icici home loans project report
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PROJECT REPORT
ON
“HOME LOANS IN ICICI”
Project Report Submitted Towards The Partial Fulfillment For Award Of The Degree Of Masters of
Business Administration(2008-2010)
Submitted To Submitted BySHARMA ROHIT Faculty Guide MBA-4th Sem
ASIA PACIFIC
1
MATHURA ROAD, NEW DELHI
2
CONTENTS
Acknowledgement
Executive Summary
Chapter 1 – Introduction
Chapter 2 – Products
Chapter 3 – Objectives and Rationale of the Project
Chapter 4 – Review of Literature
4.1 Business Process
4.2 Types of Appraisal
4.3 Property Documentation
4.4 Know Your Customer Compliance
4.5 Repayment Track Record based lending
Chapter 5 – Research Methodology
5.1 Research Design
3
5.2 Sample Design
5.3 Research Tools and Questionnaire
5.4 Analysis
a) Porter’s five forces model
B) SWOT Analysis
c) Comparative study of ICICI Bank Ltd and HDFC
Chapter 6 – Research Findings
Chapter 7 – Summary and Conclusion
Bibliography
4
ACKNOWLEDGEMENT
I am obliged to all the people which includes my managers and mentors and my
colleagues for co-operation during the internship. My increased spectrum of knowledge
in this field is the result of their content supervision and direction that has helped me to
absorb relevant and high quality information.
I would like to thank my faculty guide Ms. sharma for her guidance and enriching my
thoughts in this field from different perspectives.
I would like to thank all my respondents without whose cooperation my study/project
would not have been possible/complete.
Last but not the least, I feel indebted to all those persons and organizations who/which
have provided helped me directly or indirectly in successful completion of this study.
rohit
5
Executive Summary
Against the milieu of rapid urbanization and a changing socio-economic scenario, the
demand for housing has grown explosively. The importance of the housing sector in the
economy can be illustrated by a few key statistics. According to the National Building
Organization (NBO), the total demand for housing is estimated at 2 million units per year
and the total housing shortfall is estimated to be 19.4 million units, of which 12.76
million units is from rural areas and 6.64 million units from urban areas. The housing
industry is the second largest employment generator in the country. It is estimated that
the budgeted 2 million units would lead to the creation of an additional 10 million man-
years of direct employment and another 15 million man-years of indirect employment.
A year equates a century, knowledge compresses time and the information technology
sweeps the world, gathering momentum with each new application, soaring towards fresh
goal, rapidly opening vistas hitherto unknown. Here we are, in the 21st century….Years
that catapults us towards new challenges at every stage of endeavor. It gives us good
reason for aiming high.
Keeping the above philosophy in mind, this project is carried out with an objective to
identify the basic needs of the applicants and the process of Home Loans in ICICI Bank
Ltd.
The various areas covered in the report are:
6
Business Process of Home loans
Types of Appraisal
Property Documentation
Know your customer compliances
Repayment Track Record lending
The final outcome of the report is to find out the number of the applicants who have
applied for bank loans in the month of June and the analysis of the population applying
for Home Loans through the sample size 40.
The report includes the various products that are introduced by the bank such as Home
Loans, Loan against property, Land Loan, Property OD, Lease Rental Discounting,
Balance Transfer, etc. It consists of questionnaire which helped to analyze the final
outcome of the report.
7
Introduction
ICICI Bank is India’s No. 1 Home Loans Provider. At ICICI Bank Home Loans, it offers
unbeatable benefits to ensure that the customers get the best deal without any hassles.
And ICICI Bank makes it extremely easy for them by offering
• Attractive loan interest rates
• Home loan amounts starting from Rs.2 lakhs
• Term loans up to 20 years
• Free Personal Accident Insurance
• Insurance options for your home loan at attractive premium
With varied offering of house loans and home finance, ICICI Bank Home Loans gives an
opportunity to select the perfect loan as per the needs of the customers who can choose
from:
• Adjustable Rate Home Loan
• Fixed Rate Home Loan
• Part fixed, Part Floating Rate Home Loan
• Smart fix Home Loan
• Money Saver Home Loan and also
• Balance Transfer of your existing home loan from other banks.
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And the other categories that the customers can avail are :
Land Loans
Office Premises Loans
Home Improvement Loan and
Home Loan for NRI.Customers can also leverage their existing property to get
Loan against Property
Property Overdraft or Lease Rental Discounting.
All of these are available on an adjustable rate or a fixed rate.
Challenges in the growth path
The housing finance industry is going to observe polarization of the players
For survival, the Housing Finance Institution should have -:
Good investment in people and system
Should have strong Business Origination process in place
Excellent Credit Appraisal Skills
Monitoring the Systems in place
Strong Collection mechanism in place
HFI’s survival can be at stake
9
ICICI Bank
Sales Manager Credit Manager Area Operations Manager Collection DMA / DSA CPA (Credit Customer Account Manager Manager(Direct marketing Processing Analyst DEO (Data Entry Operator)Agency/ direct salesAgent)
Sales Department – It basically search the customer who is in need of loan and pitches
the different kinds of customer accordingly.
Credit Department – It is responsible for Credit Documentation, Profile check, Legal
and Technical reports of the customer and his property.
10
RCLG(Retail Customer Liability
Group)
RAPG(Retail Assets Product
Group)
RCLG deals in Accounts i.e., Current, savings and fixed.It looks after the liability side of the bank that constitutes the withdrawals and deposits of the customer.
COPS / CAM Operations Department
Sales department
Collection Department
Credit department
Operations Department – It is responsible for punching end to end. It does NDC
according to the RBI norms and performs after sales services. It collects the Post Dated
Cheques.
Collection Department – It functions at the time when any customer is in default.
19 th February 1999………The launch of ICICI Bank Home Loans
Scenario then
New to the business
Formidable competition
End to End delivery of the product through the DMA being done for the first time
Ambitious growth plans
Home loans – Highlights
Customer base (as on march 2005):
Year-to-Date……….276756 (Sanction cases)
Life-to-Date………..687364 (Sanction cases)
Book Size (as on March 2005) – Rs.33175.20 crores
Disbursement (YTD)….Rs.18871.00 crores
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Now – Year 2007
1000 + locations
845 + Direct marketing Agencies
10000 + FOS across the country
Centralized Call Centers covering all major states and cities
Leveraging corporate relationships
Cross sell initiatives: leveraging customer centric data warehouse infrastructure.
Polarization – Future Scenario
Weak HFI with high cost of funds & poor system would end up as DSA sourcing
business in the market.
HFIs with low cost of funds but poor system may turn out to be buyers of MBS
HFI with good systems in place but with high cost of funds need to look at
Securitization.
HFIs with Low cost funds and good systems would be the major players.
Low margins & High delinquency can increase the lending rate to
cover the cost of operations.
Can force the HFIs to re-look at its business model.
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Products and Documentation
Products: We Offer:-
Products – Home Loan & XSELL
1. Home Loans (HL) & Variance
MV Lending
Smart Fixed
Part Fixed & Part floating
Fixed ROI with MMC
EMI in under construction stage
Max Money – SURF
2. Money Saver
3. Home Improvement Loan (HIL)
4. Land Loans (LL)
5. Office Premises Loan (OPL)
6. Balance Transfer (BT)
7. Top – Up Loan
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8. Cross Sell to Auto loans
9. No Income Proof Loan (NIP)
Products – LAP / OD
Loan Against Property (LAP)
Property OD (Residential / Commercial)
Income Surrogate Banking Product
Lease Rental Discounting (LRD)
New product introduced on June 4, 2007
Lap on Land
Features :-
1. There must be a plot number. The plot must be properly demarcated by fencing or
boundary wall.
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2. There must be change in transaction within last 10 years. The title must be
changed.
3. Land usage must be residential. Commercial, agricultural or industrialized land is
not considered.
4. It should be DLA or Municipal approved.
5. The loan amount can be between 7- 50 lakhs
Low Loan To Value i.e., 16.25 % ROI on 30 % LTV
16.50 % ROI on 35 % LTV
6. Minimum Plot Area must be 800 square feet
Maximum can be 10000 square feet.
7. Tenure for repaying the loan would be 10 years.
8. Case can be made on Income Basis or Repayment Track Record (RTR) of all
kinds of loans i.e., auto loans, medical equipment loans, personal loans.
9. LAP on Land can be given to all kinds of customers – Salaried, Self Employed
Non Professional (SENP) & Self employed Professional (SEP).
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Home Loans : Key Features
Purpose : To purchase, construct or extend new or existing flat / house
Loan to value (LTV) ratio is 85 %. This includes stamp duty, registration charges
and amenities.
Amenities on Stamp paper : We can add Maximum of 20% of Agreement value.
Maximum Tenor : 20 years (15 years for SENP retail & non – retail)
Only for first sale builder properties.
Loan amount : From Rs.2 lac to Rs. 3 Crore
Validity of Loan Approvals : 6 months from the date of Sanction Letter.
