the respondents have done Post Graduation.

46
6. REASONS FOR TAKING HOME LOAN

Table 4.6
Reason for taking home loan
No of respondent Percentage of respondent
New construction 26 43.33%
Renovation 13 21.67%
Other 21 35%
Total 60 100

Fig 4.6

35%
43.33%

21.67%

New construction Renovation Other

Interpretation:

It is observed from the above table that many of the respondents take home loan for the
purpose of other than renovation and new construction about 43.33% of the respondent take
home loan for new construction. And about 21.67% of the respondents go for renovation of
their house by taking home loan.

47
7. TYPE OF BANK, LOAN TAKEN FROM

Table 4.7
Type of bank loan taken from
Public bank Private bank Total
No of respondent 24 36 60
Percentage of respondent 40% 60% 100

Fig 4.7

40%
Public bank

60% private bank

Interpretation:

From the above table majority of the people take home loan from private banks that is 60%.
The reason for taking home loan from private banks may be because private banks provide
loan within a limited period of the time as compared to the public banks. Some of them take
a loan from private banks because they are staff and as staffs get loan at a low interest rate
as compared to other banks. About 40% of the respondent takes home loan from the public
banks.

48
8. PERIOD REQUIRED TO PASS A LOAN

Table 4.8
Period required for to pass a loan
No of respondent Percentage of respondent
10 - 15 days 33 55%
1 month 19 31.67%
2 - 3 months 8 13.33%
More than 3 months 0 0%
Total 60 100

Table 4.8
Period required for to pass a loan
0%

13.33%

31.67% 55%

10 - 15 days 1 month 2 - 3 months More than 3 months

Interpretation:

It can be seen from the above table that minimum period required to pass a home loan is
about 1 month. During this period various documentation of the respondents is been done
after everything is been verified by the bank and is satisfying the bank grants a home loan to
the respondents. And maximum period required to pass loan is 2-3 months. If the loan is
taken by staff of the bank than the loan can be processed n passed between 10-15days.

49
9. AWARNESS REGARDING DOCUMENTATION OF HOME LOAN.

Table 4.9

AWARENESS ABOUT DOCUMENTATION OF HOME

LOAN.
Yes No Total

No of respondent 43 17 60

Percentage of respondent 71.66% 28.34% 100

Fig 4.9
RESPONDENTS

28.34%

71.66%

Yes No

Interpretation:

About 71.66% of the respondents are aware about the documentation of loan and about
28.34% of the respondent is not aware bout the documentation of loan. Documentation of the
loan is done for satisfaction of the bank that after granting them loan the respondent has
capacity to repay the loan and also to see whether the property which is taken is legal. There
are some still people who are not aware may be because of poor knowledge of banks and
poor educational qualification.

50
10. PROBLEMS DURING PROCEDURE OF HOME LOAN

Table 4.10
Problems during procedure of home loan
yes no total
No of respondent 10 50 60
Percentage of respondent 16.67% 83.33% 100

Fig 4.10
RESPONDENTS

16.67%

83.33%

YES NO

Interpretation:

It is observed from the above table that during the procedure of home loan it hardly creates a
problem. About 16.67% of the respondents say that it creates a problem while passing a loan
that may be because of high rate of interest, rejection at the first stage etc.

51
11. TYPES OF PROBLEMS FACED DURING DOCUMENTATION

Table 4.11
Types of problem faced during documentation
No of respondent percentage of respondent
Rejection at first stage 3 30%
Processing fees not refunded 0 0
Desired loan not sanctioned 3 30%
High rate of interest 3 30%
Other 1 10%
Total 10 100%

FIG 4.11

Respondents

10%
30%

30%

0
30%

Rejection at first stage Processing fees not refunded Desired loan not sanctioned
High rate of interest Other

Interpretation:

Majority of a problem faced by the respondents as shown in the above table is rejection at
first stage, desired loan not sanctioned and because of high interest rate. Desired loan not
sanctioned may be because of the value of asset given for mortgage by the respondent is not
sufficient for the loan amount to be passed. The loan is not sanctioned even if the documents
of the respondent are wrong.

