ashutosh project

8/6/2019 Ashutosh Project

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TABLE OF CONTENTS

PARTICULARS PAGE NO.

LIST OF TABLES

3

CHAPTER 1: INTRODUCTION

SELECTION OF TOPIC

OBJECTIVE OF STUDY

RESEARCH METHODOLOGY

BANKING SECTOR IN INDIA

4-9

CHAPTER 2: COMPANY PROFILE 10-14

CHAPTER 3: REVIEW OF LITERATURE

INTRODUCTION TO CREDIT APPRAISAL

TYPES OF HOME LOAN

DATA COLLECTION

15-45

CHAPTER 4: FINDINGS & ANALYSIS 46-53

CHAPTER 5: CONCLUSION, SUGGESTIONS AND LIMITATIONS 54-58

BIBLIOGRAPHY

BOOKS AND JOURNALS

WEBSITES 59

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ACKNOWLEDGEMENT

I take this opportunity as privilege to express my deep sense of gratitude to all the

people connected with this project for their continuous encouragement, invaluable guidance

and help for completing the present research work. They have been a source of inspiration tome and I am indebted to them for initiating me in the field of research.

I am deeply indebted to Ms. Shilki Bhatia, my research guide, Delhi Institute of

Advanced Studies, Delhi without her help completion of the project was highly impossible.

I take this opportunity as privilege to articulate my deep sense of gratefulness to the

Deputy Manager, and the staff of SBI for their timely help and positively encouragement.

I wish to express a special thanks to all teaching and non-teaching staff members, Delhi

Institute of Advanced Studies, Delhi for their forever support. Their encouragement and

valuable guidance are gratefully acknowledged. I would like to acknowledge all my family

members, relatives and friends for their help and encouragement.

Place: New Delhi

Date: Ashutosh Kumar

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LIST OF TABLES

TABLE NO. TITLE OF THE TABLE PAGE NO.

TABLE NO. 1.1

TABLE NO. 1.2

TABLE NO. 1.3

TABLE NO. 1.4

TABLE NO. 1.5

TABLE NO. 1.6

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CHAPTER 1:

INTRODUCTION

INTRODUCTION

SELECTION OF TOPIC

OBJECTIVE OF STUDY

RESEARCH METHODOLOGY

BANKING SECTOR IN INDIA

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INTRODUCTION

The responsibility to provide Housing finance largely rested with the Government of India till

the mid-eighties. The setting up of National Housing Bank (NHB), a fully owned subsidiary

of the Reserve Bank of India (RBI) in 1988 as the apex institution marked the beginning of

the emergence of housing finance as fund based financial service in the country. It has growth

in the volume and depth with entry of number of specialized financial Institution / Companies

in the public, private and joint sectors, although it is at an early stage of development.

The Banking Industry has been undergoing some fundamental changes in its approach to

banking. There has been a perceptible shift towards Customer Relationship Management

(CRM) mainly arising out of the element of intensive competition infused into the industry by

the arrival of private players. With the free economy reforms government permitted private

players to inter in banking business along with existing nationalized Banks.In 2002 government allowed foreign banks to enter in Indian Market. The concept of retail

banking introduced with the increase in no of banks, private players introduce especially this

concept. The banks are segmenting their portfolio into different segments like Personal

Banking, Retail Banking, Corporate Banking, Agri. Banking and Investment banking. In

Retail Banking, banks are concentrating on SME (Small and Medium Entrepreneur(s) and

Individual finance like Vehicle finance, Housing finance etc. As large no of customer can be

tap with diversification of risk as it evolved lower risk than corporate banking. All banks are

increasing their exposure to this area.

Credit has done a thousand times more to enrich mankind than all the gold mines in the

world. It has exalted labour, stimulated manufacture, and pushed commerce over every sea.

Credit provided by banks is an important driver of national economy. In olden days when

commercial banking had not taken the present shape, individuals or families traditionally

involved in money lending as source of finance. Present days economy is vastly different

from old economy. Due to industrialization, need for finance change drastically. With change

in population as well as industrialization demand and supply increased more over the sources

of supply no longer confine to the area where the demand exists with the improvement in

transport and communication system the demand can be easily met by suppliers made fromsources located in fair flung areas.

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SELECTION OF TOPIC

The Banking Industry has been undergone some fundamental changes in its approach to

banking. There has been a perceptible shift towards Customer Relationship Management

(CRM) mainly arising out of the element of intensive competition infused into the industry by

the arrival of private players. With free economic reforms government permitted privateplayers to enter into the banking business along with the existing nationalized banks.

In 2002 the government allowed Foreign Banks to enter into the Indian Market.

The concept of retail banking introduced with the increase in number of banks, the private

players especially introduced this concept. The banks are segmenting their portfolio into

different segments like Personnel Banking, Retail Banking and are concentrating on Small

Medium Enterprise individual finance like housing finance, vehicle finance, etc as large

number of customers can be taped with diversification of risk as it evolved lower risk than

corporate banking. All banks are increasing their exposure to this area.

OBJECTIVE OF THE STUDY

The Credit Manager plays a crucial role in increasing banks profitability as the major portion

of funds are utilized by bank for the purpose of lending of loans and advances to get more

return on account of the Interest reducing risk in financing.

Objectives of the study:

To study the appraisal process of Home Loan proposal.

To understanding the process and key issues in sanctions.

To understand the process and key issues in disbursement.

To study the restricted areas of credit of the bank.

To analyze the performance of the bank regarding sanction, disbursement.

To find out the causes of rejection of proposals.

To analyze performance of bank.

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INTRODUCTION TO BANKING SECTOR IN INDIA

Banking Sector in India

Immediately after Independence, the government of India initiated measures to play an active

role in the economic life of the nation. In pursuance of this policy, government adoptedIndustrial Policy Resolution in 1948 in which it envisaged a mixed economy. From now

onwards, government decided to play an active role in different segments of an economy

including banking and finance. The Government of India, in a major step nationalized

Reserve Bank of India in 1948. In 1949, the Banking Regulation Act was enacted which

empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in

India. Government in order to have firm grip over this sector nationalized the private banks

first in 1969 and later in 1980. With the second dose of nationalization, the GOI controlled

around 91% of the banking business of India. After this, until the 1990s, the nationalized

banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.

In the early 1990s the then Narsimha Rao government embarking on a policy of

liberalization, gave licenses to a small number of private banks, which came to be known as

New Generation tech-savvy banks, which included banks such as Global Trust Bank, UTI

Bank, (now re-named as Axis Bank), ICICI Bank and HDFC Bank. This almost kick started

the banking sector in India, which has seen rapid growth with strong contribution from all the

three sectors of banks, namely, government banks, private banks and foreign banks.

FDI in Banking Sector

The next stage for the Indian banking has been setup with the proposed relaxation in the

norms for Foreign Direct Investment, where all Foreign Investors in banks may be given

voting rights which could exceed the present cap of 10%, at present it has gone up to 49%

with some restrictions.

Present Situation

In the present situation, banking in India has attained fair amount of maturity 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. In terms of quality of assets and capital adequacy, Indian

banks are considered to have clean, strong and transparent balance sheets relative to other

banks in comparable economies in its region. Since Indian economy is witnessing stronggrowth the demand for banking services, especially retail banking, mortgages and investment

services are expected to be strong. One may also expect M&As, takeovers, and asset sales.

Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is

with the Government of India holding a stake), 29 private banks (these do not have

government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign

banks. They have a combined network of over 53,000 branches and 17,000 ATMs.

According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75

percent of total assets of the banking industry, with the private and foreign banks holding

18.2% and 6.5% respectively.

Banking Structure in India

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The commercial banking structure in India comprises:

Scheduled Commercial Banks and Unscheduled Banks, The banks which are included in the

second schedule of Reserve Bank of India (RBI) Act, 1934 is called scheduled bank. RBI in

turn includes only those banks in this schedule which satisfy the criteria laid down vide

section 42 (6) (a) of the Act.For assessing the performance of the bank, the Reserve Bank of India categories the bank as

public sector banks, old private sector banks, new private sector banks and foreign banks

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CHAPTER 2:

COMPANY PROFILE

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ORGANISATION PROFILE

1.1 EVOLUTION OF BANK

The origin of the State Bank of India goes back to the first decade of the nineteenth century

with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806. Three years later,

the bank received its charter and was re-designed as the Bank of Bengal (2 January 1809). A

unique institution, it was the first joint-stock bank of British India sponsored by the

Government of Bengal. The Bank of Bombay (15 April 1840) and the Bank of Madras (1

July 1843) followed the Bank of Bengal. These three banks remained at the apex of modern

banking in India till their amalgamation as the Imperial Bank of India on 27 January 1921.

Primarily Anglo-Indian creations, the three presidency banks came into existence either as a

result of the compulsions of imperial finance or by the felt needs of local European

commerce and were not imposed from outside in an arbitrary manner to modernize India'seconomy. Their evolution was, however, shaped by ideas culled from similar developments

in Europe and England, and was influenced by changes occurring in the structure of both the

local trading environment and those in the relations of the Indian economy to the economy of

Europe and the global economic framework.

BUSINESS

The business of the banks was initially confined to discounting of bills of exchange or other

negotiable private securities, keeping cash accounts and receiving deposits and issuing and

circulating cash notes. Loans were restricted to Rs.1 lakh and the period of accommodation

confined to three months only. The security for such loans was public securities, commonly

called Company's Paper, bullion, treasure, plate, jewels, or goods 'not of a perishable nature'

and no interest could be charged beyond a rate of twelve per cent. Loans against goods like

opium, indigo, salt woolens, cotton, cotton piece goods, mule twist and silk goods were also

granted but such finance by way of cash credits gained momentum only from the third decade

of the nineteenth century. All commodities, including tea, sugar and jute, which began to be

financed later, were either pledged or hypothecated to the bank. Demand promissory notes

were signed by the borrower in favor of the guarantor, which was in turn endorsed to the

bank. Lending against shares of the banks or on the mortgage of houses, land or other real

property was, however, forbidden. Indians were the principal borrowers against deposit ofCompany's paper, while the business of discounts on private as well as salary bills was

almost the exclusive monopoly of individuals Europeans and their partnership firms. But the

main function of the three banks, as far as the government was concerned, was to help the

latter raise loans from time to time and also provide a degree of stability to the prices of

government securities.

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MAJOR CHANGE IN THE CONDITIONS

A major change in the conditions of operation of the Banks of Bengal, Bombay and Madras

occurred after 1860. With the passing of the Paper Currency Act of 1861, the right of note

issue of the presidency banks was abolished and the Government of India assumed from 1

March 1862 the sole power of issuing paper currency within British India. The task ofmanagement and circulation of the new currency notes was conferred on the presidency

banks and the Government undertook to transfer the Treasury balances to the banks at places

where the banks would open branches. None of the three banks had till then any branches

(except the sole attempt and that too a short-lived one by the Bank of Bengal at Mirzapore in

1839) although the charters had given them such authority. But as soon as the three

presidency bands were assured of the free use of government Treasury balances at places

where they would open branches, they embarked on branch expansion at a rapid pace. By

1876, the branches, agencies and sub agencies of the three presidency banks covered most of

the major parts and many of the inland trade centers in India. While the Bank of Bengal had

eighteen branches including its head office, seasonal branches and sub agencies, the Banks of

Bombay and Madras had fifteen each.

IMPERIAL BANK

The Imperial Bank during the three and a half decades of its existence recorded an impressive

growth in terms of offices, reserves, deposits, investments and advances, the increases in

some cases amounting to more than six-fold. The financial status and security inherited from

its forerunners no doubt provided a firm and durable platform. But the lofty traditions of

banking which the Imperial Bank consistently maintained and the high standard of integrity it

observed in its operations inspired confidence in its depositors that no other bank in Indiacould perhaps then equal. All these enabled the Imperial Bank to acquire a pre-eminent

position in the Indian banking industry and also secure a vital place in the country's economic

life.

When India attained freedom, the Imperial Bank had a capital base (including reserves) of

Rs.11.85 crores, deposits and advances of Rs.275.14 crores and Rs.72.94 crores respectively

and a network of 172 branches and more than 200 sub offices extending all over the country.

FIRST FIVE YEAR PLAN

In 1951, when the First Five Year Plan was launched, the development of rural India was

given the highest priority. The commercial banks of the country including the Imperial Bank

of India had till then confined their operations to the urban sector and were not equipped to

respond to the emergent needs of economic regeneration of the rural areas. In order,

therefore, to serve the economy in general and the rural sector in particular, the All India

Rural Credit Survey Committee recommended the creation of a state-partnered and state-

sponsored bank by taking over the Imperial Bank of India, and integrating with it, the former

state-owned or state-associate banks. An act was accordingly passed in Parliament in May

1955 and the State Bank of India was constituted on 1 July 1955. More than a quarter of the

resources of the Indian banking system thus passed under the direct control of the State.

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ORGANISATION STRUCURE

VISION OF SBI

CUSTOMER SATISFACTION

MISSION OF SBI

We will be prompt, polite and proactive with our customers. We will speak the

language of young India. We will create products and services that help our customers

achieve their goals. We will go beyond the call of duty to make our customers feel valued.We will be of service even in the remotest part of our country. We will offer services to those

abroad as much as we do to those in India. We will imbibe state of art technology to drive

excellence.

VALUES OF SBI

We will always be honest, transparent and ethical. We will respect our customers and

fellow associates. We will be knowledge driven. We will learn and share our learning. We

will never take the easy way out. We will do every thing we canto contribute to the

community we work in. we will nurture pride in India.

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CHAPTER 3:

LITERATURE REVIEW-


TYPES OF HOME LOAN

DATA COLLECTION

__________________________________________________

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WHAT IS CREDIT?

You are granted credit when an organization or individual makes a sum available for you toborrow.

There are two main types of credit.

Home loans, or mortgages, and personal or shop loans are linked to a specific item or

items for example, a new kitchen, or a house

Revolving credit on payment cards can give you access to a fixed amount of money

that you can spend as you wish, in a wide range of retailers and other outlets

Repayment

Loans are normally repaid in regular installments over an agreed period of time. Mortgages,or home loans, can be repaid in variable installments but most personal loans specify fixed

repayments of approximately equal amounts. If you want to make another major purchase

when you have finished paying off one loan, you need to negotiate a new loan. Revolving

credit means that you always have access to the amount of your line of credit that remains

unspent. And every time you pay off some of the outstanding amount, that proportion of your

credit limit becomes available for you to spend again.