LTV Norms
In case of Resale :
A) If COP = MV, Loan Amount = 85% of COP (LTV 85%)
B) If COP > MV, Loan Amount = 85% of MV (LTV 85%)
Example : COP : Rs.25 Lacs & MV : Rs.20 lacs
Loan Amount : Rs.17 lacs
C) If COP < MV, Loan Amount = 80% of MV subject to 100% of COP
Example : COP : Rs.20 lacs & MV : Rs.25 lacs
Loan Amount : Rs.20 lacs
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LTV Norms > Rs.100 lacs
Cap based on COP
For Property value > Rs.100 lacs & <=Rs.200 lacs, the max LTV will be 80 %.
Property value > Rs.200 lacs, the max LTV will be 75%
Cap based on MV
For Property value > Rs.100 lacs & <= Rs.200 lacs, the max LTV will be 75%
Property value > Rs.200 lacs, the max LTV will be 70%
Also Valuation will be mandatory for all cases > Rs. 100 lacs.
17
MV Lending LTV Norms
MV Lending
To bridge customers requirements between circle rates specified by sub-registrar and
transaction value. For example transaction in certain sectors are as given below
Location % of MV
Delhi 25 – 40 %
Banglore 60 – 65 %
LTV Based on the lower of the two : In case of purchase in ready / resale cases
1.Lower of the TWO
1. 80 % of the Market Valuation if the property is valued up to Rs.50 lacs
65 % of the Market Valuation if the property is valued at more than Rs.50 lacs
(Lower of 2 valuations done will determine market valuation).
2.100 % of agreement value / sale deed (with stamp duty paid) + stamp duty +
registration + society transfer charges + state electricity board connection charges +
amenities agreement (without stamp duty )
The cost of Amenities should not exceed 200 % of (Agreement Value / Sale Deed +
Stamp Duty + Registration charges).
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If Amenities Agreement is not on stamp paper, then that component of the loan amount
would be done as Top Up loan with norms of Home Loans.
However, the overall restriction of 80 % / 65 % or 100 %, as mentioned, would apply.
03 Years Fixed – Smart Fixed
03 Years fixed gives option to customer to look at fixed rate for the first 03 years and
subsequently the product moves into floating reference rates
Fixed from the first date of disbursement based on weighted average rate of
interst.
At the end of 03 years it will move to FRR on immediate reset date which could
be 03 years to 03 years and 03 months.
Products : Home Loan & BT + Top-up & MV lending possible
Margins for FRR set at the time of Sanction.
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Part Fixed & Part Floating
Customer can opt for combination of them.
02 separate tranches would be given on the same date.
Amount under each category decided at the time of sanction itsef.
Combination of two should be minimum of Rs.1 lac and each tranch should be of
Rs.50000/-
Products : HL / LL / NRI / OPL / HIL / LAP (R&C)
Not applicable to MV Lending or all loans with two tranches.
Process
02 separate application forms
02 LAN numbers for the loans
Common Sanction Letter
Common HLD
Common I/T certificate on cross linking of files.
Prepayment on each tranche possible but foreclosure on completion of both the
loans.
Eligibility
Based on the combination of the loan EMI for the other loan would be considered
as FOIR for calculation purpose.
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Fixed with MMC
A new product variant for Home Loans with a variation in Fixed rate of interest with
Money Market Conditions (Fixed MMC)
Salient features :-
Fixed MMC rates can be offered for Home Loans & Balance Transfer of Home
Loans only.
Fixed MMC rates can be offered only to Resident Indians. Thus, Home Loans
with Fixed MMC rate cannot be offered to NRIs
The Fixed MMC rate can be offered only for new sanctions. Conversion from
fixed ROI to Fixed MMC rate and vice versa would not be allowed.
All Fixed MMC rate loans would be booked under the following scheme Finnone/
APS :
a) Individual Home Loan with Fixed MMC
b) BT of HL with Fixed MMC
New format of the sanction letter for Home loans with Fixed MMC
A new Home Loan Document (agreement) with the following mentioned on the
top cover “With Money Market Condition Clause for Fixed Rate of Interest.”
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EMI Under Construction
Purpose : Commence EMI in under Construction Project.
Target Segment : Home Loans to Resident Indian
Features :
Offered to APF Projects.
Customers pay EMI from the first disbursement on total sanctioned amount.
EMI remains constant with term changing
Disbursed amount keeps changing
Disbursed amount not more than Sanctioned amount.
Subsequent disbursement would be at the end of the month.
EMI Under Construction : Example
Sanctioned amount Rs. 10.00 lacsROI 7.5 %Tenor 240 monthsEMI Rs.8056/-1st Disbursement Rs.5 lacsReduced Tenure 79 monthsPrincipal O/s At the end of 03 months Rs.485114.002nd Disbursement after 03 months Rs.2 lacsBalance Tenure 240 – 3 = 237
O/s principal = Rs. 485114.00 + 200000.00 = 685114/-
22
EMI Rs.8056.00Revised Tenure 124 monthsFull & Final after 03 monthsBalance Principal O/s 673721 + 300000 = 973721/-Revised Tenure 233 monthsMaximum Tenure 240 – 6 = 234
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Step – Up Repayment Facility (SURF)
Concept – SURF
The tenor is divided in three parts ; viz.
a) Primary
b) Secondary
c) Tertiary
The installments will increase beginning from the least in Primary & the highest
in Tertiary.
Installment in Primary period to cover interest, in the current rate scenario –
Rs.625/-per lacs
Types of SURF
Category I
Category II
Category I
Monthly Income > Rs.25000/-
Applicant is employee of Select Corporate (i.e., Category 0 and Category 1
worksite list)
Should NOT be employee of Pvt. Ltd Companies, Prop. Concerns, Trusts.
Should NOT be a Self Employed Non- Professional.
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Category II
Monthly Income > 15000/-
Should NOT be employee of Pvt. Ltd Companies, Prop. Concerns, Trusts.
Should NOT be a Self Employed Non- Professional
Benefits :SURF
Enhanced Eligibility
Opting for SURF could raise the eligibility by up to 30% above the eligibility in a
normal repayment pattern.
Ex. Term – 20 yrs , ROI – 7.5% , Income pm – 25000/- , Normal eligibility –
Rs.17.07 lacs , Enhanced Eligibilty – Rs.22.14 lacs & Increase in Eligibility 30%.
Easy Installments in Primary period, lower strain on cash flows.
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Features : SURF
Eligible Entities (Only Individuals)
a) Salaried
b) Self Employed Professional
Eligible not Eligible Products:
a) Only Home Loans (Top Ups not permitted)
b) BT of Home Loans shall also not be permitted SURF
Term possible – 15-20 years (both terms included)
Not Eligible :
a) Self Employed Non Professional
b) Employees of Pvt. Ltd Companies, Prop. Concerns, Trusts.
Rate of Interest – Only Adjustable Rate Loans
Deviations / Re – schedulements
a) No Deviations permitted
b) No Re – Schedulements permitted.
Documents – SURF
Sanction Letter – Automated Sanction Letter capable of generating SURF letter.
Agreements
a) Normal loan Agreement
b) Amendatory Agreement
26
Income Tax Benefits
IT Certificate to show both ; Interest payable & Actual Interest paid.
In case if Negative Amortization :
a) No IT benefit available on capitalized interest – Sec 24 (b)
b) No IT benefit available on re-payment on capitalized interest – sec 80C
Part Pre-Payments – Adjustments will be made first towards the capitalized
portion.
27
Land Loans : Key Features
Purpose : To acquire a site / plot of land for residential use
Maximum Tenor : 20 years (15 years for SENP retail & 10 years for SENP non-retail)
LTV Ratio : 85% of the cost, if allotment is directly from Development Authority
75%of the cost, if purchase from Development / Resale / Society
Fee : Same as Home Loan
Amount of Loan : Rs.2 lacs to 50 lacs
In HUB & Spoke Locations
Land Loans + Construction
LTV would be 85% of Land + Estimated Construcction
Provided land has been purchased in last one year OR 100% of estimated construction
based on technical report which is lower.
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In Spoke Loactions
Only land loan would not be financed.
Land Loan + Construction would be considered.
First disbursement would happen only after the construction has reached plinth
level.
75% of land cost can be given provided land has been purchased in the last 01
year.
In HUB locations for Land + Construction
Disbursement for land would be done.
Case would be Pre EMI
In case the applicant avoids construction the scheme ID should be changed
To avoid giving I/T benefits certificate on the case
29
Office Premises Loan : Key Features
Purpose : To purchase / construct office premises
Maximum Tenor : Resident Indian
SENP Retail = 15 years.
SENP Non Retail = 10 years.
LTV Ratio :
85% of the cost of property for doctors.
60% of the cost of property for others.
Fee : Processing and Administrative fee of 0.5% each
Amount of Loan : From 2 lacs to 1 crore.
Eligible Entities :
Professionally Qualified Self Employed Individuals & only Qualified Chemist
NRIs
Other Norms :
Minimum 3 years Experience as Practicing Professional
Loan available for improvement of office premises
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Maximum of 30% of the cost of the property.
LAP / Home Equity Loan
Loan Against Property : Key Features
Purpose : For Marriage, Business, Education, Medical Treatment, Purchase of Property,
etc.
