1

2


























3


Study of Market Share of Home Loans "

In partial Fulfilment of Award of Master of Business Administration
AMITY BUSINESS SCHOOL
AMITY UNIVERSITY UTTAR PRADESH, LUCKNOW

FACULTY GUIDE
DR.ASHOK KUMAR

INDUSTRY GUIDE SUBMITTED BY
Mr. BARKAT ALI SNEHLATA SINGH
M.B.A 2
ND
YEAR
3
RD
SEMESTER








4


STUDENTS CERTIFICATE
Certified that this report is prepared based on the summer internship project undertaken by me in
STATE BANK OF INDIA. from 16
th
may 2011 to 16
th
July 2011, under the able guidance of
Professor MR. ASHOK KUMAR in partial fulfillment of the requirement for award of degree
of Master of Business Administration (MBA-G/IB/M&S) from Amity University, Uttar Pradesh.

Date.______________
Signature Signature Signature
.. .
Student Faculty Guide Director (ABS)

AMITY UNIVERSITY,
LUCKNOW CAMPUS
UTTAR PRADESH






5


FACULTY CERTIFICATE

Forwarded here with a summer internship report on study of market share of home loans
of SBI submitted by SNEHLATA SINGH Enrollment NO A7001910042. student of MBA
(G/IB/M&S ) 3
rd
Semester (2010-12)

This project work is partial fulfillment of the requirement for the degree of Master in
Business Administration from Amity University Lucknow Campus, Uttar Pradesh.


PROF. ..


AMITY UNIVERSITY,
LUCKNOW CAMPUS
UTTAR PRADESH









6








7







8


PREFACE
The summer training program is objected to understand the corporate world and
its various aspects. The training helps us in gaining practical and managerial
knowledge which is very much different from what is given in the books. The
internship provides us the insight into the real corporate world which would
help us make a presence in this vast professional environment.
The masters of business administration course is not limited to managing things
but has a wide area of performance and perspective which is applied in todays
world of management jobs. The internship program is an extremely essential
part of MBA which makes an individual more experienced and practical
towards todays organizational undertakings.
The project report has been written in an organized manner in the form of a
procedure so that one does not feel discomfort in understanding it. The topics
have been presented in a systematic manner to bring out the clarity of the topic.
The language of the project is kept simple and lucid to reduce complexity in
relating to it. The information has been derived from various sources, visiting
the various branches and business correspondents working under those branches
as a part of the organisation. Lastly all possible efforts have been made in order
to avoid errors.






9


A C K N O W L E D G E M E N T

Acknowledgement is not merely a formality or ritual but a genuine
opportunity to express the indebtedness to all those without whos active
support and encouragement this project wouldnt possible.
Hence, it gives me immense gratification to place on my records my
profound gratitude sincere appreciation to each and every one of those who
have helped me in this endeavour.
Firstly, I would like to thank STATE BANK OF INDIA and its staff for
allowing me to do my project and providing valuable help in collecting data. I
extend my sincere thanks to MR. BARKAT ALI for his continuous guidance,
Cooperation and valuable suggestion to carry out the study.


Date:17 -07-2011
SNEHLATA SINGH
R.No: A7001910042


(Signature)







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CONTENTS
CHAPTER -1

1. INTRODUCTION....................................................................................................... 12
1.1. ABSTRACT ........................................................................................................... 12
1.2. OBJECTIVES OF THE STUDY ........................................................................... 13
1.3. NEED OF THE STUDY .........................................................................................13
1.4. SCOPE OF THE STUDY .......................................................................................14
1.5. RESEARCH METHODOLOGY............................................................................14
1.6. TOOLS AND TECHNOLOGIES USED...............................................................15
1.7. LIMITATIONS OF THE STUDY..........................................................................15
CHAPTER -2
2. LITRTATURE SURVEY................................................................................................ 16
CHAPTER -3

3. COMPANY PROFILE ....................................................................................................25

CHAPTER - 4

4. HOME LOAN PRODUCTS OFFERED BY SBI..........................................................31

CHAPTER -5

5. TERMS AND NORMS ...................................................................................................37

CHAPTER - 6

6. SYSTEMS AND PROCEDURES ..................................................................................55

CHAPTER -7

7. PERFORMANCE EVALUATION ................................................................................60

CHAPTER- 8

8 MARKET SHARES OF SBI74
8.1 CORPORATE STRATEGY & NEW BUSINESSE.78

CHAPTER-9
APPENDIX QUESTI ....................................................87


11


C O N C L U S I O N...........................................................................................93
REFERENCE ......................................................................................................94

LIST OF FIGURES
Figure 1: Housing in India ......................................................................................13

Figure 2: Demographics in Housing....................................................................14

Figure 3: Housing Finance Timelin..........................................................................14

Figure 4: Penetration of Housing Finance in the World ..........................................15

Figure 5: Improved Affordability ............................................................................15

Figure 6: Market features .........................................................................................16

Figure 7: Issues in Affordable Housing in India.......................................................17

Figure 8: Shareholders of SBI...................................................................................26

Figure 9: Software Interface for EMI calculation......................................................49

Figure 10: demand trends ..........................................................................................76

Figure 11: number of sanctions and disbursals .........................................................77

Figure 12: customer portfolio ....................................................................................78

Figure 13: purpose portfolio.......................................................................................79

Figure 14: Loan amount portfolio..............................................................................80

Figure 15: Home loan book sizes ..............................................................................81

Figure 16: credit growth trend ...................................................................................82

Figure 17: share of home loan segment in the retail portfolio ...................................83

Figure 18: Quality of Assets ......................................................................................86

Figure 19: customer complaints.....................................................................................



