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The successful development in the banking business has become a complex process in
the world of competition today. The development of marketing og a new service, the
complexity of a new and different product, their market and therefore their process
through which they developed, dictates that a number of different people, each which
there own role, work together to create the service.
For the execution of the project, the methodology adopted is the collection of
information through primary and secondary data collection method, questionnaire,
processing and analyzing data.
The banks collected for comparison of a housing loan are the main stream banks in
Nanded city i.e. state bank of India, bank of Maharashtra , one schedule and one co-
operative bank. The above group represents the total population of Nanded city. The
Bank of Baroda is very good service provider in the banking sector. The bank has
recently completed 100 years, in its quest to become a world class bank with global
best practice.
The area of project work is Nanded city as it is the fast developing city in Marathwada
region and the city has very good prospect in future.
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OBJECTIVE OF THE PROJECT:
The objective of the project on Home – Loans is to compare the home loan schemes
of different banks and financial institutions in the Nanded City only. This will help us
to select the appropriate bank of financial institution, which will have less interest rate
and maximum repayment of period with easy documentation.
Main objectives include:
Profitability and cost of the loan proposal decides the financial position of the bank
and its survives. And it also helps to banks to decide which type of loans gives them
more benefits for the long period.
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BANKING AND FINANCE IN INDIA
Early History
Banking in India originated in the first decade of 18th century. The first banks were
The General Bank of India, which started in 1786, and Bank of Hindustan, both of
which are now defunct. The oldest bank in existence in India is the State Bank of
India, which originated in the "The Bank of Bengal" in Calcutta in June 1806. This
was one of the three presidency banks, the other two being the Bank of Bombay and
the Bank of Madras. The presidency banks were established under charters from the
British East India Company. They merged in 1925 to form the Imperial Bank of India,
which, upon India's independence, became the State Bank of India. For many years
the Presidency banks acted as quasi-central banks, as did their successors. The
Reserve Bank of India formally took on the responsibility of regulating the Indian
banking sector from 1935. After India's independence in 1947, the Reserve Bank was
nationalized and given broader powers.
Post-independence
The partition of India in 1947 adversely impacted the economies of Punjab and West
Bengal, paralyzing banking activities for months. India's independence marked the
end of a regime of the Laissez-faire for the Indian banking. The Government of India
initiated measures to play an active role in the economic life of the nation, and the
Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed
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economy. This resulted into greater involvement of the state in different segments of
the economy including banking and finance. The major steps to regulate banking
included:
In 1948, the Reserve Bank of India, India's central banking authority, was
nationalized, and it became an institution owned by the Government of India.
In 1949, the Banking Regulation Act was enacted which empowered the Reserve
Bank of India (RBI) "to regulate, control, and inspect the banks in India."
The Banking Regulation Act also provided that no new bank or branch of an existing
bank may be opened without a license from the RBI, and no two banks could have
common directors.
However, despite these provisions, control and regulations, banks in India except the
State Bank of India, continued to be owned and operated by private persons. This
changed with the nationalization of major banks in India on 19th July, 1969.
Nationalization
By the 1960s, the Indian banking industry has become an important tool to facilitate
the development of the Indian economy. At the same time, it has emerged as a large
employer, and a debate has ensued about the possibility to nationalize the banking
industry. Indira Gandhi, the-then Prime Minister of India expressed the intention of
the GOI in the annual conference of the All India Congress Meeting in a paper
entitled "Stray thoughts on Bank Nationalization." The paper was received with
positive enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued
an ordinance and nationalized the 14 largest commercial banks with effect from the
midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described
the step as a "masterstroke of political sagacity." Within two weeks of the issue of the
ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer
of Undertaking) Bill, and it received the presidential approval on 9th August, 1969.
A second dose of nationalization of 6 more commercial banks followed in 1980. The
stated reason for the nationalization was to give the government more control of credit
delivery. With the second dose of nationalization, the GOI controlled around 91% of
the banking business of India.
After this, until the 1990s, the nationalized banks grew at a pace of around 4%, closer
to the average growth rate of the Indian economy.
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Liberalisation
In the early 1990s the then Narsimha Rao government embarked on a policy of
liberalisation and gave licenses to a small number of private banks, which came to be
known as New Generation tech-savvy banks, which included banks such as Global
Trust Bank (the first of such new generation banks to be set up) which later
amalgamated with Oriental Bank of Commerce, UTI Bank (now re-named as Axis
Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the
economy of India, kick – started the banking sector in India, which has seen rapid
growth with strong contribution from all the three sectors of banks, namely,
government banks, private banks and foreign banks.
The next stage for the Indian banking has been setup with the proposed relaxation in
the norms for Foreign Direct Investment, where all Foreign Investors in banks may be
given voting rights which could exceed the present cap of 10%at present it has gone
up to 49% with some restrictions.
The new policy shook the Banking sector in India completely. Bankers, till this time,
were used to the 4-6-4 method (Borrow at 4%; Lend at 6%;Go home at 4) of
functioning. The new wave ushered in a modern outlook and tech-savvy methods of
working for traditional banks. All this led to the retail boom in India. People not just
demanded more from their banks but also received more.
Current situation
Currently (2007), banking in India is generally fairly mature in terms of supply,
product range and reach-even though reach in rural India still remains a challenge for
the private sector and foreign banks. In terms of quality of assets and capital
adequacy, Indian banks are considered to have clean, strong and transparent balance
sheets relative to other banks in comparable economies in its region. The Reserve
Bank of India is an autonomous body, with minimal pressure from the government.
The stated policy of the Bank on the Indian Rupee is to manage volatility but without
any fixed exchange rate-and this has mostly been true.