Maximum Tenor : 15 years (10 years for SENP)
LTV Ratio : 45% for commercial and 60% for Residential
LTV + FOIR (Non retail) : Subject to maximum of 120% for residential and 105% for
commercial with no LTV deviation.
FOIR for Salaried : 50% & SENP Retail : 55%
Amount of Loan : From Rs. 5 lacs to 100 lacs
Eligible Entities : Salaried, SEP & SENP
Minimum value of property : Rs. 7 Lacs across all cities.
Other norms : Loan can be availed only against the self occupied property.
31
Balance Transfer
Balance Transfer : Key Features
Purpose : Take over of housing loans taken from other HFC / Bank at a higher rate than
current rate.
Tenor : Maximum term not to exceed as applicable under product category OR
Residual age of property as determined by the site engineer
LTV : 85%
Fee : Same as Home Loan
Amount of Loan : Outstanding principal amount of the existing loan + prepayment
charges + fee payable to ICICI HFC subject to applicable LTV norm, calculated on the
cost of property.
Disbursal to be in favor of HFCs / Banks whose loan is being prepaid.
Repayment track record for the last twelve months to be verified.
Documents Required : Pre Sanction
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Outstanding Principal statement from existing HFC / Bank
Declaration-cum-Undertaking of legal documents submitted with earlier HFC /
Bank
Legal verification
Letter to the builder / society / DA as per letter drafted by ICICI HFC
Documents Required : Pre Disbursal
Letter of Authority & Power of Attorney in favor of ICICI representative to
collect original docs & mortgage release letter from HFC / Bank.
Cases Pending with Sub Registar : BT applications where property title
documents are pending will not be accepted.
Documents Required : Post Disbursal
Original receipt required from HFC / Bank for the amount disbursed
Mortgage release letter & No dues letter required.
Original title deeds as per list provided.
Acknowledged copy of notice sent by the legal agency of ICICI to the
landowner.
BT OF EMPLOYER LOAN WOULD BE RESTRICTED TO CENTRAL % STATE
GOVERNMENT.
33
34
Top Up Loan
Purpose : To purchase of Consumer Durable, Vehicle, Furnishing of Home, Family
Vacation, Daughter’s Marriage, Child’s Education Or any other personal requirement of
the borrower.
Maximum Tenor : as per individual product norms
Fee : Same as Home Loan
Amount of Loan : Rs.50000 to 20 lacs
Validity of loan approval : 3 months from date of sanction.
Entitled Borrowers : Borrowers for the Top up loan must be the same as the existing
ICICI loan
Security of Loan : Extension of mortgage on the property financed.
Top Up Loan is offered on following products :
Home loan
Balance Transfer – Home Loans
Balance Transfer – NRP
NRP
(Loan available on fully disbursed cases & NIL post disbursement pending documents)
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Home Improvement Loan
Purpose : Improvement of residential premises.
Maximum Tenor : 15 years
LTV Ratio : 70% of the estimate subject to
45% of the market valuation of property prior to fianancing
Fee : Same as Home Loan
Amount of Loan : From Rs.1 lac to 50 lacs
Eligible Entities :
Salaried
SEP
SENP
Eligible Improvements : Being completed within 12 months from the date of first
disbursement
Property has to be occupied by at least 1 applicant to the loan.
36
Lease Rental Discounting
Purpose : Enable the consumer to raise funds (and increase liquidity) against future
expected funds from property leased out by him.
Maximum Tenor : 9 years (subject to balance lease period)
LTV Ratio : 50% of market valuation subject to
85% of the NPV of furure expected rentals discounted at the applicable ROI
( net of TDS)
Eligible Entities :
Salaried
SEP
SENP (Non – Retail)
Amount of Loan : From Rs.10 lacs to 1 crore
37
No Income Proof Loan
Purpose : To purchase, construct or extend new or existing flat / house
Eligible Entities : Self Employed Individuals only
Fee : Admin fee of 0.5% & proc fee of 0.5%
Amount of Loan : from Rs.2 lac to 50 lacs
LTV Ratio : For loan amount > Rs.25 lacs, LTV 60% of COP or 65% of MV (whichever
is lower)
For loan amount < Rs.25 lacs,
Method I II III IVMV (%) 40 50 60 65COP (%) 75 70 65 60
Documentation :
Proof of continuity of business – 05 years
Bank Statements – 6 months (verification required)
a) Current Account
b) Savings Account
Out Cheque returns – not more than 06 in 06 months.
Stop Payment returns – 02 in least 06 months
38
Maximum number of transactions 10 per month
EMI not to exceed 10% of the average monthly bank credits for the last 06
months
Average balance on 10th, 20th & 30th for last 06 months should be greater than 02
times EMI.
Client / Supplier References -2
Copy of title document
RTR of 12 months – if EMI of existing loan is more than 25% of the proposed
EMI
OCR : By Cheque prior to disbursement & No PDD
No deviations permitted.
39
Income Surrogate Banking Product
Purpose : Surrogate product for Home Equity Loan
Target customers with good banking record.
Lap – Income Surrogate Banking Product
1. Approved Borrower Entities – Resident Indians (SEP & SENP)
2. Loan Amount
Min. – Rs.5 lacs
Max. – Rs.30 lacs
3. Term – Max.10 years (Term should not exceed property’s residual age)
4. Loan type – Fixed and Floating.
5. Min Property Value – Rs. 15 lacs (as per technical valuation)across all
cities.
6. LTV
i) Residential property – 35%
ii) Commercial property – 25%
7. Bank Statement
i) Photocopies of updated bank statements for the last one year –
from current a/c of the firm / company.
ii) Photocopies of updated bank statements for the last one year –
from current a/c / savings a/c of the individual applicants and co-
applicants.
8. Client reference required 3 large creditors.
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9. Business to have continuity for the last 3 years.
10. Personal discussion is mandatory.
11. CC accounts – EMI to be less than or equal to 10% of the inward flow into
the bank a/c in last 6 months.
12. Other accounts – EMI to be less than or equal to 15% of the inward flow
into the bank a/c and average balance to be more than 1.5times the EMI in
the last 6 months.
41
Adjustable Rate Home Loan
Purpose : Facility of variable ROI
Eligible Entities : Existing and new customers
Eligible Products :
Home loan
Land Loan
NRI
OPL
LAP
BT
Top Up
Max. term of Loan : 20 years for Salaried and SEP
15 years for SENP
Monthly reducing
Date of change : 1st day of each quarter (as per calendar year)
EMI shall remain constant, except in the following three instances :
42
1. Negative amortization
2. Term of loan exceeding : 30 yrs for salaried & self employed
20 yrs for SENP
3. Term of loan exceeding : Retirement age for salaried.
65 years for self employed applicants whose income is
considered for eligibility.
Switching of Rates Between Switch fees ICICI Bank
Portfolio
Others
Fixed to fixed 1.75% 1.75%Fixed to floating 1.75% 1.75%Floating to fixed 1.75% 1.75%Floating to floating 0.5% 1.75%Change in ROI on account
of change in Tenor Fixed to
fixed
1.75% 1.75%
43
THIRD PARTY PRODUCT
Icici Home Finance – Loan Shield with ICICI Lombard
Loan Shield – For Resident Indian
Loan Shield for a period of 05 years.
Loan care Insurance
Property Insurance offered free – one year in case of commercial property.
Maximum Cover : Rs.1050000
Minimum Age : 20 years
Maximum Age : 50 years ( loan cover ends at 55 years)
Loan Care is maximum of 05 years
Property Insurance : Same Tenure & cover commences after completion of work
Feature : Based on Medical declaration no medical check up.
Loan Shield
Loan Care Features : Salaried & Self Employed
1. Default due to Death : Principal o/s paid
2. Permanent disability due to accident : Principal o/s repaid
3. Critical illness leading to hospitalization and loss of income
In case of Salaried only 12 EMIs would be covered
44
Unemployment due to retrenchment
1. Closure of unit due to financial health or M&A
2. Closure due to action by Public Authority.
3. Termination from job due to ill health.
Any illness pre-existing or repoted within 90 days or loss of job within 90 days not
covered.
Salaried employees would be paid maximum of 03 monthly EMIs in case of default.
Policy ends on attaining at the age of 55 years
Policy ends with closure of loan account.
No refund of premium on part prepayment
Part Premium refund in case of full closure
Claim settlement in 21 days.
45
Home Assure – Prudential (Group Policy)
Customer Segment : Individuals opting for Single premium
Age Group : 18 to 60 years ( Maximum on attaining 70 yrs)
Sum Assured : Rs. 25000/-To Home Loan scheme
Product Feature
No medical examination upto Rs.15 lakhs
Death Cover : principal o/s as per the sanction letter
Part / Under Construction : Cover can take 0/1/2 + tenure of the loan.
Joint Cover Possible provided both are earning
Cover would cease on Full closure or BT
Surrender Value : 70% of single Premium ( Balance Term / Policy Term)
Exclusions : No claim within 45 days
No claim due to suicide within 01 year
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OBJECTIVES AND RATIONALE OF THE PROJECT
Main objective:
To find out the utility of Home Loans in general public and analyze the number of
customers applying for Home Loans in ICICI. To learn the process of Home Loans.