So if you have a credit limit of Rs.1, 000/-, spend Rs.30/- and repay Rs.100/-, you have

Rs.800/- available to spend. Whatever type of loan you choose, be certain to make your

repayments on time, or you can face financial penalties.

Interest

In order to cover the lending risk and to make a profit on their money, lenders generally

charge interest on loans and revolving credit. You must remember this when you are

calculating your repayments.

For example, if you borrow Rs.100 and interest is payable at an annual rate of ten per cent,

the total cost is Rs.110. This is known as simple interest. It is rarely charged on borrowings.

Compound interest is more common. It means that interest is charged on the interest at

regular intervals.

For example if you owe Rs.100 and are charged ten per cent compound interest each year,

at the end of year one you will owe Rs.110. In year two, the lender will charge ten per cent of

this sum and add it to the outstanding amount, so you will owe Rs.121, and so on. Interest

may be compounded after any period a day, a week, a month and so on.

With fixed repayment loans, the amount of interest is worked out in advance and added into

the repayments. There is often a penalty if you want to repay the outstanding amount earlier

than agreed.

With revolving credit, you can repay as much or as little as you want, at any point. You can

often avoid paying any interest at all if you repay the total amount you have borrowed on the

date when the first repayment is due.WHAT IS APPRAISAL?

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Appraisals are needed to accurately determine the value of the loan and also inspect the

property's condition. An appraisal report is only good for 90 days and most mortgage

companies will require a certified appraiser.

General Appraisal MethodsThe appraiser obtains an estimated value through the interpretation of the market. Theappraiser collects data pertinent to a report, such as the site, amenities and the physical

condition of the property. Through considerable research and data collection of both general

and specific, the appraiser arrives at the final estimated value.

The three common approaches to arrive at the estimated value, which are derived from the

market, are:

1. Cost Approach: The cost to make the improvements as of the date of the appraisal,

minus the Physical Deterioration, the Functional Obsolescence and the Economic

Obsolescence. The remainder is added to the Land Value.

2. Comparison Approach: Uses other "bench mark" properties of similar size, quality

and location that have been recently sold and compares it to the subject property.

3. Income Approach: A key principal in determining the value of income producing

properties and has little importance in residential type properties. This approach is

used to get an objective estimate of what a cautious investor would pay based upon

the net income the property produces.

WHAT IS CREDIT APPRAISAL?

It is the process of appraising the credit worthiness of a loan applicant. Factors like

age, income, number of dependents, nature of employment, continuity of employment,

repayment capacity, previous loans, credit cards, assets, liabilities etc. are taken into

account while appraising the credit worthiness of a person. Every bank or lending

institution has its own panel of officials for this purpose.

The documents submitted by the applicant are verified by the panel of

officials / the appraisal committee.

The committee checks the genuineness of the documents and confirmswhether the applicant will be able to repay the loan installments or not.

After the verification of the documents the appraisal committee

approves the loan application and then submits the / apprises the loan

application to the sanction committee for loan sanction.

After the appraisal of the loan to the sanctioning committee in case the

sanctioning committee finds any fraud documents then both the

applicant as well as the appraisal committee is held responsible.

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LEGAL APPRAISAL

In a legal appraisal the documents submitted by the applicant are verified by the

lawyer to confirm whether the holder would be able to generate a mortgage in favour

of SBI or not.

TECHNICAL APPRAISAL

It is considered as the most important document stage of the appraisal process. In this

stage the applicants original documents are verified. All other information provided

by the applicant is asked to submit documents regarding guarantees.

The documents needed change depending upon whether house is being purchased or

constructed. Banks carry out technical appraisal to safeguard the applicants interests

before and after the property selection. The officer of the technical appraisal even

conducts checks at various stages of construction to ensure quality of materials used to

safeguard the borrowers interest.

The loan amount can be disbursed entirely or in installments. The disbursement

amount is generally dependent on factors such as own funds available, and the extent

of completion of construction. The disbursement amount is calculated using formula:

RD=AV*CC/100*PC/100+LC/100-(BC-CM)

Where:

RD=recommendation for disbursement in Rs.

PC=Progress of construction in % points

AV=Aggregate value= LC+CCLC=Land component

BC=Borrowers contribution

CM=cumulative disbursement.

CALCULATION OF EMI

Housing loans are long term loans that are repayed in equated monthly installments

(EMI). Each of which includes repayment of interest as well as the principal amount.

EMI payments generally start after the loan has been fully disbursed or after 12

months from the date of first installment. The EMI is determined on the basis of theloan size, interest rate and loan period. An approximate value of EMI can be arrived at

using the following formula:

EMI=1/12(Lr (1+r)^ n/ (1+r)^ n-1)

Where:

L=Loan

r=rate of interest in decimal

N=loan period.

FEATURES OF THE PRODUCT

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TYPES OF HOME LOANS AND FEATURES OF THE PRODUCT

I. SBI-Flexi Home Loans

A customized product designed to enable borrowers to hedge their Home Loan

against unfavorable movement in interest rates. The product gives a one time

irrevocable option to choose one of the three customized combinations of fixed

and floating interest rates and also to choose the order in which the fixed and

floating rate will be availed.

Minimum Loan Amount: Rs.5 lakhs

(Other terms and conditions as applicable to regular Home Loans)

II. SBI-MaxGain Home Loans

An innovative and customer-friendly product to earn optimal yield on yoursavings and minimize interest burden on Home Loans, with no extra cost.

The loan is granted as an Overdraft facility with the added flexibility to operate

your Home Loan Account like your SB or Current Account.

The product serves to minimize interest cost by enabling to park surplus funds in

SBI-Max Gain (with the benefit to withdraw the surplus funds whenever you

require), specially in the wake of low yields from other deposit/ investment

avenues.

Minimum Loan Amount: Rs.5 lakhs


III. SBI-Realty Home Loans

A unique product for a loan to purchase a plot of land for house construction.

The loan is available for a maximum amount of Rs.1 crore and with a

comfortable repayment period of upto 25 years.

You are also eligible to avail another Housing Loan for construction of house on

the plot financed above with the benefit of running both the loans concurrently.

(House construction should commence within 2 years from the date of availment

of SBI-Realty Housing Loan)


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IV. SBI-Freedom Home Loans

A revolutionary product designed for customers who are on the look out for a

source of finance for a property they want to invest in without mortgaging the

same. All you have to do is pledge any financial security that you have and you

will get a Home Loan for your dream home.

For those who do not want to pay stamp duty for mortgage of their property or

go through the hassles of creation of mortgage.

You also have an option to take the loan by way of mortgage of the property and

pledge financial securities in lieu of margin money.

Repayment is highly customized, giving you the option to repay through regular

EMIs or through maturity proceeds of the securities pledged.


V. SBI-OPTIMA ADDITIONAL HOME LOANS

Innovative and value added products extended to existing Home loan borrowers

with a satisfactory repayment record of 3 years and whose loan is Standard

Asset, with a view to reinforce the customer loyalty and to maintain long term

relationship with the borrowers. In case of take-over of Home Loans from other

Banks/HFCs, the borrower should have fulfilled the above conditions with the

present Bank/HFC.

