a study on retail loans, at uti bank retail asset centre

SHRI

B.V.V.SANGHA’S

INSTITUTE OF MANAGEMENT STUDIES BAGALKOT-02

CERTIFICATE OF APPROVAL

PROJECT REPORT

2006-2007

This is to certify that the project report entitled “A

Study on Retail Loans, At UTI Bank Retail Asset centre” Is

being submitted by Miss.Uma. B. Mallannavar, a student of

MBA First year. She has satisfactorily completed the project

work for the partial fulfillment of MBA Course under Karnataka

University, Dharwad.

INTERNAL GUIDE DIRECTOR

Prof. C. Subramaniam Shri: C. Subramaniam

Examiners:

1.

2.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.

http://www.utibank.com/personal/index.asp

DECLARATION

I under signed Miss.Uma.B .Mallannavar 2nd semester student of the BVV

Sangha’s Institute Of Management Studies Bagalkot here by Declare that the Project

report entitled “A study on Retail Loans ” at UTI Bank Retail Asset Centre, Belgaum, is

written and submitted by me under the guidance of Prof.C. Subramaniam is my original

work.

The findings and Conclusions are based on the information collected by me

during my In plant Training.

UMA B. MALLANNAVAR

BIMS,

BAGALKOT



ACKNOWLEDGEMENT

It is my Privilege to extend words of Thanks to the people who have helped and

encouraged me in completing this study successfully

It was really a valuable period, which I spent in UTI Bank Retail Asset Centre,

Belgaum Branch for my In Plant Training. It thought me a lot in practical way. In the

way of completion of this project report, I am obliged to many persons.

I take this opportunity to express my deep sense of gratitude and sincere thanks to

my External Guide Mr. Jeer. Basavaraj Deputy Manager of UTI Bank Retail Asset

Centre, Belgaum Branch and to Mr. Bharat. Malagimani Assistant Manager, for

providing me an opportunity to undergo In Plant Training and for their valuable

Guidance in completing the Project.

I am also thankful to our Director Shri. C. Subramaniam for his valuable

guidance for successful completion of this project and staff members for the guidance

during the course of my study for the MBA.

Finally, I also thank my Parents and all my Friends who have helped directly or

indirectly in completing this Project.



EXECUTIVE SUMMARY

Without a sound and effective banking system in India it cannot have a healthy

economy. The Banking system of India should not only be hassle free but it should be

able to meet new challenges posed by the technology and any other external and internal

factors.

With years, banks are also adding services to their customers. The Indian banking

industry is passing through a phase of customers market, the customers have more choice

in choosing their banks .A competition has been established within the banks operating

in India, by the stiff competition and advancement of technology, the services provided

by banks have become more easy and convenient.

The basic reason for which the loans are given to customers is to help the

customers in satisfying their needs. So different kinds of loans are given to the customers

by various bankers in order to help the customer in satisfying their various needs. Loans

and deposits constitute an important or major part of any banking or financing business,

and the profit made by a bank or non-banking financing companies mainly depends upon

the spread and non interest income of that particular bank or company. In order to

enhance its profit will offer different kinds of loans with attractive lending terms.

UTI Bank was the first of new private banks to have begun its operations in

1994, after the Govt of India allowed new private banks to be established. The progress

of UTI Bank has been identical with the phase of progressive banking in India. The Bank

is well equipped to meet the challenges of 21st century in the areas of information

technology, knowledge and competition



At UTI Bank Retail asset centre was given the task of studying the Retail loans.

The study was conducted to know about the Fundamentals of the retail loans and

to know about the policies, procedures and practices of UTI Bank, to study about the

portfolio management of various loans i.e. personnel, auto and housing loans, and to

study about NPA’s and write-off concepts with regard to collection perspective overall

make an analysis of retail banking industry.



Contents

Section A –

a) Introduction

b) Company Profile

Section B _

a) Project Title

b) Objectives

c) Retail Loans at UTI Bank

d) Recoveries Department

e) Priority Sector Lending

f) Non-Performing assets

g) Portfolio Management Of Loan Products

Section C –

a) Findings

b) Suggestions

c) Conclusion

d) Bibliography



Introduction

a. Introduction to Indian Banking

b. Introduction to Retail Banking



Introduction to Indian Banking

The Indian banking can be broadly categorized into nationalized (government

owned), private banks and specialized banking institutions. The Reserve Bank of India

acts a centralized body monitoring any discrepancies and shortcoming in the system.

Since the nationalization of banks in 1969, the public sector banks or the nationalized

banks have acquired a place of prominence and has since then seen tremendous

progress. The need to become highly customer focused has forced the slow-moving

public sector banks to adopt a fast track approach. The unleashing of products and

services through the net has galvanized players at all levels of the banking and financial

institutions market grid to look anew at their existing portfolio offering.

The Indian banking has finally worked up to the competitive dynamics of the

‘new’ Indian market and is addressing the relevant issues to take on the multifarious

challenges of globalization. Banks that employ IT solutions are perceived to be

‘futuristic’ and proactive players capable of meeting the multifarious requirements of

the large customer’s base. Private Banks have been fast on the uptake and are

reorienting their strategies using the internet as a medium The Internet has emerged as

the new and challenging frontier of marketing with the conventional physical world

tenets being just as applicable like in any other marketing medium.

The Indian banking has come from a long way from being a sleepy business

institution to a highly proactive and dynamic entity. This transformation has been

largely brought about by the large dose of liberalization and economic reforms that

allowed banks to Explore new business opportunities rather than generating revenues

from conventional streams (i.e. borrowing and lending). The banking in India is highly

fragmented with 30 banking units contributing to almost 50% of deposits and 60% of

advances. Indian nationalized banks (banks owned by the government) continue to

bethe major lenders in the economy due to their sheer size and penetrative networks

which assures them high deposit mobilization.



The Reserve Bank of India acts as a centralized body monitoring any

discrepancies and shortcoming in the system. It is the foremost monitoring body in the

Indian financial sector. The nationalized banks (i.e. government-owned banks) continue

to dominate the Indian banking arena. Industry estimates indicate that out of 274

commercial banks operating in India, 223 banks are in the public sector and 51 are in the

private sector. The private sector bank grid also includes 24 foreign banks that have

started their operations in India. . Under the ambit of the nationalized banks come the

specialized banking institutions. These co-operatives, rural banks focus on areas of

agriculture, rural development, unlike commercial banks these co-operative banks do not

lend on the basis of a prime-lending rate. They also have various tax sops because of

their holding pattern and lending structure and hence have lower overheads. This

enables them to give a marginally higher percentage on savings deposits. Many of these

cooperative banks diversified into specialized areas (catering to the vast retail audience)

like car finance, housing loans, truck finance etc. in order to keep pace with their public

sector and private counterparts, the co-operative banks too have invested heavily in

information technology to offer high-end computerized banking services to its clients.

NEW GENERATION BANKING

The liberalize policy of Government of India permitted entry to private sector in

the banking, the industry has witnessed the entry of nine new generation private banks.