The basic necessity of general public is food, clothing and SHELTER. So , for the
fulfillment of the last need ICICI has introduced many products according to the
status of the applicant.
Economic Growth of the country is predicted by its Infrastructure and Real Estate.
Therefore, ICICI has made easy by granting loans by easy methods and normal
rates.
Home loans are of big amounts therefore, it comprises of many important
documents and deeds which have to be studied with due importance.
Government is concentrating on one important aspect that every person should
have his/ her own house through home loans which facilitates deduction in
Income Tax.
All the NBFCs are interested in granting Home Loans because it is of large
amount .
It is the only type of loan which is coordinated and continued from the time of
money lenders to NBFCs.
47
Personal Objective :
I choose this project in order to have the detailed study of the topic Home Loans
as it comprises of many formalities and legal deeds.
To have the practical knowledge because in future every second person will be in
need of Home Loans
ICICI Bank specializes in Home Loans so to gain knowledge regarding career
prospects.
It helps in calculating Income and eligibility of the customer, Study of ITRs,
Legal and Technical study of any property and even profile check.
48
REVIEW OF LITERATURE
THE BUSINESS PROCESS – THE ICICI WAY
Business model
ICICI HFC currently functions through four sales channels :
a) DMA Network
b) Counselor Teams
c) Relationship Managers
d) ICICI bank Branches
All channels function independently of each other
Processing and appraisals are done in house and on-site to reduce TAT’s
Role of the DMA / DME / COUNSELOR
The face of ICICI Bank Home Loans
Representing everything that ICICI HFC promises
a) Superior service
b) Excellent products
c) End to end solutions
The person who has to ensure that we fulfill every promise that we make to the
customer
A consultant and guide to the customer
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Risk Containment Unit (RCU) Process
Purpose – Control frauds entering the system
a) Pre-Sanction Stage
b) Pre-Disbursement Stage
Pre sanction stage verifies files based on triggers.
The files are either
a) Screened – No triggers found. Allowing credit process to continue
b) Sampled – Implying verification required with source of document
c) Credit Referred – Based on Credit Manager request
Pre – Disbursement Stage verifies property document.
Field Investigation (FI) Process
Purpose – Collection process of ensuring customer verification
a) Residence FI
b) Employment FI
c) Tele FI of both residence and office
Property verification
This FI Shoot is done of all the applicants and co-applicants. The office FI is
done of all the co applicants who’s income is considered.
Operation Process
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Sanction Process
b) NDC Check
c) Data Entry in Finnone
d) Storage of sanctioned files
Disbursement Process
a) NDC Check
b) Date Entry in Finnone
c) Preparation of Cheque
d) Storage of Dockets
Sanction Process
Normally, it would take 4-7 days for the sanction process from the date of receipt of
all the documents at IHFC
The customer calls the bank
Bank’s representative visits the customer and explains the loan product
Now customer provides the bank with Income and Personal documents as
listed in the brochure
Again the representative visits the customer to validate information
Documents are credit appraised and decision taken on the sanction of the loan
Bank delivers the offer letter along with a list of legal documents required.
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Disbursement ProcessNormally, it would take 4-7 days for the disbursement process from the date of
receipt of all the documents at IHFC
The customer calls the bank for disbursement
Bank’s representative visits the customer and collects the Legal Documents.
Loan Documents and PDC’s from the customer.
An IHFC lawyer vets the legal documents.
An IHFC Site Engineer visits the property to verify stage of construction.
Disbursement cheque is prepared.
The disbursement cheque is delivered to the customer.
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CUSTOMER
DMA/COUNSELLOR
BSM
RO FIRE FI
FI AGENCY
RECEIVES FI
RCU
DEDUP
BCM
COPS
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Customer
DMA
RO
BCM
Fires and Receive Legal and TechnicalSales
department
Firstly, starts the work of Relationship Officer
Purpose : To provide Single Point contact to the customer and handhold him through the
process of Enrolment, Sanction and Disbursement.
Enrolment
Ensure entry of new DME leads and updation of existing leads in CMS
Make Welcome Call to customers for all new logins
Ensure Welcome Letter is sent to all new customers at the time of login.
Sanction
Resolve with customer all enquiries raised by CPA / BCM on the Sanction file
Make Sanction Call to all customersand inform them regarding all disbursement
documents required and take DID.
Attach Annexure containing list of disbursement documents with all Sancction
Letters
Disbursement
Ask the customer regarding Express Disbursement during Welcome Call
Inform customer about the pending documents, if any, as per the legal report and
set DME appointment.
Make a Disbursement call to customer to inform him that the disbursement
cheque is ready
Introduce Call Centre to the customer during the disbursement call
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Next is Branch Credit Manager
Purpose : To provide credit decision for snction and disbursement in order that the
commitment to the customer on turnaround time is fulfilled
Sanction
Check the Sanction file for Credit compliance and eligibility norms and authorize
sanction
Coordinate with the higher authority for the cases that require approval
Disbursement
Scrutinize complete docket and DM and authorize disbursement
Ensure completion and clearing of dockets put on hold by branch operations
Coordinate with the outsourced agency for collection of PDDs
Impart training to Back office and DMEs regarding policy and process changes
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What is Contact Management System ?
It is a Lead Management System.
It appointments the Scheduler.
Records all touch points with customer.
Acts as a reminder for all follow –ups.
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Flowchart
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Add Contact
Leads With DMA
Fix Appointment Remainder for Customer
Take a Print of Schedule
DME Meets The Customer
Customer Interested
DME Collects Documents and Returns the DSR to the Back Office
All Documents Collected
Sanction Process
NO
Update Diary
Close
NO
YES
YES
NO
YES
Benefits of CMS
Availability of Information
Structured Planning
Ensures no loss of leads
Online feedback to Call Center and Marketing Manager
Increase in Productivity
Better service to the customer.
Introduction to Credit
Why is Credit essential ?
It is important to evaluate cases for credit so as to have a quality portfolio, remove frauds,
have control checks to see the performance of the portfolio
Whom do we want to fund ?
Anyone who will
Repay all the installments
Repay installments on time
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Things to look at in credit
Ability to Pay Intention to Pay
How do we judge it ? Industry Trends
Income received by the customer Background of Individual
Disposable Income Previous Repayments
Other sources of income a) Car loans
Possibility of Cash income b) Housing loans
Petrol pump owners, doctors, etc. c) Credit cards loans
d) Cellular repayments
Income can always be window dressed
Income Document Analysis
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In case of salaried look at Fixed & Variable Income
Compare Gross Income and Net Income
Savings in Social Security Funds
b) Mandatory contribution
c) Additional Contribution
d) Withdrawals in Social Security Funds
Contribution towards other savings
Deduction or payment of all obligations
Look at Form – 16 for Annual benefits & any obligations too.
In case of Self Employed / Non Proffesional
Comprehensive look at ITRs of last 3 years
Computation of Income
Balance Sheet and P& L certified by C.A
Stability of Income
In case of Salaried
Look at the Organization employed with
The Industry in which it operates
Skill set and Educational Qualification
No. of years in the Organization / Industry
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In case of Self Employed
Family business or start-up
Business volume vis a vis Industry Standard
Understanding of industry structure/ Forces operating
Health of Bank Statement
Verification of Bank Statement
In salary case, number of credits to be checked – Fixed & Variable
In business case, check the average balance for liquidity
Large credit or debit entries
Recurring debits on account of loan repayment
b) Inward Cheque bounces
c) Outward Cheque bounces
d) Verify with debtors or creditors list to know
e) The impact on business
Stop Payment Instruction
Minimum Balance charges
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Family Background
Family
No. of dependents
Age of dependents to understand the expenses
Additional earnings of family members – cash flow
Dependence of parents / family members staying in hometown
Any ancestral or self owned property
Family dependent on salary income or diversified income i.e., rental, agriculture,
business, small savings
Family reference / Business reference
As per the norms maximum should be 5
Applicants Lifestyles – match between Income & Savings & Expenses
Habits like excessive drinking – Reference check
Family members with medical history
b) Claims made under various Income Tax Benefit
c) Any banking transaction showing payments
d) Information provided by FOS / FI / Personal Visit
Appreciation of Insurance
a) Family medical cover is a good indication
b) Life Insurance – Planning for the Future of the family
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Geographical Restrictions
Customer Residence / Property not in Negative Area. Customer does not belong to
Negative Profile category. Customer Residence / Property not beyond Geographical
limits.
In case customer working outside Geo limit
Property to be purchased should be within Goe limits
Immediate family member to be within Geo limit & to be taken as co- applicant
PDC to be issued from Bank Account to be in Geo limit
Waiver of FI subject to positive office tele – check & residence FI of family
member (within Geo limit
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Customer Profile
Where applicant and co-applicants income are combined, the minimum income
per applicant should be Rs.4000/- pm
Work site is further classified as : Category 0 & Category 1
Employees working with Trust should be approved & noted by the Policy & Risk.