VI. PRASHASAN PLUS, TEACHER PLUS AND OIL PLUS

The above plus schemes offer Concessional interest rate of 0.25% below the

applicable interest rates on Home Loans to niche client groups like Government Employees,

Teachers, employees of public sector oil companies etc.

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Purpose

SBI-Optima Additional Home Loans

To meet expenditure towards major repair,

renovation, addition to their house/flat, purchase

of furniture, fixtures and consumer durables

SBI-Home line Special Personal LoansGeneral purpose loan to meet expenditure to meet

foreseen/unforeseen contingencies

Eligibility

SBI-Optima Additional Home Loans

18 times NMI (for salaried borrowers)/

1 times NAI ( for others) or

(i)25% of the original project cost of house/flat

(ii) 85% of the cost of repairs etc. or (iii) gapbetween 85% of the current market price of

flat/house and actual outstanding loan dues ,

Whichever is lower (EMI/NMI ratio of all loans

should not exceed 60%)

SBI-Home line Special Personal Loans18 times NMI (for salaried borrowers)/

1 times NAI (for others)

Interest Rates/processing fee

SBI-Optima Additional Home Loans As applicable to Home Loans

SBI-Home line Special Personal

Loans

Interest rates 50 bps above rates applicable to

the repayment tenure (floating rates only)

Processing fee : 0.50% of the loan amount

(including service tax)

Other Salient Features

Inbuilt provision for availment of the loans on the expiry of each bloc of 5 years, the

first bloc commencing on the expiry of 5 years from the date of sanction of original

Home Loan.

Original Home Loan and all SBI-Optima Home Loans/SBI-Home Line Personal

Loans can run concurrently

Comfortable repayment obligations Tenure of the loans equal to the residual

maturity of the original Home Loans -

DATA COLLECTION

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SBI HOME LOANS

Brings Your Dream House on Earth

At SBI we take extra care to build your dreams into reality. Providing unmatched support

through easy terms and adequate finances to fulfill your ambition / dream to own /

construct a house.

Purpose

i. Construction of a new house.

ii. Repair.

iii. Renovation.

iv. Alteration of the house.

v. Purchase of a plot for the construction of new house.vi. Purchase of a new house or flat.

vii. Purchase of existing house / flat.

Eligibility

Individual(s) with steady source of income including persons engaged in

agriculture & allied activities.

Salaried

Self employed professionals

Self employed non-professionals

Minimum age:21 years and above

Maximum age:

Loan to be fully repaid by the age of70 years

Loan amount

For Salaried persons For Business men / Professionals

36 times of Net Take Home Pay3 times the Net Income of Income Tax

return

Margin: 20% of Project Cost / valuation cost.

Security: Equitable mortgage on the plot / house / flat being purchased or the house / flat

being constructed / purchased / renovated.

Disbursements

-Direct disbursement of loan to vendor of the house/flat where building is ready forpossession.

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-For construction / renovation / extension of flat / house, disbursement is done in phases.

Repayment: In Equated Monthly Installments (EMIs) comprising of Principal and Interest in

a maximum period of 15 years including moratorium period.

Repayment Period: -Starting from the month following month of full disbursement of loan.

Maximum period including moratorium: Age upto 45 years 20 years

Age above 45 15 years

In case of joint borrowing 25 years

Processing charges:

Loan amount Charges

Up to Rs. 25,000/- Nil.

Rs25,001 to Rs. 2 lakhs Rs. 500/-

Above Rs. 2 lakhs 0.50%

Maximum Loan:

Loan eligibility is determined by EMI/NMI ratio, irrespective of borrowers age i.e. the loan

amount is decided by the repayment capacity of borrower(s), which comes out as a ratio of

EMI to NMI.

EMI/NMI Ratio:

Maximum Permissible Loan amount (MPLA) is subject to the following income-wise graded

ratio:

Net Annual Income EMI/NMI ratio

Upto Rs.2 lakhs 40%

Above Rs.2 to 5 lakhs 50%

Above Rs.5 lakhs 55%

Increase up to 5% in the above ratios may be permitted by the controller of Branch/

RACPC, which processes the loan application, depending on the family size and availability

of disposable surplus income.

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Monetary ceilings:

MPLA is also subject to following monetary ceilings:

Forrepairs / renovation: Rs 10 lakhs

[Loans above Rs.10 lakhs require prior administrative clearance of network GM]

For furnishings and consumer durables: 10% of the project cost or Rs.3 lakhs

whichever is less where check off facility or additional security or 3 rd party guarantee

good for the amount is available.

Income of spouse/son/ unmarried daughter and expected rental of proposed house can be

clubbed [subject to conditions]

Regular income from other sources (with proof) can be considered.

Total project cost:

Total project cost to include cost of land, additional amenities, insurance premium, stamp

duty & registration charges for purchase/construction of new or old property.

LTV Ratio:

i) Loans up to Rs. 1 crore 80% (i.e. 20% margin)

ii) Loans above Rs.1 crore 75% (i.e. 25% margin)

Interest:

-Loans at fixed / floating rates and combination of fixed and floating rates.

-Loans above Rs.1 crore at floating rates only.

-Interest rate concession for loans with LTV ratio of 75% or less.

Type of Loan:

-Term Loan.

Administrative approval:

No prior administrative clearance required.

For purchase of a house up to 10 years old no A/C required.

For >10 years old, controlling authority would be permitted

to grant administrative clearance. In all cases the life & condition of the house shall be such that the banks security

charge is not affected till full repayment of the loan.

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INSURANCE

Insurance of the house / flat covering all risk is necessary.

Inspection:

For standard assets: Initial inspection(s) at the time of disbursement/ release of installments during

construction.

Thereafter once every 3 years.

If repayments are in arrears for two successive months, inspection should be conducted

immediately.

For NPAs: At half - yearly intervals.

Inspections should be recorded in Inspection Register.

Property inspection is to be carried out and recorded at each stage of disbursement.

ELIGIBILITY CALCULATION:

PARTICULARS AMOUNT(RS)

Gross Monthly Income *****

Less: Deductions *****

Net Monthly Income *****

Less: Obligations *****

Maximum Amount For Repayment *****

A. Recent Modifications in SBI Home Loan Scheme

a. In Principle Approval:

In principle approval / sanction can be given prior to identification of a

specific house / flat / property by the prospective borrower to give him

greater flexibility in negotiations.

It is valid for the period of three months.

The borrower can select the property as per the eligibility or loan amount

he may get.

b. Takeover of Housing Loans:

In simple words Take Over of Housing Loan means to transfer the

housing loan from other financial institute / bank to SBI.

Take Over of Housing Loans may be considered highly selective after

due diligence and precautions, in cases where possession of the house / flat

has been taken, repayment of the existing loan has already commenced and

installments have been paid as per the terms of sanction, subject to the

conditions-

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Each case to be approved by the DGM of the module / Main branch only,

in consideration of large business interests / valuables connections.

The prospective borrower should address a letter to the institution through

whom the finance has been availed, that the institution would deliver the

title deeds direct to our bank branch upon receipt of the loan amount. The institution to confirm the above and that they are holding the EMI

over the property.

