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SHRI

B.V.V.SANGHA’S
INSTITUTE OF MANAGEMENT STUDIES BAGALKOT-02

CERTIFICATE OF APPROVAL

PROJECT REPORT
2006-2007

This is to certify that the project report entitled “A

Study on Retail Loans, At UTI Bank Retail Asset centre” Is

being submitted by Miss.Uma. B. Mallannavar, a student of

MBA First year. She has satisfactorily completed the project

work for the partial fulfillment of MBA Course under Karnataka

University, Dharwad.

INTERNAL GUIDE DIRECTOR

Prof. C. Subramaniam Shri: C. Subramaniam

Examiners:

1.

2.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


DECLARATION

I under signed Miss.Uma.B .Mallannavar 2nd semester student of the BVV


Sangha’s Institute Of Management Studies Bagalkot here by Declare that the Project
report entitled “A study on Retail Loans ” at UTI Bank Retail Asset Centre, Belgaum, is
written and submitted by me under the guidance of Prof.C. Subramaniam is my original
work.
The findings and Conclusions are based on the information collected by me
during my In plant Training.

UMA B. MALLANNAVAR
BIMS,
BAGALKOT

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


ACKNOWLEDGEMENT

It is my Privilege to extend words of Thanks to the people who have helped and
encouraged me in completing this study successfully

It was really a valuable period, which I spent in UTI Bank Retail Asset Centre,
Belgaum Branch for my In Plant Training. It thought me a lot in practical way. In the
way of completion of this project report, I am obliged to many persons.

I take this opportunity to express my deep sense of gratitude and sincere thanks to
my External Guide Mr. Jeer. Basavaraj Deputy Manager of UTI Bank Retail Asset
Centre, Belgaum Branch and to Mr. Bharat. Malagimani Assistant Manager, for
providing me an opportunity to undergo In Plant Training and for their valuable
Guidance in completing the Project.

I am also thankful to our Director Shri. C. Subramaniam for his valuable


guidance for successful completion of this project and staff members for the guidance
during the course of my study for the MBA.

Finally, I also thank my Parents and all my Friends who have helped directly or
indirectly in completing this Project.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


EXECUTIVE SUMMARY

Without a sound and effective banking system in India it cannot have a healthy
economy. The Banking system of India should not only be hassle free but it should be
able to meet new challenges posed by the technology and any other external and internal
factors.

With years, banks are also adding services to their customers. The Indian banking
industry is passing through a phase of customers market, the customers have more choice
in choosing their banks .A competition has been established within the banks operating
in India, by the stiff competition and advancement of technology, the services provided
by banks have become more easy and convenient.

The basic reason for which the loans are given to customers is to help the
customers in satisfying their needs. So different kinds of loans are given to the customers
by various bankers in order to help the customer in satisfying their various needs. Loans
and deposits constitute an important or major part of any banking or financing business,
and the profit made by a bank or non-banking financing companies mainly depends upon
the spread and non interest income of that particular bank or company. In order to
enhance its profit will offer different kinds of loans with attractive lending terms.

UTI Bank was the first of new private banks to have begun its operations in
1994, after the Govt of India allowed new private banks to be established. The progress
of UTI Bank has been identical with the phase of progressive banking in India. The Bank
is well equipped to meet the challenges of 21st century in the areas of information
technology, knowledge and competition

At UTI Bank Retail asset centre was given the task of studying the Retail loans.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


The study was conducted to know about the Fundamentals of the retail loans and
to know about the policies, procedures and practices of UTI Bank, to study about the
portfolio management of various loans i.e. personnel, auto and housing loans, and to
study about NPA’s and write-off concepts with regard to collection perspective overall
make an analysis of retail banking industry.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Contents

Section A –
a) Introduction
b) Company Profile

Section B _
a) Project Title
b) Objectives
c) Retail Loans at UTI Bank
d) Recoveries Department
e) Priority Sector Lending
f) Non-Performing assets
g) Portfolio Management Of Loan Products

Section C –
a) Findings
b) Suggestions
c) Conclusion
d) Bibliography

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Introduction
a. Introduction to Indian Banking
b. Introduction to Retail Banking

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Introduction to Indian Banking

The Indian banking can be broadly categorized into nationalized (government


owned), private banks and specialized banking institutions. The Reserve Bank of India
acts a centralized body monitoring any discrepancies and shortcoming in the system.
Since the nationalization of banks in 1969, the public sector banks or the nationalized
banks have acquired a place of prominence and has since then seen tremendous
progress. The need to become highly customer focused has forced the slow-moving
public sector banks to adopt a fast track approach. The unleashing of products and
services through the net has galvanized players at all levels of the banking and financial
institutions market grid to look anew at their existing portfolio offering.

The Indian banking has finally worked up to the competitive dynamics of the
‘new’ Indian market and is addressing the relevant issues to take on the multifarious
challenges of globalization. Banks that employ IT solutions are perceived to be
‘futuristic’ and proactive players capable of meeting the multifarious requirements of
the large customer’s base. Private Banks have been fast on the uptake and are
reorienting their strategies using the internet as a medium The Internet has emerged as
the new and challenging frontier of marketing with the conventional physical world
tenets being just as applicable like in any other marketing medium.

The Indian banking has come from a long way from being a sleepy business
institution to a highly proactive and dynamic entity. This transformation has been
largely brought about by the large dose of liberalization and economic reforms that
allowed banks to Explore new business opportunities rather than generating revenues
from conventional streams (i.e. borrowing and lending). The banking in India is highly
fragmented with 30 banking units contributing to almost 50% of deposits and 60% of
advances. Indian nationalized banks (banks owned by the government) continue to
bethe major lenders in the economy due to their sheer size and penetrative networks
which assures them high deposit mobilization.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


The Reserve Bank of India acts as a centralized body monitoring any
discrepancies and shortcoming in the system. It is the foremost monitoring body in the
Indian financial sector. The nationalized banks (i.e. government-owned banks) continue
to dominate the Indian banking arena. Industry estimates indicate that out of 274
commercial banks operating in India, 223 banks are in the public sector and 51 are in the
private sector. The private sector bank grid also includes 24 foreign banks that have
started their operations in India. . Under the ambit of the nationalized banks come the
specialized banking institutions. These co-operatives, rural banks focus on areas of
agriculture, rural development, unlike commercial banks these co-operative banks do not
lend on the basis of a prime-lending rate. They also have various tax sops because of
their holding pattern and lending structure and hence have lower overheads. This
enables them to give a marginally higher percentage on savings deposits. Many of these
cooperative banks diversified into specialized areas (catering to the vast retail audience)
like car finance, housing loans, truck finance etc. in order to keep pace with their public
sector and private counterparts, the co-operative banks too have invested heavily in
information technology to offer high-end computerized banking services to its clients.

NEW GENERATION BANKING

The liberalize policy of Government of India permitted entry to private sector in


the banking, the industry has witnessed the entry of nine new generation private banks.
The major differentiating parameter that distinguishes these banks from all the other
banks in the Indian banking is the level of service that is offered to the customer. Verify
the focus has always been centered on the custom understanding his needs, preempting
him and consequently delighting him with various configurations of benefits and a wide
portfolio of products and services. These banks have generally been established by
promoters of repute or by ‘high value’ domestic financial institutions. The popularity of
these banks can be gauged by the fact that in a short span of time, these banks have

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


gained considerable customer confidence and consequently have shown impressive
growth rates. Today, the private banks corner almost four per cent share of the total
share of deposits. Most of the banks in this category are concentrated in the high-growth
urban areas in metros (that account for approximately 70% of the total banking
business). With efficiency being the major focus, these banks have leveraged on their
strengths and competencies viz. Management, operational efficiency and flexibility and
superior product positioning

The private banks with their focus on business and service portfolio have a
reputation of being niche players in the industry. A strategy that has allowed these banks
to concentrate on few reliable high net worth companies and individuals rather than cater
to the mass market. These well-chalked out integrates strategy plans have allowed most
of these banks to deliver superlative levels of personalized services. With the Reserve
Bank of India allowing these banks to operate 70% of their businesses in urban areas, this
statutory requirement has translated into lower deposit mobilization costs and higher
margins relative to public sector banks.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Introduction to retail Banking

Banking services offered to the general public, Retail banking services are a
group of financial services that includes installment loans, residential mortgages, equity
credit loans, deposit services, and individual retirement accounts. In contrast with
Wholesale Banking or corporate banking, retail banking is a high volume business with
many service providers competing for market share. Some retail banking services, for
example, credit cards, are among the most profitable services offered by financial
institutions.