The major differentiating parameter that distinguishes these banks from all the other

banks in the Indian banking is the level of service that is offered to the customer. Verify

the focus has always been centered on the custom understanding his needs, preempting

him and consequently delighting him with various configurations of benefits and a wide

portfolio of products and services. These banks have generally been established by

promoters of repute or by ‘high value’ domestic financial institutions. The popularity of

these banks can be gauged by the fact that in a short span of time, these banks have



gained considerable customer confidence and consequently have shown impressive

growth rates. Today, the private banks corner almost four per cent share of the total

share of deposits. Most of the banks in this category are concentrated in the high-growth

urban areas in metros (that account for approximately 70% of the total banking

business). With efficiency being the major focus, these banks have leveraged on their

strengths and competencies viz. Management, operational efficiency and flexibility and

superior product positioning

The private banks with their focus on business and service portfolio have a

reputation of being niche players in the industry. A strategy that has allowed these banks

to concentrate on few reliable high net worth companies and individuals rather than cater

to the mass market. These well-chalked out integrates strategy plans have allowed most

of these banks to deliver superlative levels of personalized services. With the Reserve

Bank of India allowing these banks to operate 70% of their businesses in urban areas, this

statutory requirement has translated into lower deposit mobilization costs and higher

margins relative to public sector banks.



Introduction to retail Banking

Banking services offered to the general public, Retail banking services are a

group of financial services that includes installment loans, residential mortgages, equity

credit loans, deposit services, and individual retirement accounts. In contrast with

Wholesale Banking or corporate banking, retail banking is a high volume business with

many service providers competing for market share. Some retail banking services, for

example, credit cards, are among the most profitable services offered by financial

institutions.

Meaning

“Retail Banking refers to the dealing of commercial banks with individual

customers, both on liabilities and assets side of the balance sheet fixed, savings current

account on the liabilities side, and mortgages, loans like personnel, auto, housing and

educational on the assets side”

Retail banking is the new mantra in the banking sector, net banking, phone

banking, mobile banking, ATM’s and bill payments are the new buzz words that banks

are using to lure customers

Today much of retail banking is streamlined through ATM’s or through virtual

retail banking known as online banking, retail banking focuses strictly on consumer

markets.

Across the globe, retail lending has been a spectacular in the commercial banking

sector, Retail loans is estimated to have accounted for nearly one-fifth of all bank credit,

Housing sector is experiencing a boom in its credit .The retail market has decisively got

transformed from a sellers market to buyers market



Retail banking is becoming an increasingly complex concept to define. While

"pure" retail banking is generally conceived to be the provision of mass market banking

services to private individuals, it has been expanded over the years to include in many

cases services provided to small- and medium sized businesses. Some banks may also

include their "private banking" business (i.e. services to high net worth individuals) in

their definition of retail banking. The advantages of a retail franchise are numerous:

Retail banking in India

In India, retail banking has always been prevalent in various forms ever since the

evolution of banking. Co-operative banks that have been existence in India for over a

century have always had retail thrust. It is only since the mid nineties that the term retail

banking has been used as a means of reinforcing a conscious foray into this particular line

of business. Retail banking today for many banks is synonymous with mainstream

banking, with vast sums of money being invested in creating and sustaining a retail

brand, further supported by requisite technological and staffing support. It is pertinent to

ponder about the causes of the shift (or increase) of focus towards the retail side.

Retail banking in India is not a new phenomenon has. It always been prevalent in

India in various forms. For the last few years it has become synonymous with mainstream

banking for many banks.

The typical products offered in the Indian retail-banking segment are housing

loans, Consumption loans for purchase of durables, auto loans, credit cards and

educational loans. The loans are marketed under attractive brand names to differentiate

the products offered by different banks. Retail lending has turned out to be a key profit

driver for banks within the retail segment; the housing loans had the least gross asset

impairment. In fact, retailing make ample business sense in the banking sector.



Factors contributing to the growth of retail business

The following are the factors, which contribute to the growth of Retail business

1. The economic prosperity and the consequent increase in purchasing power have

given a fillip to a consumer boom.

2. The changing consumer demographics indicate vast potential

For growth in consumption both qualitatively and quantitatively

3. The Technological innovations relating to increasing use of credit / debit cards,

ATMs, direct debits and phone banking has contributed to the growth of retail

banking in India

4. Decline in interest rates have also contributed to the growth of retail credit by

generating the demand for such credit

Opportunities and challenges of retail banking in India

Retail banking has immense opportunities in a growing economy like India.

The rise of the Indian middle class is an important contributory factor in this

regard. The percentage of middle to high-income Indian households is expected to

continue rising. The younger population not only wields increasing purchasing power.

But as far as acquiring personal debt is concerned, they are perhaps more comfortable

than previous generations. Improving consumer purchasing power, coupled with more

liberal attitudes toward personal debt, is contributing to India's retail banking segment.



The combination of the above factors promises substantial growth in the retail

sector,. Some of the key policy issues relevant to the retail-banking sector are: financial

inclusion, responsible lending, and access to finance, long-term savings, financial

capability, consumer protection, regulation and financial crime prevention.

Retail banking is a banking service that is geared primarily toward individual

consumers. Retail banking involves two aspects i.e. Business Banking where transactions

are carried out with industries and organizations, where as at UTI individual customers

are the end users to whom the retail loans such as personal, auto and housing loans are

provided

Types of Retail Banks

1) Commercial bank has two possible meanings:

Commercial bank is the term used for a normal bank to distinguish it

from an investment bank.

Commercial bank can also refer to a bank or a division of a bank that

mostly deals with deposits and loans from corporations or large

businesses,

2) Community development bank are regulated banks that provide financial services

and credit to underserved markets or populations.

3) Private Banks manage the assets of high net worth individuals.

4) Savings bank accepts savings deposits.

o Postal savings banks are savings banks associated with national postal

systems.


http://www.answers.com/topic/saving

http://www.answers.com/topic/savings-bank

http://www.answers.com/topic/private-bank

http://www.answers.com/topic/community-development-bank

http://www.answers.com/topic/commercial-bank


COMPANY PROFILE



About UTI Bank

UTI Bank was the first of the new private banks to have begun operations in

1994, after the Govt of India allowed new private banks to be established. The bank was

promoted jointly by the Administrator of the specified undertaking of the unit trust of

India (UTI-I), life insurance Corporation of India (LIC) and General Insurance

Corporation of India

The Bank has strengths in both retail and corporate banking and committed to

adopting the best industry practices internationally in order to achieve excellence

The banks registered office is at Ahmedabad and its Central office is located at

Mumbai. Presently, the bank has a very wide network of more than 561 branch offices

and extension counters. The bank has a network of over 2341 ATMs providing 24hrs a

day banking convenience to its customers. This is one the largest ATM networks in the

country

UTI Bank has been in constant endeavor to bring a sharper focus to the

requirements of its customers and provide the highest levels of services. UTI is one of the

few banks in India, which has built up a fully integrated centralized banking architecture

to offer banking services

UTI bank provides facilities for bill payments, NRI services, financial advice and

retail loans. The bank offers a complete range of retail and corporate services, including

retail loans, corporate credit, forex services, investment banking and depository services.

UTI Bank’s deposit base currently stands at over Rs 58000 crores with over 59 lakhs

accounts

The bank has strengths in both retail and corporate banking and is committed to

adopting the best Industry practices internationally in order to achieve excellence



Board of Directors

The Bank has 11 members on the Board. Dr. P. J. Nayak is the Chairman and

Managing Director of the Bank.

The members of the Board are :

Dr. P.J. Nayak Chairman & Managing Director

Shri Surendra Singh Director

Shri N.C. Singhal Director

Shri A.T. Pannir Selvam Director

Shri J.R. Varma Director

Dr. R.H. Patil Director

Smt. Rama Bijapurkar Director

Shri R.B.L. Vaish Director

Shri S.B. Mathur Director

Shri M.V. Subbiah Director

Shri Ramesh Ramanathan Director



UTI Banks Mission and Core values

Mission

1) Customer service and product Innovation tuned to diverse needs of

individual corporate clientele

2) Continuous technology up gradation while maintaining human values.

3) Progressive globalization and achieving international standards.

4) Efficiency and effectiveness built on ethical practices.