The disbursement of the loan should be made direct to the institution and

their receipt kept along with the documents.

The agreement to mortgage should be taken.

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DOCUMENTS OF HOUSING LOAN

Documents play an important role for the approval of the loan. Unless and until all the

documents are submitted by the applicant and are properly verified by the responsible

authority the loan cannot be apprised i.e. documents are very important for the appraisal ofhome loan.

The documents required for the appraisal of Home Loan are divided into two stages which

are as follows:

A. PRE-SANCTION / CREDIT DOCUMENTS

These documents are required for the approval / sanction of the housing loan. They are

required for the analysis of the credit worthiness of the applicant. They help to understand the

financial strength and weakness of the applicant i.e. what amount of loan should be

approved? Whether the applicant will be able to repay the loan installments or not?

26

DOCUMENTS

PRE-SANCTION

DOCUMENTS

POST-SANCTION

DOCUMENTS


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The documents are as follows

COMMON DOCUMENTS

27

PROCESSIN

G FEE

CHEQUES

NET WORTH

SUPPORTIN

G

DOCUMENT

S

PERSONAL

ASSETS &

LIABILITY

STATEMENT

IDENTITY &

RESIDENTA

L PROOFCOMMON

DOCUMENT

S

APPLICATIO

N FORM

WITH

PHOTO


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DOCUMENTS AS PER OCCUPATION

SALARIEDSELF- EMPLOYED

PROFESSIONALS

SELF EMPLOYED

PROFESSIONALS

Last three months salary-slip.

Educational qualification

certificates & proof of

business existence.

Educational qualification

certificates & proof of business

existence.

Form 16Last three years Income Tax

returns.Business profile.

Net worth supporting

documents

Net worth supporting

documentsNet worth supporting documents

Employers CertificateCertificate copies of Wealth

Tax Returns, if applicable

Certificate copies of Wealth Tax

Returns, if applicable

Details of previous

employmentBrief write-up on profession Brief write-up on business.

Latest Income Tax Return, if

applicable.

Certified copies of Income

Tax.Certified copies of Income Tax.

Processing fees cheques. Processing fees cheques. Processing fees cheques.

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DOCUMENTS RELATED TO PROPERTY

PURCHASE OF HOUSE /

FLAT

CONSRUCTION /

EXTENSION & REPAIR

OF HOUSE / FLAT

CO-OPERATIVE

HOUSING SOCIETY

Agreement of sale.

Detailed cost estimate by

approved Architect/Civil

Engineer/Chartered

Engineer/Valuers.

Bye-laws of the Society.

Letter of allotment. Certificate of Membership.

Receipt of payment made to

the vendor.

Certificate stating the

number of shares held by

the member.

Power of attorney, if

applicable.

No Objection Certificate for

loan and mortgage fromSociety.

No Objection Certificate for

loan and mortgage from

lesser / builder, if

applicable.

Letter of allotment

Development agreement if

applicable.

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ANALYSIS OF INOME DOCUMENTS

1) Salary Slip Analysis

Name of the Applicant whether matches with the salary slip or not?

Designation Name of the Employer

Is the latest salary credit as per the salary slip

Are the salary credits in the bank statements as per the salary slip

Is the salary fixed or variable

Any regular deductions reflecting in the salary slip.

2) Understanding Bank Statements

In case of Salaried, number of credits to be checked Fixed & Variable

In case of Self Employed check the average balance for liquidity Large credit or debit entries

Recurring debits on account of loan repayment

Inward Cheque bounces

Outward Cheque bounces

Stop Payment / Minimum Balance charges

3) Form 16 Salaried / Form 16A Other than salaried

Name & address of the employer

Name and designation of the employee

Details of the salary paid / other income

Details of the tax deducted

Information of Housing loan availed

Information on Mediclaim, pension policy etc

Information on other savings like PPF, NSC, Mutual funds etc.

4) Understanding Profit & Loss Account

Expense heads

Trend in Profitability & Sales over the years

Depreciation charged

Any unusual expenditure

5) Why do we require a Balance Sheet?

To understand the business of the customer in terms of-

Owners involvement

Profitability of the business

Asset base

His Customer Base & Liquidity

His Suppliers

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6) What to read out of Schedules?

Understanding the list of his Customers

Understanding the list of his Suppliers Understanding the value of assets as on date

Understanding various loans availed by the loan applicant

POST- SANCTION / LEGAL DOCUMENTS

Once the loan gets sanctioned the banks needs certain documents for security. The documents

prepared are legal documents which are as follows-

1. Declaration by the borrower.

2. Documents relating to repayment :

Where Check-off is available:

a) Irrevocable Letter of Authority from employee (on standard format).

b) Letter of undertaking from employer (on Banks standard format).

c) Irrevocable Letter of Authority where applicant himself is drawing and

Disbursing Officer (on Banks standard format) or in other cases PDCs or

standing instructions wherever required may be obtained.

3. Memorandum of Term Loan Agreement for Housing Loan.

4. Guarantee Agreement, if applicable.

5. Mortgage Deed to be executed by the borrower.

6. Agreement to Mortgage, pending creation of mortgage.

7. Documents in connection with pledge of other securities, where applicable.

8. Arrangement letter.

9. A single consolidated stamped affidavit and Indemnity sworn before Magistrate/

notary public.

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IMPORTANCE OF THE DOCUMENTS

1) Declaration by the borrower:

Declaration by the borrower agreeing to construct the house within the stipulated

period in case of loan granted for purchase of plot of land.2) Memorandum of Term Loan Agreement for Housing Loan:

It is the agreement related to the term for which the loan has been taken i.e. number of

years of repayment, amount of loan, EMI, etc.

3) Guarantee Agreement:

Guarantee agreement is the agreement signed by the guarantor giving guarantee of

repayment of loan in case of default by the borrower.

4) Mortgage Deed to be executed by the borrower:

It is the document related to the mortgage of the property constructed or purchased.

5) Agreement to Mortgage, pending creation of mortgage:

Agreement to mortgage is prepared in case if the property to be mortgage is in

incomplete state.

6) Documents in connection with pledge of other securities:

In case where the property to be mortgage is of less value than required then other

property or investments such as bonds, insurance policies, etc, are used to cover the

risk.

7) Arrangement letter:

Arrangement letter is a letter which consists of all the terms and conditions related to

the loan. The term of loan, interest rate, EMI, repayment period, rate of interest

margin, disbursement, insurance and other terms and conditions such as non-availment of loan against same property, restrictions related to entering into any

agreement related to the sale of same property, etc.

8) Consolidated stamped affidavit and Indemnity:

Declaring non availment of other loans against the same property / from otherfinancial institutions (in lieu of No Dues Certificate), delivery of original

documents of title etc.

To cover risk for Home loans below Rs.1 cr., where the search report coversonly a period of 15 years and which does not reveal any encumbrance (instead

of obtaining non encumbrance certificate for 30 years) Undertaking that construction is as per sanctioned building plan (plan is to beenclosed to the undertaking.

To enable the Bank to initiate criminal proceedings against borrowers if theydeclare incorrect, false or misleading information (to mitigate risks on account

of multiple financing/ submission of fake / forged title deeds etc).