Meaning

“Retail Banking refers to the dealing of commercial banks with individual


customers, both on liabilities and assets side of the balance sheet fixed, savings current
account on the liabilities side, and mortgages, loans like personnel, auto, housing and
educational on the assets side”

Retail banking is the new mantra in the banking sector, net banking, phone
banking, mobile banking, ATM’s and bill payments are the new buzz words that banks
are using to lure customers

Today much of retail banking is streamlined through ATM’s or through virtual


retail banking known as online banking, retail banking focuses strictly on consumer
markets.

Across the globe, retail lending has been a spectacular in the commercial banking
sector, Retail loans is estimated to have accounted for nearly one-fifth of all bank credit,
Housing sector is experiencing a boom in its credit .The retail market has decisively got
transformed from a sellers market to buyers market

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Retail banking is becoming an increasingly complex concept to define. While
"pure" retail banking is generally conceived to be the provision of mass market banking
services to private individuals, it has been expanded over the years to include in many
cases services provided to small- and medium sized businesses. Some banks may also
include their "private banking" business (i.e. services to high net worth individuals) in
their definition of retail banking. The advantages of a retail franchise are numerous:

Retail banking in India

In India, retail banking has always been prevalent in various forms ever since the
evolution of banking. Co-operative banks that have been existence in India for over a
century have always had retail thrust. It is only since the mid nineties that the term retail
banking has been used as a means of reinforcing a conscious foray into this particular line
of business. Retail banking today for many banks is synonymous with mainstream
banking, with vast sums of money being invested in creating and sustaining a retail
brand, further supported by requisite technological and staffing support. It is pertinent to
ponder about the causes of the shift (or increase) of focus towards the retail side.

Retail banking in India is not a new phenomenon has. It always been prevalent in
India in various forms. For the last few years it has become synonymous with mainstream
banking for many banks.

The typical products offered in the Indian retail-banking segment are housing
loans, Consumption loans for purchase of durables, auto loans, credit cards and
educational loans. The loans are marketed under attractive brand names to differentiate
the products offered by different banks. Retail lending has turned out to be a key profit
driver for banks within the retail segment; the housing loans had the least gross asset
impairment. In fact, retailing make ample business sense in the banking sector.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Factors contributing to the growth of retail business

The following are the factors, which contribute to the growth of Retail business

1. The economic prosperity and the consequent increase in purchasing power have
given a fillip to a consumer boom.

2. The changing consumer demographics indicate vast potential


For growth in consumption both qualitatively and quantitatively

3. The Technological innovations relating to increasing use of credit / debit cards,


ATMs, direct debits and phone banking has contributed to the growth of retail
banking in India

4. Decline in interest rates have also contributed to the growth of retail credit by
generating the demand for such credit

Opportunities and challenges of retail banking in India

Retail banking has immense opportunities in a growing economy like India.

The rise of the Indian middle class is an important contributory factor in this
regard. The percentage of middle to high-income Indian households is expected to
continue rising. The younger population not only wields increasing purchasing power.
But as far as acquiring personal debt is concerned, they are perhaps more comfortable
than previous generations. Improving consumer purchasing power, coupled with more
liberal attitudes toward personal debt, is contributing to India's retail banking segment.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


The combination of the above factors promises substantial growth in the retail
sector,. Some of the key policy issues relevant to the retail-banking sector are: financial
inclusion, responsible lending, and access to finance, long-term savings, financial
capability, consumer protection, regulation and financial crime prevention.

Retail banking is a banking service that is geared primarily toward individual


consumers. Retail banking involves two aspects i.e. Business Banking where transactions
are carried out with industries and organizations, where as at UTI individual customers
are the end users to whom the retail loans such as personal, auto and housing loans are
provided

Types of Retail Banks

1) Commercial bank has two possible meanings:

 Commercial bank is the term used for a normal bank to distinguish it


from an investment bank.
 Commercial bank can also refer to a bank or a division of a bank that
mostly deals with deposits and loans from corporations or large
businesses,

2) Community development bank are regulated banks that provide financial services
and credit to underserved markets or populations.
3) Private Banks manage the assets of high net worth individuals.

4) Savings bank accepts savings deposits.

o Postal savings banks are savings banks associated with national postal
systems.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


COMPANY PROFILE

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


About UTI Bank

UTI Bank was the first of the new private banks to have begun operations in
1994, after the Govt of India allowed new private banks to be established. The bank was
promoted jointly by the Administrator of the specified undertaking of the unit trust of
India (UTI-I), life insurance Corporation of India (LIC) and General Insurance
Corporation of India

The Bank has strengths in both retail and corporate banking and committed to
adopting the best industry practices internationally in order to achieve excellence

The banks registered office is at Ahmedabad and its Central office is located at
Mumbai. Presently, the bank has a very wide network of more than 561 branch offices
and extension counters. The bank has a network of over 2341 ATMs providing 24hrs a
day banking convenience to its customers. This is one the largest ATM networks in the
country
UTI Bank has been in constant endeavor to bring a sharper focus to the
requirements of its customers and provide the highest levels of services. UTI is one of the
few banks in India, which has built up a fully integrated centralized banking architecture
to offer banking services

UTI bank provides facilities for bill payments, NRI services, financial advice and
retail loans. The bank offers a complete range of retail and corporate services, including
retail loans, corporate credit, forex services, investment banking and depository services.
UTI Bank’s deposit base currently stands at over Rs 58000 crores with over 59 lakhs
accounts

The bank has strengths in both retail and corporate banking and is committed to
adopting the best Industry practices internationally in order to achieve excellence

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Board of Directors

The Bank has 11 members on the Board. Dr. P. J. Nayak is the Chairman and
Managing Director of the Bank.

The members of the Board are :

Dr. P.J. Nayak Chairman & Managing Director


Shri Surendra Singh Director
Shri N.C. Singhal Director
Shri A.T. Pannir Selvam Director
Shri J.R. Varma Director
Dr. R.H. Patil Director
Smt. Rama Bijapurkar Director
Shri R.B.L. Vaish Director
Shri S.B. Mathur Director
Shri M.V. Subbiah Director
Shri Ramesh Ramanathan Director

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


UTI Banks Mission and Core values

Mission

1) Customer service and product Innovation tuned to diverse needs of


individual corporate clientele

2) Continuous technology up gradation while maintaining human values.

3) Progressive globalization and achieving international standards.

4) Efficiency and effectiveness built on ethical practices.

Core values

1) Customer satisfaction through providing quality service effectively and


efficiently.

2) Maximization of stakeholder value

3) Success through Teamwork, Integrity and People

4) Periodic Customer Service Audits.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


PROJECT TITLE

“A Study on Retail Loans”

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Objectives of the Study

1. To study the fundamentals of the Retail loans.

2. To study the policies, practices, and procedures of UTI Bank.

3. To know the appraisal Techniques.

4. To study about Priority Sector Advances.

5. To study about the portfolio management of various loan products.

6. Analysis of allocation of business, balancing the portfolios for the good


yield and profitability.