12



LIST OF TABLES

Table 1: major home loan providers ............................................................................................16
Table 2: Associate Banks of SBI .................................................................................................23
Table 3: SBI Group Comapnies ...................................................................................................24
Table 4: Best Practices in SBI......................................................................................................26
Table 5: SBI Hi-Five Loan...........................................................................................................28
Table 6: Processing fee.................................................................................................................28
Table 7: loan amount in SBI easy home loan .............................................................................29
Table 8: : loan amount in SBI advantage home loan..................................................................30
Table 9: criteria and documents required for individuals ..........................................................39
Table 10: Criteria for Loan Amount ............................................................................................46
Table 11: Determination of Repayment capacity .......................................................................47
Table 12: Enhancing Repayment capacity options.....................................................................49
Table 13: EMI calculation in the flat rate system .......................................................................50
Table 14: EMI calculation in Reduced balanced system ...........................................................51
Table 15: monetary ceilings .........................................................................................................53
Table 16: criteria of margin amount ............................................................................................54
Table 17: Securitization................................................................................................................55
Table 18: Processing fee amounts ...............................................................................................55
Table 19: Rate of interests............................................................................................................58
Table 20: valuation policies .........................................................................................................62
Table 21: Systems and procedures in lending process ...............................................................64
Table 22: competitors ...................................................................................................................75
Table 23: strengths and weaknesses ............................................................................................75
Table 24: demand trend ................................................................................................................76
Table 25: customer capacity profile ............................................................................................77
Table 26: sanctions and disbursals ..............................................................................................77
Table 27: customer portfolio ........................................................................................................78
Table 28: lending purposes ..........................................................................................................79
Table 29: amounts of loans sanctioned .......................................................................................80
Table 30: loan book size...............................................................................................................81
Table 31: credit growth trend .......................................................................................................82
Table 32: share of home loan segment in the retail portfolio ....................................................83
Table 33: take overs......................................................................................................................84
Table 34: outstanding amounts ....................................................................................................85
Table 35: Quality of Assets ..........................................................................................................86
Table 36: income generated .........................................................................................................87
Table 37: customer complaints ...................................................................................................






13


CHAPTER -1

1. INTRODUCTION


1.1. ABSTRACT

Home is a dream of a person that shows the quantity of efforts, sacrifices luxuries and above
all gathering funds little by little to afford ones dream. Home is one of the things that
everyone one wants to own. Home is a shelter to person where he rests and feels comfortable.
Many banks providing home loans, whether commercial banks or financial institutions, to the
people who want to have a home. Many banks are providing home loans at cheapest rate to
attract consumers towards them. The more customer friendly attitude of these banks,
currently offer to consumers cheapest loan over homes. In view of acute housing shortage in
the country, and keeping in mind the social economic role of commercial banks in the
present times, the

RBI advised banks to encourage the flow of credit for housing finance. With the RBI
reducing bank rate, the home loan market rates nose-diving by 50 basis points. The ICICI
Bank and Standard chartered bank has
become the first player in this sector to announce a housing loan for a 20 years period. No
doubt it will enhance the end cost of the home but it will facilitate people to plan their house
over longer duration now, it has been made easy for a person to buy that dream house which
he dreamt of long ago.

A home loan is a loan taken for buying or constructing a home or to make improvements to a
residential property. You can get a loan from banks and registered housing finance
companies.
The Home loan sector in India is the pivotal role player in the growth of the real estate
scenario in India. With tax incentives given to the housing finance sector in the annual budget
of 2001, transactions related to buying and selling of residential properties increased.
considerably and was much higher as compared to previous years. Since the new class of
buyers are relatively younger set of customers who are more aware about legal
documentation and approvals, buyers are now more 'end-users' rather than investors; the
property market in India undergoes transformation to align itself with global standards with
an increased emphasis on quality & cost control and documentation methods. In the current
economy of India, the real estate sector has the maximum propensity to generate income and
demand for materials, equipment and services. It can be said that housing finance companies
were formed for co-existing with buyer's requirements of housing loans for investing in
properties. Home loans are made available by financial institutions to both Indian and NRI
customers at floating and fixed rate of interest and also at attractive EMI options.


14


The realty boom in India has given a new dimension to the finance sector in India - both in
Home Loans and Home Insurance segments. This has not only given a competitive edge to
the finance companies to provide attractive options to customers but has also contributed to
the increased investments in the real estate sector. This has resulted in 13 new institutions
foraying into the housing finance business in the last three years.
1.2. OBJECTIVES OF THE STUDY

1.2.1. Identification Of The Problem

housing sector.
loan products.
loans.
bank.
y method followed by the bank while lending
the home loans.

1.2.2. Offer A Solution To The Problem



To reduce credit risk
.

1.3. NEED OF THE STUDY
It has been felt very useful in future
To study the roles of the staff and the decision making processes in lending to the home loan
borrowers.
To learn and comprehend thoroughly the systems and Procedures used in financing the
segment.
To analyze the issues relating to various financial aspects of lending.


15


To calculate the risk involved and how the risk and uncertainty to be assessed and managed
by the bank while lending the home loans.
To study the valuation of collateral security method followed by bank while lending the
home loans.


1.4. SCOPE OF THE STUDY

= The present study is confined to Home loan products offered by the domestic operations of
State Bank of India.
= The study is also confined to the internal functional and operational aspects of the lending
process.
= The data collected here, is specific to:

-09-Q1FY10.

= The data and the information could be collected here has been taken from the record books
maintained by the branch and from the oral communication with the branch manager.

1.5. RESEARCH METHODOLOGY

1.5.1. Research Design
The study done is exploratory in nature.
branch of the bank was selected by convenience and for the sake of access to the
qualitative information.
the systems and procedures in
lending and the time period as said above.

1.5.2. SOURCES OF DATA

The data and the information presented here have been collected mainly from two kinds of
resources:

1.5.2.1. Primary sources

Direct and oral interaction with the Bank officials, particularly, the branch manager via a
Questionnaire, a copy of which is made available in the APPENDIX.
The Record books maintained at the branch office.

1.5.2.2. Secondary sources



16


Several secondary resources have been referred for collecting first hand information and literature
on the subject that includes:
The Training and Guidance Material supplied to the staff of the Branch.
Annual Reports of RBI.
Online Annual Reports by Consultancy and Research companies.
Online Content of the Banks Website.
The material supplied by the Faculty Guide.
Several websites on personal loans and
Daily News Papers like Economic Times of India and Business Standard.

The details of which have been presented in Bibliography.

1.6. TOOLS AND TECHNOLOGIES USED

1.6.1. Statistical techniques:
Percentages.
Averages and
Tools like
Tables,
Bar Charts and
Pie charts

1.6.2. Hardware and Software Technologies:

Home PC with Internet access
MS Word and Excel-2003.
World Wide Web or Internet

1.7. LIMITATIONS OF THE STUDY

Some of the limitations of the project that were encountered during the study are:

+ In case of interaction with the representative of a particular bank it happens many a time that
the representative cannot disclose all the data because of certain reasons like banks privacy policy
etc. thus getting clear picture about the service provided is not possible.

+ Due to paucity of time, only important factors have been analyzed and discussed.

+ To collect the data from various banks was quite difficult due to non-cooperation
of some banks. This proved to be major limitation of the study.

+ To access such a large number of customers was difficult because of non-cooperative
attitude of respondents.

+ Lack of data was also the other limitation of the study as some of banks do not have proper
data on topic.



17


+ There was limitation of time to conduct such a big survey in limited available time.

+ Generally the data on the websites of the banks are not fully disclosed i.e. other than the
charges mentioned on the website there are many hidden charges which increases the cost like
service charge etc

+ Ignorance and reluctant attitude of customers was also a major limitation in this study.

