consumer loan with reference to bank of india’

7/30/2019 Consumer Loan with reference to Bank of India

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Project on Study of Consumer Loan with

reference to Bank of India

CHAPTER 1

An Overview of Bank

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1.1 HISTORY OF BANKING IN INDIA

In 1786 the General Bank of India was established for the first time

as a joint stock bank. In 1806 another bank under the patronage of the

Government was established. There after the East India Company which

established the Bank of Bengal in 1809? Then other two presidency

banks came in Mumbai and Chennai in the year of 1840 and 1843

respectively. The three presidency bank were amalgamated to form a new

bank called Imperial Bank of India in 1921 (27th January) and later this

bank was re-christened as State Bank of India in 1955(1st July) under the

act of Indian Parliament.

The Reserve Bank of India, as a banker of central as well as state

Government, came into being in 1935 which proved to be a land mark in

the history of the banking in India.

Then a concept of social control over commercial bank in order to

achieve the objective of a balanced growth of all sector of the economy

this measure of social control was considered to be inadequate. In order

to achieve the larger objective of sustained and planned growth of

economy 14 major banks were nationalized on 19 th July 1969; later on

April 1980 six more banks were nationalized bringing the tally to the 20.

Banking means the accepting for the purpose or lending or investment of

deposits of money from the public, repayable on demand and withdrawal

by cheque, draft or order.

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WHAT IS NATIONALISATION

Nationalization is the process of taking an industry or

assets into government ownership by a national government or

state. Nationalization usually refers to private assets, but may also mean

assets owned by lower levels of government, such as municipalities,

being transferred to the public sector to be operated and owned by the

state. The opposite of nationalization is usually privatization or de-

nationalization, but may also be municipalization.

A renationalization occurs when state-owned assets are

privatized and later nationalized again. Nationalization has been used to

refer to either direct state-ownership or management of an enterprise or to

a government acquiring a large controlling share of a nominally

private, publicly listed corporation.

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1.2 STRUCTURE OF BANKING SYSTEM IN

INDIA

1.3 FUNCTIONS OF BANKS IN INDIA

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The economic functions of banks include:

1. Issue of money -

In the form ofbanknotes and current accounts subject to checkor

payment at the customers order these claims on banks can act as

money because they are negotiable or repayable on demand, and

hence valued at par. They are effectively transferable by mere

delivery, in the case of banknotes, or by drawing a check that the

payee may bank or cash.

2. Netting and settlement of payments

Banks act as both collection and paying agents for customers,

participating in interbank clearing and settlement systems to collect,

present, be presented with, and pay payment instruments. This

enables banks to economize on reserves held for settlement of

payments, since inward and outward payments offset each other. It

also enables the offsetting of payment flows between geographical

areas, reducing the cost of settlement between them.

3. Credit intermediation

Banks borrow and lend back-to-back on their own account as

middle men.

4. Credit quality improvement

Banks lend money to ordinary commercial and personal borrowers

(ordinary credit quality), but are high quality borrowers. The

improvement comes from diversification of the bank's assets and

capital which provides a buffer to absorb losses without defaulting on

its obligations. However, banknotes and deposits are generally

unsecured; if the bank gets into difficulty and pledges assets as

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security, to rise the funding it needs to continue to operate, this puts

the note holders and depositors in an economically subordinated

position.

5. Maturity transformation

Banks borrow more on demand debt and short term debt, but provide

more long term loans. In other words, they borrow short and lend

long. With a stronger credit quality than most other borrowers, banks

can do this by aggregating issues (e.g. accepting deposits and issuing

banknotes) and redemptions (e.g. withdrawals and redemption of

banknotes), maintaining reserves of cash, investing in marketable

securities that can be readily converted to cash if needed, and raising

replacement funding as needed from various sources (e.g. wholesale

cash markets and securities markets).

6. Money creation

Whenever a bank gives out a loan in a fractional-reserve

banking system, a new sum of virtual money is created.

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CHAPTER 2

Introduction to Bank of India

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2.1 History of Bank of India

Bank of India was founded on 7th September, 1906 by a

group of eminent businessmen from Mumbai. The Bank was under

private ownership and control till July 1969 when it was nationalized

along with 13 other banks.

Beginning with one office in Mumbai, with a paid-up

capital of Rs.50 lakh and 50 employees, the Bank has made a rapid

growth over the years and blossomed into a mighty institution with a

strong national presence and sizable international operations. In business

volume, the Bank occupies a premier position among the nationalized

banks.

The Bank has 3752 branches in India spread over all states/

union territories including specialized branches. These branches are

controlled through 50 Zonal Offices. There are 29 branches/ offices

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(including five representative offices) and 3 Subsidiaries and 1 joint

venture abroad.

The Bank came out with its maiden public issue in 1997 and

follow on Qualified Institutions Placement in February 2008. . Total

number of shareholders as on 30/09/2009 is 2, 15,790.

While firmly adhering to a policy of prudence and caution,

the Bank has been in the forefront of introducing various innovative

services and systems. Business has been conducted with the successful

blend of traditional values and ethics and the most modern infrastructure.

The Bank has been the first among the nationalized banks to establish a

fully computerized branch and ATM facility at the Mahalaxmi Branch at

Mumbai way back in 1989. The Bank is also a Founder Member of

SWIFT in India. It pioneered the introduction of the Health Code System

in 1982, for evaluating/ rating its credit portfolio.

The Bank's association with the capital market goes back to

1921 when it entered into an agreement with the Bombay Stock

Exchange (BSE) to manage the BSE Clearing House. It is an association

that has blossomed into a joint venture with BSE, called the BOI

Shareholding Ltd. to extend depository services to the stock broking

community. Bank of India was the first Indian Bank to open a branch

outside the country, at London, in 1946, and also the first to open a

branch in Europe, Paris in 1974. The Bank has sizable presence abroad,

with a network of 29 branches (including five representative offices) at

key banking and financial centers viz. London, New York, Paris, Tokyo,

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Hong-Kong and Singapore. The international business accounts for

around 17.82% of Banks total business.

2.2 Objectives of Bank of India

1. To promote and develop in India sound and progressive banking

principles, practices and conventions and to contribute to the

developments of creative banking.