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PROCESS OF HOME LOAN

The process of housing loan consists of three stages. All the three stages play a vital role in

fulfilling the requirements of housing finance of the bank.

The three stages are as follows-

33

PRE-SANCTION

DISBURSEMENT

SANCTION


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FLOW CHART SHOWING THE CREDIT APPRAISAL IN HOME LOAN

34


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36

Approval by the sanctioning

officer

Visit / inspection by the

appraisal officer (if necessary)

Recommendation of loan

proposal to higher authority

Checking the genuineness of

the builder, property to be

purchased)

Verification of documents

submitted by the applicant

Submission of documents with

application form

Obtaining search report &

valuation certificate by

empanelledlawyer &valuer.

Preparation of security

documents by bank.

(Hypothecation &mortgage)

Asset verification by the

disbursement officer

Commencement of

disbursement

Repayment

PRE-

SANCTIO

N STAGE

SANCTIO

N STAGE

DISBURSE

M-ENT

STAGE


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iv. Place: Builder-

To establish the genuineness, track record and reputation in terms of timely

completion of quality projects.

Procedure: check-a. With a few reputed builders in the area.

b. With a few of the owners of their complete projects to ascertain quality of

construction, timely delivery and conveyance of the ownership issues.

c. With the concerned industry body i.e. Chamber of Housing Industry /

Builders Forum etc.

d. With the builders bankers.

v. Place: property proposed to be purchased-

Procedure-

a. Independent and surprise visit is to be made to the property.

b. Identify the property based on details in title documents.

c. Landmarks for reaching and identifying the property to be recorded.

d. Accessibility / approachability i.e. all modes of transport / car / two wheeler

only / others.

e. Ensure that proper access is available to the property i.e. roads etc.

f. Comments of the locality i.e. whether residential / commercial /

underdeveloped / trouble prone.

g. Comment whether the area is posh / upper middle class / middle class / lowerclass / slum area.

h. Discreet enquires with the owners / occupants of neighboring houses in

respect of the ownership of the property, information on any pending disputes

/ litigation etc.

i. Ensure that the property is kept in good and tenantable condition.

j. Ascertain whether the property is rented out and, if so, for how long and the

rentals p.m. Whether leased to an institution for occupation of its employees

or rented out to an individual / business concern.

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The following items have been taken out of the preview of pre-sanction inspection by the

Banks staff wherever the services of outsourced agencies are available:

i. Visit to the residence of the applicant,

ii. Visit to the residence of the guarantor,iii. Visit to the office / work place of the borrower.

Formats standardized:

In addition to the above procedures, the following formats to be used are also

standardized for the pre-sanction and sanction process to ensure uniformity and effective

compliance of instructions by operating functionaries and to minimize possibility of

frauds during pre-sanction stage:

Pre-sanction inspection sheet

To be kept with documents. (Separate format to be used

for recording pre-sanction visits by Banks staff where

outsourced agencies are engaged).

Control Card

Control card will serve as a check list of compliance of

various processes / procedures, carrying brief details of

the loan, including details of post sanction inspection, to

be kept with documents.

Appraisal format

With a view to ensuring uniformity in appraisal of HLs

and compliance with extant instructions, standard

appraisal format introduces.

Letter forwarding BC / DD to

the Builder / Seller

Standard forwarding letter introduced to safeguardBanks interest and ensure proper delivery of BC / DD

to seller / builder.

Control reportStandard Control Report to ensure uniformity in

reporting a sanction.

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B. SANCTIONING STAGE / PROCESS.

SEARCH REPORT

The sanctioning process in case of home loans starts with the preparation of a search

report. In case of loans amounts below Rs. 1 crore, the bank can take a limited risk bymaking a search for a period pf 15 years, instead of 30 years. if the search made for 15

years does not reveal any encumbrance, then the risk has to be covered by

incorporating the relevant clause in the consolidated stamped affidavit. In case of

properties belonging to government, local authorities, empanelled lawyer should

furnish the search report for 30 years. Where this search report reveals encumbrance

on the property which is detrimental to the Banks interest, immediate steps are to be

taken to either avoid granting the loan or advise the borrower to rectify the defect in

the title, if it is possible.

RISK OF MULTIPLE FINANCING/ SBMISSION OF FAKE TITLE DEEDS

A consolidated stamped Affidavit of Declaration and Indemnity is to be obtained from

prospective borrowers covering various points including non availment of other loans

against the same property, delivery of original documents of title, undertaking that

construction is as per sanctioned building plan etc to enable the bank to initiate

criminal proceedings against them if they declare incorrect, false or misleading

information.

The sanctioning authority should verify the current CIS data base to avoid multiple

financing. This will also enable them to know the repayment obligations of other

loans availed by these borrowers from other branches under other schemes also,

which are not disclosed in the loan applications.

Branches/RACPCs should access CIBIL data base, wherever required, to trace credit

facilities, if any availed by such borrowers from other banks in the centre [opinion

report from these Banks should be obtained regarding nature and conduct of the

facilities, before sanction].

(iv) RACPCs/ Branches can use the service of verification agencies who run 'de-

dupe' tests with other Banks' data too.

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ASSET VERIFICATION AND QUALITY OF LOAN PROCESS

Controlling Offices are to scrutinize every month, at least 5% of the loans sanctioned by a

branch/ RACPC during the previous month, with a view to ascertaining the quality of

pre-sanction processes, loan appraisal, and documentation. This may be done either by

asking the branches/RACPCs to submit photocopies of the relevant papers/documents

or by visiting the branches/RACPCs concerned. Services of Concurrent Auditors may

also be used for this purpose at the RACPCs. Asset verification, in case of at least 5%

of the loan accounts sanctioned during the previous quarter, may be arranged by the

controlling office during each quarter.

I. Disbursement Stage / Process.

It is a stage where the cheques of sanctioned amount of loan are handed over to the

borrower or to the concerned person.

To prevent misuse of funds, disbursement should be made only in phases co-relating to

the actual progress made in the construction e.g. at stages like completion of plinth,lintel level, roof, etc. Before disbursement, the proper end-use of funds should be

ensured by visit to the sites. Branches may insist on a certificate from engineer /

architect of the borrower confirming stage wise completion of the project.

As regards loans for repairs/renovation/construction, etc, Branches should satisfy

themselves about the estimated cost of labor and other charges and after obtaining

certificate(s) of qualified engineers/architects as concerned necessary.

As far as possible it is made directly to the suppliers / builders as per the progress of the

work only after complete execution of documents and creation of valid mortgage.

The process of disbursement is as follows-

Disbursement of cheques

This is the final step in the disbursement stage. The operational manager prepares the cheques

along with the letter which is handed over to the borrower.

The disbursement of cheques is done in accordance with the stage of construction as reported

by the technical advisor. The cheques is disbursed in two ways as follows-

i. DISBURSEMENT IN ONE STROKE

41

DISBURSEMENT

ONE STROKE

DISBURSEMENT

STEP-WISE

DISBURSEMENT


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In case of purchase of property which is in ready stage the payment is made in full

to the concerned party from whom the property is being purchased. The property

such as flat / fully constructed house etc. which are ready for acquisition comes

under this case.