I have tried a lot to overcome the above mentioned limitations as far as possible.























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CHAPTER -2

2. LITRTATURE SURVEY

2.1. HOME LOAN INDUSTRY IN INDIA

After going through pervious studies of Home loans in India I came to conclude the following
indicated in different forms:

HOUSING - THE PULSE OF THE ECONOMY



FIGURE 1- HOUSING IN INDIA
2
ND
LARGEST
EMPLOYMENT
GENERATOR
BACKWARD/FORWARD
LINKAGE OVER 269
INDUSTRIES
SECTOR GROWING AT OVER
30% P.A.
ESTIMATED INVESTMENT
FOR MEETING HOUSING
NEEDS UP TO: US $ 90 bn
EVERY INR 1 INVESTED IN HOUSING ADDS INR 0.78 TO GDP


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Housing amenities

Figure 2: Demographics in Housing



0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
1981 1991 2001
drinking water
electricity
sanitation


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Housing finance- timeline















Figure 3: Housing Finance Timeline
Schedule commercial banks get in to direct lending for housing finance-chnaging the
market scenario-late 1990s
Public sector banks /insurance companies promote housing finance companies
,also private sector enters late 1980s
National housing bank- regulatory & supervisory body/refinancing
agency-late 1988
HDFC: 1
st
private sector retail housing finance institution-1977
HUDCO: public sector, wholesale lending-1971
Centrealised directed credit- pre 1970


21


LOW PENETRATION IMPLIES ROOM FOR GROWTH

Figure 4: Penetration of Housing Finance in the World


Improved Affordability


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Figure 5: Improved Affordability
Unique features of sbi home loans:
Given below are the key benefits offered by State Bank of India home loans:
Package of special benefits.
Affordable interest rates. In addition, SBI imposes interest on the basis of daily reducing
balance method.
Nominal processing fees.
No administrative costs or hidden fees.
There are no prepayment penalties. You can lower your interest burden and use your excess
funds in the most desirable way through prepaying the loan.
With more than 13,700 branches throughout the country, you can receive your account placed
at a branch which is closest to your current or future home.


Figure 6: Market features




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Major Home Loan Providers
Banks & Public Sector Housing Finance
Companies
State Bank of India, Corporation Bank,
Punjab National Bank, Central Bank,
Dena Bank, Allahabad Bank, Bank of
Maharashtra, Bank of Baroda Housing
Finance, Can Fin Homes, GIC Housing
Finance, LIC Housing Finance, PNB
Housing Finance, SBI Home Finance,
Centbank Home Finance, HUDCO,
LIC, etc.
Financial Institutions HDFC, ICICI Ltd, Citibank, HSBC,
Standard Chartered- Grindlays, IDBI
Bank, etc
Table 1: major home loan providers
ISSUES IN AFFORDABLE HOUSING
. urban areas have created job opportunities,
but not provided sufficient affordable
Housing.
.high transaction costs- stamp duty,registration
.lack of reliable data


Figure 7: Issues in Affordable Housing in India


2.2. LATEST TRENDS IN THE INDUSTRY

2.2.1. GDP ratio at 7% provides room for further growth

The ratio of mortgage to GDP in India has remained low at 7%, as against 12% for china, 41%
for Hong-Kong and more than 80%foor developed countries, thus providing for further growth in
the housing sector during the coming years. While the housing finance companies (HFC), which
are regulated by National housing Board (a wholly-owned subsidiary of RBI) were pre
dominantly catering to mortgage needs. Over the past few years, banks too have started in
increasing their exposure to real estate, especially Home loans. This is evident from the fact that
the market share of HFCs has decreased from 65% if FYO1 to present 55%. Banks, on other hand
have been constantly increasing their market share, there by intensifying competition.



HOUSING COST
Component %
Land cost 5%
Labour cost 5%
Material cost 28%
Profit 18%


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2.2.2. Revival in real estate prices in the initial period of the year and low interest
rate

The correction in the real-estate prices in the initial period of the year and low interest rate
schemes announced by the banks/HFCs have resulted in significant surge in volumes especially
in the Affordable housing segment.

2.2.3. Sluggish credit demand; banks increase their exposure to housing sector.

Due to the sluggish credit demand (up 10.1% yoy for the fortnight ended November 20, 2009),
banks have been diverting their funds towards housing loans. According to the figures revealed
by RBI, the non-food credit growth during April-august 2009 has remained muted at 0.8%. On
the other hand, lending to the home loan segment during this period increased 2.8%. Since
February 2009, banks have been aggressively pricing interest rates on home loans (including both
floating and fixed rates). Subsidies have also been provided to the form of reduced processing
fees and minimal/no penalty on early re-payments. SBIs s home loan book has increased by
rs117bn or ar2.5% CQGR in the last four quarters. With credit demand to revive in coming
period, banks are likely to divert their funds to high yielding assets thereby reducing their
exposure to the housing sector.

2.2.4. HFCs continue to do business as usual

HFCs foresee the increasing share of banks exposure towards home loan segment as a temporary
phenomenon. In our view, banks are likely to face asset-liability miss-match as these loans have a
long gestation period. Further, these loans are a zero-sum game in the initial period due to lower
interest rate offered. HFCs, on the other hand typically raise money that match their requirements
and thus minimize their ALM mismatch

2.2.5. Differential interest rate may not remain for long

While the discounted / special scheme rates are offered to new home loans, existing customers
continue to ply higher rate of interest. The Indian Banks Association has planned to introduce a
uniform rate for all borrowers.

2.2.6. India's mortgage market scores over West

In India, the borrower contributes a higher share of his own funds (24-46% of house value) at
the time of purchasing a house.
The loan installments too eat away a smaller portion of the borrowers income.
The installment to income ratio-ranged between 34% and 40%, in India is lower than some
countries in the West.
This is based on an analysis by rating agency Fitch of the home loan asset pool that it rates.
This is because borrowers income has kept pace with rise in property prices.


25


The extent of second houses purchased is also limited and most borrowers stick to their
repurchase schedules.
The figures computed by Fitch based on the asset pool that it rates implies that on an
average, the borrower funds up to 30% of the house value through his own capital
This among other things increases the borrowers willingness to repay.
Some bankers say the black money component is also high in the Indian realty market,
resulting in higher borrower equity.
Another notable factor is that delinquencies have remained range-bound in the last 33
months, according to residential mortgage index launched by the ratings firm.
The index which tracks home loans that have not repaid for over 90 days has moved in a
narrow range between 0.90% and 1.07%.


