7. To know about NPA’s, and Write-off concepts.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Retail Loans at UTI Bank

 Personal Loans
 Auto (Car) Loans
 Housing Loans

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Retail Loans at UTI Bank

UTI Bank has separate division as Retail banking for Retail Loans; Called as
Retail Asset Management Group at the Central Office and local Branches are called as
Retail Asset center. Currently the Bank is providing Retail loans to customers, which
include Personal Loans, Housing Loans, Mortgage Loans, Auto loans, Educational loans,
Loans against Shares and Securities, etc. The retail loans products at UTI Bank are given
brand names like personal power to personal loans, Power homes to housing loans and
power drive to auto loans and Property Power for Mortgage Loans …like wise.
The above loans are called as Retail Loans as these loans are given only to the Retailers
i.e. on Individual Capacity.

Apart from the above, they are also providing loans for the Business entities
called as Business Banking.

This project study is more confined to those products, which are offered by Retail
Asset Centre, Belgaum. They are mainly in to the Housing, Personal, and Auto Loans.

Personal loan-

Personal loan is the loan provided for individual customers for their personal needs.
UTI Bank finances only for approved reasons like educational purpose, medical
expenses, for improvement the current business etc and does not finance for unapproved
reasons like for Investment in shares, mining business and for the purpose of venture
capital.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


UTI Bank has segmented the customers in to following Categories:

1) Salaried individual normal


2) Salaried individual Professional
3) Salaried Doctors
4) Salaried Employed Doctors
5) Self Employed Professional
6) Self Employed Normal

Bank has defined different policy parameters like, Salary eligibility, loan amount,
interest rates, etc. For the different categories of customers as below:

1) Salaried Individual normal

Eligibility criteria

Any individual having a cumulative experience of 2 yrs or more with a


minimum net income of Rs 7000 pm is eligible for the loan, the applicant should be
above 21 yrs of age

Loan amount

The loan limits for salaried individual normal is minimum loan amount =50,000
and maximum loan amount =Rs 10 lakhs

Repayment period Maximum loan amount

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


5times net monthly income for CAT A
=>12 months but<24 months 4times net monthly income for CAT B
4times net monthly income for CAT C
4times net monthly income for CAT D

10times net monthly Income for CAT A


=>24months but<36 months 8times net monthly Income for CAT B
8times net monthly Income for CAT C
8times net monthly Income for CAT D

13times net monthly Income for CAT A


=>36months but<48 months 10times net monthly Income for CAT B
10times net monthly Income for CAT C
10times net monthly Income for CAT D

15 months net monthly Income for CAT A


=>48months upto60 month’s 12months net monthly Income for CAT B
NA for CAT C\D

Security\ collateral

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


1) Salaried (having salary power account with the bank with check off facility)
having net monthly income of Rs 7000to 10000,need not provide collateral
security
2) Salaried (not having Salary power account with the bank) having net monthly
income of Rs 7000 need to provide 50% collateral security

Guarantor- Father\ mother\third party (any one of these) can be a financial guarantor by
declaration
Rate of Interest

S.no Category Rate of Interest


1 A 14.5%
2 B 17.5%
3 C 20.5%
4 D 21.5%

Repayment

12 to 60 months (for cat A &B) in equated monthly installments from the date of
disbursement by way of post dated cheque in case were check-off facility is not available
otherwise, the monthly installment will be received from the employer under check-off
facility
Documents Required

1) Proof of Identity – Passport\Voter’s\Driving license\PAN Card and Photograph

2) Proof of Income - Latest Salary Slip showing all deductions or Form16 along with
current dated salary certificate

3) Proof of residence- Ration card\Passport\Latest Electricity Bill\Latest Telephone


Bill

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


4) Bank statement\Passbook where salary \Inc is Credited- Last 6 months and Last 3
months for CAT A & B employees

5) Proof of Telephone- Latest Bill of Landline\ Mobile stating name of borrower or


address of borrower

Service tax\ Processing fees

Service tax = 12.36% and processing fees is 2% of loan amount applied

2) Salaried Individual Professional

By salaried Professional means-MBA\ Engineers\ CA, ICWA, CS\ Architects

Eligibility criteria

Any Professional qualified individual having a minimum work experience of


6months or more with a minimum net income of Rs 15000pm is eligible for the loan

Loan amount
Minimum loan amount =Rs 50,000
Maximum loan amount=Rs 15 lakhs

No collaterals required

Rate of Interest
S.no Category Rate of Interest

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


1 A 14.5%
2 B 17.5%
3 C 20.5%
4 D 21.5%

Repayment

12 to 60 months in equated monthly installments from the date of disbursement


by way of post dated cheque in case were check-off facility is not available otherwise, the
monthly installment will be received from the employer under check-off facility

Documents Required

1) Proof of Identity – Passport\Voter’s\Driving license\PAN Card and Photograph

2) Proof of Qualification – Degree\ Diploma\certificate indicating the proof of the


professional qualification

3) Proof of Income - Latest Salary Slip showing all deductions or Form16 along with
current dated salary certificate

4) Proof of residence- Ration card\Passport\Latest Electricity Bill\Latest Telephone


Bill

5) Proof of Telephone- Latest Bill of Landline\ Mobile stating name of borrower or


address of borrower

Service tax\ Processing fees

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Service tax = 12.36% and processing fees is 2% of loan amount applied

3) Salaried Doctors
By salaried Doctors means salaried MBBS\BDS and above. No Doctors from
ayurvedic\ Homeopathic
Eligibility criteria

Minimum qualification should be MBBS \BDS or higher, Doctor


Has to be in permanent confirmed service for minimum 6 months with a minimum
gross income of Rs10, 000pm
The applicant should be above 24 yrs of age and less than 65 yrs of age at the time of
termination of loan

Loan amount
Minimum loan amount =Rs 50,000
Maximum loan amount=Rs 15 lakhs

No collaterals required

Rate of Interest
s.no Category rate of Interest

1 A 14.5%
2 B 17.5%
3 C 20.5%
4 D 21.5%

Repayment

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


12 to 60 months in equated monthly installments from the date of disbursement by way
of post dated cheque in case were check-off facility is not available otherwise, the
monthly installment will be received from the employer under check-off facility

Documents Required

1) Proof of Identity – Passport\Voter’s\Driving license\PAN Card and Photograph

2) Proof of Qualification – Degree certificate or passing certificate registered with


respective state medical councils or Dentists Association of India for Dentists

3) Proof of Income - Latest Salary Slip showing all deductions or Form16 along with
current dated salary certificate

4) Proof of residence- Ration card\Passport\Latest Electricity Bill\Latest Telephone


Bill

5) Proof of Telephone- Latest Bill of Landline\ Mobile stating name of borrower or


address of borrower

6) Employment Proof – Latest Form-16, 3 months salary slip Appointment

Service tax\ Processing fees

Service tax = 12.36% and processing fees is 2% of loan amount applied

4) Self Employed Doctors

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Doctors – self-employed MBBS\BDS and above. No Doctors from ayurvedic\
Homeopathic

Eligibility criteria

Minimum qualification should be MBBS \BDS or higher, Doctor has to be in practice


for at least 2 yrs. Business has to be profitable for the last 2 yrs.