Core values

1) Customer satisfaction through providing quality service effectively and

efficiently.

2) Maximization of stakeholder value

3) Success through Teamwork, Integrity and People

4) Periodic Customer Service Audits.



PROJECT TITLE

“A Study on Retail Loans”



Objectives of the Study

1. To study the fundamentals of the Retail loans.

2. To study the policies, practices, and procedures of UTI Bank.

3. To know the appraisal Techniques.

4. To study about Priority Sector Advances.

5. To study about the portfolio management of various loan products.

6. Analysis of allocation of business, balancing the portfolios for the good

yield and profitability.

7. To know about NPA’s, and Write-off concepts.



Retail Loans at UTI Bank

Personal Loans

Auto (Car) Loans

Housing Loans



Retail Loans at UTI Bank

UTI Bank has separate division as Retail banking for Retail Loans; Called as

Retail Asset Management Group at the Central Office and local Branches are called as

Retail Asset center. Currently the Bank is providing Retail loans to customers, which

include Personal Loans, Housing Loans, Mortgage Loans, Auto loans, Educational loans,

Loans against Shares and Securities, etc. The retail loans products at UTI Bank are given

brand names like personal power to personal loans, Power homes to housing loans and

power drive to auto loans and Property Power for Mortgage Loans …like wise.

The above loans are called as Retail Loans as these loans are given only to the Retailers

i.e. on Individual Capacity.

Apart from the above, they are also providing loans for the Business entities

called as Business Banking.

This project study is more confined to those products, which are offered by Retail

Asset Centre, Belgaum. They are mainly in to the Housing, Personal, and Auto Loans.

Personal loan-

Personal loan is the loan provided for individual customers for their personal needs.

UTI Bank finances only for approved reasons like educational purpose, medical

expenses, for improvement the current business etc and does not finance for unapproved

reasons like for Investment in shares, mining business and for the purpose of venture

capital.



UTI Bank has segmented the customers in to following Categories:

1) Salaried individual normal

2) Salaried individual Professional

3) Salaried Doctors

4) Salaried Employed Doctors

5) Self Employed Professional

6) Self Employed Normal

Bank has defined different policy parameters like, Salary eligibility, loan amount,

interest rates, etc. For the different categories of customers as below:

1) Salaried Individual normal

Eligibility criteria

Any individual having a cumulative experience of 2 yrs or more with a

minimum net income of Rs 7000 pm is eligible for the loan, the applicant should be

above 21 yrs of age

Loan amount

The loan limits for salaried individual normal is minimum loan amount =50,000

and maximum loan amount =Rs 10 lakhs

Repayment period Maximum loan amount



5times net monthly income for CAT A

=>12 months but<24 months 4times net monthly income for CAT B

4times net monthly income for CAT C

4times net monthly income for CAT D

10times net monthly Income for CAT A

=>24months but<36 months 8times net monthly Income for CAT B

8times net monthly Income for CAT C

8times net monthly Income for CAT D

13times net monthly Income for CAT A

=>36months but<48 months 10times net monthly Income for CAT B

10times net monthly Income for CAT C

10times net monthly Income for CAT D

15 months net monthly Income for CAT A

=>48months upto60 month’s 12months net monthly Income for CAT B

NA for CAT C\D

Security\ collateral



1) Salaried (having salary power account with the bank with check off facility)

having net monthly income of Rs 7000to 10000,need not provide collateral

security

2) Salaried (not having Salary power account with the bank) having net monthly

income of Rs 7000 need to provide 50% collateral security

Guarantor- Father\ mother\third party (any one of these) can be a financial guarantor by

declaration

Rate of Interest

S.no Category Rate of Interest

1 A 14.5%

2 B 17.5%

3 C 20.5%

4 D 21.5%

Repayment

12 to 60 months (for cat A &B) in equated monthly installments from the date of

disbursement by way of post dated cheque in case were check-off facility is not available

otherwise, the monthly installment will be received from the employer under check-off

facility

Documents Required

1) Proof of Identity – Passport\Voter’s\Driving license\PAN Card and Photograph

2) Proof of Income - Latest Salary Slip showing all deductions or Form16 along with

current dated salary certificate



3) Proof of residence- Ration card\Passport\Latest Electricity Bill\Latest Telephone

Bill

4) Bank statement\Passbook where salary \Inc is Credited- Last 6 months and Last 3

months for CAT A & B employees

5) Proof of Telephone- Latest Bill of Landline\ Mobile stating name of borrower or

address of borrower

Service tax\ Processing fees

Service tax = 12.36% and processing fees is 2% of loan amount applied

2) Salaried Individual Professional

By salaried Professional means-MBA\ Engineers\ CA, ICWA, CS\ Architects


Any Professional qualified individual having a minimum work experience of

6months or more with a minimum net income of Rs 15000pm is eligible for the loan

Loan amount

Minimum loan amount =Rs 50,000

Maximum loan amount=Rs 15 lakhs

No collaterals required

Rate of Interest



S.no Category Rate of Interest

1 A 14.5%

2 B 17.5%

3 C 20.5%

4 D 21.5%

Repayment

12 to 60 months in equated monthly installments from the date of disbursement

by way of post dated cheque in case were check-off facility is not available otherwise, the

monthly installment will be received from the employer under check-off facility

Documents Required


2) Proof of Qualification – Degree\ Diploma\certificate indicating the proof of the

professional qualification




Bill


address of borrower





3) Salaried Doctors

By salaried Doctors means salaried MBBS\BDS and above. No Doctors from

ayurvedic\ Homeopathic


Minimum qualification should be MBBS \BDS or higher, Doctor

Has to be in permanent confirmed service for minimum 6 months with a minimum

gross income of Rs10, 000pm

The applicant should be above 24 yrs of age and less than 65 yrs of age at the time of

termination of loan

Loan amount




Rate of Interest

s.no Category rate of Interest

1 A 14.5%

2 B 17.5%

3 C 20.5%

4 D 21.5%

Repayment



12 to 60 months in equated monthly installments from the date of disbursement by way

of post dated cheque in case were check-off facility is not available otherwise, the

monthly installment will be received from the employer under check-off facility

Documents Required


2) Proof of Qualification – Degree certificate or passing certificate registered with

respective state medical councils or Dentists Association of India for Dentists




Bill


address of borrower

6) Employment Proof – Latest Form-16, 3 months salary slip Appointment



4) Self Employed Doctors



Doctors – self-employed MBBS\BDS and above. No Doctors from ayurvedic\

Homeopathic


Minimum qualification should be MBBS \BDS or higher, Doctor has to be in practice

for at least 2 yrs. Business has to be profitable for the last 2 yrs.

