Final 24052012

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CHAPTER-1

INTRODUCTION

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BANK:

The banking industry in the country is undergoing dramatic transformation due to

competitive market environment, technology as well as customer expectations. Till recently

the only distribution channel in India was the traditional bank branches but now banks are

experimenting with alternate technology based channels like ATM’s and Internet Banking

to lower costs and increase efficiency. Banks are embracing technology to improve

customer service, design flexible and customized producers. Distribution channel is going

to be a key differentiator. As yet in India, very few banks have adopted these ‘low cost and

effective’ channels because of inadequate customer acceptance and the bank’s own

inability to cope with the increased complexity which these channels and brings to make

sizeable investment.

Banks will continue to explore alternate channels especially. But still the traditional

banking services keep the higher importance among the developing countries like India.

Modern banking facilities like Internet banking and Tele banking showed adequate

contribution in the new foreign and private banks. Now the developing trends come into

exist among many banks as a result of competitive atmosphere. Branches will remain the

main distribution option especially since regulation is unlikely to allow a large branch

reduction, however their number will shrink and the role of the bank is bound to undergo a

change over the next few years. In India banks have very recently looked at alternate

channels and are re0thinking their delivery strategies.

The project is aimed at studying by means of developing effective distribution channels,

keeping in mind the cost factor. Meanwhile some of the important traditional and modern

banking services are studied provided by the Union Bank of India.

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Definition of banking:

A Bank is a financial institution that accepts money from the customer and lends money for

them when they ask for.

Prof.Hart

says that a banker or a bank is a person or company carrying on the business of receiving

money and collecting drafts, for customers subject to the obligations of honoring cheques

drawn upon them from time to time by the customers to the extent of the amount available

in their ‘current accounts’.

H.P.Sheldon

The function of receiving money from his customers and repaying it by honoring their

cheques as and when is the function above all other functions, which distinguishes a

banking business from any kind of business.

The Banking Regulation act, 1949

Gives a definition of the term ‘Banker’. Accordingly, ‘Any company which transact the

business of banking in India’ is called banking company.

The term ‘Banking’ has been defined as ‘accepting for the purpose of lending or

investment of deposits of money from the public, repayable on demand or otherwise and

withdrawal by cheque, draft, and order or otherwise’

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Sir John Padget

says that “No person or body corporate or otherwise, can be a banker who does not take

deposit accounts, take current accounts, issue and pay cheques and collect cheques crosses

and uncrossed for his customers”. He also says that “one claiming to be a banker must

profess he to be one, the public must accept him as such and finally banking should be his

main business”.

Commercial banking system in India :

Public sector banks:

• State bank of India and associate banks called the State Bank group

• 8 nationalized banks.

• Regional rural banks mainly sponsored by public sector banks.

Private sector banks:

• Old generation private banks

• New generation private banks

• Foreign banks in India

• Scheduled co-operative banks

• Non-scheduled banks

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Co-operative banking sector :

The co-operative banking sector has been developed in the country to the supplement

the village moneylender. The co-operative banking sector In India is divided into 8

components.

1. State co-operative banks

2. Central co-operative banks

3. Primary agricultural credit societies.

4. Land development banks

5. Urban co-operative banks

6. Primary agricultural development banks

7. Primary land development banks

8. State land development banks

Development Banks:

1. Industrial Finances Corporation of India. (IFCI)

2. Industrial Development Bank of India. (IDBI)

3. Industrial Credit and Investment Corporation of India. (ICICI)

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4. Industrial Investment of India. (IIBI)

5. Small industrial Development Bank of India. (SIDBI)

6. National Bank for Agriculture and Rural Development. (NABARD)

7. Export Import Bank of India(EXIM)

8. National Housing Bank.

Current Status of the Indian Financial and Banking System:

The last decade witnesses the maturity of India’s financial markets. Since 1991, every

Government of India took major steps in reforming the financial sector of the country

The important achievements in the following fields are discusses under

separate heads:

• Financial markets

• Regulators

• The banking system

• Non-banking finance companies

• The capital market

• Mutual funds

• Overall approach to reforms

• Deregulation of banking system

• Capital market developments

• Consolidation imperative.

RESERVE BANK OF INDIA:

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The central bank of country is the Reserve Bank of India (RBI). It was established in April

1935 with a share capital of Rs.5 crores on the banks of the recommendations of the Hilton

Young Commission. The share capital was divided into shares of Rs. 100 each fully paid

which was entirely owned by private shareholders in the beginning. The Government held

shares of nominal value of Rs.2, 20,000.

Reserve Bank of India was nationalized in the year 1949. the general superintendence and

direction of the Bank is entrusted to Central Board of Directors of 20 members, the

Governor and four Deputy Governors, one Government official from the Ministry of

Finance, ten nominates Directors by the Government to give representation to important

elements in the economic life of the country, and four nominated Directors by the Central

Government to represent the four local Board with the headquarters all Mumbai, Kolkata,

Chennai and New Delhi. Local Boards consist of five members each Central Government

appointed for a term of four years to represent territorial and economic interests and their

interests of co-operative and indigenous banks.

The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II

of 1934) provides the statutory basis of the functioning of the Bank.

The Bank was constitutes for the need of following:

• To regulate the issue of banknotes

• To maintain reserves with a view to securing monetary stability and

• To operate the credit and currency system of the country to its advantage.

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Functions of Reserve of India

The Reserve Bank of India Act of 1934 entrust all the important functions of a central bank

the Reserve Bank of India.

Functions:

(a). Bank of Issue

Under Section 22 of the Reserve of India Act, the Bank has the sole right to issue bank

notes of all denominations. The distribution of one rupee notes and coin and small coins all

over the country is undertaken by the Reserve Bank as agent of the Government. The

Reserve Bank has a separate Issue Department which is entrusted with the issue of

currency notes. The assets and liabilities of Issue department are kept separate from those

of the Banking Department. Originally, the assets of the Issue Department were to consist

of not less than two-fifths of gold coin, gold bullion or sterling securities, provided the

amount of gold was not less than rs.40 crores in value. The remaining three-fifths of the

assets might be held in rupee coins, Government of India rupee securities, eligible bills of

exchange and promissory notes payable in India. Due to the exigencies of the Second

World War and the post-period, these provisions were considerably modified. Since 1957,

the Reserve Bank of India is required to maintain gold and foreign exchange reserve of Rs.

200 crores, of which at least Rs.115 crores should be in gold. The system as it exists today

is known as the minimum reserve system.

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(b). Banker to Government

The second important function of the Reserve Bank of India is to act as Government

banker, agent and adviser. The Reserve Bank is agent of Central Government and of all

state Government in India expecting that of Jammu and Kashmir. The Reserve Bank has

the obligation to transact Government business, via... to keep the cash balances as deposits

free of interest, to receive and to make payments on behalf of the Government and to carry

out their exchange remittances

And other banking operations. The Reserve Bank of India helps the Government- both theUnion and the States to float new loans and to manage public debt. The Bank makes ways

and means advances to the Governments for 90 days. It makes loans and advances to the

States and local authorities. It acts as advisor to the government on all monetary and

banking matters.

(c). Bankers’ Bank and Lender of the Last Resort

The Reserve Bank of India acts as the Bankers’ bank. According to the provision of the

Banking Companies Act of 1949, every scheduled bank was required to maintain with the

Reserve Bank a cash balance equivalent to 5% of its demand liabilities and 2% of its time

liabilities in India. By an amendment of 1962, the distinction between demand and time

liabilities was abolished and banks have been asked to keep cash reserves equal to 3% of

their aggregate deposit liabilities. The minimum cash requirements can be changes by the

Reserve Bank of India.

The scheduled banks can borrow from Reserve Bank of India on the basis of eligible

securities or get accommodation in times of need or stringency by rediscounting bills of

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exchange. Since commercial banks can always expect the Reserve Bank of India to come to

their help in times of banking crises the Reserve Bank becomes not only the banker’s bank

but also the lender of the last resort.

(d). Controller of Credit

The Reserve Bank of India is the controller of credit i.e. it has the power to influence the

volume of credit created by banks in India. It can do so through changing the Bank rate or

through open market operations. According to the Banking Regulation Act of 1949, the

Reserve Bank of India can ask any particular bank or the whole banking system not to lend

to particular groups or persons on the basis of certain types of securities. Since 1956,

selective controls of credit are increasingly being used by the Reserve Bank.

The Reserve Bank of India is armed with many powers to control the Indian money market.

Every has to get a license from the Reserve Bank of India to do banking business within

India, the license can be cancelled by the Reserve Bank of certain stipulated conditions are

not fulfilled. Every bank will have to get the permission of the Reserve Bank showing in

detail, its assets and liabilities.

This power of the Bank to call for information is also intended to give it effective control

of the credit system, the Reserve Bank has also the power to inspect the accounts of any

commercial bank. As supreme banking authority in the country, the Reserve Bank of India

therefore has the following powers:

1. It holds the cash reserves of all the scheduled banks.

2. It controls the credit operations of banks through quantitative and qualitative.

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3. It controls the banking system through licensing, inspection and calling for

information.

4. It acts as the lender of the last resort by providing rediscount facilities to scheduled

banks.

(e). Custodian of Foreign Reserves

The Reserve Bank of India has the official rate of exchange, according to the Reserve Bank

of India Act of 1934, the Bank was required to buy and sell at fixed rates any amount of

sterling in lots of not less than Rs. 10, 00,000. The rate of exchange fixed was Re.1=sh. 6d.

Since 1935 the Bank was able to maintain the exchange rate fixed at 1sh.6d. Though there

were periods of extreme pressure in favour of or against the rupee. After India became a

member of the International Monetary Fund in 1946, the Reserve Bank has the

responsibility of maintaining fixed exchange rates with all other member countries of

I.M.F. Besides maintaining the rate to exchange of the rupee, the Reserve Bank has to act

as the custodian of India’s reserve of international currencies. The vast sterling balances

were acquired and managed by the Bank. Further, the RBI has the responsibility of

administering the exchange controls of the country.