The applicant should be above 24 yrs of age and less than 65 yrs of age at the time of
termination of loan. For above 65 yrs of age, co borrower\collateral mandatory

Loan amount
Minimum loan amount =Rs 50,000
Maximum loan amount=Rs 20 lakhs

Repayment
Repayment period max limit Rs 20 lakhs
Upto 12 months 0.6times annual gross receipts or
6 times eligible annual inc
=> 12mon but < 240mon 0.6 times eligible annual inc
=> 24 mon but< 36 mon 0.6 times eligible annual inc
=> 36 mon but<48 mon 0.6 times eligible annual inc

No collaterals required

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Rate of Interest
S.no Category Rate of interest

1 Doctors self Emp 14.5% pa

Repayment

12 to 48 months in equated monthly installments from the date of disbursement by way


of post dated cheque

Documents Required

1) Proof of Identity – Passport\Voter’s\Driving license\PAN Card and Photograph

2) Proof of Qualification – Degree certificate or passing certificate registered with


respective state medical councils or Dentists Association of India for Dentists

3) Proof of Income - Latest Salary Slip showing all deductions or Form16 along with
current dated salary certificate

4) Proof of residence- Ration card\Passport\Latest Electricity Bill\Latest Telephone


Bill

5) Proof of Telephone- Latest Bill of Landline\ Mobile stating name of borrower or


address of borrower

6) Employment Proof- latest 2 yrs IT Returns

Service tax\ Processing fees

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Service tax = 12.36% and processing fees is 2% of loan amount applied

5) Self Employed Professional

By Self employed Professional means-MBA\ Engineers\ CA, ICWA, CS\


Architects

Eligibility criteria

Any Professional individual who is self employed for the last three yrs with a minimum
annual eligible income, the applicant should be above 24 yrs of age

Loan amount
Minimum loan amount =Rs 50,000
Maximum loan amount=Rs 15 lakhs

Repayment limit

Repayment period max limit Rs 15 lakhs

=> 12Mon but < 240mon 2 times (of 2yrs) eligible annual Inc
=> 24 Mon but< 36 Mon 4 times (of 2yrs) eligible annual Inc
=> 36 Mon up to 48 Mon 5 times (of 2yrs) eligible annual Inc

No collaterals required

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Rate of Interest

s.no Category rate of interest

1 self emp Prof 17.5% pa

Repayment

12 to 48 months in equated monthly installments from the date of disbursement by way


of post dated cheque

Documents Required

1) Proof of Identity – Passport\Voter’s\Driving license\PAN Card and Photograph

2) Proof of Qualification – Degree certificate or passing certificate registered with


respective state medical councils or Dentists Association of India for Dentists

3) Proof of Income – IT Returns for the last 2 Yrs and computation of Income For
the 2 yrs Certified by a CA

4) Bank Statement – Last 6 months

5) Employment \ Business Continuity Proof – Business Continuity Proof of Last 2


yrs

6) Proof of residence- Ration card\Passport\Latest Electricity Bill\Latest Telephone


Bill

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


7) Proof of Telephone- Latest Bill of Landline\ Mobile stating name of borrower or
address of borrow

Service tax\ Processing fees


Service tax = 12.36% and processing fees is 2% of loan amount applied

6) Self Employed normal (Individual and sole proprietorship)

Eligibility criteria- any individual who is self employed for the last 3 yrs with a
minimum annual income of Rs 1 lakh

Loan amount

Minimum loan amount =Rs 50,000


Maximum loan amount=Rs 10 lakhs –

Repayment

12 to 48 months in equated monthly installments from the date of disbursement by way


of post dated cheque

Rate of Interest
s.no Category rate of Interest
1 self-Emp Normal 21.5% pa

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Documents Required

1) Proof of Identity – Passport\Voter’s\Driving license\PAN Card and Photograph

2) Proof of Income - Latest Salary Slip showing all deductions or Form16 along with
current dated salary certificate

3) Proof of residence- Ration card\Passport\Latest Electricity Bill\Latest Telephone


Bill

4) Proof of Telephone- Latest Bill of Landline\ Mobile stating name of borrower

5) Employment \ Business Continuity Proof – Business Continuity Proof of Last 2


yrs

Other facilities provided by UTI Bank to Personal loan customers

Apart from the above Income based loans bank has also framed other variants of the
schemes known as Surrogate schemes to compete in the competitive market and to have
major share in the market

UTI Bank is also providing other facilities such as

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


 Top-up Loans were existing customers are provided loans upon the prevailing
loans.

 Balance transfer- this facility is made available for those who want to retire any
higher cost debt

 Loans are made available against repayment track record of any existing auto,
personal or home loans

 Loans are made available against Proof of life Insurance policy or premium
receipts

 Prompt payment discount- It is a scheme offered by the bank to the customers


who are prompt in paying their monthly EMI’s accurately on each month’s
specified date, such customers get 2% cash back offer on their Interest rate

 Credit card program: The scheme is only applicable to gold credit card holder
only. Charge holders will also be eligible under this scheme provided the
customer can produce document showing the charge card limit

 Express Loans: in order to spread the banks net wider the bank target customers
under this scheme who are not eligible under above income based program, the
loan amount is disbursed at a shorter period

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Procedure

UTI Bank has its own systematically framed process to carry out the loan disbursement
procedure. Various departments are involved in the functions of Retail loan activities

At UTI Bank RAC the organization consists of the following departments with individual
functional aspects
1. Sales dept
2. Credit dept
3. Operations dept
4. Collections dept

Sales dept

Sales is one of the most important functionary unit as it includes the initial ground
work for generating the business, Sales dept includes the sales executives who are
responsible for sourcing the business to the UTI Bank, UTI Bank also has its own
internal sales channel called as UBL Sales ltd which is a wholly owned subsidiary of
UTI Bank, UBL Sales are solely responsible for sourcing nearly 50% of the business to
the bank, UBL Sales has been operating with its own manpower where in the
organization structure involves team leaders , business executives who have their own
Top management to whom the administratory functions are to be reported and the
business proceedings are reported to UTI Bank RAC

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


The business at UTI Bank is also sourced by the other outsourced agencies like
Dolphin Financial solutions, Money center & USA associates were in the DMA’s
(Direct marketing associates) and DST’s (Direct sales team) are responsible for getting
the business to the Bank.
The outsourced agencies are operating with the help of their own manpower,
which consists of team leaders and sales executives.
UTI Bank has been outsourcing the business to different agencies to face the
competition in the market and most importantly to gain a major share in the market.

The outsourcing concept has been a profitable source for the UTI Bank

Credit dept

Once the business is sourced to the Bank by the sales executives (DMA’s &
DST’s), the processing of the file is done by the credit dept where a detailed study of
the case file is made,
Incase were the customer profile meets the required eligibility criteria the case is
accepted for further processing, if not rejected
The case is then initiated for field Investigation, Some of the private
players\banks like ICICI and HDFC have separate departments to check the fraud they
are called as Risk control unit (RCU) or Fraud control unit (FCU) this department
concentrates on the fraudulent acts if any, the sales executives check the frauds if any in
documentation.

At UTI Bank the field Investigation has been outsourced to Kalyan consultancy
who are responsible to carry out residence verification of the customers, IT Returns
verification, salary slip verification & Bank statement verification and office
verification has been outsourced to Aim agencies who are responsible for conducting
office verification, televerification and reference verification. These agencies will be
providing remarks about the case investigated and also brings to the notice of the bank

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


in case any fraud detected, they are responsible for verifying the details such as Nature
of business, yearly Income, nature of business, about its existence, locality, verification
is done by personal interaction and also from customers and suppliers.

Then the CIBIL report of the customer is accessed to check the customer
credibility, CIBIL is a repository of Information which contains the credit history of
commercial and consumer borrowers, With a view to provide an institutional
mechanism for sharing of information on borrowers of banks and financial institution,
the Credit Information Bureau (India) Ltd (CIBIL) was set up in August 2000.The
Bureau provides a framework for collecting, processing and sharing credit information
on borrowers of credit institutions.
At UTI Bank the customer’s credibility is accessed with the help of CIBIL.
Documents collected for processing purpose in case of Self Employed Normal

 ID proof
 Address proof
 Own house proof
 Business proof
 IT papers and Bank statements

Documents collected in case of Salaried Individual

 ID Proof
 Address Proof
 Salary Slip
Appointment Letter

The Credit dept is responsible for a thorough file checking where in they have to
check the documents in detail and verify whether the documents provided match with the

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


details given, The customer profile is studied in detail in respect to his\her’s Income
statement, Bank statement, Business proof and in case any discrepancies found the same
is brought to the notice of the sales executives who inurn solve the discrepancies and
again the file is presented
After a detailed check a Credit score card sheet is prepared, The credit score card sheet
has been systematically formulated by UTI bank considering the various Parameters like
age, educational qualification number of dependants of the customer, Income
Information, total no. Of years of employment etc, and points are allocated against
various parameters were the cutoff score must be 60% and more.