The applicant should be above 24 yrs of age and less than 65 yrs of age at the time of

termination of loan. For above 65 yrs of age, co borrower\collateral mandatory

Loan amount



Repayment

Repayment period max limit Rs 20 lakhs

Upto 12 months 0.6times annual gross receipts or

6 times eligible annual inc

=> 12mon but < 240mon 0.6 times eligible annual inc

=> 24 mon but< 36 mon 0.6 times eligible annual inc

=> 36 mon but<48 mon 0.6 times eligible annual inc




Rate of Interest

S.no Category Rate of interest

1 Doctors self Emp 14.5% pa

Repayment


of post dated cheque

Documents Required







Bill


address of borrower

6) Employment Proof- latest 2 yrs IT Returns





5) Self Employed Professional

By Self employed Professional means-MBA\ Engineers\ CA, ICWA, CS\

Architects


Any Professional individual who is self employed for the last three yrs with a minimum

annual eligible income, the applicant should be above 24 yrs of age

Loan amount



Repayment limit

Repayment period max limit Rs 15 lakhs

=> 12Mon but < 240mon 2 times (of 2yrs) eligible annual Inc

=> 24 Mon but< 36 Mon 4 times (of 2yrs) eligible annual Inc

=> 36 Mon up to 48 Mon 5 times (of 2yrs) eligible annual Inc




Rate of Interest

s.no Category rate of interest

1 self emp Prof 17.5% pa

Repayment



Documents Required




3) Proof of Income – IT Returns for the last 2 Yrs and computation of Income For

the 2 yrs Certified by a CA

4) Bank Statement – Last 6 months

5) Employment \ Business Continuity Proof – Business Continuity Proof of Last 2

yrs


Bill




address of borrow



6) Self Employed normal (Individual and sole proprietorship)

Eligibility criteria- any individual who is self employed for the last 3 yrs with a

minimum annual income of Rs 1 lakh

Loan amount


Maximum loan amount=Rs 10 lakhs –

Repayment



Rate of Interest

s.no Category rate of Interest

1 self-Emp Normal 21.5% pa



Documents Required





Bill

4) Proof of Telephone- Latest Bill of Landline\ Mobile stating name of borrower

5) Employment \ Business Continuity Proof – Business Continuity Proof of Last 2

yrs

Other facilities provided by UTI Bank to Personal loan customers

Apart from the above Income based loans bank has also framed other variants of the

schemes known as Surrogate schemes to compete in the competitive market and to have

major share in the market



UTI Bank is also providing other facilities such as

Top-up Loans were existing customers are provided loans upon the prevailing

loans.

Balance transfer- this facility is made available for those who want to retire any

higher cost debt

Loans are made available against repayment track record of any existing auto,

personal or home loans

Loans are made available against Proof of life Insurance policy or premium

receipts

Prompt payment discount- It is a scheme offered by the bank to the customers

who are prompt in paying their monthly EMI’s accurately on each month’s

specified date, such customers get 2% cash back offer on their Interest rate

Credit card program: The scheme is only applicable to gold credit card holder

only. Charge holders will also be eligible under this scheme provided the

customer can produce document showing the charge card limit

Express Loans: in order to spread the banks net wider the bank target customers

under this scheme who are not eligible under above income based program, the

loan amount is disbursed at a shorter period



Procedure

UTI Bank has its own systematically framed process to carry out the loan disbursement

procedure. Various departments are involved in the functions of Retail loan activities

At UTI Bank RAC the organization consists of the following departments with individual

functional aspects

1. Sales dept

2. Credit dept

3. Operations dept

4. Collections dept

Sales dept

Sales is one of the most important functionary unit as it includes the initial ground

work for generating the business, Sales dept includes the sales executives who are

responsible for sourcing the business to the UTI Bank, UTI Bank also has its own

internal sales channel called as UBL Sales ltd which is a wholly owned subsidiary of

UTI Bank, UBL Sales are solely responsible for sourcing nearly 50% of the business to

the bank, UBL Sales has been operating with its own manpower where in the

organization structure involves team leaders , business executives who have their own

Top management to whom the administratory functions are to be reported and the

business proceedings are reported to UTI Bank RAC



The business at UTI Bank is also sourced by the other outsourced agencies like

Dolphin Financial solutions, Money center & USA associates were in the DMA’s

(Direct marketing associates) and DST’s (Direct sales team) are responsible for getting

the business to the Bank.

The outsourced agencies are operating with the help of their own manpower,

which consists of team leaders and sales executives.

UTI Bank has been outsourcing the business to different agencies to face the

competition in the market and most importantly to gain a major share in the market.

The outsourcing concept has been a profitable source for the UTI Bank

Credit dept

Once the business is sourced to the Bank by the sales executives (DMA’s &

DST’s), the processing of the file is done by the credit dept where a detailed study of

the case file is made,

Incase were the customer profile meets the required eligibility criteria the case is

accepted for further processing, if not rejected

The case is then initiated for field Investigation, Some of the private players\

banks like ICICI and HDFC have separate departments to check the fraud they are

called as Risk control unit (RCU) or Fraud control unit (FCU) this department

concentrates on the fraudulent acts if any, the sales executives check the frauds if any in

documentation.

At UTI Bank the field Investigation has been outsourced to Kalyan consultancy

who are responsible to carry out residence verification of the customers, IT Returns

verification, salary slip verification & Bank statement verification and office

verification has been outsourced to Aim agencies who are responsible for conducting

office verification, televerification and reference verification. These agencies will be



providing remarks about the case investigated and also brings to the notice of the bank

in case any fraud detected, they are responsible for verifying the details such as Nature

of business, yearly Income, nature of business, about its existence, locality, verification

is done by personal interaction and also from customers and suppliers.

Then the CIBIL report of the customer is accessed to check the customer

credibility, CIBIL is a repository of Information which contains the credit history of

commercial and consumer borrowers, With a view to provide an institutional

mechanism for sharing of information on borrowers of banks and financial institution,

the Credit Information Bureau (India) Ltd (CIBIL) was set up in August 2000.The

Bureau provides a framework for collecting, processing and sharing credit information

on borrowers of credit institutions.

At UTI Bank the customer’s credibility is accessed with the help of CIBIL.

Documents collected for processing purpose in case of Self Employed Normal

ID proof

Address proof

Own house proof

Business proof

IT papers and Bank statements

Documents collected in case of Salaried Individual

ID Proof

Address Proof

Salary Slip

Appointment Letter

The Credit dept is responsible for a thorough file checking where in they have to

check the documents in detail and verify whether the documents provided match with the



details given, The customer profile is studied in detail in respect to his\her’s Income

statement, Bank statement, Business proof and in case any discrepancies found the same

is brought to the notice of the sales executives who inurn solve the discrepancies and

again the file is presented

After a detailed check a Credit score card sheet is prepared, The credit score card sheet

has been systematically formulated by UTI bank considering the various Parameters like

age, educational qualification number of dependants of the customer, Income

Information, total no. Of years of employment etc, and points are allocated against

various parameters were the cutoff score must be 60% and more.

Then the CAM (Credit approved memo) is prepared which includes the loan

details regarding the loan amount, monthly EMI, processing fees amount, repayment

mode and repayment period etc and sent to Approval Authority for approval of loan and

once the case is approved, Sanction letter is handed over to the sales executives.

In the mean time, Backend team of Credit has to generate the application ID of the

individual customer. Account (App ID) is authorized for opening the loan a/c and for

disbursement after the case is approved.

Sales executives are responsible to present the sanction letter to the customers

which includes the details such as loan amount monthly EMI, number of installments,

processing fees etc and Loan agreement papers duly signed by the customer after going

through the terms and conditions as framed by UTI Bank and agreeing for the same by

the customer.

Operations Dept:

Complete file along with the duly signed agreement and the EMI PDC’s of the

customer is handed over to the operations dept by sales team.

Further these documents are processed for the disbursement stage.

Operation dept takes care of all the activities, which are involved post

disbursement like, disbursement, customer service, preclosure of loans, and presentation



of the EMI PDC’s. Updated the same in the system software (EMIs Cleared in the

clearing house and also the returned instruments.)

UTI Bank RAC makes use of Software’s like Finacle, which is used to maintain

the accounts and transactions and “Nischint”, is a software with the help of which

customer loan account number is created, both the software’s are developed by Infosys

for which Bank is liable to pay the maintenance Fees.

Collections dept

The duty of the collections dept starts after the loan amount is disbursed,

collection dept is responsible for collecting the disbursed loan amount in case of any

default customer, and even the collections work at UTI Bank has been outsourced to

some private agencies

A detailed function of the collection dept is briefed out in the head of

“Effectiveness of Collections Dept”.