(f). Supervisory functions

In addition to its traditional central banking functions, the Reserve Bank has certain non-

monetary functions of the nature of supervision of banks and promotion of sound banking

of India. The Reserve Bank Act, 1934, and the Banking Regulation Act , 1949 has given

the RBI wide powers of supervision and control over commercial and cooperative banks,

relating to licensing and establishments, branch expansion, liquidity of their assets,

management and methods of working, amalgamation, reconstruction, and liquidation. The

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RBI is authorized to carry out periodical inspections of the banks and to call for returns and

necessary information from them.

The nationalization of 14 major Indian scheduled banks in July 1969 has imposed new

responsibilities on the RBI for directing the growth of banking and credit policies towards

more rapid development o the economy and realization of certain desired social objectives.

The supervisory functions of the RBI have helped a great deal in improving the standard of

banking in India to develop on sound lines and to improve the methods of their operation.

(g). Promotional functions

With economic growth assuming a new urgency since Independence, the range of the

Reserve Bank’s functions has steadily widened. The Bank now performs a variety of

developmental and promotional functions, which, at one time, were regarded as outside the

normal scope of central banking. The Reserve Bank was asked to promote banking habit,

extend banking facilities to rural and semi-urban areas, and establish and promote new

specialized financing agencies.

Accordingly, the Reserve Bank has helped in the setting up the IFCI and the SFC; it set up

the Deposit Insurance Corporation in 1962, the Unit Trust of India in 1964, the Industrial

Development Bank of India also in 1964, the Agricultural Refinance Corporation of India

in 1963 and the Industrial Reconstruction Corporation of India in 1972. These institutions

were set up directly or indirectly by the Reserve Bank to promote saving habit and to

mobilize savings, and to provide industrial fiancé as well as agricultural finance.

(h). Classification of RBIs functions

The monetary functions also known as the central banking functions of the RBI are related

to control and regulation of money and credit, i.e., issue of currency, control of bank credit,

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control of foreign exchange operations, bankers to the Government and to the money

market. Monetary functions of the RBI are significant as they control and regulate the

volume of money and credit in the country. Equally important, however, are the non-

monetary functions of the RBI in the context of India’s economic backwardness. The

supervisory of the RBI may be regarded as a non-monetary function (though many

consider this a monetary function). The promotion of sound banking in India is an

important goal of th RBI, the RBI has been given wide and drastic powers, under the

Banking Regulation Act of 1949- these powers relate to licensing of banks, branch

expansion, liquidity of their assets, management and methods of working, inspection,

amalgamation, reconstruction and liquidation. Under the RBI’s supervision and inspection,

the working of banks has greatly improved. Commercial banks have developed into

financially and operationally sound and viable units. The RBI’s powers of supervision have

now been extended to non-banking financial intermediaries. Since independence,

particularly after its nationalization 1949, the RBI has

Followed the promotional functions vigorously and has been responsible for strong

financial support to industrial and agricultural development in the country.

Classification of Banks

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Reserve bank of India Schedule bank StateCorporation CommercialBank Indian banks

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Non- schedule

Bank

SBI and

Subsidiaries

Private sector

Bank Public sector

Bank

Foreign banks

Regional

Rural Bank Nationalized

Bank

Private sector

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Introduction to Different services by a bank:

Bank is a financial institution which accepts money from the customers and lends some

money out of those deposits. Therefore any banking institution bound to play some major

role in their variety of services and they consists many branches all over the country or the

world to fulfill their major and sub responsibilities.

Some of the major services of a bank can be identified as follows:

1. Keep deposits on behalf of bank’s customers by paying them an interest for their deposits.

2. Provide loans to different type of customers.

Sub facilities are:

o Automated teller machine facility (ATM).

o Tele banking

o Internet banking.

Deposits:

Deposit is a main source of fund that a bank owes to its customers as they agree to keep

sum of money with the bank either for a specific time or otherwise. Bank credits sum

amount of money periodically as the interest specified for that particular account. Normally

any bank keeps three major customer deposits named as

Savings deposits.

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Demand deposits.

Fixed deposits.

Loans:

A loan is a type of debt. All material things can be lent but this article focuses exclusively

on monetary loans like all debt instruments, a loan entails the redistribution of financial

assets over time, between the lender and the borrower. The borrower initially receives an

amount of money from the lender, which they pay back, usually but not always in regular

installments to the lender. This service is generally provided at a cost, referred to as interest

on the debt. A borrower may be subject to certain restrictions known as loan convents

under the term of the loan. Acting as a provider of loans is one of the principal tasks for

financial institutions. For other institutions, issuing of debt contracts such as bonds is a

typical source of funding. Bank loans and credit are one way to increase the money supply.

ATM:

Anytime money scheme is introduced by banks under which a customer can withdraw

money, deposit money, transfer money or check the balances in his account at any time all

days a week. ATM’s are computer based service system, which can be accessed with the

help of ATM cards, and withdraw of cash can be done in minutes.

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Internet banking:

Online banking (or Internet banking) allows customers to conduct financial transactions on

a secure website operated by their retail or virtual bank, credit union or building society.

Online banking solutions have many features and capabilities in common, but traditionally

also have some that are application specific.

The common features fall broadly into0 several categories. They include features same as

traditional banking. (Online account transactions, Bill payments, Funds transfer between

accounts etc)

Features commonly unique to Internet banking include:

Personal financial management support, such as importing data into a personal finance

program such as Quicken, Microsoft Money or TurboTax. Some online banking platforms

support account aggregation to allow the customers to monitor\r all of their accounts in one place whether they are with their main bank or with other institutions.

Tele banking:

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Telephone banking is a service provided by a financial institution which allows its

customers to perform transactions over the telephone.

Most telephone banking uses an automated phone answering system with phone keypad

response or voice recognition capability. To guarantee security, the customer must first

authenticate through a numeric or verbal password or through security questions asked by

alive representatives (see below). With the obvious exception of cash withdrawals and

deposits, it offers virtually all the features of an automated teller machine: account balance

information and list of latest transactions, electronic bill payments, funds transfers between

a customer’s accounts etc.

SEBI (Securities and Exchange Board of India):

The Securities and Exchange Board of India Act, 1992 (the SEBI Act) was amended in the

years 1995, 1999 and 2002 to meet the Requirements of changing needs of the securities

market and

Responding to the development in the securities market. Based on the Report of Joint

Parliamentary Committee (JPC) dated December 02, 2002; the SEBI Act was amended to

address certain shortcomings in its provisions. The mission of SEBI is to Make India as one

of the best securities market of the world and SEBI as one of the most respected regulator

in the world. SEBI Also endeavors to achieve the standards of IOSCO/FSAP.

Objectives of SEBI:

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As an important entity in the market it works with following objectives:

1. It tries to develop the securities market.

2. Promotes Investors Interest.

3. Makes rules and regulations for the securities market.

Functions Of SEBI:

1. Regulates Capital Market.

2. Checks Trading of securities.

3. Checks the malpractices in securities market.

4. It enhances investor's knowledge on market by providing education.

5. It regulates the stockbrokers and sub-brokers.

6. To promote Research and Investigation.

7. Actions and Responsibilities.

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Powers of SEBI:

Power of inspection

power of court

power in the interest of securities market

power regarding protection of investors

power of issue direction

power of investigation

power to lease and desist proceedings

Registration of stock-brokers. Sub-brokers and share transfer agents etc..

Measures taken by sebi for healthy development and regulation of

capital market:

“The Committee believes that regulation should be designed to achieve specific,

Well-defined goals. It is inclined towards positive regulation designed to encourage

Healthy activity and behavior.

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It has been guided by the following objectives:

(a) Investor Protection: Attention needs to be given to the following four

Aspects:

(i) Fairness and Transparency :

The trading rules should ensure that trading is conducted in a fair and transparent manner.

Experience in other Countries shows that in many cases, derivatives brokers/dealers failed

to disclose potential risk to the clients. In this context, sales practices Adopted by dealers

for derivatives would require specific regulation. In Some of the most widely reported

mishaps in the derivatives market Elsewhere, the underlying reason was inadequate internal

control System at the user-firm itself so that overall exposure was not Controlled and the

use of derivatives was for speculation rather than For risk hedging. These experiences

provide useful lessons for us for Designing regulations.

(ii)Safeguard for clients’ moneys

(iii) Moneys and securities deposited by

Clients with the trading members should not only be kept in a separate Clients’

account but should also not be attachable for meeting the Broker’s own debts. It

should be ensured that trading by dealers on Own account is totally segregated from

that for clients.

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(iv) Competent and honest service :

The eligibility criteria for trading Members should be designed to encourage competent and

qualified Personnel so that investors/clients are served well. This makes it Necessary to

prescribe qualification for derivatives brokers/dealers and The sales persons appointed by

them in terms of acknowledge base.

(iv) Market integrity:

The trading system should ensure that the market’s Integrity is safeguarded by minimizing

the possibility of defaults. This requires framing appropriate rules about capital adequacy,

margins, Clearing corporation, etc.

(B) Quality of markets:

The concept of “Quality of Markets” goes well beyond Market integrity and aims at

enhancing important market qualities, such as Cost-efficiency, price-continuity, and price-

discovery. This is a much broader

Objective than market integrity.

(C) Innovation:

While curbing any undesirable tendencies, the regulatory Framework should not stifle

innovation which is the source of all economic Progress, more so because financial

derivatives represent a new rapidly Developing area, aided by advancements in information

technology.”

Different services by a bank

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Bank is a financial institution which accepts money from the customers and lends some

money out of those deposits. Therefore any banking institution bound to play some major

role in their variety of services and they consists many branches all over the country or the

world to fulfill their major and sub responsibilities.

Some of the major services of a bank can be identified as follows:

1. Keep deposits on behalf of bank’s customers by paying them an interest for their

deposits.

2. Provide loans to different type of customers.

Sub facilities are

1. Automated teller machine facility (ATM).

2. Tele banking

3. Internet banking

Deposits:

Deposit is a main source of fund that a bank owes to its customers as they agree to keep

sum of money with the bank either for a specific time or otherwise. Bank credits sum

amount of money periodically as the interest specified for that particular account. Normally

any bank keeps three major customer deposits named as

1. Savings deposits.

2. Demand deposits.

3. Fixed deposits.

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The word FINANCE means the management of monetary support or funds of any

company. It is the process of organizing the flow of funds so that the business firm can

carry out its objectives in the most efficient manner and meet their obligations as they fall

due. It includes determining what has to be paid for raising the money on the best terms

available and devoting available funds to the best issues.