26


CHAPTER -3

3. COMPANY PROFILE
3.1. Introduction:

State Bank of India (SBI) has history of more than 200 years of existence. SBI is the largest
commercial bank in India and accounts for approximately 18% of the total Indian banking
business and the group account for 25% of the total Indian banking business. The central bank,
Reserve Bank of India (RBI) is the largest shareholder in the bank with 59.7% stake followed by
overseas investors including GDRs with 19.78% shareholding as on September 06. RBIs stake in
the bank is likely to be transferred to the Government of India (GOI).

SBI has the largest distribution network in India spread across every nook and corner of India. As
on September 06, the bank has 14,061 branches which include 4,755 branches of its associated
banks. The bank also has the largest network of 5,624 ATMs. Since the last 5 years the bank has
showed continued growth in its core business. The total asset size of the bank reported a CAGR
of 9.4% during the period FY01 FY06 and stood at Rs. 4,938.69 bn as of September 2006. In
HIFY07, the bank reported net interest income (NII) of Rs. 182.14bn, representing a growth of
2.74% over HIFY06 while the bank reported a net profit of Rs.19.8bn, registering a decline of
18.67% during the same period. Credit off take of the bank has been lower than the

State Bank of India (SBI) is India's largest commercial bank. SBI has a vast domestic network of
over 9000 branches (approximately 14% of all bank branches) and commands one-fifth of
deposits and loans of all scheduled commercial banks in India.

The origins of State Bank of India date back to 1806 when the Bank of Calcutta (later called the
Bank of Bengal) was established. In 1921, the Bank of Bengal and two other Presidency banks
(Bank of Madras and Bank of Bombay) were amalgamated to form the Imperial Bank of India. In
1955, the controlling interest in the Imperial Bank of India was acquired by the Reserve Bank of
India and the State Bank of India (SBI) came into existence 21 by an act of Parliament as
successor to the Imperial Bank of India.

Today, State Bank of India (SBI) has spread its arms around the world and has a network of
branches spanning all time zones. SBI's International Banking Group delivers the full range of
cross-border finance solutions through its four wings - the Domestic division, the Foreign Offices
division, the Foreign Department and the International Services division.

If one measures by the number of branch offices and employees, SBI is the largest bank in the
world. Established in 1806 as Bank of Calcutta, it is the oldest commercial bank in the Indian
subcontinent. SBI provides various domestic, international and NRI products and services,
through its vast network in India and overseas. With an asset base of $126 billion and its reach, it
is a regional banking behemoth. The government nationalized the bank in 1955, with the Reserve
Bank of India taking a 60% ownership stake.

In recent years the bank has focused on three priorities:

1), reducing its huge staff through Golden handshake schemes known as the Voluntary
Retirement Scheme, which saw many of its best and brightest defects to the private sector,


27



2), computerizing its operations and
3), changing the attitude of its employees (through an ambitious programme aptly named
'Parivartan' which means change) as a large number of employees are very rude to customers.


3.2 Roots:

The State Bank of India traces its roots to the first decade of 19th century, when the Bank of
Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806. The government
amalgamated Bank of Bengal and two other Presidency banks, namely, the Bank of Bombay
(incorporated on 15 April 1840) and the Bank of Madras on 27 January 1921, and named the
reorganized banking entity the Imperial Bank of India. All these Presidency banks had been
incorporated as joint stock companies, and were the result of the royal charters. The Imperial
Bank of India continued as a joint stock company. Until the establishment of a central bank in
India the Imperial Bank and its early predecessors served as India's central bank, at least in terms
of issuing the currency. The State Bank of India Act 1955, enacted by the Parliament of India,
authorized the Reserve Bank of India, which is the central banking organization of India, to
acquire a controlling interest in the Imperial Bank of India, which was renamed the State Bank of
India on 30 April 1955.

3.3 Timeline:

June 2, 1806: The Bank of Calcutta established.
January 2, 1809: This became the Bank of Bengal.
April 15, 1840: Bank of Bombay established.
July 1, 1843: Bank of Madras established.
1861: Paper Currency Act passed.
January 27, 1921: all three banks amalgamated to form Imperial Bank of India.
July 1, 1955: State Bank of India formed; becomes the first Indian bank to be nationalized.
1959: State Bank of India (Subsidiary Banks) Act passed, enabling the State Bank of India to
take over eight former State-associated banks as its subsidiaries.
1980s When Bank of Cochin in Kerala faced a financial crisis, the government merged it with
State Bank of India.

June 29, 2007: The Government of India today acquired the entire Reserve Bank of India
(RBI) shareholding in State Bank of India (SBI), consisting of over 314 million equity shares
at a total amount of over 355 billion rupees.
3.4 Associate banks:

There are seven other associate banks that fall under SBI. They all use the "State Bank of" name
followed by the regional headquarters' name. These were originally banks belonging to princely
states before the government nationalized them in 1959. In tune with the first Five Year Plan,
emphasizing the development of rural India, the government integrated these banks with the State


28


Bank of India to expand its rural outreach. The State Bank group refers to the seven associates
and the parent bank. All the banks use the same logo of a blue keyhole. Currently, the group is
merging all the associate banks into SBI, which will create a "mega bank", and one hopes,
streamline operations and unlock value.
State Bank of Bikaner &
Jaipur
State Bank of Hyderabad
State Bank of Indore
State Bank of Mysore
State Bank of Patiala
State Bank of Saurashtra
State Bank of Travancore
Table 2: Associate Banks of SBI

3.5 Foreign Offices:

State Bank of India is present in 32 countries, where it has 84 offices serving the international
needs of the bank's foreign customers, and in some cases conducts retail operations. The focus of
these offices is India-related business.
3.6 Growth:

State Bank of India has often acted as guarantor to the Indian Government, most notably during
Chandra Shekhar's tenure as Prime Minister of India. With more than 9400 branches and a further
4000+ associate bank branches, the SBI has extensive coverage. Following its arch-rival ICICI
Bank, State Bank of India has electronically networked most of its metropolitan, urban and semi-
urban branches under its Core Banking System (CBS), with over 4500 branches being
incorporated so far. The bank has the largest ATM network in the country having more than 5600
ATMs [1]. The State Bank of India has had steady growth over its history, though the Harshad
Mehta scam in 1992 marred its image. In recent years, the bank has sought to expand its overseas
operations by buying foreign banks. It is the only Indian bank to feature in the top 100 world
banks in the Fortune Global 500 rating and various other rankings. According to the Forbes 2000
listing it tops all Indian companies.

3.7 Fortune Global 500 Ranking 2007:


-2007 following are the data for SBI in $ million. Revenues 15,119.4.
Profits 1,407.3. Assets 187,547.1. Stockholders' Equity 9,786.2
Awards
with AC Nielsen-ORG Marg in 21 cities across India.