2. To render assistance and to provide various common services to

Members and to the banking industry.

(a) To develop and implement new ideas and innovations in

banking services, operations and procedures.

(b)To organize co-ordination and co-operation on procedural,

legal, technical, administrative or professional problems and

practices of banks and the banking industry.

(c) To initiate advance planning for introduction of new systems

or services in the banking industry.

3. To collect, classify and circulate statistical and other information

on the structure and working of the banking system.

4. To act as a clearing house for dissemination and exchange of

statistical data, information, views and opinions on the systems,

procedures and practices, and organization and methods of banks

and on the structure, working and operations of the banking

system.

5. To explore, plan, co-ordinate and organize detailed surveys on

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banking, business, resources, personnel and management

development programmes of banks and the banking industry.

6. To pool together talents and resources available with members and

to organize exchange of expertise and experiences of members for

simplifying forms and procedures, for reducing cost of operations,

for increasing efficiency and productivity and for such other

common purposes as may be necessary or relevant to banks and the

banking industry.

7. To organize exchange of credit information and opinions, exportinformation or information and views on any other aspects of

interest to banks.

8. To promote education and knowledge of the law and practice of

banking.

9. To issue periodical newsletters, bulletins or magazines and publish

books, pamphlets or other literature on matters of interest to

members and to the banking industry.

10.To project a good public image of banking as a service industry

and develop good public relations.

11.To promote harmonious personnel relations in banking industry

and to devise ways and means for involving banking personnel in

the endeavors of banks for growth and development of banking and

the economy of the country.

12.To organize, promote and afford facilities for indoor and outdoor

games, any form of sports, recreation, sports competitions, events,

cultural activities, social activities, fine arts, social meetings,

entertainments and to organize meetings for the above purposes

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and to provide for purposes by purchasing, acquiring, taking on

lease, own, hire or otherwise playing fields, grounds, buildings,

pavilions and other facilities.

13.To give financial assistance to individuals or bodies, from out of its

own funds, or by collection from its members, or from any other

source, and for the purpose of such collection, to accept grants,

donations, etc. in cash or kind from Government, its members,

other organizations, members of the public, etc. and to collect

subscriptions, membership and other fees and to levy fees or

charges for the use of the facilities and to raise funds in any manner

to strengthen the financial position of the Association, from time to

time, for the purpose of providing education, training and facilities

for imparting basic, advance knowledge and techniques in games,

sports, cultural activities, social activities, fine arts, etc. and to give

donations, technical and other assistance, sports equipments, sports

facilities and expert guidance to organizers for this purpose

whether its members or not and to conduct, organize, participate or

to associate itself in State-Level, Nation, International

Tournaments and competitions pertaining to sports, cultural

activities, social activities, fine arts, etc., held in or outside India.

14.To maintain continuous communications with the representatives

of bank employees, to conduct talks, discussions, and negotiations

with them and to arrive at Settlements.

15.To provide assistance and guidance to members in interpretation

and implementation of Awards, Settlements, etc.

16.To assist, advise and guide all members and the smaller members

in particular on all their needs, difficulties and problems of growth,

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development and working.

17.To act as an agent or a representative of a member or members in

respect of matters connected with any of their operations working

or administration.

18.To maintain close co-ordination and liaison with Reserve Bank of

India, All Financial Institutions, Chambers of Commerce,

Organizations of Banking Industry, Management or Educational

Institutes, Universities and such other Organizations for realizing

the subject and purposes of the Association.

19.Generally to do all and any other thing that may be necessary or

relevant for the realization of the objects and purposes of the

Association directly or indirectly.

20.To carry on publicity for the purpose of educating public opinion

with regard to the scope, importance and activities of the banking

industry, for creative growth and development.

2.3 Mission and Vision

Mission

To provide superior, proactive banking services to niche markets

globally, while providing cost-effective, responsive services to others in

our role as a development bank, and in so doing, meet the requirements of

our stakeholders

Vision

To become the bank of choice for Corporates, medium businesses

and upmarket retail customers and to provide cost-effective

developmental banking for small business, mass market and rural

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markets

2.4 SWOT Analysis of Bank of India

1. Strength

A public sector undertaking. Thus, has government backing.

Increasing profits over the years.

Pan India presence with over 3400 branches.

Founder of SWIFT (Society for Worldwide Inter Bank Financial

Telecommunications.)

Large employee base.

2. Weakness

Brand valued not as big as SBI.

The branches are not modernized in many cities as compared to

leading banks.

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3. Opportunity

Venturing into rural areas.

Installations of more ATMs.

Use of mobile banking, internet banking on a large scale.

4. Threats

New banking licenses.

Foreign players.

Disinvestments.

2.5 Indian View of Bank

In 1906 Bank of India founded with Head Office in Bombay

In 1921Bank of India entered into an agreement with the Bombay

Stock Exchange to manage its clearing house.

2.6 Global View of Bank

In 1946 Bank of India opened a branch in London, the first Indian

bank to do so. This was also the first overseas branch of any Indian

bank.

In 1950 Bank of India opened branches in Tokyo and Osaka.

In 1951 Bank of India opened a branch in Singapore.

In 1953 Bank of India opened a branch in Kenya and another

in Uganda.

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In 1953 or 54 Bank of India opened a branch in Aden.

In 1955 Bank of India opened a branch in Tanganyika.

In 1960 Bank of India opened a branch in Hong Kong.

In 1962 Bank of India opened a branch in Nigeria

In 1967 The Government of Tanzania nationalized Bank of India's

operations in Tanzania and folded them into the government-

owned National Commercial Bank, together with those of Bank of

Baroda and several other foreign banks.

In 1969 the Government of India nationalized the 14 top banks,

including BANK OF INDIA. In the same year, the People's

Democratic Republic of Yemen nationalized Bank of India's

branch in Aden, and the Nigerian and Ugandan governments

forced Bank of India to incorporate its branches in those countries.

In 1970 National Bank of Southern Yemen incorporated Bank of

India's branch in Yemen, together with those of all the other banks

in the country; this is now National Bank of Yemen. Bank of India

was the only Indian bank in the country.