Direct finance, signifies that savings are affected directly from saving –surplus units

without the intervention of such financial institutions as investment companies, insurance

companies, unit trust and so on. The first element in the growth of financial technology

under direct finance is the introduction of financial assets / instruments other than money.

The second element of third finance is, namely brokers, aims at serving exactly this need.

The third element of direct finance is the development of the secondary market/stock

exchanges, where existing securities can be regularly and continuously purchased and sold.

The second type of financial marketing/technique in the mobilization of savings is indirect

finance. The term indirect finance refers to the flow of savings from the savers to the

entrepreneurs through such intermediary financial institutions as investment companies,

unit trusts, insurance companies, etc.

Financial Systems:

Flow of funds (savings)

Flow of financial services

Incomes and financial claims

Seekers of funds

(mainly business

firms and

government)

Suppliers of

Funds (mainlyHouseholds)

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An economy’s financial system exists to organize the settlement of payments, to raise and

allocate finance, and to manage the risks associated with financing and exchange.

The word “system”, in the term “financial system “, implies a set of complex and closely

connected or interlined institutions, agents, practices, markets, transactions, claims, and

liabilities in the economy. The financial system is concerned about money credit and

finance- the three terms are intimately related yet are somewhat different from each other.

Indian financial system consists of financial market. Financial instruments and financial

intermediation.

A developed financial system is one that has a secure and efficient payment system,

security markets and financial intermediaries that arrange financing and derivative markets

and financial institutions that provide access to risk management instruments.

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Financial system

Financial assets/Instruments Financial Markets Financial Intermediaries

Forex Markets Capital Markets Money markets Credit Markets

Primary Markets

Secondary Markets

Money Market Instruments Capital market Instruments Hybrid Instruments

Financial markets

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A Financial market can be defined as the market in which financial assets are created or

transferred. As against a real transaction that involves exchange of money for real goods or

services, a financial transaction involves creation or transfer of a financial asset. Financial

Assets or Financial Instruments represents a claim to the payment of a sum of money

sometime in the future and/or periodic payment in the form of interest or dividend.

a. Money Market

The money market is a wholesale debt market for low-risk, highly-liquid, short-term

instrument. Funds are available in this market for periods ranging from a single day up to a

year. This market is dominated mostly by government, banks and financial institutions.

b. Capital Market

The capital market is designed to fiancé the long –term investments. The transactions

taking place in this market will be for periods over a year.

c. Forex Market

The Forex market deals with the multicurrency requirements, which are met by the

exchange of currencies. Depending on the exchange rate that is applicable, the transfer of

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funds takes place in this market. This is one of the most developed and integrated market

across the globe.

d. Credit Market

Credit market is a place where banks, FIs and NBFCs purvey short, medium and long term

loans to corporate and individuals.

Financial Intermediation

Having designed the instruments, the issuer should then ensure that these financial assets

reach the ultimate investor in order to garner the requisite amount. When the borrower of

funds approaches the financial market to raise funds, mere issue of securities will not

suffice. Adequate information of the issue, issuer and the security should be passed on to

take place. There should be proper channel within the financial system to ensure such

transfer. To serve this purpose, financial intermediaries came into existence. Financial

intermediation in the organized sector is conducted by a wide range of institutions

functioning under the overall surveillance of the Reserve Bank of India. In the initial

stages, the role of the intermediary was mostly related to ensure transfer of funds from

Indian Financial System

Indian financial system is broadly classified into 2 groups.

1. Organized sector.

2. Unorganized sector.

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The financial system is divided into users of financial services and provider’s. Financial

institutions sell their services to households, business and government who are the users of

financial services. The providers of financial services are:

1. Central bank

2. Banks

3. Financial institutions

4. Money and capital markets.

5. Informal financial enterprises.

The organized financial system comprises the following sub-systems:

1. The banking system

2. The co-operative system

3. Development banking systems

• public sector

• private sector

4. Money market

5. Financial companies/Institutions.

The unorganized financial system comprises of moneylenders, indigenous bankers, lending

pawnbrokers, landlords, traders etc. these are also financial companies, investment

companies chit funds etc in the unorganized sector. The central banks or the government

does not regulate these in a systematic manne

The Indian Financial system

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Ministry of finance

RBI

SEBI

FinancialInstitution

commercial Primary

DealersNBFC

MutualFunds

VentureCapital

CapitalMarkets

Hire Purchase Company

Leasing Company• Public sector banks

• Private sector banks

• Co-operative banks

• Regional rural banks

• Foreign banks

• Stock

Exchange

• Stock brokers

• Depositories

• Inventors

• Underwriters

• Custodians• Merchant

banksTerm finance

ICICI

IDBI

IFCI

State level

• State finance corporation

• State industry developmentcorporation

• Export and Import bank of India

• Tourism finance corp. of India

• Power finance corporation

• National bank for Agricultural and rural development

Investment CorporationLIC

GICUTI

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CHAPTER-2

RESEARCH DESIGN

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TITLE

“EVALUATION OF HOUSING LOAN” – a case study

related to State bank of Mysore, Bangalore

INTRODUCTION:

State Bank of Mysore was established in the year 1913 as Bank of Mysore Ltd. under the

patronage of the erstwhile Govt. of Mysore, at the instance of the banking committee

headed by the great Engineer-Statesman, Late Dr. Sir M.Visvesvaraya. Subsequently, in

March 1960, the Bank became an Associate of State Bank of India. State Bank of India

holds 92.33% of shares. The Bank's shares are listed in Bangalore, Chennai, and Mumbai

stock exchanges.

STATEMENT OF PROBLEM

State bank of Mysore housing finance scheme brings to you an excellent opportunity to

have your own house or flat.

To successfully cater housing loans to the customers in need of it, it is essential that this

product is handled with utmost professionalism and essentially within a well defined set of

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guidelines. So this study is conducted to know how essentially SBM is managing to cater

this particular need of the customer of the bank.

SCOPE OF THE STUDY

This study pertains to the SBM housing loan scheme and the study was conducted

to find out the effectiveness of the SBM loan scheme.

Useful to students to know the functioning of the bank with SBM in case of

housing loans.

Useful for the academic purpose & future references.

OBJECTIVE OF THE STUDY

To understand the features and working of home loans offered by SBM

To understand the performance of home loans offered by SBM for a period of 3

years.

To determine the consumer responsiveness towards home loans offered by SBM.

To give suitable recommendations.

METHODOLOGY

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After the data being collected in the form of questionnaire. It had been tabulated according

to the methodology. Question wise tables, charts, graphs have been used to get to the

analysis part of the questionnaire; interpretation was drawn according to the score

associated with various issues. Simple percentage analysis has been used in this study.

STATSTICAL TECHNIQUE

THE SAMPLE CHOOSEN WERE

EXISITING CUSTOMERS -15

POTENTIAL CUSTOMERS-10

TOOLS

Simple percentage method

Graphs and

charts

SOURCES OF DATA

PRIMARY DATA-

The primary data is collected through direct interviews with the help of

structured questionnaire.

Primary data is collected by meeting the official staff of the SBM through

actual interaction with them.

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SECONDARY DATA-

The secondary data is collected from the official documents of the bank and

different websites.

LIMITATIONS OF THE STUDY

The study is confined to one institution namely SBM.

The findings of the study will be closely related to the current period only.

The findings, conclusions and suggestions are based on the data provided by the

institution and hence it may be biased.

Time is the limiting factor.

CHAPTER SCHEME

Introduction.

Home Loan is a Secured Loan offered against the security of a house/property which is

funded by the bank’s loan, the property could be a personal property or a commercial one.

Research design.

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This chapter will give the details of statements of problems, objectives of

conducting research. Scope sources of data

Company profile

This chapter gives the overall background of the history, its structure,

Interpretation and analysis.

This chapter contains graphs and statistical tools used in measuring the

details collected through questionnaire

Findings. Recommendations

This chapter gives the overall picture of various findings drawn out analysis

and interpretation, conclusion made and solution for the problem

Bibliography.

TEXT BOOKS:

Financial management - Paasanna Chandra

Financial markets and institutions - Boole

Indian financial system - Vasant desai

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CHAPTER-3

COMPANY PROFILE

INTRODUCTION OF COMPANY:

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Our Profile

State Bank of Mysore was established in the year 1913 as Bank of Mysore Ltd. under the patronage of the erstwhile Govt. of Mysore, at the instance of the banking committee

headed by the great Engineer-Statesman, Late. Subsequently, in March 1960,the Bank

became an Associate of State Bank of India. State Bank of India holds 92.33% of shares.

The Bank's shares are listed in Bangalore, Chennai, and Mumbai stock exchanges.

BranchNetwork

The Bank has a widespread network of 707 branches(as on 31.03.2011) and 22 extension

counters spread all over India which includes 5 Small and Medium Enterprises

Branches, 4 Industrial Finance branches, 3 Corporate Accounts Branches, 6

Specialized Personal Banking Branches, 10 Agricultural Development Branches,

3 Government Business branches, 1 Asset Recovery Branch and 8 Service Branches ,

offering wide range of services to the customers.

HumanResources

The Bank has a dedicated workforce of 9926 employees consisting of 3179 supervisory

staff, 6747 non-supervisory staff (as on 31.03.2011). The skill and competence of the

employees have been kept updated to meet the requirement of our customers keeping in

view the changes in the environment.

Organizational Setup

While the Chairman of State Bank of India is also the Chairman of the Bank, The

Managing Director is assisted by a Chief General Manager and 6 General Managers.