Then the CAM (Credit approved memo) is prepared which includes the loan
details regarding the loan amount, monthly EMI, processing fees amount, repayment
mode and repayment period etc and sent to Approval Authority for approval of loan and
once the case is approved, Sanction letter is handed over to the sales executives.
In the mean time, Backend team of Credit has to generate the application ID of the
individual customer. Account (App ID) is authorized for opening the loan a/c and for
disbursement after the case is approved.
Sales executives are responsible to present the sanction letter to the customers
which includes the details such as loan amount monthly EMI, number of installments,
processing fees etc and Loan agreement papers duly signed by the customer after going
through the terms and conditions as framed by UTI Bank and agreeing for the same by
the customer.

Operations Dept:

Complete file along with the duly signed agreement and the EMI PDC’s of the
customer is handed over to the operations dept by sales team.
Further these documents are processed for the disbursement stage.

Operation dept takes care of all the activities, which are involved post
disbursement like, disbursement, customer service, preclosure of loans, and presentation

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


of the EMI PDC’s. Updated the same in the system software (EMIs Cleared in the
clearing house and also the returned instruments.)

UTI Bank RAC makes use of Software’s like Finacle, which is used to maintain
the accounts and transactions and “Nischint”, is a software with the help of which
customer loan account number is created, both the software’s are developed by Infosys
for which Bank is liable to pay the maintenance Fees.

Collections dept

The duty of the collections dept starts after the loan amount is disbursed,
collection dept is responsible for collecting the disbursed loan amount in case of any
default customer, and even the collections work at UTI Bank has been outsourced to
some private agencies

A detailed function of the collection dept is briefed out in the head of


“Effectiveness of Collections Dept”.

Auto loans (car loans)

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


The twentieth Century is the era of Insta buys. Research indicates that 60% of the
cars bought in the last decade were through finance. The consumer is besieged with so
many offers that it becomes impossible for him to decide which is the best

Now a day’s car has become a part of life. Many banks offer the car loan with
attractive schemes, because the risk involved in car loan is less compared to risk involved
in other loans. In car loan both customer and banker will carry the minimum risk.

At UTI Bank a car loan is given to the customers for the purchase of new car
only, the procedure involved in car loan is also simple with low Int rate. There is no need
of giving a separate security for the car loan; the only security needed is hypothecation of
the car
UTI Bank’s Power Drive finances a major part of the cost of new car; loan value is
calculated as per the on road price
LTV (loan to value) of upto 85% of the on road price on selected models is provided

Policies of Car loans

Eligible Segments
1) Salaried Individuals
2) Self Employed individuals
3) Proprietorships
4) Partnership’s
5) HUF’s
6) Trusts

a) All applicants must be either resident Indians or non resident Indians

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


b) Incase of Trusts, the following documents must be collected
1) Certified true copy of the trust deed
2) Copy of the resolution passed by the Board of trustees\Directors
authorizing borrowal
3) Certified true copy of the registration certificate from charity
commissioner\societies registration Act
Eligible Cars

Cars have been categorized as follows for LTV and eligibility purposes
CAT A CAT B CAT C CAT D
Maruti 800 Zen Baleno Vitara
Omni Swift Esteem Sonata
Alto Versa Tucson
Wagon R Accent MercedesC-Class
Santro Verna MercedesE-Class
Getz Elantra MercedesCLS-Class
Indica Bolero MercedesS Class
Palio Scorpio MercedesSLClass
Cedia MercedesSLK–
Lancer Class
Octavia Montero
Sumo Pajero
Safari Combi
Indigo Laura
Corolla Superb
Innova Camry
Land Cruiser prado

Eligibility Criteria and Documentation

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Salaried –Age, Minimum 21 yrs maxi upto 58 or 60 yrs
Loan amount = Minimum Rs 100000
Tenure- Minimum 1 yr& maxi 7 yrs
Income norms=Minimum Rs 100000\-gross annual income for CAT A\B cars and Rs
200000\-for CAT C\D cars
Work Experience-Minimum 2 yrs of total employment
Documents required-proof of identity, proof of income and address proof

Self Employed Individuals\Proprietary concerns

Age, Minimum 21 yrs maxi 65 yrs at the time of loan maturity


Loan amount = Minimum Rs 100000
Tenure- Minimum 1 yr& maxi 7 yrs
Income norms=Minimum Rs 60000\- for CAT A\B cars and Rs 200000\-for CAT C\D
cars.

Interest Rate
Tenure upto 60 months 11.75%
Tenure greater than 60 months 12.25%
Upto 84 months

Housing Loans

Introduction to Housing Finance Industry

In India, many agencies are involved to lend housing finance to homebuyers. The
National Housing Bank (NHB) provides funds to housing sector through its refinance

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


scheme for banks, housing finance companies and state level apex co-operative housing
finance societies. Apart from the premier institutions like Housing Development Finance
Corporation Ltd. And LIC Housing Finance Ltd, there are other like Can-Fin Homes Ltd,
GIC Grih Vitta Ltd., SBI Home Finance Ltd., etc. Who extend housing loans; other
entrants to the housing finance sector include Akashaya Awas Nirman Vittan Ltd. (Bank
of Baroda), GIC Housing Finance Ltd., Dewan Housing Finance Corporation Ltd., Ind,
Bank Housing Finance Ltd. PNB Housing Finance Ltd., etc. Dewan Housing Finance
Corporation's double protection plan is a safeguard against the unpredictability’s of life
and free accident risk cover protects the borrower's family against dispossession of the
house.

The impact of the housing sector on any economy is significant, as it caters to one
of life's basic needs. With India poised to become the most populous country in the
world, the influence of this sector on the economy and its growth potential could be
tremendous. It is estimated that every rupee invested in housing adds 78 paise to the
GDP. Approximately 269 industries stand to benefit from the development of the housing
sector.

Today this sector presents a picture of stiff competition - with lowest interest rates
in decades. Aggressive advertising for marketing innovative schemes has also become a
regular feature. However, these successes apart, the Indian housing finance industry is
still grappling with a host of problems, like difficulty in obtaining proper title deeds, lack

of awareness about the avenues for housing finance in small towns and rural areas, lack
of clear foreclosure norms, regional disparities in rates of stamp duty and so on.

The setting-up of HUDCO, the National Cooperative Housing Federation and the
National Housing Bank (NHB) were measures taken by the Government to strengthen
institutional financing in the housing sector. The NHB, a subsidiary of the RBI, being the

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


regulatory authority provides the guidelines for private housing finance institutions.
Though institutional financing for housing has increased in recent years, only a mere 25%
of the housing finance requirements are met by the formal sector. This is because the
informal sector caters to the needs of the rural population, which forms a large chunk of
the housing market.

The industry comprises of nearly 383 housing finance companies although


disbursements from only the leading 26 institutions are eligible for re-finance from
National Housing Bank, which is the regulatory body for these companies. These
Housing Finance Companies (HFCs) constitute nearly 95 % of the total disbursement by
the industry.

Housing sector is experiencing a boom in its credit; National housing banks were the
first to provide Housing finance, after noticing the growth of the NHB’s in Housing
finance sector many other financial institutions and bank’s entered into the business of
financing housing loan. The major players in the Indian housing industry are the HFCs,
scheduled commercial banks and cooperative banks.