In 1973Bank of India opened a rep in Jakarta.

In 1974 Bank of India opened a branch in Paris. This was the first

branch of an Indian bank in Europe.

In 1976 The Nigerian government acquired 60% of the shares in

Bank of India (Nigeria).

In 1978 Bank of India opened a branch in New York.

In 1970s Bank of India opened an agency in San Francisco.

In 1980 BANK OF INDIA (Nigeria) Ltd, changed its name to

Allied Bank of Nigeria.

In 1986 Bank of India acquired Paravur Central Bank (Karur

Central Bank or Parur Central Bank) in Kerala in a rescue.

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In 1987Bank of India took over the three UK branches of Central

BANK OF INDIA (CBI). CBI had been caught up in the Sethia

fraud and default and the Reserve BANK OF INDIA required it to

transfer its branches

In 2003 Bank of India opened a representative office in Shenzhen.

In 2005Bank of India opened a representative office in Vietnam.

In 2006Bank of India plans to upgrade the Shenzhen and Vietnam

representative offices to branches, and to open representative

offices in Beijing, Doha, and Johannesburg. In addition, Bank of

India plans to establish a branch in Antwerp and a subsidiary

in Dar-es-Salaam, marking its return to Tanzania after 37 years.

In 2007 Bank of India acquired 76 percent of Indonesia-based PT

Bank Swadesi.

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CHAPTER 3

Theoretical Framework

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3.1 Introduction of Loan

Any amount borrowed or lend is called loan. If money is

borrowed it is debt of business and if loan is given, it is receivable

for the business.

Loan is a method of lending under which bank gives credit to a

borrowed for a fixed period and for a specific purpose. Loan are

promises for future payment, they have to be repaid in periodbeyond a year and are, therefore long term liabilities.

Banks make loans and advances to traders, businessman and

industrialist against the security of some assets or on the basis of

the personal security of the borrower. In either case, the banks run

the risk of default in repayment. Therefore, banks have to follow a

cautions policy and sound lending principles in the matter of

lending. Bank in India have to consider the national interest along

with the own interest while determining the lending policy.

Many a time a borrower need fund for fixed assets or non-

respective type of activities and thus seeks money from the bank

that is withdrawn in one lump sum. The loan amount is normally

repaid in instalments. Loan may be short-term, medium-term or

long-term.

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3.2 Classification of Loan

The loans and advances granted by banks are broadly

classified into two categories:-

Secured Loan

Unsecured Loan

According to section 5 (a) of Banking Regulation Act,1949, a

secured loan or advance means a loan or advances made on the

security of assets, the market value of which not at any time less

than the amount of such loan or advances not so secured. Thus

unsecured loan or advance means a loan or advances are asfollows; the distinguished features of a secured loan or advance

are as follows.

1. The loan must be made on the security of tangible assets like

goods and commodities, land and building, gold and silver,

corporate and government securities, etc. A charge of any such

assets offered as security must be created in favour of the banker.

2. The market value of such securities must not be less than the

amount of the loan at any time till the loan is repaid. If the former

falls below the latter because of decline in the market prices, the

loan is considered as partly secured.

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The distinction between secured and unsecured loans is

made on the basis of legal title or charges created in favour of the

lender. Under the traditional principles of lending, the borrowing

capacity of a person is judged on the basis of tangible assets in the

possession of the borrower, i.e., the larger is the creditworthiness

of a borrower, if lager is the value of his tangible asset. However,

it should not be understood that unsecured loans, also called clean

loans and advances, are granted person without observing the

above mentioned criterion of credit worthiness. In fact unsecured

loans are also granted to the person of sufficient means,

possessing tangible assets and with sound finance position, but no

charges or right is created on any such cases the security happens

to be the personal obligation of the borrower which is something

supported by a guarantee given by a third party regarding the

repayment of the loan. Clean advances are obviously granted to

the parties enjoying high reputation and sound financial position.

Unsecured advances are granted with the caution and within

certain limits only because in case of default by the borrower the

banker stands at par with other unsecured creditors.

In case of secured advances, the legal status of the

banker is that of a secured creditor, he gets the first and absolute

right to recover his dues out of sale proceeds of the assets over

which a charge is created in favour of the banker. Where money is

advanced on security, including personal guarantee the granting

of instalments (for the repayment of loan) is ruled out because

that would frustrate the very purpose of talking security. There are

various modes of creating such charges, which will be secured

discussed in the next chapter.

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3.3 Loan System:

Under the loan system credit is given for a definite

purpose and for predetermined period. Normally, these loans are

repayable in instalments. Funds are required for single non-

repetitive transactions and are withdrawn only once. If the

borrower needs funds again or wants renewal of an existing loan,

a fresh request is made to the bank. Thus, a borrower is required

to negotiate every time he is taking a new loan or renewing an

existing loan. Banker is at liberty to grant or refuse such a request

depending upon his own cash resources and the credit policy ofthe central bank

Types of Loan

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Short Term Loans

Short Term Loans are granted to meet the working capital

needs of the borrowers. These loans are granted against the

security of tangible assets mainly the moveable assets like goods

and commodities, shares, debentures, etc Since April, 1995

Reserve Bank of India has made it mandatory for the bank to

grant a portion of bank credit to big customers in the form of

loans, which may be for various maturities. The Reserve Bank has

also permitted the banks to roll over such loans, i.e. to extend the

loan for another period at the expiry of tenure of the first loan.

Medium and Long Term Loans

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Medium and long term loans are usually called Term

Loans. These loans are granted for more than a year and are

meant for purchase of capital assets for the establishment of new

units and for expansion of diversification of existing unit. Banks

usually grant such loans together with specialized financial

institutions like Industrial Finance Corporation of India, Industrial

Credit and Investment Corporation etc. Such loans constitute a

part of the project finance which industrial enterprises are

required to rise from different sources. These loans are usually

secured by the tangible assets like land, buildings, plant and

machinery, etc.