52
12. TENURE OF THE LOAN

Table 4.12
Tenure of loan
No of respondent Percentage of respondent
5-10 years 46 76.66%
11-15 years 14 23.33%
16-20 years 0 0%
Total 60 100

Fig 4.12
RESPONDENTS
0%

23.33%

76.66%

5-10 years 11-15 years 16-20 years

Interpretation:

Majority of the people take home loan for a period of 5-10 years about 76.66%. It is also been
observed home is loan is mostly given by a bank up to a period of 10 years. About 23.33% of
the respondent have taken a home loan for a period of 11-15years.And it is also observed that
none of them is granted a loan for a period of 16-20 years.

53
13. TYPE OF INTEREST RATE CHARGED ON LOAN

Table 4.13
Type of interest rate
charged
0-5% 6-10% 11- 16- Total
15% 20%
No of respondent 11 32 16 1 60

Percentage of respondent 18.33 53.33% 26.66% 0.01% 100

%

Fig 4.13

RESPONDENTS
0.01%

18.33%
26.66%

53.33%

0-5% 6-10% 11-15% 16-20%

Interpretation:

From the above table it is observed that interest on home loan is highest from 6 – 10% as it
has the highest no of respondent with 53.33%%. It is actually kept low by the bank because a
common people can afford the loan and full fill their dream of purchasing a home of their
own.

54
14. TYPE OF INTEREST CHARGED ON LOAN

Table 4.16
Type of interest charged
Fluctuating interest
rate
Fixed interest rate Total
No of respondent 56 4 29
Percentage of respondent 93.33% 6.67% 100

Fig 4.16
RESPONDENTS

6.67%

93.33%

Fixed interest rate Fluctuating interest rate

Interpretation:

It is seen from the above table that home loan is normally charged at fixed interest rate. Fixed
interest refers to that the respondent has to pay equal or fixed amount of instalment to the
bank for the amount borrowed from bank. About 93.33% of the respondents pay interest at
fixed interest.

55
15. PROCESSING FEES CHARGED

Table 4.15
Processing fees
No of respondent Percentage of respondent
0-10000 32 53.33%
10000-15000 19 31.66%
15000-20000 9 15%
20000 and above 0 0%
Total 60 100

Fig: 4.15
RESPONDENTS
0%

15%

53.33%
31.66%

0-10000 10000-15000 15000-20000 20000 and above

Interpretation:

About 53.33% of the respondents have paid a processing fee between 0-10000 rs and
31.66% of the respondents have paid between 10000-15000rs. Processing fees are the fees
charged by the bank while processing the loan of the respondent. It includes basic
administrative costs.

56
16. CHOICE FOR PUBLIC /PRIVATE BANK TO GET HOME LOAN

Table 4.16
Choice for public/private bank to get home
loan
No of respondents Percentage of respondent
Advertisement 18 30%
Fast sanctioning 12 20%
Low rate of interest 4 6%
Good service provider 26 43.33%
Other 0 0
Total 60 100

Fig 4.16

Respondents
0

30%
43.33%

20.%

6.89%

Advertisement Fast sanctioning Low rate of interest Good service provider Other

Interpretation:

From the above observation, people choose private or public banks to get home loan because
the banks provide good service to the customer while obtaining home loan. 30% of the
people prefer advertisement through which they get influenced and go for home loan.20% of
the people due to fast sanctioning of the loan.

57
17. SATISFACTION FOR SERVICE PROVIDED BY THE BANK
WHILE OBTAINING HOME LOAN

Table 4.17
Satisfaction for service provided by the bank while obtaining home loan
Yes No Total
No of respondent 54 6 60
Percentage of respondent 90% 10% 100

FIG 4.17
RESPONDENTS

10

90

YES NO

Interpretation:

From the above table 90%% of the respondents are satisfied by the service of bank provided
while obtaining home loan. The bank provides various services to the customers.
About 10% of the respondent are not satisfied by the service of bank while obtaining home
loan.