UTI Bank offers Housing loans & loan against property, the housing loans at UTI Bank
have been named as Power Home, it is being offered for the following purposes

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


1) Purchase of a plot of land and construction of a house thereon
2) Construction of a house on plot of land already owned
3) Purchase of a new house \flat
4) Purchase of old house\flat which is not more than 15 yrs
5) Extend \Renovate\Repair of a house or flat
6) Take over of existing Housing loan
7) Loan against property
8) Pre-allotment Booking finance
9) Loan takeover with additional refinance

UTI Bank has segmented the customers for providing the housing loans as follows

1) Salaried Individuals
2) Professionals
3) Self Employed Individuals

Installment to Income Ratio

Sl.no Net adjusted monthly Maximum IIR


income
1 Up to Rs.10000 45%
2 Rs.10000 to Rs.20000 50%
3 More than Rs.20000 50 to 55%

Limit

Minimum-Rs.1 lakh & Maximum-Rs.50 lakhs

Rate of Interest

Fixed rate Floating rate


Tenure Above Rs.1 lakhs-upto Above Rs.1 lakhs-upto
Rs.50 lakhs Rs.50 lakhs
Upto 5 yrs 13% 14%

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


More than 5 yrs –upto 10 13% 14%
yrs
More than 10 yrs –upto 15 13% 14%
yrs
More than 15 yrs 13% 14%

Security

Equitable Mortgage of the property to be financed, by way of deposit of title deeds.

Documents required incase of construction of a house

Technical papers required

a) Approved plan
b) Sale agreement
c) Building construction permission
d) Construction estimation

Legal papers (required in case of housing construction, purchase of plot, loan against
mortgage, loan against property)

a) Title deeds pertaining to property


b) 13 yrs documents to verify the clearance of the property documents
c) Encumbrance certificate
d) Record of Rights
e) Tax paid receipts
f) Legal scrutiny report of particular property

Equitable Mortgage-Documents

a) Memorandum of entry

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


b) Equitable mortgage register
c) Declaration cum confirmation deed

Funding Criteria

Funding of loan amt incase of purchase of land= 75% to 85%

Funding of loan amt incase of construction of house = 85%

Funding for residential mortgage=60%

Funding for commercial mortgage =50%

Repayment

Repayment period of home acquisition plan\takeover of existing housing loan


shall not exceed 20 yrs, Repayment installments will start 18 months after 1st
disbursement or 1 month after full disbursement\possession of house\flat which ever is
earlier in Equated monthly installments

Where the loan is disbursed in stages, pending commencement of equated


monthly repayment installments, interest on the loan disbursed shall be recovered on
monthly basis from the date of disbursement

Repayment tenure for plot loan is 10 yrs

Disbursement

The loan will be disbursed in full or in suitable installments taking into account
the requirement of funds and progress of construction in case of housing loan for
construction purpose as assessed by the bank

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Incase of Purchase of plot or ready house the pay order \DD would be made in
favor of vendor \Development authority

Loan against property: the DD\Pay order would be made in favour of the
applicant and credited directly to his account

Pre-allotment booking finance: In this case, the Pay –order would be made in favour
of the builder \Development authority

Documents required

 Proof of Identity
 Proof of Income
 Proof of residence
 Bank statement

Documents maintained at branch

• Application
• Term loan agreement
• Completion of mortgage formalities (Equitable\Registered)
• Agreement with builder\seller duly registered
• Title clearance certificate\valuation report
• Blue print of plot\ Land\ house approved by the competent authority
• No objection certificate from builder\society to mortgage the flat
• Pledge form for collateral securities

LTV (loan to value): LTV is fixed in order to ensure resale of property in case the
customers become default

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Housing Loan

Procedure

The procedure carried out for the disbursement of housing loan

Sales dept

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Again in case of Housing loan the sales executives are responsible for sourcing
the business to the UTI Bank, the DMA’s (Direct marketing associates) and DST’s
(Direct sales team) of outsourced agencies are responsible for getting the business to the
Bank.

Credit Department

Once the business is sourced to the Bank by the sales executives (DMA’s &
DST’s), the processing of the file is done by the credit dept where a detailed study of
the case file is made the necessary required documents are collected, documents
required in case of construction of house are technical papers like approved plan,
sanction plan, building approval plan, construction estimation and valuation report
valued by a certified Civil Engineer and in case of purchase of land the necessary legal
papers are verified documents such as title deeds pertaining to property,encumberence
certificate, record of rights, tax paid receipts, legal scrutiny report of particular property
Incase were the customer profile meets the required eligibility criteria the case is
accepted for further processing, if not rejected
The case is then approved for field Investigation,
The outsourced agencies will be providing remarks about the
case investigated and also brings to the notice of the bank in case any fraud detected,
they are responsible for verifying the details such as kind of business, yearly Income,
nature of business, about its existence, locality, verification is done by personal
interaction, residence verification of the customers, IT Returns verification, salary slip
verification & Bank statement verification is done by the respective outsourced
agencies, Then the CIBIL report of the customer is accessed to check the customer
credibility, CIBIL is a repository of Information which contains the credit history of
commercial and consumer borrowers, With a view to provide an institutional
mechanism for sharing of information on borrowers of banks and financial institution,
the Credit Information Bureau (India) Ltd (CIBIL) was set up in August 2000.The
Bureau provides a framework for collecting, processing and sharing credit information
on borrowers of credit institutions.
At UTI Bank the customer’s credibility is accessed with the help of CIBIL.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Documents collected for processing purpose in case of Self Employed Normal

 ID proof
 Address proof
 Own house proof
 Business proof
 IT papers and Bank statements

Documents collected in case of Salaried Individual

 ID Proof
 Address Proof
 Salary Slip
Appointment Letter

The Credit dept is responsible for a thorough file checking where in they have to
check the documents in detail and verify whether the documents provided match with the
details given, The customer profile is studied in detail in respect to his\her’s Income
statement, Bank statement, Business proof and in case any discrepancies found the same
is brought to the notice of the sales executives who inurn solve the discrepancies and
again the file is presented
After a detailed check a Credit score card sheet is prepared, The credit score card
sheet has been systematically formulated by UTI bank considering the various
Parameters like age, educational qualification number of dependants of the customer,
Income Information, total no. Of years of employment etc, and points are allocated
against various parameters were the cutoff score must be 60% and more.

Then the CAM (Credit approved memo) is prepared which includes the loan
details regarding the loan amount, monthly EMI, processing fees amount, repayment

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


mode and repayment period etc and sent to Approval Authority for approval of loan and
once the case is approved, Sanction letter is handed over to the sales executives.
In the mean time, Backend team of Credit has to generate the application ID of the
individual customer. Account (App ID) is authorized for opening the loan a/c and for
disbursement after the case is approved.
Sales executives are responsible to present the sanction letter to the customers
which includes the details such as loan amount monthly EMI, number of installments,
processing fees etc and Loan agreement papers duly signed by the customer after going
through the terms and conditions as framed by UTI Bank and agreeing for the same by
the customer.

Operations Dept:

Complete file along with the duly signed agreement and the EMI PDC’s of the
customer is handed over to the operations dept by sales team.
Further these documents are processed for the disbursement stage.

Operation dept takes care of all the activities, which are involved post
disbursement like, disbursement, customer service, preclosure of loans, and presentation
of the EMI PDC’s. Updated the same in the system software (EMIs Cleared in the
clearing house and also the returned instruments.)

UTI Bank RAC makes use of Software’s like Finacle, which is used to maintain
the accounts and transactions and “Nischint”, is a software with the help of which
customer loan account number is created, both the software’s are developed by Infosys
for which Bank is liable to pay the maintenance Fees.

Collections dept

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


The duty of the collections dept starts after the loan amount is disbursed,
collection dept is responsible for collecting the disbursed loan amount in case of any
default customer, and even the collections work at UTI Bank has been outsourced to
some private agencies

A detailed function of the collection dept is briefed out in the head of “Effectiveness of
Collections Dept”.

Effectiveness of Collections Department

The collections department is one of the most important department among all
other departments in the Bank. The duty of the collections department starts after the loan
amount is disbursed; collection dept is responsible for collecting the disbursed loan
amount in case of any default customer.

The due date for EMI payment has been fixed on 5th and 20th of every
month for which the operations department has to present the EMI PDC’s to the Bank.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


The Bank has the systemized technique of sending the SMS alerts to the customer Mobile
phones intimating their due date and amount of their EMI

The collections department is involved in giving regular follow-ups for repayment of loan
for which the presented PDC’s got bounced back.