With the growth in the Indian economy expected to be strong for quite some time-
especially in its services sector-the demand for banking services, especially retail
banking, mortgages and investment services are expected to be strong. One may also
expect M&As, takeovers, and asset sales.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its
stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an
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investor has been allowed to hold more than 5% in a private sector bank since the RBI
announced norms in 2005 that any stake exceeding 5% in the private sector banks
would need to be vetted by them.
Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks
(that is with the Government of India holding a stake), 29 private banks (these do not
have government stake; they may be publicly listed and traded on stock exchanges)
and 31 foreign banks. They have a combined network of over 53,000 branches and
17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public
sector banks hold over 75 percent of total assets of the banking industry, with the
private and foreign banks holding 18.2% and 6.5% respectively.
Since liberalization, the government has approved significant banking reforms.
While some of these relate to nationalized banks (like encouraging mergers, reducing
government interference and increasing profitability and competitiveness) other
reforms have opened up the banking and insurance sectors to private and foreign
players.
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Vysya Bank · Kotak Mahindra Bank · Lakshmi Vilas Bank ·
Nainital Bank · Ratnakar Bank · SBI Commercial and
International Bank · South Indian Bank · Amazing
Mercantile Bank · YES Bank
ABN Amro Bank · Barclays Bank · Citibank · HSBC ·
Foreign banks
Standard Chartered · Deutsche Bank
South Malabar Gramin Bank · North Malabar Gramin
Regional Rural banks
Bank · Pragathi Gramin Bank · Shreyas Gramin Bank
Real Time Gross Settlement(RTGS) · National Electronic
Fund Transfer (NEFT) · Structured Financial Messaging
Financial Services
System (SFMS) · CashTree · Cashnet · Automated Teller
Machine (ATM)
The India Finance System is composed of different institutions and will see
subsequent address to certain roles and have accordingly brought out a variety of
instrumentation and helped create a healthy money market, which is fundamental
requisite of good finance system.
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Commercial Banks
Categories of Bank:
Banking in India falls mainly under two categories, viz. Commercial banks and Co-
operative banks, while commercial banks cater to the needs of industry and trade
largely; the cooperative banks play a major role in financing agriculture and allied
activities in rural areas, and trade and services in urban areas.
The commercial banks may be classified into four group in terms of ownership: 1)
Public Sector Banks 2) Regional Rural 3) Indian Private Sector Banks and 4) Banks
incorporated outside India.
The commercial banks can be further classified into Scheduled banks and Non
Scheduled Banks. Scheduled Banks are those listed in the second schedule to the
Reserve Bank of India Act 1934
These banks satisfy the criteria laid down under section 42 (6) of the RBI Act that
they should have capital and reserve of Rs. 5 lakhs and their activities should not be
detrimental to the interests of depositors. The scheduled banks are required to
maintain cash reserves equal to 5 % of DTL which can go up to 15 % under section
42 (1). Those, which are not included in the 2nd schedule, are called the non-scheduled
banks. The number of take- oven/liquidation as also in some cases up gradation into
scheduled banks category.
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Introduction to finance :
Banking has been understood differently at different times and indifferent countries.
In India, the earliest legislation that dealt with the business of banking was the Indian
Companies Act 1913. The Banking Regulations Act came in 1936. Under this Act all
companies having their principal business, accepting deposits from the public were
classified as banks. Hence between 1936 and 1942 even trading and industrial
concerns accepting deposits were classified as banks, if accepting such deposits was
their principal business. The Government of India passed a compressive Banking
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Regulation Act in 1949. Accordingly a banking company was defined as a company
which carries on the business of banking that is to say accepting for the purpose of
lending or investing deposits of money from the public, repayable on demand of
otherwise, and withdrawal cheque, draft, order of otherwise. The study group
reviewing legislation affecting banking is of the opinion that “banking should be
abroad based.” The definition given by the Banking Regulation Act 1949 is certainly
not exhaustive, and it needs certain alterations for the sake of simplification. The
purpose of accepting deposits is strictly not relevant for the definition of banking,
through it is basic for banking regulation. There is no need to distinguish between
“loans” deposits” in the context of banking regulation. The definition of banking
should cover all forms of deposits from the public, and banking regulation should take
into its ambit all the different types of banking.
Functioning of a Bank:
Deriving from this definition and viewed solely from the point of view of the
customers, Banks essentially perform the following functions:
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1. Accepting Deposits from public/others (Deposits)
2. Lending Money to public (Loans)
3. Transferring money from one place to another.
4. Acting as trustees.
5. Keeping valuables in safe custody.
6. Government business.
But do these functions constitute banking? The answer must be a no. There are so
many intricacies involved in the activities that a bank performs today, that the above
list must sound very simple to a seasoned banker. Please click on the activity to see
what a Bank has to do to give the above services to its customers. These activities can
also be described as back office banking. Banks are organized in a linear structure to
perform these activities at the base of which lies a Branch. The corporate office of a
bank is normally called Head Office
FORMS OF ADVANCES:
Advances by commercial banks are made in different forms such as loans, cash credit,
overdrafts, bills purchased, bills discounted etc. These are generally short- term
advances. Commercial banks do not sanction advances on a long-term basis beyond a
small proportion of their demand and time liabilities. They cannot afford to lock up
their funds for long period. Hence a considerable percentage of their advances is
repayable on demand.
Advances may be granted against tangible security or in special deserving cases on an
unsecured/clean basis.