Also the property which is proposed for re-sale comes under this case where theborrower needs to make full payment to the seller.

ii. STEP-WISE DISBURSEMENT

a. In certain cases where the work is carried out in stages such as the

construction of house the disbursement is done in phases. The bank requires

documents such as the engineers or architects completion certificate and the

quotation and bills of material to be purchased for disbursement of the

cheques.

The architect gives the stage wise completion certificate such as-Completion

of-

i. Plinth area,

ii. Lintel level,

iii. Roof, etc.

In cases where the payment has to be given in installments then the

disbursement is also done as per the installments i.e. first installment, second

installment, etc.

Example of step-wise disbursement is as follows:

PARTICULARS AMOUNT (IN %)

1. At the time of preparing agreement to sale 10%

2. At the time of Plinth 10%

3. At the time of first slab 10%

4. at the time of second slab 8%

5. At the time of third slab 8%

6. At the time of forth slab 8%

7. At the time of fifth slab 8%

8. B. B. Works 10%

9. Outer plaster 10%10. Internal plaster 8%

11. At the time of flouring 5%

12. At the time of possession 5%

TOTOL: 100%

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E. REPAYMENT OF LOAN

Repayment of loan starts after the final disbursement of the loan.

If the disbursement is done in one stroke then the repayment starts immediately from

the next month.

If the disbursement is done step-wise then the maximum time for disbursement ofloan is 18 months. The disbursement starts from the 19 th month even if the project is

completed or not.

F. GENERAL CAUSES OF REJECTION OF PROPOSAL

Not every loan proposal that comes to the bank are approves certain cases gets rejected

because of some or the other reason. The common causes of rejection of loan are as follows:

I. Personal Profile:

a. Negative profile.

b. Dependants more then 5.

c. Age norms not met.

d. Negative references.

e. Manipulated / undisclosed facts, etc.

II. Documents / Property:

a. The credit documents not as per policy.

b. Technical norms not satisfied.

c. Legal documents not as per policy.

d. Fraud documents submitted.

III. Financial reasons:

a. Unsatisfactory credit history.b. Income norms not met.

c. Employment norms not met.

d. Poor financial condition.

e. Too many existing obligations.

IV. Geographical Reasons:

a. If the property is beyond the geographical limits.

b. If the property is in negative profile area.

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CHAPTER 4:

FINDINGS, ANALYSIS &

INTERPRETATION

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DATA REPRESENTATION AND ANALYSIS

Comparative Analysis

Though the schemes of all the four major competitors are more or less the same, there are somany areas with operational differences.

Comparative statements in respect of Housing Finance Activity for the year 2008-09:

ITEMS (%) BOBHFL SBI ICICI HDFC OTHERS

Disbursement 7 16 18 19 37

0

5

10

15

20

25

30

35

40

BOBHFL SBI ICICI HDFC OTHERS

DISBURSEMENT

BOBH

SBI

ICICI

HDFC

OTHE

Interpretation: The chart shows the percentage of disbursement of various financial

institutes and banks. From the above the share of State Bank of India is 16% out of total

disbursement which is less than ICICI & HDFC.


45

ITEMS BOBHFL SBI ICICI HDFC

Time required for

Processing/Sanction

7 days 5 days 3 days 3 days

Guidelines followed N.H.B R.B.I N.H.B N.H.B

Periodicity of interest Annually Monthly Monthly Annually


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Recovery 98 99 95 98 90

RECOVERY

BOBHF

SBI

ICICI

HDFC

OTHER

Interpretation: The above chart shows the recovery of housing loans by various financial

institutes & banks. State Bank of India shows maximum recovery among all above.


NPA 0.5 0.4 0.6 0.5 1

NPA

BOBHF

SBI

ICICI

HDFC

OTHER

Interpretation: The above chart shows the rate of Non-Performing Assets in various

financial institutes & banks. Since home loan comes in priority sector the rate of NPA is very

low almost negligible for all above mentioned.

(A)

Total

visit

(B)

Application

received

(C)

Not

eligible

(D)

Rejected

(E)

Withdrawn

(F)

Sanctioned

(G)

Pending

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No. of

Applicants

170 140 12 6 5 112 5

0

20

40

60

80

100

120

140

160

180

A B C D E F G

PARTICULARS

NO. OF APPLICANT

47


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YEAR

PARTICULARS 2006 2008 2009

PERSONAL

SEGMENT

4546 7171 7298

OTHERS 567 520 1183

TOTAL

ADVANCES

5113 7691 8481

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

2006 2007 2008

OTHERS

PERSON

Interpretation: The above chart shows the figures of State Bank of India, Malviya nagar,

New Delhi. The amount of total advances is showing an increase since last 3 years. Even the

amount of loan in the personal segment is increasing which includes home loans, vehicle

loans, education loan, etc.

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YEAR

PARTICULARS 2006 2007 2008

HOUSING LOAN 3682 5593 5871OTHERS 864 1578 1427

TOTAL PERSONAL

SEGMENT 4546 7171 7298

(Figures in Lakhs)

0

1000

2000

3000

4000

5000

6000

7000

8000

2006 2007 2008

OTHERS

HOUSING LO

Interpretation: The above chart figures of housing loan among the total personal segment ofState Bank of India, Malviya nagar, New Delhi. The share of housing loan in the total

personal segment is maximum and is still increasing day by day.

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COMPARATIVE ANALYSIS

PARTICLARS STATE BANK

OF INDIA

ICICI BANK HDFC

1. PURPOSE Purchase/

construction/extension of old /

new house/ flat plot

of land for

construction of house.

For purchase of house

from builder / resale andconstruction / extension

of existing house.

For purchase of house from

builder / resale andconstruction / extension of

existing house.

2. RATE OF INTREST 8%- 11% 9.25% - 10% 9.25%-10.75%

3. LOAN AMOUNT

(i) Salaried

(ii) Self employed

500000 10000000

500000 20000000

200000 10000000

200000 20000000

200000 10000000

200000 20000000

4. ELIGIBILITY

CRITERIA

(i) Salaried

(ii) Self employed

1,20,000 p.a.

2,00,000 p.a

1,44,000 p.a

1,50,000 p.a

1,20,000 p.a

1,50,000 p.a

5. AGE CRITERIA

(i) Salaried

(ii) Self employed

18 60

18 70

21 65

21 65

21 to 58

21 to 65

6. TENURE 5 20 yrs 5 20 yrs 5 20 yrs

7. CURRENT

EXPERIENCE(i) Salaried

(ii) Self employed

2 yr3 yr

1 yr3 yr

3 yr3 yr

8. PROCESSING FEES 0.50% 0.50% Rs.10000/- or 0.5% of loan

amount(whichever is lesser)

+ Service Tax

9.PRE- PAYMENT

CHARGES

2% 2% (Full payment), No

Penalty (Part Payment).