Auto loans (car loans)



The twentieth Century is the era of Insta buys. Research indicates that 60% of the

cars bought in the last decade were through finance. The consumer is besieged with so

many offers that it becomes impossible for him to decide which is the best

Now a day’s car has become a part of life. Many banks offer the car loan with

attractive schemes, because the risk involved in car loan is less compared to risk involved

in other loans. In car loan both customer and banker will carry the minimum risk.

At UTI Bank a car loan is given to the customers for the purchase of new car

only, the procedure involved in car loan is also simple with low Int rate. There is no need

of giving a separate security for the car loan; the only security needed is hypothecation of

the car

UTI Bank’s Power Drive finances a major part of the cost of new car; loan value is

calculated as per the on road price

LTV (loan to value) of upto 85% of the on road price on selected models is provided

Policies of Car loans

Eligible Segments

1) Salaried Individuals

2) Self Employed individuals

3) Proprietorships

4) Partnership’s

5) HUF’s

6) Trusts

a) All applicants must be either resident Indians or non resident Indians



b) Incase of Trusts, the following documents must be collected

1) Certified true copy of the trust deed

2) Copy of the resolution passed by the Board of trustees\Directors

authorizing borrowal

3) Certified true copy of the registration certificate from charity

commissioner\societies registration Act

Eligible Cars

Cars have been categorized as follows for LTV and eligibility purposes

CAT A CAT B CAT C CAT D

Maruti 800

Omni

Zen

Swift

Alto

Wagon R

Santro

Getz

Indica

Palio

Baleno

Esteem

Versa

Accent

Verna

Elantra

Bolero

Scorpio

Cedia

Lancer

Octavia

Sumo

Safari

Indigo

Corolla

Innova

Vitara

Sonata

Tucson

MercedesC-Class

MercedesE-Class

MercedesCLS-Class

MercedesS Class

MercedesSLClass

MercedesSLK–

Class

Montero

Pajero

Combi

Laura

Superb

Camry

Land Cruiser prado

Eligibility Criteria and Documentation



Salaried –Age, Minimum 21 yrs maxi upto 58 or 60 yrs

Loan amount = Minimum Rs 100000

Tenure- Minimum 1 yr& maxi 7 yrs

Income norms=Minimum Rs 100000\-gross annual income for CAT A\B cars and Rs

200000\-for CAT C\D cars

Work Experience-Minimum 2 yrs of total employment

Documents required-proof of identity, proof of income and address proof

Self Employed Individuals\Proprietary concerns

Age, Minimum 21 yrs maxi 65 yrs at the time of loan maturity

Loan amount = Minimum Rs 100000

Tenure- Minimum 1 yr& maxi 7 yrs

Income norms=Minimum Rs 60000\- for CAT A\B cars and Rs 200000\-for CAT C\D

cars.

Interest Rate

Tenure upto 60 months 11.75%

Tenure greater than 60 months

Upto 84 months

12.25%

Housing Loans

Introduction to Housing Finance Industry



In India, many agencies are involved to lend housing finance to homebuyers. The

National Housing Bank (NHB) provides funds to housing sector through its refinance

scheme for banks, housing finance companies and state level apex co-operative housing

finance societies. Apart from the premier institutions like Housing Development Finance

Corporation Ltd. And LIC Housing Finance Ltd, there are other like Can-Fin Homes Ltd,

GIC Grih Vitta Ltd., SBI Home Finance Ltd., etc. Who extend housing loans; other

entrants to the housing finance sector include Akashaya Awas Nirman Vittan Ltd. (Bank

of Baroda), GIC Housing Finance Ltd., Dewan Housing Finance Corporation Ltd., Ind,

Bank Housing Finance Ltd. PNB Housing Finance Ltd., etc. Dewan Housing Finance

Corporation's double protection plan is a safeguard against the unpredictability’s of life

and free accident risk cover protects the borrower's family against dispossession of the

house.

The impact of the housing sector on any economy is significant, as it caters to one

of life's basic needs. With India poised to become the most populous country in the

world, the influence of this sector on the economy and its growth potential could be

tremendous. It is estimated that every rupee invested in housing adds 78 paise to the

GDP. Approximately 269 industries stand to benefit from the development of the housing

sector.

Today this sector presents a picture of stiff competition - with lowest interest rates

in decades. Aggressive advertising for marketing innovative schemes has also become a

regular feature. However, these successes apart, the Indian housing finance industry is

still grappling with a host of problems, like difficulty in obtaining proper title deeds, lack

of awareness about the avenues for housing finance in small towns and rural areas, lack

of clear foreclosure norms, regional disparities in rates of stamp duty and so on.



The setting-up of HUDCO, the National Cooperative Housing Federation and the

National Housing Bank (NHB) were measures taken by the Government to strengthen

institutional financing in the housing sector. The NHB, a subsidiary of the RBI, being the

regulatory authority provides the guidelines for private housing finance institutions.

Though institutional financing for housing has increased in recent years, only a mere 25%

of the housing finance requirements are met by the formal sector. This is because the

informal sector caters to the needs of the rural population, which forms a large chunk of

the housing market.

The industry comprises of nearly 383 housing finance companies although

disbursements from only the leading 26 institutions are eligible for re-finance from

National Housing Bank, which is the regulatory body for these companies. These

Housing Finance Companies (HFCs) constitute nearly 95 % of the total disbursement by

the industry.

Housing sector is experiencing a boom in its credit; National housing banks were the

first to provide Housing finance, after noticing the growth of the NHB’s in Housing

finance sector many other financial institutions and bank’s entered into the business of

financing housing loan. The major players in the Indian housing industry are the HFCs,

scheduled commercial banks and cooperative banks.



UTI Bank offers Housing loans & loan against property, the housing loans at UTI Bank

have been named as Power Home, it is being offered for the following purposes

1) Purchase of a plot of land and construction of a house thereon

2) Construction of a house on plot of land already owned

3) Purchase of a new house \flat

4) Purchase of old house\flat which is not more than 15 yrs

5) Extend \Renovate\Repair of a house or flat

6) Take over of existing Housing loan

7) Loan against property

8) Pre-allotment Booking finance

9) Loan takeover with additional refinance

UTI Bank has segmented the customers for providing the housing loans as follows

1) Salaried Individuals

2) Professionals

3) Self Employed Individuals

Installment to Income Ratio

Sl.no Net adjusted monthly

income

Maximum IIR

1 Up to Rs.10000 45%

2 Rs.10000 to Rs.20000 50%



3 More than Rs.20000 50 to 55%

Limit

Minimum-Rs.1 lakh & Maximum-Rs.50 lakhs

Rate of Interest

Fixed rate Floating rate

Tenure Above Rs.1 lakhs-upto

Rs.50 lakhs

Above Rs.1 lakhs-upto

Rs.50 lakhs

Upto 5 yrs 13% 14%

More than 5 yrs –upto 10

yrs

13% 14%

More than 10 yrs –upto 15

yrs

13% 14%

More than 15 yrs 13% 14%

Security

Equitable Mortgage of the property to be financed, by way of deposit of title deeds.