Management Committee of the Bank

Managing Director +91 80 22251855

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+91 80 22353480 Fax

080 22254753

Chief General Manager Ms. Hamsini

Menon

+91 80 22251570

Fax 080 22350563

General Manager (Operations) & Corporate

Development Officer

Mrs. Vijay Kumar

+91 80 22353487

Fax 080 22353478

General Manager &Group Executive (Agriculture &

MSME) Mr. K Lakshmisha

+91 80 22257149

Fax 080 22353494

General Manager & Group Executive(Corporate

Banking)

Mr. Saswata

Chaudhuri

+91 80 22353471

Fax 080 22355978

General Manager (Treasury and Finance & Accounts) &

Group Executive(Government Business)

Mr. Kalyan

Mukherjee

+91 80 22257149

Fax 080 22353494

General Manager (Technology &Risk Management) &

Group Executive (Personal Banking)

Mr. V

Pattabhiraman

+91 80 22352591

Fax 080 22356472

General Manager (Vig & Inspn)

+91 80 22255617

Fax 080 22350562

Financial Profile

The paid up capital of the Bank is Rs. 468 Millions as on 31.03.2011 out of which State

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Bank of India holds 92.33%. The net worth of the Bank as on 31.03.2011 is Rs.3099.47

Crores and the Bank has achieved a capital adequacy ratio of 13.76% as at the end of

31.03.2011. The Bank has an enviable track record of earning profits continuously and

uninterrupted payment of dividend since its inception in 1913. The Bank earned a net profit

of Rs.500.62 Crores for the year ended March 2011 and earning per share is at Rs.121.66

BusinessProfile

Total deposits of the Bank as at the end of March 2011 is Rs.43225 Crores and the

total advances stood at Rs. 34442 Crores which include export credit of Rs. 1260

Crores.The Bank is a major player in foreign exchange dealings also and has

achieved a merchant turnover of over Rs 34342.96 Crores and a trading turnover

of over Rs 37658.49 Crores for the year ended March 2011. Home Loan

ACHIEVEMENTS

YEAR

1913

The Bank was established as 'Bank of Mysore Ltd.'on the 19th May, and commenced its

business on the 2nd October 1913, under the patronage of His Highness the Maharaja of

Mysore, with an authorised capital of Rs.20.00 lakhs.

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1953

During the year, the Bank was appointed as an Agent of the Reserve Bank of India to

conduct Government business and treasury operations.

1959

With effect from the 10th September, the Bank was constituted as State Bank of Mysore as

a Subsidiary of the State Bank of India, under State Bank of India (Subsidiary Banks) Act,

1959

Enacted through an Act of Parliament, (Act No. 38 of 1959).

The bank has formulated schemes for

1. financing coffee planters/coffee traders against coffee curers certificate,

2. financing coffee traders,

3. coffee exporters and

4. Coffee curers who also engage in trading.

State Bank of Mysore has various deposit schemes to cater to the requirements of its

customers.

The Bank has also actively participated in all Government sponsored schemes and

contributed its share of financial assistance or the economically weaker sections through

DIR, IRDP, Prime Minister's Rojgar Yojna and SUME schemes.

The Bank has sponsored two Regional Rural Banks, Cauvery Grameena Bank and

Kalpatharu ameena Bank which have between them 202 branches for the growth of

agriculture and rural industries.

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The Bank, as part of the State Bank Group has been engaged in financing 551 since 1960

and introduced the concept of need based rather than security oriented finance and the

Entrepreneur scheme under which technically qualified persons were financed the entire

requirement up to Rs.2 lacks

The Bank has 3 specialized SSI branches to assist the SSI units and proposes to establish 3

more such 551 branches shortly.

The Bank has correspondent and agency arrangements all over the world and offers spot

services in 18 major approved currencies.

The Bank's computerized dealing room is equipped with state-of-the-art information net-

work for excellent services to the Bank's customers.

The Bank also proposed to open 21 NRI service centers to specially cater to the

requirements of NRI customers.

State Bank of Mysore handles a significant part of the day-to-day banking business of both

the Central and State Governments in the State of Karnataka and is a Banker to various

Public Sector Undertakings in various sectors of the Economy.

The Bank has been actively participating in welfare banking needs of the public through its

community services.

The Bank has set up social circles, a voluntary group of employees to conduct the

community service activities, at various centers.

The Bank is the proud recipient of the Rolling Trophy from the Red Cross Society of

Karnataka for 17 years in succession, till date, for having mobilized the maximum number

of blood donors each year, among Banking Institutions.

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The Bank has installed a Main Frame Computer in its Head Office which provides a useful

information system to the Management and mini computers at the Zonal Offices.

The Bank is a member of the society for worldwide Inter Bank Financial

Telecommunication (SWIFT) which was established to offer cost effective and fast

transmission of financial messages globally, 2 branches of the Bank are presently covered

under the scheme and an additional 15 branches are proposed to be covered under SWIFT

shortly.

1992

The State Government has also taken up vigorously 'ASHRAYA', a new housing scheme

for the weaker sections and 'VISHWA', a new rural and cottage industry scheme. A new

programme called 'AKSHAYA' has also been launched to help the children in primary

education. The Konkan Railway Project and the New Mangalore Port Project are also

progressing satisfactorily.

The Bank has also been assisting Small Scale industries by offering technology and

financial consultancy services to the units in its books, so as to enable them to overcome

the problems of technological obsolescence, marketing, management etc.

The Bank has been given a special annual award by the Karnataka Unit of the Indian red

Cross Society for the fourteenth time for having held the most number of voluntary bloods

Donation camps.

1994

Several important measures have been introduced in the busy season credit policy of

November 1993 and slack season credit policy of May 1994, announced by Reserve

Bank of India.

The Bank extended rehabilitation finance to 54 such units during the year under review.

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The Bank's STREE SAKTHI PACKAGE designed exclusively for women continued to be

implemented with full vigour.

The Bank also proposes to introduce Automated Teller Machines (ATM) and Electronic

Funds Transfer facility during the next year as a measure of offering state of the art

banking services to its customers.

2000

Mr. M. Sitarama Murty has been appointed as Managing Director, of the Bank.

Crisis has reaffirmed the A+ and P1+ ratings assigned to the bond issue and the CD

programme of the bank.

2001

State Bank of Mysore has opened a foreign exchange cell at its Hirehally Industrial estate

branch in Tumkur district to enable small-scale industrialists to manage their foreign

exchange transactions.

The Bank has closed its issue of unsecured non-convertible debentures after raising the

target of Rs 60 crore.

2002

Enters the market with a coupon of 6.4% per annum for its Tier-II capital bonds issue of

Rs.60cr on a private placement basis.

-Slashes interest rate on domestic term deposits and on NRE deposits by 25-50 basis points.

2003

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Considers new method of appraisal for lending to the agricultural sector more on the

lines of industrial credit given to trade and commerce. Declared a dividend of 40% on

equity capital for the year ended. Ties up with HMT Ltd and launches SBM-HMT Agri

Farm Scheme, to promote agricultural mechanisation in south India. Marti Udyog forges

alliances with SBM to offer car finance. Slashes floating home loan rates and the new loan

is as follows: maturities up to 5 five years, the rates would be 8 per cent, for maturities up

to 10 years, the rates would be 8.75 per cent on a floating rate basis and for above 10 years,

9.25 per cent. The fixed rate housing loans remained unchanged. Farm lending rate up to

Rs 50,000 was lowered to 9 per cent

-Inaugrated two branches in Hyderabad.

2004 -

SBM join hands with LTJD for tractor financing State Bank of Mysore has informed that

Shri M. Sitarama Murty, Managing Director of the Bank retired from the services on

December 31, 2003 on attaining super-annuation Mr. Vijayanand assumes charges as

Managing Director of the bank from 01/03/2004 -State Bank of Mysore has joined the Real

Time Gross Settlement Systems (RTGS) network that facilitates inter-bank funds

settlement on 22 July

2005

SBM unveils new single window system

2006

Mr. P.P. Pattanayak has assumed charge as Managing Director of the State Bank of

Mysore. Mr. Pattanayak was earlier Deputy Managing Director (DMD) and Chief Credit

Officer of the State Bank of India, Mumbai.

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SBM Mission:

A premier commercial Bank in Karnataka, with all India presence, committed to provide

consistently superior and personalised customer service backed by employee pride and will

to excel, earn progressively high returns for its shareholders and be a responsible corporate

citizen contributing to the well being of the society.

CHAPTER-4

ANALYSIS &INTERPRETATION

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HOUSING LOANS OF THE STATE BANK OF MYSORE

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Home Loan is a Secured Loan offered against the security of a house/property which is

funded by the bank’s loan, the property could be a personal property or a commercial

one. The Housing Loan is a loan taken by a borrower from the bank issued against the

property/security intended to be bought on the part by the borrower giving the banker a

conditional ownership over the property i.e. if the borrower is failed to pay back the

loan, the banker can retrieve the lent money by selling the property.

Home Loan Process

The house buying procedure may be easy or challenging. Most of the complications are

involved in getting the home loan sanctioned. Well, coming up with a home loan is an

efficient and smooth process, however, most people

Consider it to be frightening. This is because they don’t have a clear understanding about

the overall concept. The home loan process can be divided into the following steps-

Home Loan Process

1. First and foremost you need to fill up a home loan application form. The

information is more or less the same for all the banks. Generally, they ask for

information like professional details, personal details, information about liabilities

and assets as well as property details.

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2. After filling up the form you will have to go in for a face to face, personal

discussion. This allows the bank to gather additional details that you may have not

included in the application form.

3. Tens and thousands of people apply for home loans every day. Now, every loan

seems a risk to the bank and this is one of the reasons why it validates or confirms

the details you offer. The bank confirms all the details included such as your place

of employment, residential address, and work and residence telephone numbers, to

name a few. There are times when the banks can send its representatives to verify

the information included.

4. If the bank feels unconvinced with the credentials then it can reject your application

form and vice versa.

5. After the loan has been sanctioned you will receive an offer letter including the

following information- interest rate, loan amount, Loan tenure, repayment mode,

terms and conditions of the loan, whether variable or fixed interest rate is associated

with a reference rate or not and other special conditions

6. Now, the bank focuses on the property you plan to purchase. After you have chosen

your property, make sure to submit all the original property documents to the bank

Home Loan Eligibility

Are you searching for a housing loan in India? Well, if that’s the case, then you need to

take into consideration innumerable criteria in order to avail a home loan. In general, home

loan eligibility (for Indians) is based on the repayment potential of the applicant. The

maximum loan amount that is sanctioned differs from one bank

To the other and usually the amount granted is somewhere between 80-85% of the overall

cost of the house. Let us now take into account the home loan eligibility criteria for

Indians.

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1. The financial stability of the applicant is the first factor that is taken into

consideration. Financial profile comprises of other details on assets, past loan

records (if any) together with a couple of investment details.