1. Loans
1. Overdrafts
2. Cash credits
3. Temporary Overdrafts
4. Clean advances
5. Term loans
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6. Bridge loan
7. Participation loan
8. Loans to small borrowers
10. Hire purchase and leasing finance
11. Bills purchased
12. Bills discounted
LOANS:
Bank loans are called indirect agents of production. For achieving a sustained rate of
economic growth over a long period, greater efforts have to be made to increase
agricultural and industrial production, and in this increased production, bank credit
plays a significant role. But banks in India are not free to employ their funds n an
arbitrary manner, while lending, they will have to keep in mind factors like a desirable
balance among liquidity, safely and profitability, legal and statutory requirements,
socio-economic conditions of the country, priorities set by economic planners, and so
on. Banks try to achieve this objective through maintaining a particular relationship
between their assets and deposits. As such, between advances and deposits in the form
of advances among as many different types of securities and over as wide an areas as
possible, and they avoid granting too large a proportion of their advances to one party
or to a single industry. While the se factors limit banks capability to lend, they are,
nevertheless expected to grant credit according to the changing economic scene
conditioned by the programs and priorities of different Five Year Plans.
In a loan account the entire amount is paid to the debtor at one time, either in cash or
by transfer to his current account. No subsequent debit ordinarily allowed except by
way of interest, incidental charges, insurance premiums, expenses incurred is
provided for by installment without allowing the demand character of the loan to be
affected in any way. There is usually a stipulation that in the event of installment
remaining unpaid, the entire amount of the loan will become due. Interest is charged
on the debit balance, usually with quarterly rests unless there is an arrangement to the
contrary. No cheque book is issued. The security may be personal or in the form of
shares, debentures. Government paper, immovable property, fixed deposit receipts,
life insurance policies, goods etc.
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History of Bank of Baroda –
Bank of Baroda was founded by Maharaja Sayajirao Gaekwad of Baroda on July 20,
1908 with a paid up capital of Rs 10 lakhs. Since then bank has traversed an eventful
and successful journey of almost 100 years. Today, Bank of Baroda has a network of
2737 branches including 39 overseas branches spread over 20 countries. In mid-
eighties, the Bank of Baroda diversified into areas of merchant banking, housing
finance, credit cards and mutual funds. In 1995 the Bank raised Rs 300 crores through
a Bond issue. In 1996 the Bank tapped the capital market with an IPO of Rs 850
crores.
Bank of Baroda took the lead in shifting from manual operating systems to a
computerized work environment. Today, the Bank has 1918 computerized branches,
covering 70% of its network and 91.64% of its business.
Bank of Baroda gives high priority to quality service. In its quest for quality, the Bank
has secured the ISO 9001:2000 certifications for 15 branches. By end of the 2005-06,
the Bank is targeting 54 more branches for this quality certification.
Centenary Year
On the 20th July 2007, the Bank entered its Centenary year. In its quest to become a
world-class bank with global best practices, the Bank is, now, well poised to take-off
with the most modern business and HR systems and processes. The Bank has already
initiated myriad HR interventions with special thrust on internal talent discovery,
upgrading the managerial skills through training, and improving the motivational
level of the employees of the bank
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Mission Statement –
Education is the most important investment one makes in life. Higher studies and
specialization in certain fields call for additional financial support from time to time.
Whether you are planning school education (nursery to standard XII) of your child,
pursuing a graduate or post-graduate degree, the Bank of Baroda Education Loans,
can help finance your ambitions and goals.
ACHIEVEMENTS
1) Business Performance
The Bank continued scaling new heights of business size recording global business
growth of 24.07 per cent during 2007-08. Its domestic deposits increased by 22.82 per
cent and domestic advances rose by 25.63 per cent.
During 2007-08, the Bank’s overseas business grew by 24.56 per cent primarily due
to a substantial increase of 35.70 per cent in overseas advances. The overseas business
contributed 20.0 per cent to total business and 23.8 per cent to net profit. The level of
net profit at Rs 1,435.52 crore for the year 2007-08 reflected a robust year-onyear
growth of 39.9%.
On the front of asset quality management, while the Gross NPA in domestic
operations stood at 2.18 per cent at end-March 2008, the same for Overseas
Operations was just 0.55 per cent. The global Net NPA was pegged at 0.47 percent by
the year-end 2007-08 in line with the promise given by the Bank to its stakeholders.
• Gross Profit and Net Profit were Rs 3,028.55 crore and Rs 1,435.52 crore
respectively. Net Profit registered a growth of 39.85% over previous year
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• Net NPAs to Net Advances declined from 0.60% last year to 0.47%.
3) A dedicated effort to add 2.5 to 3.0 million quality customers to Bank’s book
in FY09 and in subsequent years
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Branch Network Overseas
Foreign(Overseas) 71
Total Global 2897
International Operations
Bank of Baroda started its overseas journey by opening its first branch way back in
1953 in Mombassa, Kenya. Since then the Bank has come a long way in expanding its
international network to serve NRIs/PIOs and locals. Today it has transformed into
India's International Bank.
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The Bank has presence in world's major financial centers i.e. New York, London,
Brussels, Dubai, Hong Kong, and Singapore.
The "round the clock around the globe", Bank of Baroda is further in the process
of identifying/opening more overseas centers for increasing its global presence to
serve its 33 million global customers in still better way.
It has further plans to establish overseas offices in Houston (USA), Canada, New
Zealand, Qatar, Saudi Arabia, Mozambique, Russia etc. Besides this, it has plans to
extend its reach in existing countries of operations in UK, UAE, Uganda, Kenya and
T&T etc.
Board Of Directors
Customers:
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• Individual
• Proprietorship Concerns
Strength
It has diversified customer profile, including Blue chip companies, small and medium
sized companies, retail customers, self-help groups, and high net worth individuals.
It has strong brand equity and a wide customer base of over 5 million.
Bank of Baroda’s financial strength has been recognized by international credit rating
agencies.