In recent years, Reserve Bank of India has encouraged banks

to lend for projects as well. Exposure limits have been laid down

at Rs. 200 crores for each bank lending to a project and Rs. 500

crores is the overall exposure limit for all banks to a announce

separate prime term lending rate for term loans of 3 years and

above. In April, 1999, Reserve Bank of India permitted the banks

to operate different prime lending rates for different maturities,

provided transparency uniformity of treatment in maintained.

Reserve Bank also permitted the banks to offer fix rate loans to

borrowers requiring project finance. It means that the interest rate

on term loans will remain unchanged throughout the period of the

term loan in spite of change in the interest rates on new loans.

Bridge Loans

Bridge loans are essential short term loans which are

granted to industrial undertakings to meet their urgent and

essential needs during the period when formalities for availing of

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the term loans sanction by financial institution are being fulfilled

or necessary steps are being taken to raise the funds from the

capital market. These loans are granted by banks or by financial

institution themselves and are automatically repaid out of amount

of the term loan or the funds rose in the capital market.

In April, 1995, R.B.I banned the bridge loans granted by

banks and financial institution to all companies. But in October,

1995, R.B.I permitted the banks to sanction bridge loans/interim

finance against commitment by a financial institution or another

bank where the lending institution faces temporary liquidity

constraint subject to the following condition;

1.The prior consent of the other banks/financial institution which has

sanctioned a term loans must be obtained.

2.The term lending bank/financial institution must give commitment

to remit the amount of the term loans to the bank concerned.

3.The period of such bridge loans should not exceed four months.

4.No extension of the time for repayment of bridge loan will be

allowed.

5.To ensure that bridge loan sanction is utilized for the purpose for

which the term loan has been sanctioned.

In November, 1997, R.B.I permitted the banks to grant

bridge loans to companies (other than non-banking finance

companies) against public issue of equity in India or abroad. The

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guidelines for sanction of such loans are to be laid down by each

bank and should include the following aspects.

Security to be obtained for the loan.

The quantum of outstanding bridge loan (or the limit sanctioned

whichever is higher) during the year.

Compliance with individual/group exposure norms.

Ensuring end use of bridge loan.

The maximum period of the bridge loan to be one year.

Composite Loans

When a loan is granted both for buying assets and for

working capital; purpose, it is called a composite loan. Such loans

are usually granted to small borrowers, such as artisans, farmers,

small industries, etc

Consumption Loans

Though normally banks provide loans for productive

purpose only but as an exception loans are also granted on limited

scales to meet the medical needs or the education expenses or

expenses relating to marriage and other social ceremonies etc. of

the needy persons such loans are called consumption loans.

3.4 Types of Loans Provided by Bank of India:-

(a) Personal Loans.

(b)Commercial Loans.

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Personal Loan

BANK OF INDIA STAR HOME LOANS

Objective/purpose of loan:

1. Provides loans to purchase a Plot for construction of a House, to

purchase/construct house/flat, as well as for renovation/

repair/alteration/addition to house/flat, furnishing of house.

2. Maximum loan amount is Rs.500 lacs and repayment ranges up to 20years, with reasonable margin and nominal processing charges. No

commitment /administrative charges.

3. The loan is available at very competitive rates of interest, currently

available in the industry.

4. Option for different EMI amounts for different periods during tenure of

loan to suit customers repayment capacity.5. Prepayment of Loan permitted.

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Star Mitra Mahila Gold

Loan

Star Mitra Pension

Loan

Star Mitra Education

Loan

Star Home Loan

Star Holiday loan

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6. Interest is calculated on daily balance basis which is of great

advantage to customer as it results in lower interest amount.

7. Loan to NRIs as well as Persons of Indian Origin.

8. Simplified application form/procedures for convenience of customers,

and speedy approvals.

9. Free Personal Accident Insurance cover.

10. Life Insurance Cover to borrowers for Loan Protection (optional).

Details of Loan

Eligibility Salaried employees, Professionals, Self-employed persons.

Requests are also considered from NRIs, Prop. Firm,

Partnership firms and corporate.

Purpose To purchase/construct house/flat.

To renovate/extend/repair existing house/flat.

To purchase a plot of land for construction of house.

To acquire household articles along with the house/flat-for

furnishing the house/flat.

Quantum

of Loan

For construction/purchase of a house/flat-Rs.300lacs(Rs.500

lacs in major metros viz. Mumbai, Kolkata, New Delhi and

Chennai)

Repairs/renovation/extension to house/flat Rs.50 lacs

Purchase of a plot - Rs.100 lacs

Purchase/acquire household articles for furnishing the

house/flat - Rs.5.00 lacs. (15% of Home Loan amount)

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Minimum Home Loan :- For Metro/Urban Centres :-Rs. 1

Lac

Processing

charges / Other

expenses

FOR INDIVIDUALS

Loan Limit- Charges- One Time

Up to Rs.25 Lacs - @0.50% of loan amount Min.Rs.4,000 and Max. Rs.10,000

>Rs.25 to Rs.75 Lacs- Flat Rs.20,000

>Rs.75 to 300 Lacs -Flat Rs.25,000

>Rs.300 Lacs -Flat Rs.50,000

For Partnership firms & Corporate Borrowers

Processing charges will be double that of individuals

For Rural areas Processing charges will be 75% that of

applicable to individuals in respect of loans availed by

borrowers from rural areas from the Rural Branches.

Legal Expenses/Valuation Charges/Stamp Paper Charges

etc.,

Margin (For

1st House )

For Loan up to Rs.20 Lacs-20%

Over Rs.20 to Rs.50 Lacs -25%

Over Rs.50 Lacs -30%

Margin is subject to RBI stipulated of Max. 90% for loans up

to Rs.20.00 lacs and LTV of Max.80% for loans above

Rs.20.00 lacs on pure cost of the house/flat, i.e. excludingstamp duty ,registration, stamp duty, etc.

Repayment(can

be customized)

Highly flexible - maximum 20 yrs. including moratorium

period of 18 months (max.) in monthly instalments.

Extended repayment up to 25 years permitted in Banks

approved projects. Loan to be normally repaid before date of

retirement in case of salaried persons and before attaining 65

years of age in case of others.

Eligible

Quantum ofLoan/ EMI

Calculation of quantum of loan is related to

Income/repayment capacity of proponent/borrower.