58
18. PRINCIPAL AMOUNT OF LOAN

Table 4.18
Principal amount of loan
No of respondent Percentage of respondent
Less than 5,00,000 23 38.33%
5,00,001 - 10,00,000 23 38.33%
10,00,001 - 20,00,000 8 13.33%
Above 20,00,000 6 10%
Total 60 100

Fig 4.18

Respondents

10%

13.33% 38.33%

38.33%

Less than 5,00,000 5,00,001 - 10,00,000 10,00,001 - 20,00,000 Above 20,00,000

Interpretation:

From the above table principal amount of loan is less than 500000 and between 500000-
1000001. Principal refers to the initial size of loan borrowed by the respondent. About
13.33% of the respondent whose principal amount is between 1000001-2000000 and 10.34%
of the respondent whose principal amount of the loan is above 2000000.

59
19. MODE OF INSTALLMENT

Table 4.19
Mode of instalment of home loan
No of respondent Percentage of respondent
Monthly 20 69%
Quarterly 9 31%
Yearly 0 0
Total 29 100

Fig 4.19

Respondents
0

31%

69%

Quarterly Yearly

Interpretation:

About 100% of the respondent pay instalments of home loan on monthly basis. EMI is the
instalment money which is paid by the respondent on the amount of home loan borrowed
from the bank which is normally paid by the respondent every month rather than quarterly
and yearly.

60
20. INCOME LEVEL AFFECTS TAKING OF HOME LOAN

Table 4.20
Income level affects (if yes)
No of respondent Percentage of respondent
Below 10000 0 0
10001 - 25000 8 27.59%
25001 - 50000 12 41.38%
50001 and above 9 31.03%
Total 29 100

Fig 4.20

Respondents
0

31.03% 27.59%

41.38%

10001 - 25000 25001 - 50000 50001 and above

Interpretation:

From the above table it is clear that home loan affects the income of the respondents. About
41% of the respondents say that income level affects even if their income is between 25001-
50000 rs.

61
21. INCOME LEVEL DOES’NT AFFECT TAKING OF HOME
LOAN

Table 4.21
Income level affects (If no)
No of respondent Percentage of respondent
Below 10000 5 16.13%
10001 - 25000 7 22.58%
25001 - 50000 8 25.80%
50001 and above 11 35.48%
Total 31 100

Fig 4.21

Respondents

16.13%
35.48%

22.58%

25.80%

Below 10000 10001 - 25000 25001 - 50000 50001 and above

Interpretation:

From the above table it is clear that 35.48% of the respondent say that income level does not
affect home loan and their income varies from 50000 and above.

62
 Chapter No-5
FINDINGS, SUGGESTIONS AND
CONCLUSIONS

63
 5.1 Findings
• Many people prefer to buy the home loan in private banks than public sector banks.
• The interest rate attracts the most in home loans than schemes or other services.
• Home loan procedure is much difficult for people demanding it as they do not have the proper
knowledge regarding home loan.
• Public sector banks are require large formalities to be fulfilled.
• The facilities of both private and public sector banks are reliable.

5.2 Suggestions

⮚ Banks should use easy and simple procedures for sanctioning of home loans for the
customers.
⮚ The loan passing procedures should be quicker by the Public Banks like the Private
Banks.
⮚ Many attractive advertisements should be provided to the customers for awareness
about different housing loans schemes of Public sector banks like the Private sector
banks.
⮚ The loan disbursement amount should be made promptly to the customers enabling
them to buy or construct their home at the earliest, thereby satisfying the
customers.

64
 5.3 CONCLUSIONS

In the conclusion we can say that both Public and Private sector banks truly deserve to
be the leading banks in home loan in India. The services offered by them are very competitive.
Mostly people prefer Private Banks for home loans, especially because they believe that they
provide faster services and come up by new technology which makes the borrower work easier.
On other hand, Public sector banks are very strict and stringent. The documents required for
home loan are comparatively more in case of Public sector banks than the Private sector banks.