Documents required incase of construction of a house



Technical papers required

a) Approved plan

b) Sale agreement

c) Building construction permission

d) Construction estimation

Legal papers (required in case of housing construction, purchase of plot, loan against

mortgage, loan against property)

a) Title deeds pertaining to property

b) 13 yrs documents to verify the clearance of the property documents

c) Encumbrance certificate

d) Record of Rights

e) Tax paid receipts

f) Legal scrutiny report of particular property

Equitable Mortgage-Documents

a) Memorandum of entry

b) Equitable mortgage register

c) Declaration cum confirmation deed

Funding Criteria

Funding of loan amt incase of purchase of land= 75% to 85%

Funding of loan amt incase of construction of house = 85%



Funding for residential mortgage=60%

Funding for commercial mortgage =50%

Repayment

Repayment period of home acquisition plan\takeover of existing housing loan

shall not exceed 20 yrs, Repayment installments will start 18 months after 1st

disbursement or 1 month after full disbursement\possession of house\flat which ever is

earlier in Equated monthly installments

Where the loan is disbursed in stages, pending commencement of equated

monthly repayment installments, interest on the loan disbursed shall be recovered on

monthly basis from the date of disbursement

Repayment tenure for plot loan is 10 yrs

Disbursement

The loan will be disbursed in full or in suitable installments taking into account

the requirement of funds and progress of construction in case of housing loan for

construction purpose as assessed by the bank

Incase of Purchase of plot or ready house the pay order \DD would be made in

favor of vendor \Development authority

Loan against property: the DD\Pay order would be made in favour of the

applicant and credited directly to his account

Pre-allotment booking finance: In this case, the Pay –order would be made in favour

of the builder \Development authority



Documents required

Proof of Identity

Proof of Income

Proof of residence

Bank statement

Documents maintained at branch

Application

Term loan agreement

Completion of mortgage formalities (Equitable\Registered)

Agreement with builder\seller duly registered

Title clearance certificate\valuation report

Blue print of plot\ Land\ house approved by the competent authority

No objection certificate from builder\society to mortgage the flat

Pledge form for collateral securities

LTV (loan to value): LTV is fixed in order to ensure resale of property in case the

customers become default



Housing Loan

Procedure

The procedure carried out for the disbursement of housing loan

Sales dept

Again in case of Housing loan the sales executives are responsible for sourcing

the business to the UTI Bank, the DMA’s (Direct marketing associates) and DST’s



(Direct sales team) of outsourced agencies are responsible for getting the business to the

Bank.

Credit Department

Once the business is sourced to the Bank by the sales executives (DMA’s &

DST’s), the processing of the file is done by the credit dept where a detailed study of

the case file is made the necessary required documents are collected, documents

required in case of construction of house are technical papers like approved plan,

sanction plan, building approval plan, construction estimation and valuation report

valued by a certified Civil Engineer and in case of purchase of land the necessary legal

papers are verified documents such as title deeds pertaining to property,encumberence

certificate, record of rights, tax paid receipts, legal scrutiny report of particular property

Incase were the customer profile meets the required eligibility criteria the case is

accepted for further processing, if not rejected

The case is then approved for field Investigation,

The outsourced agencies will be providing remarks about the

case investigated and also brings to the notice of the bank in case any fraud detected,

they are responsible for verifying the details such as kind of business, yearly Income,

nature of business, about its existence, locality, verification is done by personal

interaction, residence verification of the customers, IT Returns verification, salary slip

verification & Bank statement verification is done by the respective outsourced

agencies, Then the CIBIL report of the customer is accessed to check the customer

credibility, CIBIL is a repository of Information which contains the credit history of

commercial and consumer borrowers, With a view to provide an institutional

mechanism for sharing of information on borrowers of banks and financial institution,

the Credit Information Bureau (India) Ltd (CIBIL) was set up in August 2000.The

Bureau provides a framework for collecting, processing and sharing credit information

on borrowers of credit institutions.

At UTI Bank the customer’s credibility is accessed with the help of CIBIL.

Documents collected for processing purpose in case of Self Employed Normal



ID proof

Address proof

Own house proof

Business proof

IT papers and Bank statements

Documents collected in case of Salaried Individual

ID Proof

Address Proof

Salary Slip

Appointment Letter

The Credit dept is responsible for a thorough file checking where in they have to

check the documents in detail and verify whether the documents provided match with the

details given, The customer profile is studied in detail in respect to his\her’s Income

statement, Bank statement, Business proof and in case any discrepancies found the same

is brought to the notice of the sales executives who inurn solve the discrepancies and

again the file is presented

After a detailed check a Credit score card sheet is prepared, The credit score card

sheet has been systematically formulated by UTI bank considering the various

Parameters like age, educational qualification number of dependants of the customer,

Income Information, total no. Of years of employment etc, and points are allocated

against various parameters were the cutoff score must be 60% and more.

Then the CAM (Credit approved memo) is prepared which includes the loan

details regarding the loan amount, monthly EMI, processing fees amount, repayment

mode and repayment period etc and sent to Approval Authority for approval of loan and

once the case is approved, Sanction letter is handed over to the sales executives.



In the mean time, Backend team of Credit has to generate the application ID of the

individual customer. Account (App ID) is authorized for opening the loan a/c and for

disbursement after the case is approved.

Sales executives are responsible to present the sanction letter to the customers

which includes the details such as loan amount monthly EMI, number of installments,

processing fees etc and Loan agreement papers duly signed by the customer after going

through the terms and conditions as framed by UTI Bank and agreeing for the same by

the customer.

Operations Dept:

Complete file along with the duly signed agreement and the EMI PDC’s of the

customer is handed over to the operations dept by sales team.

Further these documents are processed for the disbursement stage.

Operation dept takes care of all the activities, which are involved post

disbursement like, disbursement, customer service, preclosure of loans, and presentation

of the EMI PDC’s. Updated the same in the system software (EMIs Cleared in the

clearing house and also the returned instruments.)

UTI Bank RAC makes use of Software’s like Finacle, which is used to maintain

the accounts and transactions and “Nischint”, is a software with the help of which

customer loan account number is created, both the software’s are developed by Infosys

for which Bank is liable to pay the maintenance Fees.

Collections dept

The duty of the collections dept starts after the loan amount is disbursed,

collection dept is responsible for collecting the disbursed loan amount in case of any



default customer, and even the collections work at UTI Bank has been outsourced to

some private agencies

A detailed function of the collection dept is briefed out in the head of “Effectiveness of

Collections Dept”.

Effectiveness of Collections Department

The collections department is one of the most important department among all

other departments in the Bank. The duty of the collections department starts after the loan

amount is disbursed; collection dept is responsible for collecting the disbursed loan

amount in case of any default customer.

The due date for EMI payment has been fixed on 5 th and 20th of every

month for which the operations department has to present the EMI PDC’s to the Bank.

The Bank has the systemized technique of sending the SMS alerts to the customer Mobile

phones intimating their due date and amount of their EMI



The collections department is involved in giving regular follow-ups for repayment of loan

for which the presented PDC’s got bounced back.

The collections department is involved in giving regular reminders to the

customers incase any delay in the repayment, one of most effective technique adopted by

the bank is SMS alerts by sending sms for their nonpayment.

Collection Dept has outsourced some agencies called as “Collection Agencies”

for the collections and recovery of the Due amount. These agencies are authorized to

recover the EMI dues and penal charges if any. Incase of Auto Loans, these agencies are

also authorized to seize the vehicles of those accounts, which are due for more than 3

EMIs,

Seizing practice is done by the legal method adopted.

Techniques used in the Appraisal system

The following are the techniques used in the appraisal system

1) Credit scorecard sheet:-

The credit scorecard sheet has been systematically formulated by UTI Bank; it is

a format where points are allocated against various parameters such as age of the

customer, qualification, No. Of dependents of the customer, Income information, total no.

Of years of employment etc and a cutoff score of 60% and more is mandatory, after

preparing the credit score sheet the customer eligibility can be accessed, the low profile



cases can be filtered and only the eligible cases are approved for further processing, UTI

Bank has been using the credit score card sheet which is a powerful technique used in the

appraisal system.