Salaried Employees: 72 times of gross monthly salary or

6times of gross annual income based on I-T Returns.

Self-employed/ Professionals etc.: 6 times of Gross annual

income based on I-T Returns

HUF/Proprietorship /Partnership Firm/ Company: 6 times of

cash accruals (PAT+ Depreciation) as per Balance

Sheet/P&L Account

In case of Individuals:

Net take home pay/income (net of all deductions

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including EMI of Proposed loan) should not be less than

40% of the gross monthly salary/income of applicant(s)

In case of HUF/Proprietorship/ Partnership firm/Company:

DSCR should be minimum 1.5.

Security Mortgage/Equitable Mortgage (1st charge) onland/flat/house.

Third Party guarantee (if mortgage could not be created at

the time of disbursement).

Attractive

Features

Interest on Daily Reducing Balance Basis

No Pre-Payment Charges on Floating Rate Loans

Repayment allowed up to 70 years in select cases

Facility for step up/ step down EMIs

Inclusion of notional rental income in case of 2nd

House and also Employees staying in Staff Quarters;

Inclusion of Income of Close relatives for enhanced

loan

Tax Benefit on Interest and Instalments repaid in

Home Loans

Facility for 100% loan irrespective of stage ofconstruction OR Bridge Loan subject to conditions;

Interest subvention from GOI in the 1st Year subject to

conditions

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Star Mitra Mahila Gold Loan:-

31

Purpose of Loan For purchase of Gold ornaments, preferably hallmarked, from

reputed Jewellers and/or Gold coins of Bank of India.

Target Group Resident Indian Women

Working Women : Women permanently employed in Central/State

Govt./ Scheduled Banks/Teachers of Govt. Aided Institutions; and

include professionals like Doctors/ C.As/Chartered Engineers etc.,

Non Working Women : Not having income proof. Spouse/other

close relative who satisfy income criteria to join as co-borrower.

Age 18- 60 years

Rating Exercise Applicant should get minimum 20 marks, under banks rating

exercise, to be eligible for loan under the scheme.

Type of Advance Demand/ Term Loan

Quantum of Advance Working/Non-working women : 10 times of monthly net

emoluments (take home salary of self/spouse, in case of non

working women) Professional : 50% of Gross Annual Income as

per latest Income Tax Return Minimum Rs. 50000/- Maximum

Rs.2 lacs.

Margin 20% of the cost of Jewellery/Gold.

Interest Rate

(Floating, p.a. atmonthly rests)

3% above Base Rate -13.50%.

Penal Interest To be levied as per prevailing guidelines in this regard from time to

time

Repayment Maximum 60 EMIs .However, repayment period not to exceed the

age of 65 or retirement age of the borrower, whichever is earlier.

Repayment through salary deduction /post dated cheques.

Net take home pay

(net of EMI )

Min. 50% of the gross income of the applicant/ spouse, in the case

of non-working women.

Security For Loan over Rs.50, 000/- liquid securities for the amount

exceeding Rs.50, 000/-.

Disbursement By DD/ Pay Order favouring the seller (with the name of the Bank

and Account Number). Stamped Receipt/ Invoice for the total cost

of jewellery (i.e. Loan Amount plus Margin) to be obtained.

Performa invoice required for a loan amount of Rs. 1 lac and over.

Processing Charge One time @ 2% of loan amount Min. Rs.500/- and Max. Rs.2,000/-

Other Charges Stamp charges for documents at actual. Loan Agreement copycharges as applicable.


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Star Mitra Pension Loan:-

Purpose of loan:

1. It is unsecured and clean type of loan.

2. It is used to-

(a) Meet marriage expenses, medical expense, education of self,

spouse, children, near relatives.

(b)Repairs/renovation/extension of existing house/flat(where

Equitable Mortgage charge over the property cannot be

created in favor of bank and the proponent has not raise

loan against such property from any Bank/NBFC, etc

(c) Any other personal expenses of bonafide nature.

3. In case of secured advances-

(a) Repayment of existing housing loan from other

banks/financial institutions etc.

(b)Purchase of consumer durables/computers/Professional

equipments, etc.

(In case of clean/unsecured loan, an undertaking to be obtained

from the borrower stating that the loan has been utilized for the

purpose declared. In case of secured advances appropriate

proof/bills receipts for expenses incurred to be obtained.)

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BOI star pensioner Loan schemes

Target

Customers

(Eligibility

-- Regular pensioners or family pensioners

drawing regular monthly pension

through the branch.

-- Retired employees (other than

dismissed/compulsorily retired)

Type of

Advance

Demand Loan/Term Loan/Overdraft

(reducible as per repayment schedule)/

Overdraft (3 months Pension Max. Rs.15000/-)

Net take home

Pension

The net take home pension after deduction of loan

instalment should be at least 40% of the pension

amount

Repayment For Clean/unsecured

advance

Secured Advance

Max.36 EMIs w .e. f. one

month after first

disbursement.

60 EMIs in exceptional

cases.

Max. 60 EMIs w. e. f.

one month after 1st

disbursement

Rate of Interest

(Floating, p.a.

at monthly

rests)

Fully Secured Advances: @ 3.75% above Base Rate,

Clean/Unsecured Advances:@4.25% above Base Rate,

For Senior Citizens (for loans up to Rs.50000/-) at

3.00%above Base Rate,

(Aged 60 years and above)

Processing/

Handling

Charges

a. No processing charge for Senior Citizens (60 years &

above)

b. For others one time @ 2% of loan amount, Min.Rs.500/- and

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Max.Rs.2000/-.

C. Stamp Paper charges: At actual. Loan Agreement

Copy charges .- As Applicable

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Star Mitra Education Loan:-

Introduction

The Star Educational Loan Scheme aims at providing

financial support from the bank to deserving/ meritorious students

for pursuing higher education in India and abroad. The main

emphasis is that every meritorious student is provided with an

opportunity to pursue education with the financial support to get

the loan.