29


3.9 The main activities of SBI are into -
Personal Banking.
NRI Services.
Agriculture.
International.
Corporate.
SME.
Domestic Treasury.

3.10 State Bank of India offers the following services to its customers
C Domestic Treasury.
C SBI Vishwa Yatra Foreign Travel Card.
C Broking Services
C Revised Service Charge.
C ATM Services.
C Internet Banking.
C E-Pay.
C E-Rail.
C RBIEFT.
C Safe Deposit Lockers.
C Gift Cheques.
C MICR Codes.
C Foreign Inward Remittances.

Moreover, State Bank of India has Colleges/Institutes/Training Centers that are the seats of
learning and research and development. It caters not only to the employees of State Bank of India
but also other banks/establishments in India and abroad.

3.11 Performance:

SBI Bank India had Total Income of Rs 68376.83 cr for the financial year 2006 -07.
State Bank of India has posted Net Income to the tune of Rs 6364.38 crore or the financial
year 2006 -07.

3.12 Organization:

State Bank of India is headed by Mr. Shri O. P. Bhatt, Chairman.


30




3.13 The Bank stands for Best Practices as it claims itself as under: Best practices
followed in SBI

People dealing with you

End to End service by Permanent employees
of SBI who are accountable to you.

Place

SBI branch of your choice will service your
loan account. You can always meet our
employees face to face.

Price

Complete transparency. Interest charged on
the daily reducing balance.

Prepayment charges

No penalty for prepayments made, out of
bonafide savings or windfall gains for which
evidence is produced.

Costs hidden in fine print

No hidden costs

Transparency

Complete transparency. All the features of our
product, including interest rates, are in the
public domain.

Table 4: Best Practices in SBI

Share holding pattern


31



Figure 8: Shareholders of SBI
3.15. Unique features of SBI Home Loan Products:

Provision for on the spot "In principle" approval.

and maximise gains.
e of your spouse and children to compute eligible loan amount.
eligible loan amount.
ject cost.






Sales
promoters
mfs/uti
banks/fls
insurance co's
flls
non institutional


32


CHAPTER - 4

4. HOME LOAN PRODUCTS OFFERED BY SBI

1. SBI HI-FIVE LOAN

SBI Hi-Five is available up to 31st March
2010 Amount
Maximum Rs.5 Lacs

Term



Maximum 120 months (i.e. 10 years)
including moratorium period.

Interest Rates

8% p.a. Fixed interest rate during first 60
months.

61st month Onwards - floating at 2.75%
below SBAR
Or
Fixed interest at 1.25% below SBAR
Table 5: SBI Hi-Five Loan
Processing Fee The revised processing fee structure (including service tax) from 9th November
2009 is as under:
Loan Amount Processing
Fee(Revised)
Upto Rs.5 Lac Rs.1000/-


2. SBI EASY HOME LOAN
FOR LOAN AMOUNT UPTO Rs. 50 Lacs
SBI Easy is available up to 31st March 2010
Getting your dream home has become easier with SBI Easy Home Loan. With low interest rates
for home loan under Rs. 50 lakhs category, SBI Easy ensures that you are not burdened with high
interest for your home loan. Plus with over 12000 SBI branches nationwide you can get your
Home Loan account parked at a branch nearest to your present or proposed residence.

Interest Rate:

Interest rate during the first year (i.e. till first anniversary date from the date of first disbursement)
is fixed at 8% p.a.
Interest rate during next two years is fixed at 8.5% p. a


33


Interest rate after three years may be Fixed or Floating as per the borrowers choice made at the
time of sanction. If floating rate option is chosen, then the rate will be 2.75% below SBAR. If
fixed rate option is chosen, then the rate will be 1.25% below SBAR prevailing on the third
anniversary date from the date of first disbursement, and shall have a reset frequency of 5 years
from the third anniversary date of the loan. Fixed interest rate shall be subject to force-majeure
clause.

Processing Fee:

The revised processing fee structure (including service tax) from 9th November 2009 is as under:
Loan Amount Processing
Fee(Revised)
Upto Rs.5 Lac and up
to rs. 1 Cr
Rs.8000/-
Above Rs.1 Cr. and
upto Rs.5 cr
Rs.10,000/-
Above Rs.5cr Rs.20,000/-

Table 7: loan amount in SBI easy home loan

4. HOME LOAN PRODUCT VARIANTS

i) SBI Max Gain

HOME LOAN AS AN OVERDRAFT

An innovative and customer-friendly product to enable you to earn optimal yield on your savings
and minimize interest burden on Home Loans, with no extra cost.
The loan is granted as an Overdraft facility with the added flexibility for you to operate your
Home Loan Account like your SB or Current Account.
The product serves to minimize your interest cost by enabling you to park your surplus funds in
SBI-Maxgain (with the benefit to withdraw the surplus funds whenever you require), specially
in the wake of low yields from other deposit/ investment avenues.
Minimum Loan Amount: Rs.5 lacs

ii) SBI Freedom

A revolutionary product designed for customers who are on the look out for a source of finance
for a property they want to invest in without mortgaging the same. All you have to do is pledge
any financial security that you have and you will get a Home Loan for your dream home.
A must-take for those who do not want to pay stamp duty for mortgage of their property or go
through the hassles of creation of mortgage.
You also have an option to take the loan by way of mortgage of the property and pledge financial
securities in lieu of margin money.


34


Repayment is highly customized, giving you the option to repay through regular EMIs or through
maturity proceeds of the securities pledged.

ii) SBI Realty

HOME LOANS FOR PURCHASE OF PLOT OF LAND FOR THE PURPOSE OF
CONSTRUCTION OF A DWELLING UNIT
A unique product if you are on the lookout for a loan to purchase a plot of land for house
construction. The loan is available for a maximum amount of Rs.1 crore* and with a comfortable
repayment period of upto 15 years.
Customers are also eligible to avail another Housing Loan for construction of house on the plot
financed above with the benefit of running both the loans concurrently. (House construction
should commence within 2 years from the date of availment of SBI-Realty Housing Loan)
(Other terms and conditions as applicable to regular Home Loans)
(* relaxation considered on case to case basis)

iv) SBI Flexi

HOME LOANS WITH A COMBINATION OF FIXED AND FLOATING INTEREST
RATES
Home Loans with an option to choose a combination of floating interest rate and fixed interest
rate, in a pre determined ratio.
Minimum Loan Amount Rs.5.00 lacs.
A customized product designed to enable borrowers to hedge their Home Loan against
unfavourable movement in interest rates. The product gives you a onetime irrevocable option to
choose one of the three customized combinations of fixed and floating interest rates and also to
choose the order in which the fixed and floating rate will be availed.

v) NRI Home Loans

HOME LOANS TO NON RESIDENT INDIANS (NRIs) AND PERSONS OF INDIAN ORIGIN
(PIOs HOLDING A FOREIGN PASSPORT)
Eligibility
Individual(s) over 18years of age with a steady source of income who

Are Non Resident Indians (NRIs) holding a valid Indian passport.
Are persons of Indian origin (PIOs) holding a foreign passport.
Minimum employment tenure in India/abroad not less than 2 years.