A strong capital base ensures that it is well placed for growth of business.
The bank, which has consistently earned profit since its inception, has committed and
competent human capital to power its aggressive growth plan.
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Wholesale Banking Deposit Products
SME Banking Loan Products
Retail Banking ATM / Debit Cards
Rural/Agri Banking Internet Banking
Wealth Management Rapid Funds2India
Demat Baroda e-Trading
Retail Loans
Bank of Baroda offers a wide range of retail loans to meet your diverse needs.
Whether the need is for a new house, child's education, purchase of a new car or home
appliances, our unique and need specific loans will enable you to convert your dreams
to realities.
Key products
Housing Loan Personal Loan
Baroda Loan for Laptop & Personal Loan for financing Individuals for
Computer subscription to Public Issues /IPO
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Baroda Ashray (Reverse Mortgage Loan) Baroda Career Development Loan
• Construction of house.
• Repaying a loan already taken from other Housing Finance Company / Bank.
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2) Baroda Home Improvement Loan-
Bank of Baroda brings to you a unique loan product. A loan for Repairs / Renovations
/ Improvement / Extension of Home and for Furniture, Fittings & Fixtures.
Key Benefits
• Loan available for repairs / renovation / improvement / extension of the
existing house.
• Loan available for purchase of furniture / fixtures / furnishing / other gadgets
such as fans, geysers, air conditioners etc. required, to:
o Our existing housing loan borrowers
o New borrowers
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RESEARCH METHODOLOGY
RESEARCH OBJECTIVE
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Steps In Research Methodology
SOURCES OF DATA
A. Primary Data:
This data can be collected through experiment or through survey. The various method
of primary data collection is:
1. Observation method
2. Interview method
3. Questionnaire method
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The methods adopted in this study are:
Personal interview through structured questionnaire of Finance head of SMEs,
Brokers etc. Sample of questionnaire is attached as an annexure.
B. Secondary Data:
Secondary data refers to the data which have already been collected and analyzed by
some one else usually published data are available in form of:
1. Various publication of central, state and local government.
2. Books Magazine and Newspapers.
3. Accounting records, sales force reports etc.
4. Websites of banks.
DIGRAMATIC APPROACH
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Primary Data:
Primary data is a data, which is gathered by the researcher himself. Primary data of
this project is collected by the personal visit to the banks.
Secondary Data:
Secondary data is a data is data which is gathered from the available sources i.e.
newspaper, magazine, Internet, financial books. Etc
.
Step 3: Collect the Information
This is the most important step in the study. This is up to the individual’s ability to
gather the information from the selected samples.
SAMPLING PLAN:
This plan calls for the main three decisions for selecting the sample of banks from
whole population of banks in the city.
1. Sampling Unit: Here we define the target population that will be sampled.
Total numbers of units of banks working in Nanded are approximately 35.
2. Sample size: How many banks and financial institution should be surveyed?
Large samples give more reliable results than small samples. Here 14% of he
population of study i.e. 5 units (branches) are undertaken for study.
3.Data collection procedure: Here I took all the information needed for this
study, by means of personal visits to the banks and by interview. This is the
most versatile method. The interviewer can ask more number of questions,
can record additional observations about the respondents.
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Home Loans in India
You'll soon realize that home loan companies do exist, and they continue to
exist to provide Basic Home Insurance as well as Home Loan Information including
Home Loan Resources because of the very people who desire to own a house the
soonest possible time - like you!
It is definitely one of the major things that you can board on in your lifetime. The bad
news is: however is that not everyone in this globe is like you, loaded enough
(financially, of course) to be able to build a house as soon as he wants to.
Whether you are Non Resident Indian or Resident of India, and you are thinking to
start your journey of buying a new house, looking to move to a new house, investing
in property or are looking forward to refinance, Consider answering these questions to
yourself:
• Is there a fine or penalty or even some reward as well if the whole amount of
loan is paid ahead of the due date?
These are just a dash of the questions to be answered when considering taking the
plunge…into the loan journey. The different home loan types are hereby presented to
you to make your journey that more smoother or step by step, safer and comfortable.
Yet, Got a fix on fixed rate or variable rates, offset accounts, lines of credit or
bridging loans!!
With so many real estates sites coming up in Indian market, finding an ideal house
isn't that big a issue nowadays, when you can virtually see all across the home you
need to purchase by the various real estate simulation programs and videos available,
but you still need to purchase it, right? - To really say "own" it. A home loan, also
popularly identified as a mortgage, is an easier financial option to own a house. Once
you've decided to endeavor on a home loan, there are so many things that you need to
be informed with. Not only is it going to be an emotional experience, it is also going
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to be a very informative monetary journey, as you will be dealing with the whole
caboodle of the mortgage process along the way.
There are thousands of home loan companies waiting to provide you with your
financial needs. Part of the success of this whole financial move is partly in your
hands, the greater part relies on the efficiency of your chosen mortgage company.
Owning a piece of land or property is a lifetime dream for every individual. There are
many home loans provider in the market to make your dream come true. But before
you opt for any home loan provider, you need to consider certain factors related to
property that you are interested in buying and also about the salient features offered
by a home loan provider and also study some Home Loans and Home Insurance
FAQs which helps in applying a Home Loan in India.
And the most important thing is you should know about each and every term related
with Home Loans before applying for a Loan. It is always advisable to consult a home
loan expert or consultant before applying for a home loan or purchasing a property.
You can take different types of home loans like Bridge Loans, Home construction
Loans, Home Equity Loans, Home Extension Loans, Home Improvement Loans,
Land Purchase Loans etc for different schemes available in the market. There are
different types of home loans tailored to meet your needs.