2. The next factor that is taken into consideration is the monthly income of the

applicant. In fact, monthly incomes are considered to be a viable factor that will

help you get a home loan. In other words, it helps determine the capacity of your

installments payment. In general, an applicant has to pay thirty to forty percent of

this monthly income as the installment. This percentage can also come down if you

have other installments or loans. For example, if you need to pay TV installments

or vehicle loan then the eligibility for home loan gradually comes down.

3. The applicant as well as the co-applicant needs to submit his or her professional

details as well. The bank takes into account what profession you belong to so as to

determine whether you will be able to pay the installments comfortably or not. In

general, they are keener to provide the loan to people engaged in an organization

over the business class.

Home Loan Documentation

Housing loan is the finance taken for buying or modifying a real estate property. Home

Loans, Home extension loans, home improvement loans, NRI Loans and home equity loans

fall under the category of housing loans. Any Non Resident Indian, NRI planning to buy a

house in India can apply for a Home loan.

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The Documentation required to be submitted by the NRIs are different from the Resident

Indians as they are required to submit additional documents, like copy of the passport and a

copy of the works contract. Another important Documentation required while processing

an NRI home loan is the power of attorney (POA).

The Documentation needed for obtaining NRI home loans are:-

• Passport and Visa

• Bank Statements for the last six months

• A copy of the appointment letter and contract from the company employing the

applicant

• Salary certificate, in English specifying name, date of joining, designation and

salary details

• The labor card or identity card, translated in English and countersigned by the

consulate if the person is employed in the Middle East

Property Documentation needed for obtaining NRI home loans are:-

• Original title deeds tracing the title of the property for a minimum period of the last

13 years

o Approved plan / license

o Copy of approved drawings of proposed construction

o Encumbrance Certificate for the last 13 years

o Receipts for payments made for purchase of the dwelling unit

o Agreement of sale /construction, if any

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o Receipts for having invested the margin money through normal banking

channels from the Non-Resident External account in India or the Non-

Resident Ordinary account in India

o Allotment letter from the co-operative society of apartment owners

o Agreement for sale cost estimate from Architect for property to be

purchased

o Latest tax paid receipt

Home Loan Settlement

Buying a dream home is one of the most significant investments in a person’s life. Home

buying involves certain steps like loan appointment, loan application, approval of loan,

loan amount offered, submission of documents, and loan settlement. Home loan settlement

is the last step in the home buying procedure where the loan amount will be offered and

ownership of the property will be legally transferred to the buyer.

Home Settlement Process

The home loan procedure starts when the buyer makes an appointment with the lender and

applies for a loan. The lender and buyer talk on different mortgage types, interest rate, loan

tenure, and other related things. After this, the buyer needs to produce documents as proof

of his identity and to substantiate his repaying capacity, which includes birth certificate,

driver’s license/voter card/PAN card, last 3 months’ pay slip (for salaried individuals), tax

returns, bank statement of last six months, and other property related documents (if any).

After verification of all necessary documents, the loan is approved and offered. Home loan

settlement is the ultimate step in completion of the home buying procedure and transfers

the ownership right to the buyer. Home loan settlement generally takes place within four to

six weeks from the date when the loan is officially approved.

Types

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• Home Purchase Loans

• Home Construction Loans

• Home Improvement Loans

• Home Extension Loans

• Home Conversion Loans

• Land Purchase Loans

• Stamp Duty Loans

• Bridge Loans

• Balance Transfer Loans

• Refinance Loans

• Loans to NRIs

•

HomePurchaseLoans:

This is the basic home loan for the purchase of a new home.

HomeConstructionLoans:

This loan is available for the construction of a new home on a said property. The

documents that are required in such a case are slightly different from the ones you submit

for a normal Housing Loan. If you have purchased this plot within a period of one year

before you started construction of your house, most HFCs will include the land cost as a

component, to value the total cost of the property. In cases where the period from the date

of purchase of land to the date of application has exceeded a year, the land cost will not be

included in the total cost of property while calculating eligibility.

HomeImprovementLoans:

These loans are given for implementing repair works and renovations in a home that has

already been purchased, for external works like structural repairs, waterproofing or internal

work like tiling and flooring, plumbing, electrical work, painting, etc. One can avail of

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such a loan facility of a home improvement loan, after obtaining the requisite approvals

from the relevant building authority.

HomeExtensionLoans:

An extension loan is one which helps you to meet the expenses of any alteration to the

existing building like extension/ modification of an existing home; for example addition of

an extra room etc. One can avail of such a loan facility of a home extension loan, after

obtaining the requisite approvals from the relevant municipal corporation.

HomeConversionLoans:

This is available for those who have financed the present home with a home loan and wish

to purchase and move to another home for which some extra funds are required. Through a

home conversion loan, the existing loan is transferred to the new home including the extra

amount required, eliminating the need for pre-payment of the previous loan.

LandPurchaseLoans:

This loan is available for purchase of land for both home construction or investment

purposes

StampDutyLoans:

This loan is sanctioned to pay the stamp duty amount that needs to be paid on the purchase

of property.

BridgeLoans:

Bridge Loans are designed for people who wish to sell the existing home and purchase

another. The bridge loan helps finance the new home, until a buyer is found for the old

home.

BalanceTransferLoans:

Balance Transfer is the transfer of the balance of an existing home loan that you availed at

a higher rate of interest (ROI) to either the same HFC or another HFC at the current ROI a

lower rate of interest.

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Re-financeLoans:

Refinance loans are taken in case when a loan for your house from a HFI at a particular

ROI you have taken drops over the years and you stand to lose. In such cases you may opt

to swap your loan. This could be done from either the same HFI or another HFI at the

current rates of interest, which is lower.

NRIHomeLoans:

This is tailored for the requirements of Non-Resident Indians who wish to build or buy a

home or property in India. The HFCs offer attractive housing finance plans for NRI

investors with suitable repayment options.

1. Lending Scheme:

1. SBM-FLEXI HOME LOAN

2. SBM-REALITY HOME LOANS

3. SBM-FREEDOM HOME LOANS

Purpose of State Bank of Mysore home loans

You can take out a home loan from State Bank of Mysore and use it for any of the

following purposes according to your own convenience:

• Renovation/maintenance/extension of current home

• Purchase/construction of a new flat/house

• For purchasing houses which are not older than 15 years

• For purchasing land for building houses within a period of 2 years

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• For purchasing consumer durables and furniture and fixtures as a component of the

project cost

• Housing loan against 2nd charge

Amount of loan

for loan amount of all types, the maximum amount of loan you can avail is 40-60 times

your monthly income, subject to your repayment ability as percentage of Net Monthly

Income as follows:

Net Annual Income EMI/NMI Ratio

Up to Rs. 2.00 lakhs 40%

Over Rs. 2 lakhs to Rs. 5 Lakhs 50%

Over Rs. 5 lakhs 55%

Sanctioning of the loan :

Individual once 21 years of age with a steady source of income including persons Engaged

in agriculture and allied activities.

Disbursement of loan:

Loan amount is given as per the age and income of the borrower.

Age of the borrower:

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Designation up to 45 years 45

Salaried 60 times net monthly income 48 times net monthly

Income

Others 5 times net annual income 4 times net annual

Income.

Margin for State Bank of Mysore home loan

the margin for State Bank of Mysore home loans is as follows:

Loan Amount Margin (%)

Up to Rs. 30 lakhs 20%

Over Rs. 30 lakhs to 75 lakhs 20%

Over Rs 75 lakhs to 1.00 Crore 25%

Over Rs 1.00 crore 40%

Maximum repayment period for State Bank of Mysore home loans:

Age Repayment term

In case of individuals under 35 years of age 25 years



Recovery:

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In equal monthly installments

Up to 45 years of age −20 years

Above 45 years of age −15 years

The processing charge is 0.30% of the loan amount

The repayment penalty :

• Loan on fixed and floating interest rates 2% penalty on the amount prepaid

In excess of normal EMI due should be levied in respect of pre-closure of

Housing loan before expiry of half the original tenure.

• Volume house loan disbursal is 46,30,000 to the public has 105 a/c in the

bank.

• Major rate is fixed the staff has 37 a/c that amounts to Rs.46,11,000/-

• Repayment of loan starts from 6 months – 11 months in case of construction

of house and purchases of house incase of fixed rate and in case of floating rate

the repayment is 18-36 months.

• Usually the loan is sanctioned to only salaried and business people.

The difference of SBM housing loans compared to other bank is mainly on the rate

of interest may be high or low in private banks but not nationalized banks. The rate

of SBM is usually less compared to that me other banks. The interest rates for

housing loan are put forward to the bank by RBI.

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Housing loan from SBM is linked to two lines of insurance: - Property (Value

on building)

Borrower (Under SBI life insurance) (for outstanding of borrow 3, 00,000 Under

SBI

Processing charges

Loan Amount Processing Charges (w.e.f. 01.06.2011)

Up to Rs 25 Lacks 0.25% of loan amount, with a minimum of Rs 500/-

Above Rs 25 Lacks and up to Rs 75

Lacks

Rs 10,000/-

Above Rs 75.00 Lacks Rs 20,000/-

Charges in Home Loan

Charges Involve in home loan India – Acquiring a Home Loan doesn’t only involve the

cost of home loan interest rates but it also includes other charges & fee accompanying at

various stages of taking the Home loan. You must consider all these charges while

comparing the cost structure across banks. Following is the detailed fee structure incurred

by banks at different loan stages:

• Processing Charge: It is a fee payable at the time of submitting the loan application to

the bank which is normally non-refundable. The fee ranges between 0.5 per cent and 1 per

cent of the loan amount.

• Administrative Fee: It is a fee incurred by banks at the time of loan sanction; there are

few banks who have removed this fee so you must check it with all the banks.

• Prepayment Penalties: When the borrower pre-pays the loan before the loan tenure,

banks charge a penalty which usually varies between 1 per cent and 2 per cent of the pre-

paid amount.

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Home Improvement Loan

With the mounting demand of the concept of ‘living in style’ teamed with the growth in the

realty sector home improvement loan system has gained importance to complement with

the modish requirement. The home improvement loan is a specially designed loan system

which caters to the need of the homeowner in improving,

Restoring or renovating their existing homes. With a fixed rate of interest the home

improvement loan program offers adequate scope to the homeowner whilst turning their home into their dream homes with the necessary improvements and remodeling.