Highlights STUDY ABROAD STUDY INDIA

Course Graduation Graduation

Loan type Term Loan Term Loan

Loan Purpose Graduation: For job oriented

professional/technical courses

offered by reputed

universities Post Graduation:

MCA, MBA, MS, etc.

Courses conducted by CIMA- London, CPA in USA, etc.

The loan is provided for

Professional courses :

Engineering, Medical,

Agriculture, Veterinary,

Law, Dental, management

Computer, etcCourses conducted by

IIM, IIT, IISc, XLRI, NIFT,

NID

and other Institutes set up

by Central/State Govt.

Loan Amount Min. - Rs 50000

Max. - Rs 2000000

Min. - Rs 50000

Max. - Rs 1000000

Margin Money Up to Rs.4 lakh : Nil

Above Rs.4 lakh : 15%

Up to Rs.4 lakh : Nil

Above Rs.4 lakh : 5%

Tenure Min. - Min- 1 Yrs

Max. - 10 Yrs.

Min - 1 Yrs.

Max. - 10 Yrs.

Interest Rate Up to Rs.7.50 lacs 3%

above Base Rate, 13.50%

Above Rs.7.50 lacs 2.50%

above Base Rate, 13%

Up to Rs.7.50 lacs 3%


Above Rs.7.50 lacs 2.50%

Above Rs.7.50 lacs


Time to Process Loan 7 Days 7 Days

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Eligibility

Study Abroad Study India

Age Min 16 years: Min 55 years:Documents Required:

ID Proof Yes Yes

Age Proof Yes Yes

Residence Proof Yes Yes

Income Proof Yes Yes

Telephone Yes Yes

Photograph Yes Yes

Bank Statement Yes Yes

Signature Proof Yes Yes

Fees and Charges:-

Security:

Up to Rs. 4 lakh: No security

Above Rs.4 lakh &up to Rs.7.5 lakh: Collateral security in the

form of a suitable third party guarantee.

Above Rs.7.5 lakh: Co-obligation of Parents together with

tangible Collateral security of suitable value along with the

assignment of future income of the student for payment of

instalments.

Terms & Conditions.....

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Study Abroad Study Indian

Pre Payment Charges 1% 1%

Comment on Charges processing/upfront

change of institution:

Charges : Rs. 1000

Rs. 250/-

Refundable on availing Loan

Change of Institution : Rs.

500

change of institution: Rs

250/-


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Repayment holiday/Moratorium: Course period + 1 year or 6

months after getting job, whichever is earlier.

Car Loan:-

Eligibility for BOI Car Loans:

Salaried employees, Professionals, Self-employed, individuals

with high net worth, People engaged in trade/commerce/ business,

Directors of Companies, Senior Citizens, Pensioners, Farmers,

Staff Members, Retired employees (other than

dismissed/compulsorily retired) of our Bank.

Non-Resident Indians in India advance to be granted jointly

with Resident Indians (close relative)

Companies, Partnership Firms, Proprietary concern and other

types of corporate entities.

HUFs not permitted.

Interest Rates of Bank of India Car Loan:-

Fully Secured Loans:

a) New Vehicles Repayment up to 3 [email protected]% over BR

12.50%

b) New Vehicles Repayment over 3 [email protected]% over BR

13.00%

c) Second Hand [email protected]% over BR 13.00

Repayment :

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A) For Individuals for new vehicles

4 wheelers imported vehicles-Max. 7 years.

4 wheelers Indian vehicles 6 years

2 wheelers max. 5 years.

B) For Corporates/Firms, etc. Max. 5 years.

C) For second hand vehicles Max. 3 years.

D) Processing Charges:

a) Loans up to Rs.25,000/- one time Rs.1,000/-

b) Loans above Rs.25, 000/- up to Rs.25 lacs one time 1.10% of

loan amount Min.Rs.1,500/-& Max Rs.5, 000/-

c) Loans above Rs.25 lacs one time 0.25% of the loan amount

Max.15, 000/-

E) Service Tax as applicable.

F) Processing charges waived for Senior Citizens, staff members

& retired employees of the Bank & Pensioners drawing pension

from the Bank.

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Star Holiday Loan Scheme

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Eligibility Salaried employees/Professionals/Self-employed /People engaged inbusiness/Individuals with high net

worth/Agriculturists/Pensioners/StaffmembersType ofAdvance

Demand Loan

Quantum ofadvance

Max Rs 2.00 lacsMinimum size of loan:-At Metro and Urban Centres: Rs.10,000/-At Rural and Semi Urban centres: No

minimum size of loan.Purpose To meet the expenses (likeairfare/Train/Bus charges, expenses foraccommodation, sightseeing, etc.) forgoing for pilgrimage/tours/excursionsetc. undertaken/to be undertaken bySelf/spouse/children/ parents/familymembers/close relatives of proponentwithin India or abroad.

Margin No specific margin. Loan amount not toexceed proposedexpenditure/requirement.

Repayment Maximum in 24 EMIs (Equated monthlyinstalments) one month after firstdisbursement from loan account. Inspecial/exceptional case, up to 36 EMIs.

Rate ofInterest(Floating, p.a.at monthlyrests)

1. Fully Secured Advances:3.00%2. Partly Secured Advances:3.50%3. Clean/Unsecured Advances: 4.25%4. For senior citizens /pensioners: 3.00%

ProcessingCharges

One time @ 2% of the loan amount.Minimum Rs. 1000/-, MaximumRs.10000/-.Pensioners : One time @ Rs. 2% of loanamount Min. Rs.500/- Maximum Rs2000/-

No processing charges for SeniorCitizens (60 years & above)


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(B) Commercial Loans:

Channels Credit:

41

Facility a. Drawee Bill Finance for Suppliers

b. Drawee Bill Finance or Overdraft facility forDealers.

Eligibility

criteria

a. Facilities to Suppliers and Dealers would be

extended based on the referral of the Sponsoring

Corporate.

b. Exposure to each Dealer to be based on the referral

of the Sponsoring Corporate.

Financial

criteria

Sponsoring Corporates referral letter to state that their

past dealings with the Supplier/Dealer are

satisfactory. No prior period of association to beprescribed.