Employees working with Private Ltd.Companies
AGE
a) Minimum Age – 21 years
b) Maximum Age – 65 years OR retirement, whichever is Earlier.(The
maximum age at the time of completion of loan)
There will be cases where the co-applicant who is the owner of the property does
not fit into the above categories. In these situations the age criteria is relaxed as
follows:
a) Min Age – 18 years (At Loan origination )
b) Max Age – 70 years at application or 80 yrs (at loan maturity )
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Age Proof Passport
Driving license
Life Insurance Policy
Birth Certificate
Election ID
School leaving certificate
Employee ID (only for PSU / Govt.employees)
PAN Card
SSC / HSC Admit Card
SSC / HSC Mark Sheet
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Customer Profile
SAL SEP SENP NRI
WORK SITE OTHERS
CASH Pvt.Ltd
Income not below 7K in other cities.Income not below 9K in Metro town.
(Banglore, Delhi, Chennai, Mumbai)
School / College passing Certificate (printed format with personal details of the
applicant handwritten are acceptable)
Salary slip (if date of birth is mentioned)
Domicile certificate
Age proof is waived for all applicants whose income is not considered for eligibility.
However, age proof is mandatory for applicants below 20 years age & above 65
years, even if his/her income is not considered for eligibility.
Negative Profile
Daily wage laborers / Mathadi Workers
Drivers and conductors of SRTC/ Taxi drivers/ Auto Rickshaw Drivers/
Commercial Vehicles Drivers
HUF
Anti Social Elements
Politicians
Mine and Quarry workers
Firma engaged in parcel movement
Plantation / Time Share Companies
Employees of Chit fund/ Stock Broking/ Investment Companies
Class 4 employees
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Garment Exporters
Employees of BIFR Companies
Watchmen
Security Services- Companies and their Employees
Stock Brokers
Real estate agents
Tour Operators
Cable Operators
Employees of NBFC’s below AA rating
Film stars
Employees of Dot Com Companies
Bar Owners
Builders
Additional Documentation for Specific Cases
Cash salary – One Additional Proof required
Form 16/ ITR/ PF Statement / Appointment Letter / Increment Letter
Job confirmation proof for applicants less than 23 years
If Existing Loans are not being considered – proof for the same.
Annual benefits - Form 16 / Appointment Letter / Increment Letter / Employer
certificate.
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Documents Required
Salaried
Application Form with photo
6 months Bank statements ( 3 months for work site )
Not more than 02 or 01 cheque bounces in case of normal and worksite cases
respectively
KYC Documentation (Address / Identity / Signature)
Age Proof
Latest Salary Slip / Certificate – 4 salary slips for variable salary
Form16
Processing Fee Cheque
Mode of Repayment
EMI
Post Dated Cheques
Auto Debit
ECS
Deduction at Source (only for salaried)
Pre EMI
Post Dated Cheques
Auto Debit
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Payment Cycle
1st and 10th of every month
Now the work starts in Operations Department:
The file logins from the Credit Department to Operations Department with 2 types
of documents
a) Customer related documents
b) Bank related Documents / Mandatory Documents
Customer Documents consist of his Bank Statements, latest ITRs, Financial
Statements, PAN No., Id Proof, DOB Proof, etc.
Bank related documents are
a) Application form – In Application Form all compulsory fields should be
filled up by the customer with no overwriting.
All the data entry should be done by the DEO.
b) Dedup – It is a software which has all the past data of all the customers
who have applied for home loans previously which helps trace any
defaulter.
c) FI / TVR – This is done by the bank to verify the residence and telephone
number of the applicant in order to avoid any fraud beforehand.
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NDC is done by the DEO as per the NDC checklist.
Final NDC is done by CAM
If there is any discrepancy the file is sent to Credit Department for re-credit with
reasons of hold.
Publishing of hold cases is done in MIS at the end of every day.
If the file is clear and there is no discrepancy, then the data is entered in finnone
by DEO.(Finnone is a software based on oracle which is the master of storing all
the entries and transactions done on daily bases)
Now, CAM authorizes the transaction i.e., Maker – Checker which means the
CAM will check the transactions and authorize them finally.
Finally when the case is clear, a Loan Account Number (LAN) is generated which
is the primary key to identify the case for the bank.
Now, at the end of the day the files are dispatched to Regional Operations.
After sales services performed by Operations Department:
Request of Statement of Accounts.
Request for Repayment Schedule.
Swap of Cheques.
Conversion (condition change in agreement)
Foreclosure
Part Payment
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NOC + Document Collection
At the time of Sanction:
When the file reaches the Regional Operations it is login at two places:
a) Processing Cell
b) Storage Cell
In processing cell
a) Firstly, the processing cheque is pulled out.
b) Banking of Cheque is done
c) Finally the cheque is released.
If the cheque is clear, entry is done in the account otherwise, the case is rejected.
In Storage Cell, the papers are divided in two types
a) Customer papers which are retained till the term of loan is completed.
b) Bank papers are shedded after some time i.e.,3 years or so.
Now the sanction is clear and processing fee is released.
At the time of Disbursement:
The docket is login from Credit to Operations Department. Docket is an important
envelop containing different papers.
Types of Disbursement:
a) Full & Final Disbursement - Eg. Applicant sanctioned loan of amount 5
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lacs and disbursement is done as and when the PF cheque is released.
b) First & Subsequent Disbursement – Eg. Applicant first Sanctions for
purchase and then subsequently for construction so, the amount is
granted in installments.
c) Enhancement / Reduction – Eg. Applicant if in future decides to
increase or decrease the amount of loan sanctioned, then again the
file of increased amount has to be sanctioned. And in case of reduction
the amount id directly deducted.
d) Back to Back Disbursement – Eg. It is done in the case of High Net
Individual (HNI) who takes loan more than 20 lacs. In this type of
Disbursement the file and docket both are done side by side.
Contents of Docket :
Loan Agreement – There are 2 copies of loan agreement, one for the abnk and the
second for the customer (including the stamp papers with stamp duty as per
respective State Stamp Act.
Disbursement Memo – It captures the entry of all financial details & entry is done
in Finnone.
Legal & Technical Deviation Sheet – This is signed by the person who takes all
the liabilities regarding the loan granted.
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Cheque Submission Form – It is for the acknowledgment taken from the customer
as per how many cheques have been issued and received and the entries are done
so as to avoid any future misunderstanding between the bank and the customer.
Disbursement Request Form – It is necessary as to know on whose name the loan
is applied and granted. And where to pay.
Pop Sheet – It contains all the contents of the docket to avoid misplacement of
any important paper. And entry is done again.
Over The Counter Sheet (OTC) – It is to exchange the deed with the cheque.
PDC Pouch / Pre EMI Pouch – It contains all the entries of cheque details.
Cheque Acknowlegement – Its purpose is to take cheque acknowledgement from
the customers.
Legal Report – It consists of Non Encumbrance Certificate (NEC) + record of 13
years of the property which is mortgaged.
Technical Report – It shows the valuation of the property and the estimate taken
by the architecture.
Punching Process:
Financial details are entered by Disbursement Memo.
Property Details are entered with the help of Legal Report.
Technical Details by Technical Report,
And all other contents are checked, verified and entered with the help of Pop
Sheet.
Finally the cheque is cut and directly handover to the customer or through Over
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the counter (OTC)
And the Docket is dispatched to Regional Operations (RO) / Central
Operations (CO).
Post Disbursal Documents:
Banking of Cheques
Realization of Cheques.
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Types of Appraisals
There are basic two types of appraisals done to investigate about the cases that are logged
into the bank:
Technical Appraisal
Construction Structure
Load Bearing Wall Structure
Entire Load on Walls
Cost of Construction Lower
Prevalent in Small Towns
RCC Frame Structure – Reinforced Concrete Cement
Entire Load on Columns and Beams
Construction of Commercial and Residential Complex
High Usage of Equipment
Mixed Structure
An Overview
Methods of Valuation
Approach for Valuation
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Market
Income
Cost
Methods of Valuation
Method of Comparison
Income Approach to Valuation
Summation or Cost Method
Residual Method
Method of Comparison
Property Rate is worked out on other similar properties that have been sold in near
past.
Circle Rates are compared.
Broker Feedback is compared.
No Standard Formula to work out value of property.
Factors vary from locality to locality.
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Things to Observe while visiting a site:
Distance from Bus Stop and Railway Station
Accessibility of Site, Infrastructure Facility
Availability of Municipal Transport.
Development of Surrounding Area.
Building wise details of Construction.
Look out for Deviations.
Check Quality of Construction & Structural soundness.
Verify Amenities & Assess their True Value through Materials at site.
How Do We Fund ?
Structure Base
a) Load Bearing or RCC
b) Bungalow or Flat
Builder
a) Track Record
b) Projects Completed
c) Category A,B,C (Matrix)
Lending
a) Stage of Construction
b) Cost Involved
c) Security
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Adherence to Process
Technical Executive
Check on the progress of the work.
Check on activity levels – on or Not
Arrive at cost incurred by Seeing Completed Structures.
Amenities in and around the Site.
Quality of Construction
Accessibility
Negative Area
Plan Validation
a) Check Frauds
b) Set Back Check – measure from Plinth (Has to measure)
c) Check whether it Confirm Building Plans
Authentic Valuation of the property (to be dealt in details)
What is to be checked at the Site and From whom
Building Rules – Critical Rules (please provide hand outs of the critical building
rules)
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APF Process
Revised APF Process
Sourcing DMA / BSM
Technical Manager
Fire Legal
APF Process – Advantages
Entire legal and technical due diligence is done in one single stroke.