• Home Purchase Loans: These are the basic forms of home loans used for
purchasing of a new home.
• Home Improvement Loans: These loans are given for implementing repair
works, healing and renovations in a home that has already been purchased.
• Home Construction Loans: These loans are available for the construction of
a new home.
• Home Extension Loans: These loans are given for expanding or extending an
existing home. For eg: addition of an extra room etc.
• Home Conversion Loans: These loans are available for those who have
financed the present home with a home loan and wish to purchase and move to
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another home for which some extra funds are required. Through home
conversion loan, the existing loan is transferred to the new home including the
extra amount required, eliminating the need of pre-payment of the previous
loan.
• Land Purchase Loans: These loans are available for purchasing land for both
construction and investment purposes.
• Bridge Loans: Bridge loans are designed for people who wish to sell the
existing home and purchase another one. The bridge loans help finance the
new home, until a buyer is found for the home.
Purchasing and moving into a dream house would generally rank among the top three
things on the wish list of most people. After all it’s what been proved by Maslow’s
Law of Hierarchy as well. That entire house hunting every few years, grumpy
landlords, killing rents would be a thing of the past. Hey, you even get to use nails to
hang your favorite paintings and pictures. Don’t you???
Taking a home loan nowadays has become very simpler. The RBI has been regularly
slashing interest rates, with the result that housing finance loans that came at an
interest rate of 16.5% to 18% four years ago are now available at 11.5% to 13% or
lower. Each year the Finance Minister's generosity during the Budget seems to be
solely concentrated for the housing sector and construction sector. The Budget 2000's
allowed interest payment up to Rs1lakh and principal payment of Rs20, 000 to be
exempted from income tax. To top it all, the Housing Finance Companies (HFCs) are
aggressively wooing customers. Now, when the sun shines, it’s the best time to make
hay. Isn’t it?
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RBI directive for home loans
The Reserve Bank of India (RBI) has in the latest directive asked the Indian
banks to be more "fair and transparent" while signing their agreements with the
consumers. This has come following complaints from various consumer sections
regarding home loans.
It has emphasized on the fact that while giving a home loan, the banks should not tie
their loans with their own prime lending rates (PLR) which often results in pro-bank
and against consumer interest.
• Households should get credit counseling before signing any loan agreement.
In such case, banks should give credit counseling to customer before giving a
loan. Any non-governmental organization can also give independent credit
counseling to small borrowers.
• Individual borrowers should ask for the exact tenure and EMI while taking a
fixed rate loan. The RBI has also resolved to look into all consumer
complaints if it is bought to the regulator's notice.
• The IRDA (insurance regulator) has powers to take action against banks if a
customer feels cheated while buying an insurance product. On its regulatory
role, the RBI is trying to maintain a balance between the extent of freedom
granted to the banks and the objectives of governance.
• RBI has made it mandatory for all banks - including private and foreign banks
- to offer a passbook to their customers with the address and telephone number
of the nearest branch.
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• Customers have often been harassed by banks' call centers where there is no
accountability of the query made. The "do not call" registry has also been
flouted by banks as customers are bombarded with unnecessary product
offerings. The RBI has directed the Indian Banks' Association to come out
with a single "do not call" registry or when a customer adds his name to a
single bank registry it should then stop unsolicited calls from all banks.
• On rising credit card frauds and wrong statements given by the banks, the RBI
has asked the customers to approach the ombudsman to redress their problems.
This way the RBI feels would inculcate more consumer friendly practices
among Indian banks.
Tax benefits
There are certain tax benefits for the resident Indians based on the principal
and interest component of a loan under the Income Tax Act, 1961. It may help one get
tax benefit up to Rs.50, 490 p.a. (approx). if interest repayment of Rs.1,50,000 p.a. is
paid. In addition to this, one also is eligible for getting tax benefits under section 80C
on repayment of Rs.1, 00,000 p.a. that further reduces the tax liability by Rs.33.660
p.a.
These deductions are available to assesses, who have taken a loan to either buy or
build a house, under Section 24(b). However, interest on borrowed capital is
deductible up to Rs150, 000 if the following conditions are fulfilled:
• The acquisition and construction should be completed within 3 years from the
end of the financial year in which capital was borrowed.
• The person, extending the loan, certifies that such interest is payable in respect
of the amount advanced for acquisition or construction of the house
• A loan for refinance of the principle amount outstanding under an earlier loan
taken for such acquisition or construction.
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If the conditions stated above are not fulfilled, then the interest on borrowed capital is
deductible up to Rs30, 000 though the following conditions have to be satisfied:
3. Tax benefits under Section 24 and deduction under section 80C of the Income
Tax Act can be claimed only when the payment is made. If an individual fails
to make EMI payments, he cannot claim tax benefits for the same.
4. According to the Income Tax Act, tax rebates can only be claimed by the loan
applicant.
5. The interest on home loans taken for repairs, renewals or reconstruction, also
qualifies for the deduction of Rs 150,000.
31
6. A husband and wife, both of whom are tax-payers with independent income
sources, get tax deduction benefits, with respect to the same housing loan; to
the extent of the amount of loan taken in their own respective name.
7. If an individual buys a house and sells it within the same year or after 3 years,
and if any profit is made, then a capital gains tax liability arises on the same
for which the individual is liable to pay short-term capital gains tax since the
sale took place in the same year. But in case, if the sale had taken place after 3
years, then a long-term capital gains tax liability would have arisen.
8. On being proved that the home loan is simply an arrangement between the
loan-seeker and the builder or with a third party for the purpose of claiming
tax benefits, then tax benefits will not be allowed and benefits, previously
claimed, will be clubbed to the income and taxed accordingly.