Margin Nil

Tenor of

the facility

Maximum 90 days exclusive of Free Period offered, if

any

Grace

period

Grace period of 03 days to Dealers only in cases

where Post Dated Cheques are not obtained

Rate of

interest

Suppliers: 1% below PLR, Min 10.25% pa. Zonal

Managers shall have the discretion to approve a

concession of 0.25% (10% floating). Furtherconcession to be approved at HO level.

Penal rate 2% over the contracted rate

Processing

charges

No processing charges for the suppliers.1% of limit

fixed for each dealer payable up front at the time of

sanction of limit to dealer.

Commercial Loans

Star mortgage loan scheme Channel Credit

Foreign Currency Loan


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Star mortgage loan scheme:

Purpose of loan:-

a. To meet the credit needs of trade, commercial activity, other general

business, Profession as also for their bonafide requirements.

b. To meet marriage or medical or educational expenses of family

members including near relatives.

c. To undertake repairs/renovation/extension to the residence/commercial

property.

d. Purchase of consumer durables.

e. To purchase/construct house/flat, purchase of plot.

f. To purchase 2/4 wheeler vehicles.

g. For going on pilgrimage/tours/excursions, etc.

h. Repayment of existing loans from other Banks/FIs.

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Product BOI Star Mortgage Loan Scheme

Target customers

(Eligibility)

People engaged in trade, commerce and business, Professionals,

Self-employed, Prop. Firms, partnership firms, HUFs (excluding

NBFC, Trade, partnership firms where HUF is a partner),companies, NRIs, individuals with high net worth, salaried

people, agriculturists, staff members.

Type of advance Demand/Term Loan/Overdraft (reducible as per repayment

schedule). Overdraft facility

Quantum of

advance

(Rs. in lacs)

Min. Max.

a. For agriculturists 0.50 2.00

b. For Others :

Individuals/Prop. Firm/1.00 50.00

Partnership firm/

Company :

Prop./Partnership 1.00 100.00

firm/company 1.00 100.00

Margin Salaried Employees 30% *

Others 50% *

*On value of property [Lower of Market Value /Distress Sale

value/Registration Value as on date of valuation] assessed by

Bank's approved value.

Rate of Interest

w.e.f.28.07.2011

Repayment upto3 years 4.00% above Base Rate 14.75% p.a.

Repayment over 3 years 4.50% above Base Rate 15.25% p.a.

Interest concession for woman beneficiaries 0.25% p.a.Repayment In accounts where regular Overdraft facility is not proposed.

Within a period of eight years by way of EMIs. The repayment

shall commence from the month subsequent to the month in

which final disbursement is made or 6 months from the first

disbursement, Whichever is earlier. In case of agriculturists: The

repayment will be related to the generation of farm income from

crops and other subsidiary activities.

Security Equitable/Legal Mortgage charge over property in the name of

applicant or his/her spouse or parents or third party. The person

in whose name the property to be mortgaged stands should either

be a borrower/co-borrower or a guarantor.Processing Fees 1. Accounts repayable as per Stipulated instalments:-

- One time @ 1% of Loan amount. Min.Rs.3,000/- and max.

Rs30000/-.

2. Overdraft Limit (not reducible as per repayment schedule):

- 0.25% of the sanctioned limit, Min. Rs.3, 000/- and Max.

Rs.10, 000/- on annual basis.

- Documents charges, advocate fee, architect fee etc. on actual

basis.

Loan agreement copy charges : As applicable

Equitable

Mortgage Fee

General:

i. Limits exceeding Rs.25 lacs up to Rs.50 lacs - Rs.6, 000/-ii. Limits exceeding Rs.50 lacsRs.100 lacs - Rs.15, 000/-

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Foreign Currency Loan

Eligible

borrowers

1. Export earning units and other customers with

AA credit rating.

2. Customers with credit rating 'A', having natural

hedge.

Purpose 1. Working Capital.

2. Demand Loan for purchase of new plant and

machinery, acquisition of equipments and other assets.

Quantum Minimum US Dollars 100,000/-.

Lending only in US Dollars.

Working Capital - Min. 3 months, Max. 18 months.

Tenor Demand Loans - Min. 12 months, Max. 36 months

Rate of Interest Interest rate linked to LIBOR + applicable spread

based on credit rating, payable at quarterly intervals.

Commitment

Fee

In case the sanction is requested to be revalidated,

revalidation fee @ 0.25% of the entire sanctioned

amount (maximum USD 5000/-) is applicable.

Rs. 145/- per lakh or part thereof, Maximum Rs.1,

45,000/-.

Processing

Charges

In case of conversion of existing facilities, no

additional processing charges are recovered.

Transaction cost ranging from Rs.15, 000/- to Rs.25,

000/- is levied at the time of conversion.

Rate of interest and other terms are subject to change from time to

time as per Bank's Corporate Policy

3.5 LOAN PROCEDURE

1. Application

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2. Shakh Report

3. Loan Report

4. Inspection

5. Committee Approval

6. Letter of Condition

7. Documentation

1. APPLICATION

A customer required any advances from a bank have to apply for

the same. Bank that the applicant must be the member or share

holder. In the application form bank need primary information

about borrower and guarantor. Income proof also required.

2. SHAKH REPORT

It is a confidential report prepared by bank for the members who

want to take a loan. In the shakh report loanees financial position

and also guarantors financial position are mentioned. In the case

of industries loan turn over report will required.

3. LOAN REPORT

After the shakh report approves, customers application go for the

loan report. Bank analyses the application throughout. And report

will go to next stage.

4. INSPECTION

For knowing correct picture banks officers are make an

inspection of property of customers. But it is done in case of

totally new and doubtful customers application. For regular

customers it is not required.

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5. COMMITTEE APPROVAL

After completing everything and if application found correct than

loan report should to come along with committee. Bank is divided

into different committee for sectioning different amount of

advances. If committee members feel that the file of applicant for

advances is correct and there is not any problem in granting loan

than they sanction the loan. If an amount of a loan is less than the

actual application amount and if a customer wants the amount

which is mentioned in application to sanction the full amount.

After the second application committee think over the new

application and if they feel satisfied than they sanctioned full

amount of application.