Monitoring is on project wise unlike unit wise.
It is a win win situation for the developer – customer – bank.
Retrieval of project details is easy.
Total Value of the property and amount of constructed area coming up in the
market is known.
Market Share of ICICI and project wise market share can be evaluated.
Tracking of property prices becomes easier
Exposure level per project can be evaluated.
Double funding on the project can be reduced
Better control
Better TAT
Generating huge database of property rates across India.
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Fire Technical
Turn Around Time / Amenities Valuation
For Normal Technical Report – 24 hours
For APF reports – 05 days
Communication should be perfect, in case plans not received.
No site visits without building plans
No amenities valuation unless actually verified at the site.
Valuation not to include Stamp Duty and Registration Charges or Water and
Electricity Charges.
Legal Appraisal
Appraisal for Home Finance
Appraisal Process for Home Finance has two distinct stages:
Sanction Stage
Relates to Credit Appraisal for the individuals.
Disbursement Stage
Legal appraisal of the property financed
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Technical appraisal of the property financed.
Legal Appraisal
Transfer of Property
Living person conveys his interest , right or title to one or more person(s)
Person includes Individual, Association of persons, Partnership, Company or
Trust.
Transfer of property must be done by a written registered document.
Sale for a value exceeding Rs.100/- requires registration.
Transfer of Property may happen by
Inheritance
Gift
Government Allotment
Purchase
Exchange
Partition
Release
Transfer of Tiltle Deed
Sale Deed
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Agreement for Sale
Allotment letter
Lease deed
Gift Deed
Probated Will
Develop Agreement
Deed of Exchange
Deed of partition
Release Deed
Concept of Contract
There has to be an offer and acceptance
Creation of an agreement
To be valid contract there should be NO coercion, undue influence, fraud,
misrepresentation or mistake.
Competence to Contract
The person should not be a minor.
He should be of sound mind.
Minor to be represented by Guardian and can transfer property with the
permission of Court.
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Property Documentation
Classification into two parts:
1. Types of Transactions
2. Classification of Documents
Transaction type
Builder
Society
Development Boards / Authorities
Self Construction
Resale Transaction
Classification of Documents
Land Related Documents
Government Land Records
Plans and Permissions
Individual Title Documents
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Property Documentation
Situation : Purchase from BuilderLand Related Documents Sale Deed / Partnership Deed / Development
Agreement, POAGovernment Land Records Extracts from Registrars office, Mutation EntriesPlans And Permissions Approved Plans and Permission, ULCA permission,
Tax receipts, Commencement certificate, Occupation certificate, Land use certificate, Building permission.
Individual Title Documents Agreement for Sale, RR, Letter to Sub Registrar, NOC to mortgage, OCR
Situation : Allotment from Development AuthorityLand Related Documents NAGovernment Land Records NAPlans & Permission NAIndividual Title Documents Allotment Letter, OCR, NOC / PTM from DA, Unit
Layout, Sale Deed / Lease Deed
Situation : Purchase from SocietyLand Related Documents Sale / Lease Deed in favor of Society, Bye Laws,
Society Registration Certificate.Government Land Records Extracts from Registrars office
Mutation EntriesPlans & Permission Approved plans, NA permission, ULCA permission,
Tax Receipts, CC, OC, Land use certificate, Building permission.
Individual Title Documents Allotment Letter, agreement for Sale, RR, Letter to Sub registrar, NOC from Society, OCR, Share Certificate.
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Situation : Self ConstructionLand Related Documents Same as individual title documentsGovernment Land Records Extracts from Registrars office
Mutation EntriesPlans & Permission Approved plans, NA permission, ULCA permission,
Tax Receipts, Commencement Certificate, Occupation Certificate, Land use certificate, Building permission, Possession Certificate, Location Certificate.
Individual Title Documents Sale Deed of the land, RR, Letter to Sub registrar previous title documents, Land Layout.
Situation : Purchase on ResaleLand Related Documents As per the applicable transactionGovernment Land Records Extracts from Registrars office
Mutation EntriesPlans & Permission As per the applicable transactionIndividual Title Documents Sale Deed , RR, Letter to the Sub registrar, Prior
Deeds, NOC to Mortgage, OCR, Share Certificate.
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Know Your Customer (KYC) compliance
(A) The matrix of the documents that are required to be collected for resident individual borrowers is as below, any one document from each of the document category would be required :
Document Category Salaried SEP & SENPResidence Address Proof
Passport Driving license Election Id card Utility bill (not more than 3
months old) Latest (not more than 3
months old)statement of account / passbook maintained with any scheduled bank, duly certified by the bank confirming the address
Letter from the existing Banker (scheduled commercial bank) in original verifying the name and address on the bank’s letterhead.
Copy of registered lease / leave and license agreement which are not expired along with the utility bill in the name of the landlord / owner confirming address.
Residential Certificate issued by Municipal corporation / local self government bodies confirming address.
Latest premium receipt of general/ life insurance company (not more than 12 months old in case of annual premium receipt)
True Copy of Gas
Passport Driving license Election Id card Utility bill (not more than
3 months old) Latest (not more than 3
months old)statement of account / passbook maintained with any scheduled bank, duly certified by the bank confirming the address
Letter from the existing Banker (scheduled commercial bank) in original verifying the name and address on the bank’s letterhead.
Copy of registered lease / leave and license agreement which are not expired along with the utility bill in the name of the landlord / owner confirming address.
Residential Certificate issued by Municipal corporation / local self government bodies confirming address.
Latest premium receipt of general/ life insurance company (not more than 12 months old in case of annual premium receipt)
True Copy of Gas
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connection book.
Certificate issued by Ward Officer maintaining election roll certifying address of the applicant.
Letter from employer certifying residential address. Name and Designation of the issuing authority must be clearly mentioned.
connection book.
Certificate issued by Ward Officer maintaining election roll certifying address of the applicant.
@ The passport $ driving license as above should be current i.e., the same should not be expired.
Clarification :A single document can be accepted provided it serves the requirement for multiple proofs and the current residential address is same as on the proof submitted for individuals. Thus, the preferred document for the Photo Id, Residence Address & Age Proofs is Passport / Election Id / Driving License.For reference the list of documents accepted as Age Proof is given below
Salaried SEP SENPAge Proof Passport
Driving license Election ID PAN Card Life Insurance
Policy Birth Certificate School leaving
certificate Employee Id
(only for PSU / Govt. employees
SSC / HSC Admit Card
SSC / HSC Mark Sheet
School / college passing certificate
(Printed format with
Passport Driving license Election ID PAN Card Life Insurance
Policy Birth Certificate School leaving
certificate Employee Id
(only for PSU / Govt. employees
SSC / HSC Admit Card
SSC / HSC Mark Sheet
School / college passing certificate
(Printed format with
Passport Driving license Election ID PAN Card Life Insurance
Policy Birth Certificate School leaving
certificate Employee Id
(only for PSU / Govt. employees
SSC / HSC Admit Card
SSC / HSC Mark Sheet
School / college passing certificate
(Printed format with
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personal details of the applicant handwritten are acceptable)
Salary Slip (if date of birth is mentioned)
Domicile certificate
Ration Card
personal details of the applicant handwritten are acceptable)
Salary Slip (if date of birth is mentioned)
Domicile certificate
Ration Card
personal details of the applicant handwritten are acceptable)
Salary Slip (if date of birth is mentioned)
Domicile certificate
Ration Card
(B) Documents required for individual NRI / PIO borrowers
Document categoryIdentity Proof In case the customer is a NRI –
a. Photocopy of the relevant pages of the passport where the customer’s name, address, date of birth, date & place of issue, expiry date, photograph, signature & stamp regarding stay outside India appear.
b. Photocopy of valid work permit / employment visa. In case of expired visas, duly acknowledged petitions made to the Visa Authorities for renewal of Visas will be accepted as a valid document.
In case the customer is a PIO –
a. Copy of the relevant pages of his current passport.b. Copy of his PIO card OrCopy of past Indian passport of self / parent / grand-parent along with a self declaration as ICICI format duly notarized and stamped for requisite value.
Adress Proof A copy of at least one of the following Address proog outside or within India :a. Utility Billb. Driving licensec. Residential Permit (Government Issued Identity Card)d. Credit Card Billse. Rent Receiptf. Overseas / Indian bank Statement
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The address proof must match with the communication address mentioned on the application form.
(C) Documents required for non – individual borrowers :Document categoryID proof Partnership Firm – Partnership Deed
Company – Articles of Association, Memorandum of Association, Certificate of Incorporation.
Office Address Proof Any one of the following documents: Latest (not more than 3 months old) Utility Bill like
Telephone Bill, Electricity Bill confirming address. Letter from the existing Banker (scheduled commercial
bank) in original. Existing banker must verify the name and address of the entity on the bank’s letterhead
Latest (not more than 3 months old) statement of account / passbook maintained with any scheduled commercial bank, duly certified by the bank confirming the address.
Copy of registered lease / leave and license agreement which are not expired along with the utility bill in the name of the landlord / owner confirming address.