9. Tax benefits on interest on housing loans are allowable only for the original
loan and according to Section 24 (1), tax benefits can also be availed for a
second loan taken to repay the first loan but not for subsequent loans. This
means that if you have already availed of one loan to refinance the original
loan and want to now avail a third loan to refinance the second loan, tax rebate
on interest payments will not be permissible.
The home buying process can seem complicated, but if you take things step-by-step
and you know how to choose the right home loan, you will soon be holding the keys
to your own home!
Step 1: Figure out how much you can afford. What you can afford depends on your
income, credit rating, current monthly expenses, down payment and the interest rate.
The calculators can help, but it is best to visit a lender to find out for sure. A housing
counselor can help you figure out how to manage and pay off your debt, and start
saving for that down payment!
32
Step 3: Shop for a loan. Save money by doing your homework. Talk to several
lenders, compare costs and interest rates, and negotiate to get a better deal. Consider
getting pre-approved for a loan.
Step 5: Shop for a home. Choose a real estate agent, Wish list - what features do you
want, Home-shopping checklist - take this list with you when comparing homes.
Step 6: Make an offer. Discuss the process with your real estate agent. If the seller
counters your offer, you may need to negotiate until you both agree to the terms of the
sale.
Step 7: Get a home inspection. Make your offer contingent on a home inspection. An
inspection will tell you about the condition of the home, and can help you avoid
buying a home that needs major repairs.
Step 8: Shop for homeowners insurance Lenders require that you have homeowners
insurance. Be sure to shop around.
• EMI: Equated Monthly Installment till the loan is paid back. It consists of a
portion of interest and the principal
• Floating Rate of interest: Rate of interest which varies with the market
lending rate. This means that there is an element of risk of paying more than
budgeted amount in case the lending rates goes up
33
• Annual Reducing Balance: In this system principal is reduced annually at the
end of the year so you end up paying interest even for the portion of principal
you have actually paid back
• Processing charge: It's a fee payable to the on applying for the loan
• Prepayment Penalties: When loan is paid back before the agreed term of the
loan, then banks/ institutions charge penalty for the prepayment
• Commitment Fee: Some institution charge commitment fee in case the loan
is not availed within a stipulated period, after it is processed and sanctioned.
Eligibility
Home loan eligibility for Resident Indians depends upon the repayment capacity of
the loan applicant. The maximum loan that can be sanctioned varies with the banks
and other housing finance companies (HFC) and generally, the maximum loan
amount granted is 80 to 85% of the cost of your home.
34
Income Stable source of income and saving
history
Dependents Number of dependents, assets, liabilities
Other income sources Spouse's income
35
21. ANDHRA BANK
22. CENTURIAN BANK LOANS
23. UNITED WESTERN BANK
24. SHANKAR NAGARI BANK
25. JAI SHIVRAI CO-OPERATIVE BANK
26. GODAVARI URBAN CO-OPERATIVE BANK
27. ALAHABAD BANK
28. MAHARASHTRA STATE CO-OPERATIVE BANK
29. MARKANDEYA NAGARI SAHAKARI BANK
30. DEVELOPMENT CREDIT BANK
31. PEOPLES CO-OPERATIVE BANK
32. PUNJAB SINDH BANK
33. UNION BANK OF INDIA
34. VIJAYA BANK
35. BANK OF INDIA
By using the sampling technique these five banks are selected i.e. Nationalize, state,
schedule and co-operatives, which REPRESENT the characteristics of whole
population of banks present in Nanded City.
36
TABULATION ANALYSIS OF DATA
1. BANK OF MAHARASHTRA
(Branch Tarasing market, Nanded only)
Bank of Maharashtra is a nationalized bank in which is involved in number of sectors
for the disbursement of funds.
37
(Data related to Vishnupuri Branch only)
Home loans:
Interest Rate = 13%
Loan disbursed = Rs. 12,75,000
Number of customer = 11
Education Loan:
Interest Rate = 11.75%
Loan disbursed = Rs. 2,00,000
Loans for businessman:
Interest rate = 11%
Loan disbursed = Rs.2, 02, 20, 00
38
Salary Loan 309 1,11,00,000
Educational Loan 3 2,00,000
Agriculture Loan 359 58,78,000
Loan to Traders 7 20,22,000
TOTAL 689 2,04,71,075
3. Bank of Baroda :
(Mahaveer Chowk, Nanded)
Housing Loan
Interest Rate 11.50% (Fixed)
Loan Disbursed Rs.92, 10,000
No. Of Customer 23
Floating Rate of Interest -
39
10year to 15year. 11.25% 11.50%
15year to 20 above 11.50% 11.75%
40
Above 15 years and upto 20 years 11.75%
41
Loan Distribution:
42
GRAPHICAL REPRESENTATION OF DATA
P ercen tag e o f H om e L o an
1.70%
O ther loans
Hom e loans
98.30%
Interpretation:- The above chart shows that percentage of home loans is just
1.70% and the other loans contribution is 98.30%. It means that NANDED
MERCHANT’S CO-OP BANK is more involved in the giving funds in business
enterprises. Because of the high interest rates i.e. 14% p.a. for home loans the
customers are not attracted. Bank enjoying the more benefits from the other loans than
Home Loan.
43
B. MARATHWADA GRAMIN BANK:
P ercentag e of H om e Lo an
6 .50%
O ther loans
Home loans
93 .50%
Interpretation:-The above chart shows that percentage of home loans is just 6.50%
and the other loans contribution is 93.50%. It means that MARATHWADA
GRAMIN BANK is more involved in the giving funds in AGRICULTURAL
SECTORS & less involved in Home Loans to employees. Because of the high interest
rates i.e. 13% p.a. for home loans the customers are not attracted. With respect to
nationalize banks and private banks. One of the reasons of the less distribution of
Home Loan is the location of the branch i.e. at Vishnupuri, Nanded. It is a agricultural
area and the Major customers of the banks are farmers and the employees of the
S.R.T.M.University.