Very interesting trait of the home improvement loan scheme which makes it little different

from the other varied loan options that are available in the market is that this particular loan

system does not require the home’s equity to be placed as the collateral in order to permit

the borrower to avail the loan. On the contrary the homeowner who has even just purchased

a house can also apply for this home improvement loan system to attend his financial needs

for home improvements.

Home Equity Loan

Home is not only the place where you live but perhaps also the most valuable financial

asset. It provides you a shelter as well as a comfortable place where you can shape your

dream for a truly respectable life. At the same time it can be an overt statement to your

wealth, social status and prosperity. The financial value of your home is significant in

providing loans and fulfilling your refinancing needs. A home equity loan is one such loan

where you use your home's equity as the collateral or security to get a fund from a bank or

finance company.

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Home equity loan is different from ordinary home loans in that it is taken for the varied

requirements of a homeowner. While home loan is procured to buy a housing structure,

home equity loan is obtained for purposes like home improvements, remodeling, debt

consolidation, restoration, college education and for meeting several other expenses. Home

equity loan, for this reason, is also known as second mortgage, as it permits one to make

use of his/her home's equity into cash in order to fulfill various requirements.

Interest rates put forward by RBI

Up to 5 years above 5 years9.75% Fixed 10% Fixed

9.75% Floating 10% Floating

Types of Home LoanInterest Rate:-

1) Fixed Interest Rate:

A rate which is set In-advance or which is pre determined for entire term of Home Loan.

Let's take an Example:

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Mr. X has a taken home loan from ABC Bank of Rs. 25 lakhs for 20ys. at an interest rate of

11.50% pa.

Then his EMI will be Rs. 26661 which he needs to pay for entire term of loan that is 20

years

please note that most of the fixed home loan interest rates products available in the market

are not fully fixed. Most of them come with a reset clause of 3 to 5 years. This means that

the interest rates can be reset after a period of every 3 to 5 years (as mentioned in the loan

document).

.

2) Floating Interest Rate:

A rate which is linked to a benchmark rate or the base rate of the bank or the financial

institution. The floating home loan interest rate will change as and when the bank will

change its benchmark rate or the base rate.

Let's take an

Example:

Mr. Y takes a floating

Floating Interest Rates for housing loans have been revised with effect

from 01.01.2008. There is NO CHANGE IN THE FIXED RATE OF

INTEREST.

Fixed Rate of Interest

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http://www.apnapaisa.com/loan/home-loan-india/interest-rates.html

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Repayment PeriodRate of interest (%)

(wef 01.04.2008)

Up to 5 years 12.75

Above 5 years up to 15years 12.75

No Fixed Rates above 15 years

Floating Rate of Interest (with effect from 01.04.2008)

Schemes and Interest rates are subject to changes from time to time.

SBM Base Rate in respect of all advances (other than certain exempted categories):

10.50 %( w.e.f 01-11-2011)

SBM Prime Lending Rate- SBMPLR-15.25%( w.e.f 01-11-2011)

Repayment PeriodUp to Rs. 20 lacks

(limit)

Above Rs.20 lacks

(Limit)

Up to and inclusive 5 years 3.25% below PLR

10.00% p.a

3.00% below PLR

10.25% p.a

Above 5 years up to 10 years

(inclusive)

3.00% below PLR

10.25% p.a

2.75% below PLR

10.50% p.a

Above 10 years up to 15 years

(inclusive)

2.75% below PLR

10.50% p.a

2.75% below PLR

10.50% p.a

Above 15 years up to and

inclusive of 20 years

2.75% below PLR

10.50% p.a

2.50% below PLR

10.75% p.a

Above 20 years up to and

inclusive of 25 years

2.75% below PLR

10.50% p.a

2.50% below PLR

10.75% p.a

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RATES OF INTEREST WITH EFFECT FROM 4th May 2012.

PERIOD RATE OF INTEREST (%)

Up to

Rs.15 lacks

Above Rs.15. lacks

7 Days to 14 days ------ 8.50

15 days to 45 days 6.25 8.50

46 days to 90 days 6.50 8.50

91 days to 179 days 8.00 8.50

180 days to 299 days 8.50 8.50

300 days 8.50 8.50

301 days to less than 1 year 8.50 8.50

1 year to less than 500 days 9.25 9.25

500 days 9.25 9.25

501 days to less than 2 years 9.25 9.25

2 years to less than 909 days 9.25 9.25

909 days 9.25 9.25

910 days to less than 3 years 9.25 9.25

3 years to less than 5 years 9.25 9.25

5 years and above 9.25 9.25

The above deposit rates are applicable for deposits of below Rs1.00 Crore. For deposits of

Rs.1.00 crore and above branches have to refer to Finance & Accounts department for rates.

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Quantum of Loan amount

Up to Rs. 2.00 lacks : 40% EMI

Above Rs. 2 lacks to Rs. 5 Lacks : 50% EMI

Above Rs. 5 lacks : 55% EMI

Rate of Interest

Float Interest Rate : 9.25

Float EMI : 18317.0

Tenure : 20

Charge for Changing Fixed to Floating: Rs 1000

Documents required in Home Loan

• Generally the documents required to processing your loan application are almost

similar across all the banks; however they may differ with various banks depending

upon specific requirement etc. Following documents are required by financial

institutions to process the loan application:

• Age Proof

• Address Proof

•Income Proof of the applicant & co-applicant

• Last 6 months bank A/C statement

• Passport size photograph of the applicant & co-applicant

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In case of Salaried

• Employment certificate from the employer,

• Copies of pay slips for last few months and TDS certificate

• Latest Form 16 issued by employer Bank statements

In case of Self-employed

• Copy of audited financial statements for the last 2 years

• Copy of partnership deed if it is a partnership firm or copy of memorandum of

association and articles of association if it is a company

• Profit and loss account for the last few years

• Income tax assessment order

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STUDY COMPARING SBM HOUSING LOAN WITH THAT OF ING

Vysysa:

SBM

• The lending schemes are SBM-flexi, SBM-reality and SBM-freedom

home loans

ING Vysysa

• The lending schemes are for the NRI’s and the residents.

SBM

• Sanctioning of the loans are for the individuals once 21 yrs with a

steady income.

ING Vysysa

• Sanctioning of the loans are for the individuals once 21 yrs with a

annual income of 15000.

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SBM

• Disbursement is based on the income and age of the customer .

ING Vysysa

• Disbursement is based on the income of the customer .

SBM

• The processing charge is 0.30% of the loan amount.

ING Vysysa

•

The processing charge is 0.50% of the loan amount.

SBM

• The repayment penalty on the fixed and floating loan is 2%

ING Vysysa

• The repayment penalty on the loan is 3%

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SBM

• The volume of house loan disbursal to the public is 105 accounts and

that of the staff are 37 and the amount given to them is Rs 4630000

for the public and Rs 4611000 for the staff.

ING Vysysa

• The home loan account disbursed was 1967 in the general that is for

the public and staff

SBM

• Loans are sanctioned to the salaried and business people.

ING Vysysa

•

Loans are sanctioned to the self employed professionals and non professionals.

SBM

• They provide insurance for the property and the borrower.

ING Vysysa

• They provide insurance for the property only.

SBM

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• The interest rates up to 5 years is 8.5% for fixed and 7.75% for the

floating and above 5 years its 8.5% for fixed and 8.25% for floating

ING Vysysa

• For the amount Rs 1500000 for 5-20 years the rate is 8.75% and

above Rs 1500000 for 5-20 yrs the rate is 9%.

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ANALYSIS

TABLE -4.1

To study the performance of housing loan in SBM

Age group of the respondents

AGE NO.OFRESPONDENTS

PERCENTAGE

Below 35 8 32

35-55 12 48

Above 55 5 20

Analysis:

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The above graph shows that below the age 35 they are the people who take the normal

loans where as age 35-55 are the maximum and above 55 takes the least

Bar diagram showing Age group of the respondents

Interpretation:

The analysis is that the people between the age 35-55 years all the main customers who opt

for house loans. Then comes the workers below age 35 years who opt for house loan the

lowest house loans opted is from the age group above 55 years.

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TABLE- 4.2

Sex of the respondents :

SEX RESPONDENTS PERCENTAGE

MALE 19 76

FEMALE 06 24

ANALYSIS:

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It’s mainly males who take up loans for the i.e. family out of the respondents taken

into consideration 19 are males and its just 6 those who are females

Figure-4.2

SEX OF THE RESPONDENTS

19, 76%

6, 24%

MALE

FEMALE

Interpretation:

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The analysis out of the 100% of respondents &^% are males who taken housing loans or

willing to take and its just 24% of females who would opt to take loans or who have

already taken the loan

TABLE-4.3

Designation

DESIGNATION RESPONDENT PERCENTAGE

SELF-EMPLOYED 4 16

SALARIED 15 60

OTHERS 6 24

Analysis:

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The graph shows that the self employment is 4 in numbers, salaried is 15 in numbers and

others are 6 in numbers

Figure-4.3

DESINATION OF THE

RESPONDENTS

4

15

6

SELF

EMPLOYED

SALARIED

OTHERS

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Interpretation:

The analysis is that the salaried people prefer taking housing loans then the self employed

and the others. It consists of 60% of salaried people taking up the loan then comes the

others 24% and finally the self employed with 16%..

TABLE-4.4

Retirement Period

RETIREMENT PERIOD RESPONDENTS PERCENTAGES

1-3 Years 5 20

4-5 Years 5 20

Above 10 Years 15 60

Analysis

In the retirement period 1-3 years only 5respondents, 4-5 years its again 5 respondents and

finally in the retirement period years it’s the maximum 15 respondents

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Figure-4.4

0

2

46

8

10

12

14

16

RESPONDENTS

RETIREMENT PERIOD

1-3 Years

4-5 Years

Above 10 Years

Interpretation:

This indicates that people with retaining period of 1-3 years have opted just 20% of the

entire 100% housing loan it’s the same with 4-5 years of retirement period people in spite

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of 60% of the retirement period people is above 10 years only 20 years have opted for

housing loans and the rest 40% have not opted for housing loan.