2) Cibil:-

With a view to provide an institutional mechanism for sharing of information on

Borrowers of banks and financial institutions, the credit information bureau (India) ltd

(CIBIL) was set up in August 2000.The Bureau provides a framework for collecting,

processing and sharing credit information on borrowers of credit institutions. Cibil is a

repository of information, which contains the credit history of commercial, and consumer

borrowers

At UTI Bank the customer credibility is accessed with the help of Cibil, which is

useful to get the credit information of the customer, and is considered as one of the major

technique of appraisal system.

3) Field Investigation:-

Field investigation is also one of the important practical tool of appraisal system

where in the field investigation at UTI Bank Retail Asset Center Belgaum has been

outsourced to Kalyan Consultancy and AIM Agencies who are responsible to carry out

residence verification of the customers, IT Returns verification, Salary slip, and Bank

statement verification of the customer, office verification has also been outsourced who

also conduct televerification and verification of references, and the concerned agencies

provide remarks about the case investigated and brings to the notice of the Bank in case

any fraud detected in Documents and in other form

A thorough Investigation of the customer profile by outsourced

agencies in each and every aspect is a technique adopted by UTI Bank RAC as an

effective appraisal method.

4) Credit alerts:-



This technique is normally used for high ticket size funding wherein the Credit

manager will take the alerts of the specific case with the bank network and his own

network built. Credit alert is checked about the customer background, cross verification is

done by his clients / Creditors or debtors or Alert is taken from his banker or Chartered

Accountant etc.

Also Credit dept takes the feedback about the high value case from the collection dept.

Priority sector advances

RBI’s revised guidelines on lending to priority sector, loans up to Rs. 20 lakh to

individuals for purchase/construction of dwelling unit per family, (excluding loans

granted by banks to their own employees) and loans given for repairs to the damaged

dwelling units of families up to Rs. 1 lakh in rural and semi-urban areas and up to Rs. 2

lakh in urban and metropolitan areas as priority sector advances (loans).



Priority sector guidelines mandate banks to lend to those sectors that impact large

sections of the population, the weaker sections and the sectors, which are employment-

intensive such as agriculture and tiny and small enterprises. Domestic commercial banks

are required to lend 40% of their adjusted net bank credit (ANBC) and foreign banks are

required to lend 32% of their adjusted net bank credit (ANBC) to the priority sector

activities identified by RBI. Notably the revised guidelines take into account the latest

definition of small and micro enterprises as per the Micro, Small and Medium Enterprises

Development Act, 2006. Other features of the revised guidelines are:

Educational loans granted to individuals for educational purposes up to Rs. 10

lakh for studies in India and Rs. 20 lakh for studies abroad qualify as priority sector

advances.

Advances to small manufacturing enterprises (investment in plant and machinery

not exceeding Rs 5 crores) and micro manufacturing enterprises (investment in plant and

machinery not exceeding Rs 25 lakhs) also qualify as priority sector advances.

Loans granted for construction, additions, alterations, repairs, etc. granted as

under would be categorized as housing loans: Direct housing loans to individuals by

banks up to Rs.10 lakh for construction of houses in urban and metropolitan areas will be

eligible for inclusion under Priority Sector. Further, banks with the approval of their

Boards may also extend direct housing loans up to Rs.10 lakh in the rural and semi urban

areas and cost be considered as part of Priority Sector advances.



Loans granted by banks upto Rs.1 lakh in rural and semi urban areas and Rs.2

lakh in urban areas for repairs, additions and alterations etc. to individual borrowers

would be reckoned as Priority Sector advances.

At UTI bank Retail asset center Belgaum, Incase of housing loans the loan

amount of below 10 lakhs is treated as priority sector advances, In personal loan the loan

amount which is below 1 lakh which is generally provided for smaller business units like

provision stores, and other petty cash business and even larger loan amount to other SSI

Units, majority of which are into the forging, iron casting business etc are treated as

priority sector advances,

Apart from the above, Bank is also lending crores of amounts to agricultural

sector, which comes under the preview of Priority Sector Lending.

Non-Performing Assets

Definition:

An asset is classified as non-performing asset (NPA’s) if any dues in the form of

principal and interest are not paid by the borrower for a period of 180 days.



Any asset that is not effectively producing income is generally referred as Non-

performing Asset.

For example, an overdue loan would be considered non-performing asset

One of the most important and major roles played by banking sector is that of

Lending business. It is generally encouraged because it has the effect of funds being

transferred from the system to productive purposes, which also results into economic

growth. As there are pros and cons of everything, the same is with lending business that

carries credit risk, which arises from the failure of borrower to fulfill its contractual

Obligations either during the course of a transaction or on a future obligation.

However with effect from March 2004, default status would be given to a

borrower if dues are not paid for 90 days. If any advance or credit facility granted by

bank to a borrower becomes non-performing, then the bank will have to treat all the

advances/credit facilities granted to that borrower as non-performing without having

any regard to the fact that there may still exist certain advances / credit facilities

having performing status.

Banks play a very important role in the economic development of every nation.

They have control over a large part of the supply of money in circulation. Banks are the

main stimulus of the economic progress of a country. In general there are several

challenges confronting of banks. The main challenge confronting the bank is the

disbursement of funds in quality assets (loans and advances), The main challenge facing

the banks is the disbursement of funds in quality assets (Loans and Advances) or other

wise it leads to Non-performing assets.

An asset which ceases to generate income of the bank is called non-performing

asset. The past due amount remaining uncovered for the two quarter consequently the

amount would be classified as NPA for the whole year. It includes borrowers’ defaults or

delays in interest or principal repayment.



NPA is a double-edged weapon, which affects bank profitability due to interest

income not being recognized on NPA accounts and loan loss previously to be created

from profit earned.

NPA doesn’t earn any income, it adversely affects the capital adequacy ratio, and

the adequacy ratio reveals the health condition of the bank. The capital adequacy ratio is

defined as the ratio between a bank’s total capital and its risk-weighted assets.

GENERAL REASONS FOR ASSETS BECOMING NPA’s

A multiplicity of factor is responsible forever increasing size of NPA’s in banks.

A few prominent reasons for assets becoming NPA’s are as under.

4Poor credit appraisal system

4Lack of proper monitoring

4Reckless advances to achieve the budgetary targets.

4There is no or lack of corporate culture in the Bank. In adequate legal provisions

On Foreclosure and bankruptcy.

4Change in economic policies/ environment.

4No transparent accounting policy and poor auditing practices.

4Directed lending to certain sector



Write offs:

Write offs is also one of the common management techniques of NPA’s. The

assets are treated as loss assets, when the bank writes off the balances. The ultimate aim

of the write off is to cleaning the Balance sheet.

Generally Banks writes off these NPA’s once they are 180 days old after the

approval of competent authority. After Writing Off these NPA’s, they are removed from

the Books of Records of the Bank, thereby maintaining the standard of their Balance

sheet.

Even after the Writing Off the cases, Banks used to collect the due amount, which is

treated as the Recovery.

Impact of NPA’s on internal factors:

An NPA’s affect the internal position of the bank. The following are the impact of

internal factors.

1) NPA’s increase Total Expenditures:

The overall expenses of the bank continued to rise for a number of reasons. The

Provision for doubtful accounts, that caused the dramatic increase in total expenses. The

size of provision for doubtful accounts varies from year to year because of the differences

in the levels of the risk anticipated.

2) NPA’s reduce the earning Capacity:

The NPA affects earning capacity of the bank. In general various causes reduce

the profitability performance of the bank. The provision for doubtful debts is one among

the most important cause for reducing the profitability of the bank.