44
C. Bank of Baroda :
P e r c e n ta g e o f H o m e Lo a n
30%
O th e r lo a n s
H o m e lo a n s
70%
Interpretation:- The above chart shows that percentage of home loans is very
high i.e. 70% and the other loans contribution is 30%. It means that Bank of Baroda is
more involved in the giving funds Home loans. Because of the low interest rates i.e.
11.5% p.a. for home loans and easy processing for getting the loan the customers are
quickly attracted. With compare to the other banks i.e. nationalize and the co-
operative banks it is having lowest rate of interest. The main feature of the bank is
sanctioning of the home loan proposal is very fast.
45
D. BANK OF MAHARASHTRA
P e r c e n ta g e o f H o m e Lo a n
4 0 .0 0 %
O th e r lo a n s
H o m e lo a n s
6 0 .0 0 %
Interpretation:-The above chart shows that percentage of home loans is 40% and the
other loans contribution is 60. It means that BANK OF MAHARASHTRA is more
involved in the giving funds in home loans. Because of the low interest rates i.e.
11.75% p.a. for home loans the customers are attracted. Bank is having the number of
schemes and even then it disbursed 40% of the funds in the Home Loan sector. It is
enjoying the maximum interest rates from the other loans 11% and above.
46
E. STATE BANK OF INDIA
P e r c e n ta g e o f H o m e L o a n
4 0 .0 0 %
O th e r lo a n s
6 0 .0 0 % H o m e lo a n s
Interpretation:-The above chart shows that percentage of home loans is 60% and the
other loans contribution is 40%. It means that STATE BANK OF INDIA is more
involved in the giving funds in home loans. Because of the low interest rates i.e.
11.75% p.a. for home loans and the some special scheme for the professional such
0.25% discount on loan and 0% processing fee for some customers the customers are
47
attracted. Bank is having the number of schemes and even then it disbursed 60% of
the funds in the Home Loan sector.
COMPARISON OF RATE OF INTEREST(Fixed)
16
14
14 13
12 11.75
11.5
12
Rate of Interest
10
0
BOM MGB BOB SBI NMC
Name of Bank
Interpretation:-The above graph shows that, in terms of rate of interest (Fixed Rate)
Nanded Merchant Co-operative Bank’s (NMC) rate is high i.e. 14%. Bank of Baroda
(BOB) is lending with lowest rate i.e. 11.5%. Bank of Maharashtra(BOM) and State
Bank of India(SBI) is having rate 12% and 11.75% respectively which is more than
Bank of Baroda.
48
B. Percentage of housing loan to total disbursement
Percentage of
Name of bank housing loan to total
disbursement
Bank of Maharashtra 40%
Marathwada Gramin Bank 6.5%
Bank of Baroda 30%
State Bank of India 40%
Nanded Merchant’s Co-op. Bank 1.7%
120
100
80
Percentage
60 60
70 Other
60
93.5 Housing
98.3
40
20 40 40
30
6.5 1.7
0
BOM MGB BOB SBI NMC
Name of Bank
Interpretation:-As per the above Graph, State Bank of India (SBI) and Bank of
Maharashtra (BOM) are having greater percentage of Home Loan i.e 40% to the Total
disbursement of loan. Bank of Baroda is quite good percentage of Home Loan-30% to
the total disbursement, which is lower than State Bank of India and Bank Of
Maharashtra. But, Marathwada Gramin Bank(MGB) and nanded Merchant co-
operative bank(NMC) is having very low percentage of Home Loan to the Total
disbursement.
49
DURATION FOR SANCTION OF HOUSING LOAN
35
30
30
25
25
Duration in Days
20
15
15
10
10
7
0
BOM MGB BOB SBI NMC
Name of Bank
50
Name of bank Number of customers of housing
loan
Bank of Maharashtra 20
Marathwada Gramin Bank 11
Bank of Baroda 23
State Bank of India 40
Nanded Merchant’s Co-op. Bank 2
45
40
35
No. of A/c
30
25
20
15
10
5
0
BOM MGB BOB SBI NMC
Name of Banks
Interpretation:-From the above graph, it is clear that State Bank of India is having
40 A/C of Housing Loan which is Good performance in housing sector. Bank of
Baroda and Bank of Maharashtra is having quite good performance. Nanded
Merchant Co-operative bank (NMC) and Marathwada Gramin Bank (MGB) should is
their customers.
• First of all the applicants have to make an application to the Concerned bank
in which he/she wants to get loan.
51
• The next step is identification and selection of the property. Bank or financial
institutions will verify the all documents and the customers i.e. Income and
ability to repayment.
• Documents required at the disbursement stage as per the “procedure & draft
booklet” for the location in which the property is located.
• Computation of Income, Balance sheet, the Profit and Loss A/C along with
schedules of company and individuals for past 3 ears duly certified by
C.A.
52
• Memorandum/Article of Association or partnership as applicable.
• Brief profits of the company.
• A/C continuity proof for the last one year.
• Office address proof.
• Residence address proof.
• Qualification certificate for self employed professionals.
• Sale deed/ Agreement of sale
• Letter of allotment of Housing Board or society.
• Copy of approval plan if applicable.
• Permission for construction if applicable.
• Valuation of property which is to be financed.
• In case of agricultural land conversion into – copy of relative order.
• NOC under the provision of ULC Regulation Act,1976 in original
(* More or less documents may be required as per the banks rules.