TABLE-4.5

Annual income of the respondents

ANNUAL INCOME RESPONDENTS PERCENTAGE

Less than 3 lakhs 10 40

3-5 lakhs 11 44

Above 5 lakhs 4 16

Analysis:

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The maximum no. of respondents is with the annual income of 3-5 lakhs and the next is

with less than 3 lakhs and finally it’s above 5 lakhs.

Figure-4.5

ANNUAL INCOME OF THE

RESPONDENTS

10

11

4

Less than 3 lakhs

3-5 lakhs

Above 5 lakhs

Interpretation:

Table 4.5 shows the maximum no. of people opting for housing loan. People with salary

less than 3 lakhs opt for 40% housing loans which are 40%. those with the annual income

between 3-5 lakhs the survey was held for 44% out of which 20% have opted for house

loans as the rest 24% have not opted for it and people with more than 5 lakhs have not

opted for housing loan and that is the least percentage i.e. 16%

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TABLE:4.6

Annual savings of the respondents

ANNUAL SAVINGS RESPONDENTS PERCENTAGE

Less than 1 lakhs 10 40

1-2 lakhs 13 52

Above 4 lakhs 2 8

Analysis:

The graph depicts that the respondents with an annual savings of Less than 1 lakhs is 10 in

no’s , 1-2 lakhs is 13 in no’s and above 4 lakhs is the least with 2 in nos.

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Figure-4.6

10

13

2

0

2

4

6

8

10

12

14

RESPONDENTS

Less than 1

lakhs

1-2 lakhs

Above 4 lakhs

Interpretation:

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This shows that the individuals with annual savings 1-2 lakhs opting for more housing

loans than that of people with annual income and less than 1 lakh in the second place and

finally with the individuals with annual income of 4 lakhs do not prefer taking up housing

loan.

TABLE-4.7

HOME LOANS TAKEN:

HOMELOANS OPTED R ESPONDENTS PERCENTAGE

YES 15

60

NO

10

40

Analysis:

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This pie chart represents how many of the respondents have opted for the housing loans

and how many have not. The number of respondents opted for housing loans is more

compared to that of those who have not opted.

Figure-4.7

HOME LOANS TAKEN

15

10

YES

NO

Interpretation:

Out of the respondents whop have taken into consideration only 60% have opted for the

loan and the rest have not opted for the loan.

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TABLE-4.8

Interest rates

INTEREST RATES RESPONDENTS PERCENTAGE

HIGH 2 8

LOW 2 8

ACCEPTABLE 11 44

Analysis:

The interest rates are very much acceptable by the customers

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Figure-4.8

INTEREST RATES

2

2

11

HIGH

LOW

ACCEPTABLE

.

Interpretation:

This indicates out of the 60% who have opted for the housing loan says that the interest

rates are 44% acceptable and 8% each for high and low which states that the loan rate are

acceptable in a modular manner by every individual.

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TABLE-4.9

RECOVERY OF LOANS

RECOVERING LOANS RESPONDENTS PERCENTAGE

RIGID 1 4

MODERATE 9 36

FLEXIBLE 3 12

EASY 2 08

Analysis:

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The ways of recovering the loan by the bank from the customers are moderate.

Figure-4.9

1

9

3

2

0

1

2

3

4

5

6

7

8

9

RESPONDENTS

RIGID

MODERATE

FLEXIBLE

EASY

Interpretation:

Out of the 60% individuals who have opted for housing loans states that way of recovering

the loan is the highest 36% in a moderate way then it’s flexible with 12%. Few people

i.e.8% feel the way of recovering the loan is easy and finally with 4% is the rigid of

recovering the loans so this means that it is the moderate way which is preferred to.

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TABLE-4.10

Sanctioning of the loan:

Sanctioning of the loan RESPONDENTS PERCENTAGE

less than 1 week 04 26

1-2 weeks 8 54

above 2 weeks 03 20

ANALYSIS

This GRAPH represents how many of the respondents have opted for the housing loan

graph shows how much time is taken by the bank to sanction the loan . The graph shows

that 4 respondents loan is sanctioned within 1 week and for 8 respondents the loan is

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sanctioned within 1-2 weeks and for the 3 respondents the loan is sanctioned above 2

weeks

Figure-4.10

0

10

20

30

40

50

60

RESPONDENTS

less than 1

week

1-2 weeks

above 2 weeks

INTERPRETATION:

Out of the 26% individuals who have opted for housing loans states that time of

sanctioning the loan is 1 week , 54% in time of 1-2 weeks then its above 2 weeks for the

20%.so this means that the average time taken by the bank to sanction the loan is 1-2

weeks.

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TABLE 4.11

Tenure of the loan

Tenure of the loan RESPONDENTS PERCENTAGE

12 months- 24 months

3

20

4 months-36 months

4

26

Above 36 months

8

54

ANALYSIS

This GRAPH represents how many of the respondents have opted for the housing loan

graph shows how much tenure period is sanctioned by the bank to the customer. The graph

shows that 3 respondents loan is sanctioned for a tenure period of 12 months- 24 months,

for 4 respondents the loan is sanctioned for a tenure period of 24 months- 36

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Months and for 8 respondents the loan is sanctioned for a tenure period of above36

Month

Figure-4.11

3

20

4

26

8

54

R E S P O

N D E N T S

P E R C E N T A

G E

Above 36 months

4 months-36 months

12 months- 24 months

INTERPRETATION:

Out of the 20% individuals who have opted for housing loans states that tenure period of

sanctioning the loan is12 months- 24 months, 26% respondents states that tenure period of

sanctioning the loan is 24 months- 36 months and for the 54% tenure period of sanctioning

the loan is above 36 months .so this means that the tenure period of sanctioning the loan is

most of the time above 36 months by the bank.

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TABLE-4.12

Terms and conditions

TERMS AND

CONDITIONS

RESPONDENTS PERCENTAGE

RIGID

3 12

MODERATE

7 28

FLEXIBLE

3 12

EASY

2 08

Analysis:

The terms and conditions of housing loans are also moderate to the customers of the bank.

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Figure-4.12

TERMS & CONDITIONS

3

7

3

2

RIGID

MODERATE

FLEXIBLE

EASY

Interpretation:

In this case the terms and conditions are moderate to almost 28% out of the

60%who have taken the loan and at the same time is 12% rigid and flexible for the

terms and conditions whereas its only 8% for the term and conditions to be easy to

the individuals opted for it

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TABLE-4.13

DIFFICULTY IN PAYING BACK THE LOANS

DIFFICULTY IN

PAYING BACK THE

LOANS


YES

1 4

NO

14 56

Analysis:

The difficulty in paying back the loan by the customers who have taken the loan is just 1

respondent but that of those who have no difficulty is 14 respondents out of the 15

respondents who have taken up the loan

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Figure-4.13

DIFFICULTY IN PAYING BACK THE

LOANS

1

14

YES

NO

Interpretation:

This shows that 56% opted for hosing loans has no difficulty in paying back the loan

amount in time which shows that the scheme is effective for each individual.

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TABLE: 4.14

KNOWLEDGE ABOUT THE LOAN

KNOWLEDGE

ABOUT THE LOAN


ADVERTISEMENTS 10 40

JOURNALS 1 4

WORD OF MOUTH 3 12

OTHERS 1 4

Analysis:

Most of the respondents came to know about the housing loans through advertisements and

then word of mouth, journals and others. This shows that any new scheme of loan is put

forward it should be advertised so that people will be aware of it and opt for it.

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Figure-4.14

10

1

3

1

0

2

4

6

8

10

12

RESPONDENTS

ADVERTISEME

NTS

JOURNALS

WORD OF

MOUTH

OTJHERS

Interpretation:

It is always better to go by the advertisements which bank is better to opt for the home

loan.

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TABLE-4.15

INTENTION TO OPT

INTENTION TO OPT RESPONDENTS PERCENTAGES

DESIRE TO OWN A

HOUSE

8 31

SHORT FALL OF

RESOURCES

1 04

TAX PLANNING 6 24

Analysis:

The desire to own a house is made the individual to take loans and then tax planning has

also influenced in making the individuals to take loans and the least effective was short fall

of resources

Figure-4.15

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INTENTION OF THE CUSTOMER

8

1

6

DESIRE TO

OWN A HOUSE

SHORT FALL

OF

RESOURCES

TAX

PLANNING

Interpretation:

It is analyzed that desire to own a house by the customer the main intention to opt the loan.

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TABLE-4.16

SATISFACTION

SATISFACTION RESPONDENTS PERCENTAGE

YES 10 40

NO 0 0

CAN’T SAY 05 20

Analysis:

This diagram shows that the respondents are very much satisfied with the housing loan and

few are not able to say whether they are satisfied or not. So that we can conclude that most

of them are satisfied

Figure-4.16

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10

0

5

0

1

2

3

4

56

7

8

9

10

RESPONDENTS

YES

NO

CAN’T SAY

Interpretation:

There is no problem with the loans that is opted by the customers few are satisfied with

them.

TO STUDY THE POTENTIALITY WHERE NON CUSTOMERS

WOULD PREPER TO OPT FOR THE LOAN:

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TABLE-4.17

Intention to opt for the loan (non customer)

Intention to opt for the

loan.


Desire 6 24

Tax planning 8 32

Short fall of resources 11 44

ANALYSIS

This GRAPH shows the intention for the respondents to opt for the loan .The graph shows

that 6 respondents has intention to opt for loan for desire , for 8 respondents the intention to

opt for loan is tax planning and for 11 respondents the intention to opt for the loan is to

cover up with short fall of resources

Figure-4.17

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0

2

4

6

8

10

12

Desire Short fall

of

resources

RESPONDENT

S

INTERPRETATION:

The graph shows that 24% respondents has intention to opt for loan for desire , for 32%

respondents the intention to opt for loan is tax planning and for 44% respondents the

intention to opt for the loan is to cover up with short fall of resources. So this means that

the intention for the individuals to opt for the loan is tax planning to some extent as well as

to cover up their short fall of resources.