Loan Amount

The loan amount is to be determined on the basis of repayment capacity taking into account
income, age, assets and liabilities, qualifications, stability of occupation, and employment
prospects on return. The loan amount is subject to the following:
Minimum: Rs. 3 lacs


35


Maximum: Maximum permissible loan amount would be determined by EMI/NMI ratio criteria
as applicable to regular Home Loans scheme for Resident Indian customers, which is 40% for
Net Annual Income (NAI) upto Rs.2 Lac, 50% for NAI above Rs..2 Lac and upto Rs.5 Lac, 55%
for NAI above Rs.5 Lacs.

vi) SBI Optima

Innovative and value added products extended to existing Home loan borrowers with a
satisfactory repayment record of 3 years and whose loan is Standard Asset, with a view to
reinforce the customer loyalty and to maintain long term relationship with the borrowers. In case
of take-over of Home Loans from other Banks/HFCs, the borrower should have fulfilled the
above conditions with the present Bank/HFC.

Vii) SBI Tribal Plus

SPECIAL HOME LOAN SCHEME FOR HILLY/TRIBAL AREAS
'SBI-Tribal Plus' Home Loans, a Special Scheme designed for Hill/Tribal areas for extending
financial assistance to individuals in such areas to:
a. Purchase or construction of a new house / flat (without mortgage of land)
b. Purchase of an existing (old) house / flat which is not more than 10 years old (In such cases,
valuation report from our empanelled valuer and a certificate on the condition of the house to be
given by a structural engineer or Govt. approved architect should be taken);
c. Repair /Renovation/extension of an existing house or flat.

viii) Gram Niwas

HOME LOANS TO FARMING AND POOREST OF THE POOR IN RURAL AREAS
The Scheme covers all rural and sEMI-urban centres. Rural Area for the purpose of the Scheme
is the area comprised in any village including the area comprised in any town, the population of
which does not exceed 50000 as per 2001 census.The scheme seeks to provide home loans to
farming and poorest of the poor in rural areas for the purpose of purchase or construction of a
house, repairs and renovation, purchase of plot for the purpose of construction of a house/shed
etc.

ix) Sahyog Niwas

RURAL HOME LOANS TO SELF HELP GROUPS
The Sahyog Niwas scheme has been instituted to finance the self help groups with a good track of
payment record for 2 years, for on lending to members for housing in rural areas, covering the
following purposes.
i) For the purchase or construction of a house exclusively or including the housing needs of
activities carried by them. (Dairy shed, tailoring shed/shop, grocery stores etc.)
ii) For the renovation or repair of an existing house / shed
iii) For the purchase of a plot of land for the purpose of house construction.
iv) For the extension of existing house / work space to existing house / shed.

x) SBI Happy Home Loans

HOME LOANS AT 8% P.A


36


The SBI Happy Home Loans scheme enables the genuine needy buyers to buy dwelling units by
freezing interest rate at 8% p.a. for a period of one year from the date of disbursement on new
Home Loans including SBI Special Home Loans scheme.

xi) SBI Green Home Loan

State Bank of India has adopted a Green Banking Policy with an objective of contributing
towards the fight against the adverse climate change. One of the initiatives approved by the Board
for this purpose is incentivizing customers who go in for Green Projects, i.e. those projects which
reduce Carbon Emissions and promote Renewable Energy. Green Housing or Green Home is
one of the types of projects identified for this purpose.
At present State Bank of India is the only Bank in the country supporting the cause of Green
Buildings by offering a 5% concession in margin, 0.25% concession in interest rate and waiver of
processing fees, on the existing home loan products to customers who go in for Green Projects.

5. HOME LOAN TOP-UP PRODUCTS

i) SBI Home Line

SBI Home Line Special Personal Loans come with inbuilt provision to sanction personal loans to
home loans borrowers with a satisfactory repayment record of 3 years. The rate of interest
charged on these personal loans is only 50 bps above the Home Loan interest rate applicable to
the repayment tenure opted by the borrower (floating rates only), prevailing as on the date of
sanction of SBI-Home Line Special Personal Loans.

ii) SBI Home Plus

SBI Home plus is scheme is launched for granting personal loans to the banks home loans
customers against the security of their house property. All home loans customers with a
satisfactory repayment record of at least one year and who maintain a Savings bank or current
account with us.
The loan can be used for any purpose, viz. extension/repair of house, purchase of car/ consumer
durables, education / medical expenses of family members, personal expenses, etc. There will be
no need to obtain documentary evidence for the end-use of funds. However a certificate from the
customer in the application to the effect that the loan will not be used for speculative purposes
would be obtained.

iii) SBI Life style Loan

LOANS TO MEET LIFE STYLE NEEDS OF HOME LOANS CUSTOMERS
State Bank Of India launched the SBI Life Style Loans to help home loan customers meet any
short term expenditure, (Vacation travel, purchase of Gold, Lifestyle goods) except speculative
investments, which adds comfort to the life style of the borrower with satisfactory repayment
record. SBI has tie up with various reputed travel houses, lifestyle product companies for
discounts to our customers.
6. RELATED HOME LOAN PRODUCTS



37


i) Earnest Money Deposit (EMD) Scheme

Many Government agencies, like Urban Development Authorities and Housing Boards,
periodically come out with schemes for sale of plots/houses, wherein applicants have to submit
10-20% of the cost of plot/house as Earnest Money Deposit (EMD) and allotments are made by
draw of lots.
The SBI EMD scheme is designed for financing against earnest money for allotment of a
house/plot. Individuals above 21 years of age and with a steady source of income are eligible to
avail loans under this scheme.

ii) SBI Reverse Mortgage Loan

LOAN FOR WELFARE OF SENIOR CITIZENS IN INDIA
SBI Reverse Mortgage Loan Enables house-owning Senior Citizens having inadequate income to
meet their financial needs for renovation/repairs to house, medical & other personal purposes.
There is no compulsion for the borrower to repay a RML during his or her lifetime or till such
time he or she continues to stay in the house.
The borrower continues to retain ownership of the house. Also, the borrower will have the option
to prepay the loan at any time during the loan tenure and there will be no pre-payment penalty.