The collections department is involved in giving regular reminders to the


customers incase any delay in the repayment, one of most effective technique adopted by
the bank is SMS alerts by sending sms for their nonpayment.

Collection Dept has outsourced some agencies called as “Collection Agencies”


for the collections and recovery of the Due amount. These agencies are authorized to
recover the EMI dues and penal charges if any. Incase of Auto Loans, these agencies are
also authorized to seize the vehicles of those accounts, which are due for more than 3
EMIs,
Seizing practice is done by the legal method adopted.

Techniques used in the Appraisal system

The following are the techniques used in the appraisal system

1) Credit scorecard sheet:-


The credit scorecard sheet has been systematically formulated by UTI Bank; it is
a format where points are allocated against various parameters such as age of the
customer, qualification, No. Of dependents of the customer, Income information, total no.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Of years of employment etc and a cutoff score of 60% and more is mandatory, after
preparing the credit score sheet the customer eligibility can be accessed, the low profile
cases can be filtered and only the eligible cases are approved for further processing, UTI
Bank has been using the credit score card sheet which is a powerful technique used in the
appraisal system.

2) Cibil:-
With a view to provide an institutional mechanism for sharing of information on
Borrowers of banks and financial institutions, the credit information bureau (India) ltd
(CIBIL) was set up in August 2000.The Bureau provides a framework for collecting,
processing and sharing credit information on borrowers of credit institutions. Cibil is a
repository of information, which contains the credit history of commercial, and consumer
borrowers
At UTI Bank the customer credibility is accessed with the help of Cibil, which is
useful to get the credit information of the customer, and is considered as one of the major
technique of appraisal system.

3) Field Investigation:-
Field investigation is also one of the important practical tool of appraisal system
where in the field investigation at UTI Bank Retail Asset Center Belgaum has been
outsourced to Kalyan Consultancy and AIM Agencies who are responsible to carry out
residence verification of the customers, IT Returns verification, Salary slip, and Bank
statement verification of the customer, office verification has also been outsourced who
also conduct televerification and verification of references, and the concerned agencies
provide remarks about the case investigated and brings to the notice of the Bank in case
any fraud detected in Documents and in other form

A thorough Investigation of the customer profile by outsourced


agencies in each and every aspect is a technique adopted by UTI Bank RAC as an
effective appraisal method.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


4) Credit alerts:-
This technique is normally used for high ticket size funding wherein the Credit
manager will take the alerts of the specific case with the bank network and his own
network built. Credit alert is checked about the customer background, cross verification is
done by his clients / Creditors or debtors or Alert is taken from his banker or Chartered
Accountant etc.
Also Credit dept takes the feedback about the high value case from the collection dept.

Priority sector advances

RBI’s revised guidelines on lending to priority sector, loans up to Rs. 20 lakh to


individuals for purchase/construction of dwelling unit per family, (excluding loans
granted by banks to their own employees) and loans given for repairs to the damaged
dwelling units of families up to Rs. 1 lakh in rural and semi-urban areas and up to Rs. 2
lakh in urban and metropolitan areas as priority sector advances (loans).

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Priority sector guidelines mandate banks to lend to those sectors that impact large
sections of the population, the weaker sections and the sectors, which are employment-
intensive such as agriculture and tiny and small enterprises. Domestic commercial banks
are required to lend 40% of their adjusted net bank credit (ANBC) and foreign banks are
required to lend 32% of their adjusted net bank credit (ANBC) to the priority sector
activities identified by RBI. Notably the revised guidelines take into account the latest
definition of small and micro enterprises as per the Micro, Small and Medium Enterprises
Development Act, 2006. Other features of the revised guidelines are:

Educational loans granted to individuals for educational purposes up to Rs. 10


lakh for studies in India and Rs. 20 lakh for studies abroad qualify as priority sector
advances.

Advances to small manufacturing enterprises (investment in plant and machinery


not exceeding Rs 5 crores) and micro manufacturing enterprises (investment in plant and
machinery not exceeding Rs 25 lakhs) also qualify as priority sector advances.

Loans granted for construction, additions, alterations, repairs, etc. granted as


under would be categorized as housing loans: Direct housing loans to individuals by
banks up to Rs.10 lakh for construction of houses in urban and metropolitan areas will be
eligible for inclusion under Priority Sector. Further, banks with the approval of their
Boards may also extend direct housing loans up to Rs.10 lakh in the rural and semi urban
areas and cost be considered as part of Priority Sector advances.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Loans granted by banks upto Rs.1 lakh in rural and
semi urban areas and Rs.2 lakh in urban areas for repairs,
additions and alterations etc. to individual borrowers
would be reckoned as Priority Sector advances.

At UTI bank Retail asset center Belgaum, Incase of housing loans the loan amount of
below 10 lakhs is treated as priority sector advances, In personal loan the loan amount
which is below 1 lakh which is generally provided for smaller business units like
provision stores, and other petty cash business and even larger loan amount to other SSI
Units, majority of which are into the forging, iron casting business etc are treated as
priority sector advances,

Apart from the above, Bank is also lending crores of amounts to agricultural sector,
which comes under the preview of Priority Sector Lending.

Non-Performing Assets

Definition:
An asset is classified as non-performing asset (NPA’s) if any dues in the form of
principal and interest are not paid by the borrower for a period of 180 days.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Any asset that is not effectively producing income is generally referred as Non-
performing Asset.
For example, an overdue loan would be considered non-performing asset

One of the most important and major roles played by banking sector is that of
Lending business. It is generally encouraged because it has the effect of funds being
transferred from the system to productive purposes, which also results into economic
growth. As there are pros and cons of everything, the same is with lending business that
carries credit risk, which arises from the failure of borrower to fulfill its contractual
Obligations either during the course of a transaction or on a future obligation.

However with effect from March 2004, default status would be given to a
borrower if dues are not paid for 90 days. If any advance or credit facility granted by
bank to a borrower becomes non-performing, then the bank will have to treat all the
advances/credit facilities granted to that borrower as non-performing without having
any regard to the fact that there may still exist certain advances / credit facilities
having performing status.

Banks play a very important role in the economic development of every nation.
They have control over a large part of the supply of money in circulation. Banks are the
main stimulus of the economic progress of a country. In general there are several
challenges confronting of banks. The main challenge confronting the bank is the
disbursement of funds in quality assets (loans and advances), The main challenge facing
the banks is the disbursement of funds in quality assets (Loans and Advances) or other
wise it leads to Non-performing assets.

An asset which ceases to generate income of the bank is called non-performing


asset. The past due amount remaining uncovered for the two quarter consequently the
amount would be classified as NPA for the whole year. It includes borrowers’ defaults or
delays in interest or principal repayment.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


NPA is a double-edged weapon, which affects bank profitability due to interest
income not being recognized on NPA accounts and loan loss previously to be created
from profit earned.

NPA doesn’t earn any income, it adversely affects the capital adequacy ratio, and
the adequacy ratio reveals the health condition of the bank. The capital adequacy ratio is
defined as the ratio between a bank’s total capital and its risk-weighted assets.

GENERAL REASONS FOR ASSETS BECOMING NPA’s

A multiplicity of factor is responsible forever increasing size of NPA’s in banks.


A few prominent reasons for assets becoming NPA’s are as under.

4Poor credit appraisal system

4Lack of proper monitoring

4Reckless advances to achieve the budgetary targets.

4There is no or lack of corporate culture in the Bank. In adequate legal provisions


On Foreclosure and bankruptcy.

4Change in economic policies/ environment.

4No transparent accounting policy and poor auditing practices.

4Directed lending to certain sector

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Write offs:
Write offs is also one of the common management techniques of NPA’s. The
assets are treated as loss assets, when the bank writes off the balances. The ultimate aim
of the write off is to cleaning the Balance sheet.
Generally Banks writes off these NPA’s once they are 180 days old after the
approval of competent authority. After Writing Off these NPA’s, they are removed from
the Books of Records of the Bank, thereby maintaining the standard of their Balance
sheet.
Even after the Writing Off the cases, Banks used to collect the due amount, which is
treated as the Recovery.