It is found that Private sector banks are very popular among the
customers these days. The satisfaction level that customers have with these banks is very high
as compared to the Public sector banks. Customers are associated with banks for many services
that they require on regular basis and people tend to prefer banks that provide better facilities
and convenient banking. From the overall analysis it can be said that the satisfaction level in
relation to services provided by the Private Banks are very high as compared to Public sector
banks.

Different banks offer the same product but their way

of service differs. The customer’s choice the schemes which they fell are good and better for
them and the capacity to repay it on a specified time period.

65
WEBLIOGRAPHY

66
Websites:-

1. http://ijmrr.com/admin/upload_data/journal_S--8jun15mrr.pdf

2. http://www.differencebetween.info/difference-between-nationalised-banks-and-private-banks

3. http://www.blog.sanasecurities.com/types-of-bank-loans-in-india-interest-rates-and-charges/

4. http://www.bankandfinance.com/loan/Home-Loan/Home-Loan-Rates.php
5. https://www.scribd.com/doc/49180381/A-Project-Report-on-Home-Loan

67
ANNEXURE

68
QUESTIONNAIRE

● AGE?

a) 18-30
b) 31-40
c) 41-50
d) 51-60
e) 61 and above

● GENDER?
a) Male
b) Female

● MARITAL STATUS?
a) Married
b) Unmarried

● OCCUPATION?
a) Private
b) Public
c) Self employed
d) Other

● EDUCATIONAL QUALIFICATION?
a) S.S.C
b) H.S.C
c) Graduate
d) Post-graduate
e) Other

● REASON FOR TAKING HOME LOAN?

a) New construction
b) Renovation
c) Other

69
● TYPE OF BANK, LOAN TAKEN FROM?
a) Public banks
b) Private banks

● PERIOD REQUIRED TO PASS A LOAN?

a) 10-15 days
b) 1 month
c) 2-3 months
d) More than 3 months

● AWARNESS REGARDING DOCUMENTATION OF HOME LOAN?

a) Yes
b) No

● PROBLEMS DURING PROCEDURE OF HOME LOAN?

a) Yes
b) No

● TYPES OF PROBLEMS FACED DURING DOCUMENTATION?

a) Rejection at first stag
b) Processing fees not refunded
c) Desired loan not sanctioned
d) High rate of interest
e) Other

● TENURE OF THE LOAN?

a) 5-10 years
b) 11-15 years
c) 16-20 years

● TYPE OF INTEREST RATE CHARGED ON LOAN?

a) 0-5%
b) 6-10%
c) 11-15%
d) 16-20%

70
● TYPE OF INTEREST CHARGED ON LOAN?
a) Fixed interest rate
b) Fluctuating interest rate

● PROCESSING FEES CHARGED?

a) 0
b) 10000-15000
c) 15000-20000
d) 20000 and above

● PROCESSING FEES CHARGES BY PUBLIC / PRIVATE SECTOR BANKS ARE DIFFERENT?

a) Yes
b) No

● CHOICE FOR PUBLIC /PRIVATE BANK TO GET HOME LOAN?

a) Advertising
b) Fast sanctioning
c) Low interest rates
d) Good service provider
e) Other

● SATISFACTION FOR SERVICE PROVIDED BY THE BANK WHILE OBTAINING HOME LOAN?
a) Yes
b) No

● PRINCIPAL AMOUNT OF LOAN?

a) 0-500000
b) 5,00,001-10,00,000
c) 10,00,001-20,00,000
d) Above 20,00,000

● MODE OF INSTALLMENT?
a) Monthly
b) Quarterly
c) Yearly

71
● INCOME LEVEL AFFECTS TAKING OF HOME LOAN? (if yes)
a) Below 10000
b) 10001-25000
c) 25001-50000
d) 50000 and above

● INCOME LEVEL AFFECT TAKING OF HOME LOAN? (if no )

a) Below 10000
b) 10001-25000
c) 25001-50000
d) 50001 and above

72