If 25% of outstanding

amount is paid every year

till 3 years - No penalty,

otherwise 2% of outstanding

amount

10.DOCUMENTS

REQUIRED

(i) Salaried

(ii) Self employed

1) Application form

with photograph,

2) Identity &

residence proof,

3) Last 3 months

salary slip,

4) Form 16,

5) Last 6 months

bank salaried credit

statements ,6) Processing fee

1) Application form

with photograph,

2) Identity & residence

proof,

3) Age Proof

4) Latest 3 months

salary slip,

5) Form 16,

6) If current service is

less than 2 years thanprevious company

1) Application form with

photograph,


proof,

3) Latest salary slip,

4) Form 16,

5) Last 6 months bank

statements,

6) Processing fee cheque

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cheque

1) Application form

with photograph,

2) Identity &

residence proof,

3) Education

qualifications

certificate & proof of

business existence,

Business profile,

5) Last 3 years

profit/loss & balancesheet,

6) Last 6 months

bank statements,

7) Processing fee

cheque

relieving letter,


statements,

8) Processing fee

cheque

1) Application form

with photograph,


proof,

3) Education

qualifications certificate

& proof of business

existence,

4) Business profile, Last

3 years profit/loss &balance sheet,


statements, Processing

fee cheque

1) Application form with

photograph,


proof,

3) Education qualifications

certificate & proof of

business existence,

4) Business profile, Last 3

years profit/loss & balance

sheet,5) Last 6 months bank

statements,

6) Processing fee cheque

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CHAPTER 5:

CONCLUSION,SUGGESTIONS &

LIMITATIONS

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RECOMMENDATIONS & SUGGESTIONS

1. The bank needs to satisfy customer needs that are complicated and difficult to

manage. A robust data warehouse should create wherefrom meaningful data on

customers, their preferences, their spending, patterns etc can be viewed.2. Business process re-engineering is key requirement of bank. Fast delivery of

services, less documentation, simplified process etc, is necessary.

3. It is spending more time on loan disbursement as compared to other private

sector banks. It can focus on measures to reduce this timely delay.

4. There should be strong risk management capabilities.

5. Leadership in market through differentiation and product innovation.

6. SBI can increase professional employment by bank and sells its loan schemes

to customer aggressively with the help of advertising media.

7. Continually invent new products and services to satisfy more customers.

8. Bank can upgrade interest rate according to market share.

9. SBI can provide Net banking services to its existing customers as well as

promotion stunt to attract new customers.

10. Insurance for life is optional for now but to minimize the risk life insurance

should be made compulsory.

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CONCLUSION

1. For the purpose of approving a loan credit appraisal plays a very important

role.

2. Home Loans being a trust area the rate of NPA is very low or negligible ascompared to the other loans. Thus, there is minimum risk for default in Home

Loan Finance.

3. There is heavy risk involved in funding of any property like double funding.

4. In case of the borrower lost his job or meets with accident, which results into

permanent disability & in case of the borrowers death the loan repayment

responsibility comes on his family. It is major problem.

5. Most of the customers prefer SBI because of low interest rates.

6. Documentation plays a very important role in the appraisal process.

7. Due to careful credit appraisal of loan the chances of default are reduced and

the repayment of loan almost 99%.

8. Recent modifications in home loans such as Take over of housing loan helps

the borrowers of other banks or financial institutes to transfer their loan to State

Bank of India and enjoy the benefit of low interest rates & In principle

sanction/approval helps the borrower to take advantage of finding property as

per his eligibility.

EQUATED MONTHLY INSTALMENTS FOR LOAN AMOUNT OF Rs.1,00,000

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No. of Months 6.75% 7.00% 7.25% 7.50% 7.75% 8.00% 8.25% 8.50% 8.75%

6 16,996 17,009 17,021 17,033 17,045 17,058 17,070 17,082 17,095

12 8,641 8,653 8,664 8,676 8,687 8,699 8,710 8,722 8,734

18 5,857 5,868 5,880 5,891 5,903 5,914 5,925 5,937 5,948

24 4,466 4,477 4,489 4,500 4,511 4,523 4,534 4,546 4,557

30 3,632 3,643 3,655 3,666 3,677 3,689 3,700 3,712 3,72336 3,076 3,088 3,099 3,111 3,122 3,134 3,145 3,157 3,168

42 2,680 2,691 2,703 2,714 2,726 2,738 2,749 2,761 2,773

48 2,383 2,395 2,406 2,418 2,430 2,441 2,453 2,465 2,477

54 2,152 2,164 2,176 2,188 2,199 2,211 2,223 2,235 2,247

60 1,968 1,980 1,992 2,004 2,016 2,028 2,040 2,052 2,064

66 1,818 1,830 1,842 1,854 1,866 1,878 1,890 1,902 1,914

72 1,693 1,705 1,717 1,729 1,741 1,753 1,766 1,778 1,790

78 1,587 1,599 1,612 1,624 1,636 1,648 1,661 1,673 1,686

84 1,497 1,509 1,522 1,534 1,546 1,559 1,571 1,584 1,596

90 1,419 1,431 1,444 1,456 1,469 1,481 1,494 1,506 1,51996 1,351 1,363 1,376 1,388 1,401 1,414 1,426 1,439 1,452

102 1,291 1,304 1,316 1,329 1,342 1,354 1,367 1,380 1,393

108 1,238 1,251 1,263 1,276 1,289 1,302 1,315 1,328 1,341

114 1,191 1,203 1,216 1,229 1,242 1,255 1,268 1,281 1,295

120 1,148 1,161 1,174 1,187 1,200 1,213 1,227 1,240 1,253

126 1,110 1,123 1,136 1,149 1,162 1,176 1,189 1,202 1,216

132 1,075 1,088 1,102 1,115 1,128 1,142 1,155 1,169 1,182

138 1,044 1,057 1,070 1,084 1,097 1,111 1,124 1,138 1,152

144 1,015 1,028 1,042 1,055 1,069 1,082 1,096 1,110 1,124

150 989 1,002 1,016 1,029 1,043 1,057 1,071 1,085 1,099

156 965 978 992 1,005 1,019 1,033 1,047 1,061 1,075

162 942 956 970 983 997 1,011 1,025 1,040 1,054

168 922 935 949 963 977 991 1,006 1,020 1,034

174 903 916 930 944 959 973 987 1,002 1,016

180 885 899 913 927 941 956 970 985 999

186 868 882 897 911 925 940 954 969 984

192 853 867 881 896 910 925 940 954 969

198 839 853 867 882 896 911 926 941 956

204 825 840 854 869 883 898 913 928 943

210 813 827 842 856 871 886 901 916 932

216 801 816 830 845 860 875 890 905 921222 790 805 819 834 849 864 880 895 911

228 779 794 809 824 839 855 870 885 901

234 770 784 799 815 830 845 861 876 892

240 760 775 790 806 821 836 852 868 884

LIMITATIONS

Following are the limitations for carrying out this project work:

The study was related to the Financial Services sector where the Financial Institution

did not given each & every information of their working procedure.55


56/57

The study was related to Credit Appraisal System for specifically Home Loan, so

other Credit Appraisal System was not taken into consideration for the study.

56


57/57

BIBLOGRAPHY

BOOKS

SITES

BOOKS:

Banking guide SBI group

promotions.

By G. Subramanian.

Personal segment loan products SBI Staff college Manual.

Research Methodology By C. R. Kothari.

SITES:

www.statebankofindia.com

www.sbi.co.in www.sbimf.com

www.onlinesbi.com www.sbici.com
http://www.statebankofindia.com/http://www.sbi.co.in/http://www.onlinesbi.com/http://www.statebankofindia.com/http://www.sbi.co.in/http://www.onlinesbi.com/