Certificate issued by Municipal Corporation / local self government bodies confirming address.
Latest available Income Tax Assessment order confirming address.
Latest available Wealth tax Assessment order confirming address.
Sales Tax registration certificate confirming address. Valid Shops and Establishment Certificate confirming
address. Factory registration certificate confirming address. Latest Premium receipt of general / life insurance
company (not more than 12 months old in case of annual premium receipt)
In case of non – individual applicants, KYC will also be required for the partners / directors / promoters who would be required as the co – applicants and also all authorized signatories.
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Repayment Track Record Based lendingAuto loans
Introduction of RTR based product Capitalize on Repayment History of applicant Focused on Auto Loan Customers Auto Loan Customers of
a) ICICI Bankb) Other lenders
Product Highlights Opportunities to give home loans to approved list of auto loan customers Should have serviced for a minimum period of 12 months Or RTR should not have been closed before 12 months back Product can be offered for
a) Home loans b) Home premises only for doctors c) HL for SEP & SENP
Minimum – Maximum Loan : Rs.5 – Rs.25 lacs
Product Features RTR of commercial vehicles not acceptable a) Scorpio / Qualis b) Sumo / Tata Indicab Multiple lending on same RTR not acceptable Lending to Directors / Partners a) Based on RTR of the firm / Pvt Ltd. company b) Director / Partner > 76% should come as Co-applicant / Guarantor c) Stake to be verified by CA / CS or Returns of ROC Loan To Value as per product norms All other norms as per the product category
Customer SegmentResident Indian
1. Salaried2. Self Employed Professionals3. Self Employed Non Professional
Transporters / Taxi fleet Operators Not acceptable
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Target Segment
Product Working
Eligibility1. Minimum Seasoning 12 months2. Seasoning EMI Multiplier
>12 months 1 times of the current EMI for Auto loan
>18 months 1.25 times of the current EMI for Auto loan
Parameters1. EMI in arrears (current) Nil2. Defaults Peak not more than 30 days
RTR HealthFor 12 months RTR 0 Cheque bounces in 12 monthsFor 24 months RTR Maximum 02 cheque bouncesFor 36 months RTR Maximum 03 cheque bounces
Loan Amount based on RTR working
Loan Amount in lacs Auto loan EMI *1.25/ EMI factor per lac for the loan tenure
Example 1Mr. Rakesh has Accent loan paying EMI Rs.15000/-Loan Amount in lacs 15000*1.25 / 927 = Rs.20.22 lacs
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SalariedSelf Employed Professional / Non Profesional
Already having Auto Loans with ICICI Bank and other Institutions
PROCESS OF RTR
PROCESS
Research Methodology
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IMP
Completely filled in Home Loan form.Bank statement considered for RTR.Repayment Track for the applicable repayment period.Age Proof / Signature ProofProcessing Fee ChequeProof of existence in case of SEP / SENPField InvestigationOffice address proof.
LAP: 03 years continuity of business Proof of ExistenceClient Reference – 02 large suppliers / customers.
Waiver
Income Documents – Salary Slip, cash salary, second income proof / annual benefits.
Form No. 16 Job confirmation proof. Income Proof for SEP / SENP.
RESEARCH METHODOLOGY
Research Design: The Research Design can be grouped under 2 sectors i.e., Primary source and secondary sources.
Other than these primary and secondary sources the study of various cases of the applicants by going through the files guided to make an analysis and findings regarding the status of Home Loans in the current scenario. Even by assisting the Credit Processing Analyst, the analysis and findings were approved by them.
Sample Design:
The data collected from the questionnaire is of sample size 40.The questionnaires have been filled by the customers through Direct Marketing Agencies of ICICI Bank Ltd. and their Direct Sales Agent.The questionnaires were distributed equally among 4 DMAs equally and the response collected through them was of great use.
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Primary Source
Secondary Source
Interviews with
customers / DMAs
Questionnaire
Websites and Intranet of ICICI Bank
Ltd.
Research Design
Research Tools and Questionnaire:
QUESTIONAIRE:
1. NAME OF THE APPLICANT: AGE:
2. PROFESSION:
3. LOAN AMOUNT:
4. TENURE:
5. PRODUCT APPLIED FOR:
6. MODES OF PAYMENT: (a) ECS (b) PDCs (c) DAS (d) SI (e) Any other
7. PROPERTY MORTGAGED:
8. ANY OTHER LOAN TAKEN ON SAME PROPERTY:
9. PREFFERED BANK FOR HOME LOANS: (a) ICICI (b) HDFC (c) SBI (d) PNB (e) Allahabad Bank
10. LOAN TAKEN FROM ANY OTHER BANK, IF YES WHICH BANK AND FOR WHAT PURPOSE:
11. SOURCES OF INFORMATION FOR THE VARIOUS HOME LOANS PLANS: (a) NEWSPAPER (b) BANK (c) DIRECT MARKETING AGENCY / DSA
12. ARE U SATISFIED WITH THE SERVICES PROVIDED BY ICICI? (a) YES (b) NO
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Analysis:
In last 10 years the rate of growth in the number of applicants have been at a faster pace because the individuals have vast knowledge about the benefits of Home Loans. Year No. of Applicants2002-03 7,73,5622003-04 9,65,2912004-05 13,42,0972005-06 15,27,9452006-07 17,95,0482007-08 19,84,164
(These figures are of a particular state)
Secondly, the applicants applying for Home Loans were of young age as compared to past 10 years. Then the applicants ranging above 45 years were more in number applying but now there are applicants of even 25-30 years. The tenure to repay the loan has also decreased because of the increase in Income Obligation ratio.
But since last 1-2 years there is a stable percentage of individuals applying for it because of the increase in the rate of interest and strict norms of RBI. They are as follows:a) Rate of Interest will be less for people in minority.b) Applicants applying for more than 50 lacs who are High Net Individuals (HNI) are provided with some percentage of rebate.c) Applicants taking loan for the second time for Home loans are under strict supervision and verification.
This is done because the customers take loans for investing money by taking HL and enjoying the redemption and deductions.Bank has even introduced Know Your Customer (KYC) documents which constitutes of all the personal and professional details of the applicants and the co-applicants applying for home loans which helps the bank to get the information about the customers and judge the purpose of applying for HL.
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FIVE FORCES OF PORTER’S MODEL OF ICICI
Supplier Power Increased Dependence on IPOs There is a growing dependence of corporates on broking houses with the rising number
of IPO’s coming to the market.
Buyer Power Lack of Expertise Curtails Bargaining Power Retail investors often lack the knowledge and expertise in the financial sector that calls
them to approach the broking houses. Low Product Differentiation Proves Beneficial The retail broking services provided by the various companies is homogeneous with very
low product differentiation. This allows customers to enjoy a greater bargaining power.
Degree of Rivalry Move towards consolidation Lot of brokerage companies are moving towards consolidation with the smaller ones
becoming either franchisees for the larger brokers or closing operations. Increased Focus of Banks in Retail Broking Various foreign banks like ABN Amro and others are planning to enter the Indian retail
brokerage industry. Online Trading Competes with Traditional Brokerage There is an increasing demand for online trading due to consumer’s growing preference
for internet as compared to approaching the brokers.
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BUYER’S POWER DEGREE OF RIVALRY
SUPPLIER’S POWER
RIVALRYBARRIERS TO ENTRY
THREAT OF SUBSTITUES
Barriers to Entry Entry of Foreign Players New forms of trading including T+2 settlement system, dematerialization etc are
strengthening the retail brokerage market and attracting foreign companies to enter the Indian industry.
Threat of Substitutes Alternative Investment Options Various alternative forms of investment including fixed deposits with banks and post
offices etc act as substitutes to retail broking products and services.
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SWOT ANALYSIS
Strength Advanced Technology Providing innovative products and technology Leverage technology to satisfy customer demands. Add value to share holders.
Weakness: Too many subsidiaries High cost of funds
Opportunities: Higher capital base First mover advantages
Threats: Competition from other industry rivals like HDFC. Concern over NPA despite provisioning
Thus, ICICI has been able to use technology to provide value – added service to its customers during the last few years. For ICICI, technology is an integral part of their business. However, their overall progress could have been smoother but for certain internal and extraneous factors and also a pressure on spreads due to a competitive market.
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Comparative study of ICICI Bank Ltd. and HDFC Bank
Even their offices reflect their attitudes. ICICI Bank's headquarters in suburban Mumbai is a huge, imposing edifice in glass and granite. HDFC Bank's office in central Mumbai is comparatively smaller and more sedately furnished. The two banks have carried forward their style statement in their approach to business. ICICI Bank thinks big, is all for growth and hungry for market share. HDFC Bank is more conservative and cautious, grows at a measured pace, without taking any undue risks.
ICICI Bank's assets in the retail space stand at Rs 56,000 crore (Rs 560 billion). In comparison, the tally for HDFC Bank is Rs 18,000 crore (Rs 180 billion). ICICI Bank also leads HDFC Bank in almost every segment they are present in. But that's just the current update.