• With compare to all the five banks i.e. State Bank of India, Bank of
Maharashtra, Marathwada Gramin Bank, Bank of Baroda & Nanded
53
Marchant’s Co-Operative Bank, in which Bank of Baroda And SBI Bank
having very good performance in Loan Sector.
• In terms of Interest rate comparison also Bank of Baroda loan is leading with
having lowest interest rate of 10.5% p.a. (floating rate) only.
• But banks like SBI & Maharashtra bank and Marathwada Gramin bank &
Nanded merchant’s co-operative bank are having more number of schemes for
loan rather than home loan.
• In comparison SBI & bank of Baroda are in with competition and provided
several schemes like. Bank of Baroda gave free insurance & SBI given 0.25%
discounts for selected professional customers.
In the bank point of view the main businesses of bank is accepting deposits with
low interest rates & lend it on high interest rate and enjoy the variation for long
period of time.
Maximum interest rate will help the bank but it will not attract customer to earn
the interest for long period. And home loans are more reliable to gain constant
interest for long period of time. And the recovery will be more. Maximum fund
will be disbursed and will have less risk rather than other loans, which are in short
term and high interest rate schemes.
That is why the in these five banks bank of Baroda & SBI will enjoy long term
benefit & other may have problem in future course. The number customers that
banks are chosen for home loans are salaried employ in which it reduces the risk
involved in recoveries.
54
C. CUSTOMERS POINT OF VIEW:
ii. Bank of Baroda bank sanction loan within short time period with respect to
Nationalize banks.
iii. Nationalize banks takes maximum time for selecting application.
iv. In co-op. Banks loan will be sanctioned but it depends upon the relation with
banking personnel & member of the banks.
v. The very important benefit that the customer getting is getting tax benefit.
Home loans is the only loan which Government Of India have given relief &
tax deduction upto 1,50,000 p.a. for the income tax payee.
That is the reason customer paying less interest that he actual is having.
LIMITATION OF STUDY
55
• I was unaware of their operation. The banking activities are very large in
number. I wish to know the whole gamut of policy and operations.
• Financial terminology was new to me and that was a limitation to
understand the whole process.
• I had no work experience earlier, so I had a hesitation in approaching my
colleagues. Soon I overcame this problem.
• Time Constraint was one of the limitations. Document verification requires
more time and concentration. A minute mistake in the exercise could be
costly.
Financial terminologies were new. Felt the deficiency within myself to
understand them in their perspectives.
SUGGESTIONS:
56
1. In this era of Globalization it is very difficult to the banks to keep the high rate
of interest for facing the competitor -
iv. To select the sectors in which the large number of funds are invested
for long time period such as Home Loan.
v. To attract not only salaried people but also attract the businessmen and
contractors in which more money will be disbursed and may enjoy
large rate of interest.
57
Conclusion
• With compare to all fire banks. Bank of Baroda and SBI have a very good
performance in home loan sector.
• Max. interest rate will help the bank but it will not attract thee customers to
earn long term interest and home loans are more reliable to gain constant
interest so, interest rate of housing loan should be minimum.
• The days for sanctioning loan also affect the loan proposal because in the era
of competition thee bank should keep thee sanctioning period minimum.
BIBLIOGRAPHY:
58
Practical Banking Advances
By: Bedi & Haldikar
Financial management
By: Arun Kumar & Rachana
INTERNET :
www.bankofbaroda.com
www.googlesearch.com
www.sbi.co.in
www.mahabank.com
www.bankrate.com
www.apnaloan.com
59
Questionnaire
60
7) What is the repayment period?
a) 0-5 years
b) 5-10 years
c) 10-15 years
d) 15-20 years
e) 20 years and above
61
BALANCE SHEET
( As on 31st march,2008)
Assets
Cash and balances with Reserve Bank of 6 9369,72,34 6413,52,02
India
Balances with Banks and Money at Call 7 12929,56,33 11866,84,51
and Short Notice
Investments 8 43870,06,78 34943,62,75
Advances 9 106701,32,41 83620,86,98
Fixed Assets 10 2427,00,81 1088,80,75
Other Assets 11 4301,82,95 5212,50,45
Total 179599,51,62 143146,17,46
62
For the Year ended 31st March, 2008
Profit & Loss Account for the Year ended 31st March, 2008
Amount in Rupees
(000's Omitted)
Schedules Year ended 31st March, Year ended 31st March,
2008 2007
I. Income
Interest Earned 13 11813,47,67 9004,08,55
Other Income 14 2051,03,61 1381,79,27
Total 13864,51,28 10385,87,82
II. Expenditure
Interest Expended 15 7901,67,06 5426,55,70
Operating Expenses 16 2934,29,21 2544,31,34
Provisions and 1593,02,86 1388,54,33
Contingencies
Total 12428,99,13 9359,41,37
III. Profit
Net. Profit for the year 1435,52,15 1026,46,45
Available for
1435,52,15 1026,46,45
Appropriation
Appropriation
Transfer to :
a) Statutory Reserve 358,88,04 256,61,61
b) Capital Reserve 84,64,85 14,31,65
c) Revenue and Other 651,05,38 65,503,07,35
Reserves
I) General Reserve 650,35,08 502,50,35
II) Statutory Reserve
70,30 57,00
(Foreign)
d) Dividend (including
340,93,88 252,45,84
Dividend Tax)
I) Interim Dividend 0 124,60,65
II) Proposed Dividend 340,93,88 127,85,19
TOTAL 1435,52,15 1026,46,45
Basic & Diluted
39.41 28.18
Earnings per Share
Significant Accounting
17
Policies
Notes on Accounts 18
63