7) Other schemes:

The bank offers loans schemes known as 'Prashasan Plus', 'Teacher Plus' and 'Oil Plus' to
Government Employees, Teachers and employees of public sector oil companies etc at
consessional rates. These plus schemes offer concessional interest rate of 0.25% below the
applicable interest rates on Home Loans to niche client groups like Government Employees,
Teachers, employees of public sector oil companies and so on
















38


CHAPTER -5

5. TERMS AND NORMS

5.1. ELIGIBILITY

If one is a resident or non-resident individual who is planning to buy a house in India, one can
apply for a home loan. If a person has decided to buy a property in the near future, he/she can
apply for a loan before even selecting the property. Once the maximum amount to put into the
property has been decided, the Housing Finance Institutions or Banks will let the customer know
that how much he/she is eligible for and this helps to plan out the budget.

Conditions regarding co-applicants:

All Housing Finance Institutions lay down conditions on who can be co-applicants. All co-
owners of the property need to be co-applicants to the loan necessarily. These institutions do not
permit minors to join in as either co-owner or as co-applicants because a minor is not eligible to
enter into a contact as per law. They do not permit even friends or relatives who are not blood
relatives to take a property jointly. However, Income of co-applicants can be clubbed together to
get higher loan eligibility. Given below is a Table that throws light on acceptable relationship of a
co-applicant for clubbing of income.

Minimum age: 18 years as on the date of sanction

Maximum age: limit for a Home Loan borrower is fixed at 70 years, i.e. the age by which the
loan should be fully repaid, subject to availability of sufficient, regular and continuous source of
income for servicing the loan repayment.

Eligibility Criteria & Documentation required for Individuals:




Salaried

Self employed

Age

21years to 60years

21years to 70years

Income

Rs.1,20,000 (p.a.)

Rs.2,00,000 (p.a.)

Loan Amount Offered

5,00,000 - 1,00,00000

5,00,000 - 2,00,00000

Tenure

5years-20years

5years-20years

Current Experience

2years

3years


39



Documentation

1) Application form with
photograph 2) Identity &
residence proof 3) Last 3
months salary slip 4) Form 16
5) Last 6 months bank
salaried credit statements 6)
Processing fee cheque

1) Application form with
photograph 2) Identity &
residence proof 3) Education
qualifications certificate &
proof of business existence 4)
Business profile, 5) Last 3
years profit/loss & balance
sheet 6) Last 6 months bank
statements 7) Processing fee
cheque
Table 9: criteria and documents required for individuals

5.2. DOCUMENTS

(1) ADVOCATE Check List: (Prepare separate set)

E Copies of Mother deed/parent document link deeds, allotment letter, Khatha
certificate/endorsement, up to date encumbrance & tax paid receipts. (In case of flats, if the
project is already approved by SBI panel advocate then this is not required).
E Copies of Agreement for sale, Construction Agreement
E ORIGINAL Sub Registrar certified copy of the Sale Deed (for takeover loans )
E ORIGINAL of updated encumbrance certificate.
E Copy of Plan sanction.
E Copies of latest Khata certificate, Khata extract etc.
E Up to date Tax paid receipts.
E Copies of Sanction letter of other bank/institution & Letter of original documents held in
their custody (applicable In case of takeover loans from other banks/institutions)

(2) ENGINEER Check List:

(Kindly take the Engineer Telephone Nos from the bank to co-ordinate with him for inspection of
your property)

d.



(3) Builders/Sellers Check List


40



property is ready for
registration.
E Letter from the builder/seller the property is not mortgaged to any bank/ financial institution.
If mortgaged then an NOC from the concerned bank/institution.
E Advance Receipt / Paid Receipts from Builder/Seller, If any.
E Due diligence on Builders and Seller KYC Norms : Proof of Identity (PAN copy) &
Residence proof (Telephone/electricity bill - both self attested and originals verified & attested by
the bank) along with the duly filled in KYC form (form to collect from the bank)

(4) Other Bank/Institution Check List ( In case of Takeover Loans)
E Sanction Letter of the other bank/institution.
E Loan account statement from the date of sanction till date.
E Pre-closure letter inclusive of penalty from the other bank/institution.
E Letter of original documents held in their custody.
E Receipts for the total amount of the project issued by builder/seller to the
purchaser/bank/institution.


(5) PERSONAL DOCUMENTS Check List

(From the Applicant / Co- applicant and Guarantor, if any)
SELF ATTESTED COPIES OF DOCUMENTS Sl.No.1 to 6:
1) Proof of Identity (passport/pan card) 2) Proof of Residence (telephone/electricity bill/ company
letter)
3) Salary Slip - last 3 months. (Attested by the employer) 4) Salary account bank statement - last
6 months (bank attested) 5) Form 16 for the last two years. 6) Income Tax Saral copy for the last
two years. 7) Photograph - 2 nos. 8) Application Form
9) Company Profile details of company

(6) Check list by the Purpose

Confirmation of Income

If you are a salaried person, please provide two recent consecutive pay slips or a copy of your
employment contract or a letter from your employer.


41


If you are self-employed, please provide copies of your last two Financial Accounts as prepared
by your accountant.
Appointment Letter
Salary Certificate
Retainer ship Agreement, if appointed as a consultant
FORM 16 issued by the employer in your name.
Last three years income tax returns duly filed and certified by the Income Tax Authorities

Similar Document -separately for each co-applicant.

Employment Proof

Identity card issued by your employer
Visiting card

Age Proof

Passport
Voter's ID card
PAN card
Ration card
Employer's Identity card
School leaving certificate
Birth certificate

Residence Proof

Ration card
Passport
PAN card


42


Rent agreement, if you are staying currently on rent
Bank Pass book
Allotment letter from your company if you are residing in company quarters.

Name Change Proof (If Applicable)

a. A copy of the official gazette
b. A copy of a newspaper advertisement publicizing the name change
c. Marriage certificate

Investment Proof (If Applicable)

Bank statement for the last six months of all operating and salary accounts
Bank statements for the last six months of all current accounts, if self-employed.
Any other photocopies of investments held, if required by the Bank

Property Title Proof

Original Sale agreement with Builder/Developer duly registered, Registration receipt
Tripartite agreement from builder/developer
Land documents indicating ownership, e.g.- Photocopies of title deeds, if applicable
A certificate by the legal advisor of the builder to the effect that the builder has a good
reputation and it is free from encumbrance and other charges.
A certificate from builder's Chartered Accountant certifying that the builder has not mortgaged
the property anywhere else.
Certified true copy of approved plan.
Copies of receipts of payments made to builder/developer.
Allotment letter
Possession letter
Lease agreement, if applicable (Property bought from a development authority)
Mortgage deed if the Bank opts for a registered mortgage.