TABLE-4.18

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NON CUSTOMERS PREFERANCE TO OPT FPR THE LOANS IN

THE FUTURE:

PREFERANCE RESPONDENTS PERCENTAGE

BANKS 7 28

LIC 2 8

GE FINANCE 0 0

BIRLA HOUSING

FINANCE

1 4

Figure-4.18

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7

2

0

1

0

1

2

3

4

5

6

7

RESPONDENTS

BANKS

LIC

GE FINANCE

BIRLAHOUSING

FINANCE

Analysis and Interpretation:

This diagram shows the number of respondents who not housing loan but where they

would prefer to opt, 7 individuals prefer to opt bank, 2 in LIC and 1 in Birla housing

finance. The previous diagram shows the percentage where 60% has already opted for

housing loan and this chart shows that the remaining 40% who has not opted were, 28%

opted for banks ,8% for LIC and 4% for Birla housing finance so this indicates that banks

always remain in the fruit portion in case of housing loan that are opted and yet to be opted

by the individuals. Whereas no one would prefer to opt GE finance.

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TABLE-4.19

RECOMMENDATION TO POTENTIAL CUSTOMERS

RECOMMEND RESPONDENTS PERCENTAGE

BANKS 18 72

LIC 6 24

GE FINANCE 0 0

BIRLA HOUSING

FINANCE

1 4

Figure-4.19

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18

6

01

0

2

46

8

10

12

14

16

18

RESPONDENTS

BANKS

LIC

GE FINANCE

BIRLA HOUSING

FINANCE

Analysis& INTERPRETATION:

The diagram shows which institutions each individual would prefer to recommend to the

others. The main recommendation goes to the bank with 18 respondents then comes LIC

with 6 respondents, Birla housing finance with 1 respondents and GE finance with nil. The

chart shows the total percentage banks takes 72%, LIC with 24% and Birla housing finance

with 4%, this shows that if any one would prefer to avail housing loan it is better to go to

the banks rather than any other institutions

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CHAPTER -5

Findings conclusions &Recommendations

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FINDINGS

The housing loan customers are between the age group of 35-55 years. It shows that

not the too young and too old prefer taking housing loans

Males are the usual customers , women usually do not prefer taking loans unless

there spouses are not in the place at the time of taking the loan

It is understood that the salaried people are more in number to take-up housing loan

compared self-employed and other categories people having a retirement period

above10 years take housing loan than that of people to retire in the next 5 years

Annual income of 3-5 lakhs prefer taking housing loan out of that those who save

1-2 lakhs annually take up housing loan in spite of having comforts like vehicle,gold yet people take housing loan

Out of the respondents who have been asked whether they have taken up housing

loans 60% of them said yes, they have opted the rest have not taken up the loan.

The interest is acceptable in case of SBM

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The mode of recovering loans and the terms and conditions of SBM are moderate.

There is not much difficulty in paying back the loan taken by the respondents.

The main intention for the customer to take up housing loan is the desire to own a

house while some of them have taken up the loan as tax planning and very few of

i.e. 14% have taken up due to short fall of resources. The respondents are satisfied

with the scheme they have opted.

People who have taken up the loan that is 40% would prefer to take the loan in case

they are in need from bank, rather than that of LIC, GE finance, Birla housing

finance.

This shows that they have their own brand name and customers do look at that

before they decide not the final acceptance.

As comparing with ING vysya they have schemes of housing loans for both NRI’s

and Indians where as in SBM there are loans for Indians not for NRI’s

NOTE:

Sanctioning of the loans is based on the customer’s income and age.

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For the loans taken up to 5 yrs the fixed rate is 8.5% and floating rate is 7.5% and

above 5 yrs the fixed rate is 8.5% and floating rate is 8.25% but in case of ING

vysya bank its upto to Rs. 15 lakhs for 5-20 yrs .the rate of interest is 9%

The processing fees in case of SBM are 0.3% of loan amount and incase of ING

vysya its 0.50% of amount loan.

The total volume of disbursal amount for housing loan in SBM for the public is

Rs.46, 300,000 with 105 accounts and in case of staffs its Rs. 4, 61,100 with 37accounts. The home loan disbursed was 1967 in general i.e. for the public and staffs

in ING vysya

The repayment penalty in SBM is 2% and in ING vysya it is 1%.

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CHAPTER-6

RECOMMENDATIONS

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The income might not be steady below the age of 35 and above 55 years. So

loans cannot be sanctioned in case of SBM.

But in case a customer has an income of Rs. 1, 50,000 he is been sanctioned

home in ING vysya which shows that to some extent it is better for customers to

opt their home loans from ING vysya.

If the customers are personally told the services rendered to them rather thanadvertisement based on the hame loans it will be better for them to opt the best,

SBM is better in this case.

The interest rate is reasonable and sanctioned by RBI sit is better to opt SBM

loans

The processing fees is less in SBM so its preferred by the customers to opt their

housing loans from SBM.

The loans are linked to insurance like properties and borrowers which is an

advantage in case of SBM housing loan compared to that of ING

vysya housing loans which provides insurance only for the property.

The accounts sanctioned for SBM is 142 and ING Vysya is 1967 which shows

the ING Vysya bank provides more housing loan accounts.

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The best option for taking housing loan is SBM as it provides more facility than

compared to the other bank. That is related to interest rate mobilizing of the

deposits and processing rates.

CONCLUSION

The project titled “EVALUATION OF HOUSING LOAN” in SBM was

undertaken to assess the performance and functioning of home loans.

A survey was conducted through questionnaire to find out the customers who have

taken up the loan, where they prefer to take the loan in case they have not opted for

it and where they recommend rather potential customers to opt for the loan. A

comparision was conducted with ING vysya to know which bank provides best

facilities.

All in all the survey undertaken proved to be very interesting and highly involving.

It is hoped that the findings and recommendation will prove use full to the banks

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BIBLIOGRAPHY

TEXT BOOKS :

Financial management - Paasanna Chandra

Financial markets and institutions - Bhole

Indian financial system - Vasant desai

Theory and practices of banking - B.S. Raman

Financial markets and services - Gordon & Natarajan

WEBSITES:

www.statebankofmysore.co.in

www.google.com

www.sebi.com

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http://www.statebankofmysore.co.in/

http://www.google.com/

http://www.sebi.com/

http://www.statebankofmysore.co.in/

http://www.google.com/

http://www.sebi.com/

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ANNEXURE

QUESTIONAIRE

I, RANGAPPA.T studying MBA 4TH SEM in IASMS with finance specialization is

carrying out a project work on the topic “EVALUATION OF HOUSING LOANS IN

STATE BANK OF MYSORE, Bangalore”. Kindly spend few minutes in filling up this

questionnaire.

1. Name: ______________________________________

2. Age:

Below 35 years 35-55 years above 55

3. Gender:

Male Female

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4. Designation:

Self employed salaried others

5. You are retiring within next………..

1-3 years 4-5 years above

10 years

6. Your annual income?

Below 3 lakhs 3-5 lakhs Above 5 lakhs

7. Your Annual savings?

Less than 1lakh 1-3 lakhs Above 3 lakhs

8. Have you taken up a housing loan?

Yes No

If yes, from which bank/institution __________________________________________

9. What do you feel about the interest rates of housing loan scheme?

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High Low Acceptable

10. Sanctioning of the loan

Less than 1 week 1-2 weeks above 2 weeks

11. Tenure of the loan.

12 Months-24 months 4 months-36 months Above 36

12. How do you feel about recovering the loan?

Rigid Moderate flexible Easy

13. How do you feel about the terms and conditions of the housing loan ?

Rigid Moderate flexible Easy

14. Was there any difficulty in repaying the loan amount?

Yes No

15. How do you come to know about housing loan of SBM?

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Advertisements

Journals

Others

If others, please specify ___________________________________________

16. Are you satisfied with the housing loan scheme you have opted for?

Yes No

17. Your intention to opt for the loan.

Desire Tax planning Short fall of resources

18. From where do prefer availing housing loan in the future?

Bank LIC GE finance Birla Housing Finance

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19. Where would you recommend potential customers to go for housing loans?

Bank Yes No

LIC Yes No

GE finance Yes No

Birla Housing Finance Yes No

20. Suggestions to improve your experience in availing housing loan

_________________________________________________________________________

_________________________________________________________________________

______________________________________________________________________

Thank you for your co-operation

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CONTENTS

1 INTRODUCTION 1- 31

2 RESEARCH

METHODOLOGY

32-37

3 COMPONY PROFILE 38-47

4 ANALYSIS AND

INTERPRETATION

48-110

5 FINDINGS 112-115

6 RECOMMENDATION 116-117

CONCLUSION 118

BIBLOGRAPHY 119

ANNRXURE120-124

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LIST OF TABLES

TABLES

NO.

TABLE TITLE PAGE

NO.

1. Tables showing the age group of respondents 73

2. Tables showing the sex of the respondent 75

3. Tables showing the designation of the respondents 77

4. Tables showing the retirement period 79

5. Tables showing the annual income of the

respondents

81

6. Tables showing the annual savings of the

respondents

83

7. Tables showing the home loans taken 85

8. Tables showing the interest rates 87

9. Tables showing the recovery of loans 89

10. Tables showing the sanction of loans 91

11. Tables showing the tenure of loans 92

12. Tables showing the terms & conditions 94

13. Tables showing the difficulty in paying back the

loans

96

14. Tables showing the knowledge about the loan 98

15. Tables showing the intention to opt for the loans 100

16. Tables showing the satisfaction of the respondent 102

17. Tables showing the intention to opt for the loans

(non customer)

104

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18. Tables showing the non customer preference to opt

for the loans in future

106

19. Tables showing the recommendation to potential

customer

108

LIST OF FIGURES

FIGURE

NO:

FIGURE TITLE PAGE

NO:1. Figure showing the age group of respondents 72

2. Figure showing the sex of the respondent 74

3. Figure showing the designation of the

respondents

76

4. Figure showing the retirement period 78

5. Figure showing the annual income of the

respondents

80

6. Figure showing the annual savings of the

respondents

82

7. Figure showing the home loans taken 84

8. Figure showing the interest rates 86

9. Figure showing the recovery of loans 88

10. Figure showing the sanction of loans 90

11. Figure showing the tenure of loans 92

12. Figure showing the terms & conditions93

13. Figure showing the difficulty in paying back

the loans

95

14. Figure showing the knowledge about the loan 97

15. Figure showing the intention to opt for the 99

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loans

16. Figure showing the satisfaction of the

respondent

101

17. Figure showing the intention to opt for the

loans (non customer)

103

18. Figure showing the non customer preference

to opt for the loans in future

105

19. Figure showing the recommendation to

potential customer

107

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Final 24052012

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