6. LETTER OF CONDITION

In the letter of condition bank includes the rate of interest,

instalments, deposits and other primary rules. Steps taken by the

bank if customer is not able to repay the loan are also mentioned.

7. DOCUMENTATION

Document means any matter expressed or described upon any

substance by means of letters, figures, or marks or by more than

one of those means intended to be used or which may be used forthe purpose of recording that matter. At BANK OF INDIA

different documents are required for different Loans / Advances

like promissory note, letter of guarantee, equitable mortgage and

Hypothecation of vehicle etc.

CHAPTER 4

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DATA Collection and Analysis

For the preparation of the project both types of data are used.

Primary Data

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Secondary Data

4.1 Primary Data:-

Primary data was collected from existing customers to know about their

experience with the loan process with Bank of India. The loan manager of

bank was also asked questions by researcher. The following is customer

survey done by researcher:-

1. Since how long you deal with BOI?

Less than 1 year

1 to 5 years

More than 5 Years

2. Besides loan, what are the other facilities you are enjoying with

BOI?

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Savings bank Account Fixed deposit

Recurring deposit Current Account

None

3. Which type of loan do you prefer?

Vehicle loan Education loan

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Star mortgage loan Star home loan

Star Mitra Mahila gold loan

4. What do you feel about the documentation requirements for loan

processing in BOI?

Very Heavy Easy

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Difficult Normal

5. What do you feel about the speed of processing the loan

application?

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Very fast Normal

Fast Slow

6. What do you feel about the interest rate and processing charge?

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Heavy Normal

High Low

7. What do you feel about the interest rate and processing charge?

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Heavy Normal

High Low

8. Are you satisfied with information that you get from loan

manager?

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0%-25% 25%-50%

50%-75% 75%-100%

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9. Does your bank give you the updates of upcoming of new facilities

and new loan schemes?

0%-25% 25%-50%

50%-75% 75%-100%

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10.Are you satisfied with response you get when you E-mail or call

for some work?

0%-25% 25%-50%

50%-75% 75%-100%

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11.Will you recommend BOI to any of your friends / relatives for

loans?

Yes No

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4.2 Interview of manager

1. Which type of loan does a customer prefer more?

Vehicle loan Education loan

Star mortgage loan Star home loan

Star Mitra Mahila gold loan

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2. What are the different types of documents needed for a loan

approval?

Each lender has their own requirements for the set of documents

to be submitted with loan application. Some of the documents

generally required by various lenders are as follows:

Completed Loan Application

Passport size photographs

Proof of Identity: PAN Card/ Voters ID/ Passport/ Driving License

etc.

Proof of Residence: Recent Telephone Bill/ Electricity Bill/

Property tax receipt/ Passport/ Voters ID etc.

Statements of Bank Account/ Pass Book for last 6 months to 1 year

Statements of any investments showing financial background of

borrower (fixed deposits, shares, fixed assets such as land etc.)

Sale Deed

Agreement for Sale

Copy of the approved plan for the proposed construction /

extension / addition

Detailed cost estimate / valuation report from Bank's Panel

Chartered Engineer / Architect

Allotment letter of Co-operative Housing Society / Apartment

Owners' Association / Housing Board / NOC from the Society /

Association / Builders / Housing Board

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Legal Scrutiny Report, EC for the past 13 years, Property Tax paid

receipt, Khata and permission for mortgage, wherever necessary

Additional Documents for Salaried Persons

Salary Certificate & Form No. 16

Recent Salary Slips with all deductions

Additional Documents for Non-Salaried Persons

IT Returns filed for last several (2 or 3 typically) years

Proof of business address

Document describing nature of business, year of establishment,

type of organization etc.

Balance Sheet and Profit & Loss Statements for the past several (2

or 3 typically) years

3. What is EMI?

EMI stands for Equated Monthly Installments and represents the

amount of money you have to pay each month in order to repay

your loan. EMI remains the same throughout the loan period

(assuming the interest rate remains the same and there are no

prepayments of the loan). The EMI is applied towards paying off

the principal (or loan amount) as well the interest on the loan.

EMI is computed based on the loan amount, the interest rate and

the loan period. EMI is an important aspect of loan search

process.

4. What are the fees I would pay when I apply for a loan?

Fees are essentially costs to be borne by you in addition to the

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CHAPTER 5

Suggestions and Conclusion

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Suggestions

To increase more customers, the bank should provide more loan

schemes most probably to retired customers and also provide

guidance regarding sanctioning of loan and its procedure especially

to customers who are illiterate.

The bank should use easy procedures, or say, less lengthy

procedure for sanctioning loan to customer. There should be less

legal formalities, in case this exists, and then, these should be

completed in less time. This will be helpful in attracting more

customers.

Conclusion

The loan market in India has grown at a rapid and alarming rate from last

few years. Bank of India has introduced several loan products in order to

meet the needs of a wide variety of customers. The various Bank of India

loan schemes have their different interest rates in the market. The

customer can choose those which he feels are good for him and have the

capacity to repay it on that specified time period.

Most of the people are availing loan facility from Bank of India. People

are relating with Bank of India because it satisfy with the interest rate as

compare to other banks. Processing of Bank of India is fast & after all

loan services is also good. Peoples related with Bank of India are more

satisfied with the

Employee behavior People are more satisfied by Bank of India for time

taken for sanctioning the loan. From all this I conclude that Bank of India

provide good loan services and many people are very satisfied from Bank

of India.

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BIBLIOGRAPHY

BOOKS

1) Innovations in Banking, Romeo S. Mascarenhas

2) Indian Economy, S. Chand publishing, 2007

3) Banking strategy, Katuri Nageswara Rao, 2002

4) Banking System in India, Reforms & Perform Evolution, S.M.

Jawed Akhtar & M.D. Shabbir Alam.

WEBSITES

http://en.wikipedia.org/wiki/Bank_of_India

http://www.bankofindia.co.in/english/home.aspx

http://www.rbi.org.in/home.aspx

http://www.successcds.net/Educationloan/Bank_India_education_loan

http://www.deal4loans.com/loans/banks/sbi-state-bank-of-india-loan/

http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/b

ankofindia/BOI