The DNA of the strategy
ICICI Bank began its retail banking venture in mid-1999. By January 2000, it had moved on to introducing home loans, car loans, personal loans and credit cards. Realising the need for a bigger retail deposit base, the bank started building a branch and an ATM network. The acquisition of Bank of Madura in March 2001 added 263 branches, many of them in cities where ICICI Bank did not have a presence.
The merger of the erstwhile financial institution ICICI Limited with the bank in April 2002, gave it a ready-made corporate clientele. The flip side was that ICICI Bank had Rs 10,000 crore (Rs 100 billion) of restructured assets for which it had to make provisions.
On the other hand, HDFC Bank kick started its operations in 1995 with a focus on corporate banking, targeting the top-end of the market.HDFC Bank ventured into retail lending in 1998, a year before ICICI Bank. But in products like credit cards, it was slow to get off the mark. For instance, its credit cards were launched only two years ago. By then ICICI Bank had been present in the credit card business for nearly three years.
However, HDFC Bank was handicapped because it could not sell home loans (because its parent HDFC was in the business), though it has been originating them in the past one-and-a-half years. For ICICI Bank, home loans are 46 per cent of its retail assets.
A banking consultant observes that ICICI Bank is far more aggressive. Though ICICI executives do not admit it, industry sources observe that ICICI's pricing has been far more competitive, which probably brought it more customers.
According to some industry experts, growth for ICICI Bank may have come at the cost of quality. ICICI Bank denies this.
Calling the customer
Both players targeted the same customer -- the upper-middle class. The marketing channels used by both, including direct sales agents (DSAs), were the same. Yet, there was a difference.
In the past two years, the bank has spent less than Rs 100 crore (Rs 1 billion) on advertising and publicity (In comparison, ICICI has spent Rs 185 crore). HDFC Bank says that its spends have always focused on other channels such as direct sales and phone banking rather than mainstream advertising.
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Better pick-up
The numbers tell the story. ICICI Bank's retail deposits are nudging Rs 60,000 crore (Rs 600 billion) and in FY06, it grew its deposits by 47 per cent compared with the industry deposit growth of 14 per cent. HDFC Bank's retail deposits are about Rs 23,000 crore (Rs 230 billion). Even in home loans, ICICI Bank commands 30 per cent of the market, having eaten into housing finance pioneer, HDFC's share.
Share of the wallet
Mar-05 HDFC Bank
ICICI Bank
Branches 467 565
ATMs 1,147 2,000
Cities 211 371
Retail assets (Rs crore) 18,000 56,000
Deposits (Rs crore) 38,000 99,800
Car loans (Rs crore) 2,500 11,500
Credit cards (Mn) 1.3 3
Retail customers (Mn)
6.4 13.7
Cost of deposits (%) 3.2 4.5
Net interest margin (%) 3.2 2.4
Net NPLs (%) 0.2 2
Even in the number of customers ICICI Bank leads by a distance (See table: Share of the wallet). Nearly 14 million customers bank with ICICI Bank, while the number for HDFC Bank is less than half (6.4 million). ICICI Bank has issued 3 million credit cards -- that is more than twice the number of HDFC Bank's credit card users. However, industry observers point out that ICICI Bank's effective users for credit cards may not be high.
Nonetheless, they concede that even with a discounted customer base, the numbers will still be strong. Even in businesses like online trading where the risks are relatively low, ICICI Bank commands a two-thirds marketshare.
'Tell all' street
The stock market has always valued HDFC Bank at a huge premium -- at the current price of Rs 585, HDFC Bank is valued at 3.5 times price to forward book (valuation based on estimated book value in FY 06 of Rs 165). The multiple for ICICI Bank that quotes at Rs 415, is just 2.1 (estimated book value Rs 194). The reason: the impeccable quality of HDFC Bank's balance sheet. With NPLs of less than 0.2 per cent, compared with 2 per cent for ICICI Bank, its books are definitely in far better shape.
HDFC Bank's operations are also more profitable -- its net interest margin at 3.2 per cent is way higher than that of ICICI Bank's 2.4 per cent. Also, it is able to access deposits at a lower cost. On an average, it pays an interest of 3.2 per cent while ICICI Bank shells out 4.5 per cent.
But round one of the banking sweepstakes has clearly gone to ICICI Bank.
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RESEARCH FINDINGS:
The data collected through questionnaires with the help of Direct Sales Agent and Direct Marketing Agencies has been of great importance to analyze many details regarding all the captions that are there in the questionnaire of sample size 40. They are as follows:
• Age: The applicants ranging between the age of 30 - 45 years are the ones who have applied for Home Loans large in number, it is because they are financially stable and sound. But now a days customers ranging between 25 – 30 are even applying for Home Loans because they are aware of the benefits that can be availed by applying for Home Loans.
• Profession: Mostly, the Self Employed Non Professionals i.e., business persons who are involved in their family business apply for Home Loans. Salaried are less in number.
• Tenure & Loan Amount: The tenure which the bank and the customer finally arrives at is according to the eligibility of the applicant in consideration to his
a) Age – As the bank itself assumes that is the person capable enough physically and financially that he’ll be able to repay the loan in the fixed tenure. b) Profession – either the person is salaried which shows he has a fixed income per month and thus the installments will be on time, if the applicant is SEP or SENP then there can be any gain or loss and so the tenure and amount of loan is fixed accordingly.
• Product applied for: The most preferred products in Home Loans are:
Home Loan – It is specially for the purpose of construction and purchase. Benefits of Home loans
Cheaper Rates – RBI has given a margin of 0.75% which deducts from the current prevailing rates.
Easily granted. Amount of loan granted – 50% of the salary in case of salaried
class. Rebate / deduction in Income Tax.
Land Loan – It is normally given for the purpose of purchase of land for Investment for future. Benefits of Land Loans
Normal rates – As it is granted for the purpose of investment so RBI has not given any deduction of margin because it is not beneficial for the government and is merely for the personal benefit of the customer.
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There is no rebate in Income Tax.
LAP (Loan Against Property) – It is given for different purposes against any property which is mortgaged with the bank and is released when the loan is over. Benefits of LAP
Rates at which the loan is granted is above margin It is also known as Mortgage Loan.
Modes of Payment: After the whole analysis, the final conclusion is that more than 60% of the applicants repay the loan through PDCs.
Property Mortgaged: Applicants can mortgaged any free property which they own. Free property includes:
Residential ( commercial and non-commercial) Commercial
Any other loan taken for the same property: Out of sample size 40, mostly have not applied for any other loan simultaneously but through Credit Information Bureau of (India) limited (CIBIL) and DEDUP records show that at time of applying for HL customers itself take a check that they have already repaid their dues of other loans.
Preferred bank for Home Loans: According to the survey through questionnaire shows that ICICI Bank Ltd. is the most preferred bank but this is because questionnaires have been filled by the applicants applying in ICICI. Otherwise, HDFC is second market leader in Home Loans.
Loan from any other bank: Out of sample size of 40 customers mostly have not applied in any other bank but some number of applicants are customers of any other bank.
Sources of information for the various home loan plans: Features launched by the bank in different plans of HL is outsourced through Direct Sales agents and agencies. And even some customers or can say general public prefers bank as the most reluctant source of availing information.
99% of the applicants in sample size are satisfied by the services provided by ICICI Bank Ltd.
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SUMMARY AND CONCLUSION:
The report made on ICICI Home Loans concludes by findings of various benefits to the customer, government, builders and HFCs / Banks.There is a growing tendency of investing at a younger age, increase in NRI demand in real estate, increased urbanization, owning property now more economical than renting.Government committed to simplifying Mortgaged Backed Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002. There is tax benefit to the customers and rationalization of stamp duty.Builders are now a days focusing on end users rather than Investors and there is improvement in quality of constructions. The final outcome of the report gives the following data:
JUNE 2008FILES LOGIN 100( Ist Disbursement) 49 ( Sub Disbursement) 52 ( Final Disbursement)
FILES CLEAR 46 ( Ist Disbursement) 26 ( Sub Disbursement) 47 ( Final Disbursement)
The graphs below shows the market leadership of ICICI as compared to HDFC and SBI.
Market leadership
Sanctions (in Rs.Crore)
0
5000
10000
15000
20000
25000
30000
2004 2005 2006 2007
ICICI
HDFC
SBI
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2005 2006 2007 2008
Market leadership
Disbursement (in Rs.Crore)
02000400060008000
100001200014000160001800020000
2004 2005 2006 2007
ICICI
HDFC
SBI
Market share of ICICIYear 2003 – 04: 25000 croreYear 2004 – 05: 41000 croreYear 2005 – 06: 53000 croreYear 2006 – 07: 65000 croreYear 2007 – 08: 85000 crore ( projected)
Market Share
0% 50% 100%
2004
2005
2006
2007SBI
OTHER PSBs
LIC
OTHER HFCs
FBs
Pvt Bks
HDFC
ICICI
StanChart
Citi
107
2005 2006 2007 2008
2008
2007
2006
2005
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Bibliography:
Pandey I.M., Financial Management
Chandra P., Financial Management
Khan & Jain, Financial Management
V.Sharan, Financial Institution & Services
Induction program book of ICICI Bank Ltd.
www.ICICIBank.com
www.homeloans.com
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