3) NPA’s reduce the ROA

NPA reduce the earning capacity of assets, return on assets also gets affected.

4) NPA’s do not earn any income they adversely affect Capital Adequacy ratio.

Impact on external factors:

a. Regulatory and credit rating agencies are also not happy with the level of

NPA

b. Indifferent attitude developed in the mind of the Bank customers.

c. Image of the bank in the minds of the general public will go down.

NPA’s at UTI Bank Retail Asset Centre Belgaum



UTI Bank has been successfully maintaining relatively a lower size of NPA’s

which is mainly because of adoption and implementation of effective credit appraisal

tools and also the bank makes a through study at the financial profile / Cash flows of the

customers before selling any loan products

The EMI payment which is due for more than 3 months or 90 days past due

(DPD) results into Non Performing Asset. Incase where the repayment due exceeds

6months the case is considered for Write-off, Write-off is a concept where the balances

of the customer are written off completely from the Balance sheet.

The Housing loan and Loans against Property portfolio till date has no any record of

NPA’s and so the write off situation doesn’t arises in case of Housing Loan Portfolio as

of now.

As in Personal loan portfolio in 30 days past due as against the Banks target of

3.5%, the percentage has been nominal of 1.75% which shows an healthy sign of the

branch and incase of 90 days past due the NPA’s percentage accounts to only 0.8% which

is extremely good in terms of quality of the portfolio of Personal loan being absolutely

nonsecured.

And in case of Auto Loan, since the bank has recently started this product, the

NPA does not come into picture during my project tenure.

Portfolios of various loan products

The housing finance industry has been observed to outperform everyone's

expectations in the last two years. Loan disbursements have grown at a CAGR of over



35% in the last five years. There are approximately 383 housing finance companies

(HFCs) in the country now. This number does not include numerous banks that have also

entered into the fray recently. The fragmented nature of the housing finance industry is a

major impediment for its further growth. Despite this, the industry has managed to grow

mainly due to a consistent decline in interest rates, tax incentives given by the

government and changing income profile of the Indian middle class population, The

major players in the Indian housing industry are the HFCs, scheduled commercial banks

and cooperative banks

Commoditizing of the housing finance industry is another factor that is

contributing to its growth. Some of the attractive features are adjustable rate plans, lower

processing fees, monthly rest, low interest rates, low EMI, lower margin money, no

prepayment penalty, etc.

Housing, with its ability to give high yields on its investments because of its

backward and forward linkages is rightly considered as an `Engine of Economic Growth'.

Realizing this potential the Government on its part has taken several measures at

reforming this sector in the country. These initiatives apart, social and economic changes

have also come to play a role in the present face of the housing finance industry. Some of

the contributory causes for these changes which encompasses all the segments of the

industry, namely, the property developers, the consumers, banks and the housing finance

institutions include, the liberal attitude of the common man towards borrowed funds,

professional attitude of developers, and the slow shift in the profile of institutions

financing this sector - banks, with new policies are slowly emerging as the leading

providers of home loans.

The sector presents a picture of stiff competition - with lowest interest rates in

decades. Aggressive advertising for marketing innovative schemes has also become a

regular feature. However, these successes apart, the Indian housing finance industry is

still grappling with a host of problems, like difficulty in obtaining proper title deeds, lack



of awareness about the avenues for housing finance in small towns and rural areas, lack

of clear foreclosure norms, regional disparities in rates of stamp duty and so on.

The UTI Bank has a Portfolio size of about 5 crores in Housing Loan and 8 crores

in personal loan Portfolio

The Personal Loan, which is unsecured loan product, the interest rate is high

which results in high yield and hence more profitable with shared risk.

The Housing Loan product at UTI Bank has a portfolio size of about 5 crores, the

Housing loan product which is secured product carries low risk which results in low

yield, but results in huge building of Book size.

The Auto Loans, which is a partly secured loan product, carries moderate risk

compared to Personal loan and adversely delinquencies are also high, but minimize the

Write off situation as the reposed vehicles are sold out to compensate against the

overdue.



Findings

1) UTI Bank RAC, Belgaum has adopted a new concept of Outsourcing the

business where more than 75% of the business is through outsourced

agencies, which has been proved to be Profitable concept.

2) UTI Bank RAC also has its own internal sales channel called as UBL sales

ltd, which is a wholly owned subsidiary of UTI Bank.

3) The bank has Different DST’s and DMA teams of the outsourced agencies

for each of the loan products to increase the sales

4) UTI Bank has systematically framed policies for each of the loan

Products.

5) UTI Bank RAC follows a properly structured loan disbursement procedure

With all the departments effective contribution.

6) UTI Bank follows a systematic and good communication network with its

head office, which Results in speeding up the disbursement procedure and

making convenience to the customers.

7) UTI Bank RAC maintains a relatively negligible size of NPA’s due to

adoption and implementation of effective credit appraisal tools and makes

a thorough study of the financial profile of the customers before selling

any loan product, which helps in reducing the NPA’s and ultimately write

offs.

8) UTI Bank also contributes some portion of its advances towards Priority

Sector advances and also lending to agricultural sector.



9) The Personal Loan product of the bank contributes maximum to the total

Advances as compared to Housing loan and auto loan.

10) The Promotional activities are carried out by the Outsourced agencies

Through pamphlets, personal canvassing etc.

Suggestions



a. As UTI Bank has recently stepped into the Retail Loan Industry, should

try to promote its Loan Products through aggressive promotional activities

to Increase its sales and gain a major share in the market.

b. The Auto loan product of the bank should be more highlighted with

promotional activities as there are many competitors for Auto loan in the

market.

c. UTI Bank should make provision for free accident insurance cover for the

Auto loan product to attract the customers for Auto loan.

d. Since most of the customers of Auto Loan go for Purchasing Of new

Vehicles during Festivals, are attracted towards the special offers in loan

Schemes, special offers should be announced during Special occasions

Like New Year, Festivals etc as such offers attract customers.



Conclusion

Overall banking in India is considered as fairly mature in terms of supply, product

range and reach even – though reach in rural India still remains a challenge for the private

sector and foreign banks. Even in terms of quality of assets and capital adequacy, Indian

banks are considered to have clean, strong and transparent balance sheets as compared to

other banks in comparable economies in its region

With the growth in Indian Economy expected to be quite some time

especially in its services sector, the demand for banking services especially retail

banking, mortgages and Investment services are expected to be strong.

UTI Bank is facing competition from Public sector banks like State

Bank of India and its associates, Canara bank, Syndicate bank etc, and Private sector

banks like ICICI, HDFC etc, It is the private sector banks giving stiff competition to UTI

Bank than public sector banks.

UTI Bank has entered into the Retail loan segment recently and has

been a competent player in the market with quality service and attractive Interest rate, its

service is not only limited to Metropolitan cities but its striving hard to reach and cater

the needs of the urban and rural customers and has been a good performer in the Retail

loan Industry.

As the Banking sector is booming, all the banks are facing stiff competition

among themselves; to face the competition and survive in the market UTI should adopt

Innovative Techniques to face the competition. The main concern of UTI Bank should be

quality service and customer satisfaction, to gain a major share in the market bank should

go for aggressive promotional activities and attract customers by charging competitive

interest rate.



BIBLIOGRAPHY

a) WWW.utibank.com

b) WWW.Google.com


http://WWW.utibank.com/


a study on retail loans, at uti bank retail asset centre

Documents

practices of uti bank

progress of uti bank

particular bank

housing loans

banking system of india

indian banking industry

project work

reserve bank of indi