Impact of NPA’s on internal factors:

An NPA’s affect the internal position of the bank. The following are the impact of
internal factors.

1) NPA’s increase Total Expenditures:

The overall expenses of the bank continued to rise for a number of reasons. The
Provision for doubtful accounts, that caused the dramatic increase in total expenses. The
size of provision for doubtful accounts varies from year to year because of the differences
in the levels of the risk anticipated.

2) NPA’s reduce the earning Capacity:

The NPA affects earning capacity of the bank. In general various causes reduce
the profitability performance of the bank. The provision for doubtful debts is one among
the most important cause for reducing the profitability of the bank.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


3) NPA’s reduce the ROA

NPA reduce the earning capacity of assets, return on assets also gets affected.

4) NPA’s do not earn any income they adversely affect Capital Adequacy ratio.

Impact on external factors:

a. Regulatory and credit rating agencies are also not happy with the level of
NPA

b. Indifferent attitude developed in the mind of the Bank customers.

c. Image of the bank in the minds of the general public will go down.

NPA’s at UTI Bank Retail Asset Centre Belgaum

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


UTI Bank has been successfully maintaining relatively a lower size of NPA’s
which is mainly because of adoption and implementation of effective credit appraisal
tools and also the bank makes a through study at the financial profile / Cash flows of the
customers before selling any loan products

The EMI payment which is due for more than 3 months or 90 days past due
(DPD) results into Non Performing Asset. Incase where the repayment due exceeds
6months the case is considered for Write-off, Write-off is a concept where the balances
of the customer are written off completely from the Balance sheet.

The Housing loan and Loans against Property portfolio till date has no any record of
NPA’s and so the write off situation doesn’t arises in case of Housing Loan Portfolio as
of now.

As in Personal loan portfolio in 30 days past due as against the Banks target of
3.5%, the percentage has been nominal of 1.75% which shows an healthy sign of the
branch and incase of 90 days past due the NPA’s percentage accounts to only 0.8% which
is extremely good in terms of quality of the portfolio of Personal loan being absolutely
nonsecured.

And in case of Auto Loan, since the bank has recently started this product, the
NPA does not come into picture during my project tenure.

Portfolios of various loan products

The housing finance industry has been observed to outperform everyone's


expectations in the last two years. Loan disbursements have grown at a CAGR of over

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


35% in the last five years. There are approximately 383 housing finance companies
(HFCs) in the country now. This number does not include numerous banks that have also
entered into the fray recently. The fragmented nature of the housing finance industry is a
major impediment for its further growth. Despite this, the industry has managed to grow
mainly due to a consistent decline in interest rates, tax incentives given by the
government and changing income profile of the Indian middle class population, The
major players in the Indian housing industry are the HFCs, scheduled commercial banks
and cooperative banks

Commoditizing of the housing finance industry is another factor that is


contributing to its growth. Some of the attractive features are adjustable rate plans, lower
processing fees, monthly rest, low interest rates, low EMI, lower margin money, no
prepayment penalty, etc.

Housing, with its ability to give high yields on its investments because of its
backward and forward linkages is rightly considered as an `Engine of Economic Growth'.
Realizing this potential the Government on its part has taken several measures at
reforming this sector in the country. These initiatives apart, social and economic changes
have also come to play a role in the present face of the housing finance industry. Some of
the contributory causes for these changes which encompasses all the segments of the
industry, namely, the property developers, the consumers, banks and the housing finance
institutions include, the liberal attitude of the common man towards borrowed funds,
professional attitude of developers, and the slow shift in the profile of institutions
financing this sector - banks, with new policies are slowly emerging as the leading
providers of home loans.

The sector presents a picture of stiff competition - with lowest interest rates in
decades. Aggressive advertising for marketing innovative schemes has also become a
regular feature. However, these successes apart, the Indian housing finance industry is
still grappling with a host of problems, like difficulty in obtaining proper title deeds, lack

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


of awareness about the avenues for housing finance in small towns and rural areas, lack
of clear foreclosure norms, regional disparities in rates of stamp duty and so on.

The UTI Bank has a Portfolio size of about 5 crores in Housing Loan and 8 crores
in personal loan Portfolio

The Personal Loan, which is unsecured loan product, the interest rate is high
which results in high yield and hence more profitable with shared risk.

The Housing Loan product at UTI Bank has a portfolio size of about 5 crores, the
Housing loan product which is secured product carries low risk which results in low
yield, but results in huge building of Book size.

The Auto Loans, which is a partly secured loan product, carries moderate risk
compared to Personal loan and adversely delinquencies are also high, but minimize the
Write off situation as the reposed vehicles are sold out to compensate against the
overdue.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Findings

1) UTI Bank RAC, Belgaum has adopted a new concept of Outsourcing the
business where more than 75% of the business is through outsourced
agencies, which has been proved to be Profitable concept.

2) UTI Bank RAC also has its own internal sales channel called as UBL sales
ltd, which is a wholly owned subsidiary of UTI Bank.

3) The bank has Different DST’s and DMA teams of the outsourced agencies
for each of the loan products to increase the sales

4) UTI Bank has systematically framed policies for each of the loan
Products.

5) UTI Bank RAC follows a properly structured loan disbursement procedure


With all the departments effective contribution.

6) UTI Bank follows a systematic and good communication network with its
head office, which Results in speeding up the disbursement procedure and
making convenience to the customers.

7) UTI Bank RAC maintains a relatively negligible size of NPA’s due to


adoption and implementation of effective credit appraisal tools and makes
a thorough study of the financial profile of the customers before selling
any loan product, which helps in reducing the NPA’s and ultimately write
offs.

8) UTI Bank also contributes some portion of its advances towards Priority
Sector advances and also lending to agricultural sector.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


9) The Personal Loan product of the bank contributes maximum to the total
Advances as compared to Housing loan and auto loan.

10) The Promotional activities are carried out by the Outsourced agencies
Through pamphlets, personal canvassing etc.

Suggestions

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


a. As UTI Bank has recently stepped into the Retail Loan Industry, should
try to promote its Loan Products through aggressive promotional activities
to Increase its sales and gain a major share in the market.

b. The Auto loan product of the bank should be more highlighted with
promotional activities as there are many competitors for Auto loan in the
market.

c. UTI Bank should make provision for free accident insurance cover for the
Auto loan product to attract the customers for Auto loan.

d. Since most of the customers of Auto Loan go for Purchasing Of new


Vehicles during Festivals, are attracted towards the special offers in loan
Schemes, special offers should be announced during Special occasions
Like New Year, Festivals etc as such offers attract customers.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


Conclusion

Overall banking in India is considered as 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. Even in terms of quality of assets and capital adequacy, Indian
banks are considered to have clean, strong and transparent balance sheets as compared to
other banks in comparable economies in its region

With the growth in Indian Economy expected to be 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.

UTI Bank is facing competition from Public sector banks like State
Bank of India and its associates, Canara bank, Syndicate bank etc, and Private sector
banks like ICICI, HDFC etc, It is the private sector banks giving stiff competition to UTI
Bank than public sector banks.

UTI Bank has entered into the Retail loan segment recently and has
been a competent player in the market with quality service and attractive Interest rate, its
service is not only limited to Metropolitan cities but its striving hard to reach and cater
the needs of the urban and rural customers and has been a good performer in the Retail
loan Industry.

As the Banking sector is booming, all the banks are facing stiff competition
among themselves; to face the competition and survive in the market UTI should adopt
Innovative Techniques to face the competition. The main concern of UTI Bank should be
quality service and customer satisfaction, to gain a major share in the market bank should
go for aggressive promotional activities and attract customers by charging competitive
interest rate.

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


BIBLIOGRAPHY

a) WWW.utibank.com
b) WWW.Google.com

B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.


B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.
B.V.V. SANGHA’S INSTITUTE OF MANAGEMENT STUDIES, BAGALKOT.