43

No Objection Certificate from the developer, society or development authority as applicable

Personal Guarantees, if applicable.
In case of alternate or additional security, documents for the same depending upon the security
details.
For self-construction: Approved plans and clearance certificates along with estimates
Post dated cheques for the EMIs.

Confirmation of Rental Income

Copy of the existing tenancy agreement, or a rental appraisal, from a local real estate agent signed
by branch manager, or rental manager.

Deposit or Investments

Evidence of your deposit or investment funds, i.e. a bank statement or term deposit receipt.
For low equity loans (5-19% deposit), copy of your savings account statements over the last six
months.

Sale and Purchase Agreement

If you are planning to buy a property, please provide a copy of the successful sale and purchase
agreement signed by both you and the vendor.
If you are planning to sell or have already sold your existing property, please provide a copy of
that property's sales and purchase agreement.

New Customer to the banks of India

If you are refinancing from another bank please provide copies of your loan statements
covering the last six months.
Please provide copies of your account statements covering the last six months from your
current bank.
Please provide copies of your identification and if you have arrived in the country within the
last 5 years, please provide a copy of your passport.

Government Valuation and rating System


44



A copy of the latest Government or Ratings Valuation is to be provided. Depending on the age
and value indicated in conjunction with the amount required to borrow, the Bank may require a
Registered Valuation and your Banker will advise you.

5.3. PURPOSE

The bank offers home loans for purchase and/or construction of house property as well as plot
loans.

It offers loans for:

Purchase/ Construction of new House/ Flat
Purchase of an existing House/ Flat
Purchase of a plot of land for construction of House
Extension/ repair/ renovation/ alteration of an existing House/ Flat
Purchase of Furnishings and Consumer Durables as a part of the project cost
Takeover of an existing loan from other Banks/ Housing Finance companies.


5.4. QUANTUM OF LOAN

Actual loan amount will be determined taking into consideration such factors as applicants
income and repaying capacity, age, assets and liabilities, cost of the proposed house/flat etc.
Applicants aged between 18 and 45 years, can get 60 times Net Monthly Income (NMI) or 5
times Net Annual Income (NAI) and for applicants aged over 45 years of age, it is 48 times NMI
or 4 times NAI.
This will be subject to a maximum EMI/NMI ratio as under:



Net Annual
Income

EMI/NMI Ratio
Upto Rs.2 lacs 40%
Above Rs.2 lac
to Rs. 5 lacs
50%
Above Rs. 5
lacs
55%


Table 10: Criteria for Loan Amount


45



O Increase upto 5% in the EMI/NMI ratio may be permitted by the sanctioning authority, depending on
the availability of disposable surplus income after meeting expenditure towards maintenance of family.
Judgment regarding repayment capacity on the basis of income:

To understand how the income of a customer is considered to arrive at his repayment capacity, it
is first necessary to classify customers into salaried and self-employed individuals.
a) The income of the salaried individual is considered in the following manner:

Gross monthly income as it appears on the salary slip
Less:- Any non regular variable income appearing on the salary slip (including overtime, etc.)
Add: - 50 per cent of the average variable income of the last six months.
Add: - Any fixed cash/voucher payments for which proof can be submitted.
Add: - 50 per cent of the average variable cash/voucher payments with proof like traveling
reimbursement etc.
Add: - HRA receivable if not being received already in the salary slip.
The above income calculated for the calculation of eligibility using IIR and FOIR norms. For
calculation of FOIR, the installments of all the loans that one has availed of currently for which
repayment is being made is taken into account as well. The lower of the two eligibilities is
considered as the maximum repayment capacity.

E.g.: Determination of loan amount eligibility of a salaried individual:
Net Monthly Income i.e. Take home
salary
85,000/-
Expected rental from proposed
property
15,000/-
Add any other monthly regular
income
-
Total Net Monthly Income 1, 00,000/-
Take 55% of this for total loan EMI
provision i.e.
55,000/-
Subtract all existing loan EMIs being
Paid now.(other loan)
15,000/ -
Net EMI available for the present loan 40,000/-
Now, for repayment period 15 yrs @
9 % the EMI/ lakh is
1,014/-
To arrive at your eligibility Divide
40,000/ by 1014
39.44 lacs
Table 11: Determination of Repayment capacity
i.e. 39.44 lacs or 80% of project cost whichever is lower.
b) To consider income of Self-employed individuals we further classify them into
Professionals and non-professionals.


46



Professionals: - Comprising doctors, chartered accountants, lawyers, architects, etc. For
calculation of eligibility of professional's income is computed by most HFIs using the gross
professional receipts instead of the Net profit as in the case of self-employed non-professionals.

Non-Professionals: - The income of non-professionals is normally calculated by HFIs in the
following manner: -

Average of the net profits of last 2 years as it appears in the profit and loss account (Returns need
to be filed for the same. They should be filed regularly before the due date is over).

Less: - Any income, which is unusual and non-recurring in nature like sale of some asset, etc
which affects profits substantially,

Add: - Any expense that is unusual and non-recurring in nature like repairs and maintenance that
has not been capitalized and effect profit adversely.

Add: - 50 per cent of the average depreciation of the last two years. The above income is
calculated for the calculation of eligibility using IIR and FOIR norms.

For calculation of FOIR the installments of all the loans that one has availed of currently for
which repayment is being made is taken into account and the eligibility is worked out. The lower
of the two eligibilities is considered as the maximum repayment capacity.
To enhance loan eligibility you have option to add:
1) Income of your spouse/ your son/
daughter living with you, provided they
have a steady income and his/ her
salary account is maintained with SBI.
2) Expected rent accruals (less taxes, cess,
etc.) if the house/ flat being purchased
are proposed to be rented out.
3) Depreciation, subject to some
conditions.
4) Regular income from all sources.
Table 12: Enhancing Repayment capacity options

5.5. Equated Monthly Installment Calculation:

The staff at the selected Branch did not want to reveal the actual method adopted by SBI as they
used to have a computer software Application for the purpose that looks just as below:
Calculate EMIFor
Amount 3000000 EMI calculate rate: 36398.28


47


Duration 120 months total interest : rs. 1367793.6
Interest rate 8%
Calculate reset

Figure 9: Software Interface for EMI calculation
However, the actual calculation model for EMI could be as follows:

From various resources, it is found that:

1) The EMI break up, for SBI is:
68% - Principal Component and
32% - Interest Component
2) The way EMI is calculated can be broadly categorized under two heads:
Flat rate system and
Reducing balance system.

The flat rate system:

The rate of interest on the loan amount is calculated over the full duration of the loan, the
principal and the interest is divided over the number of installments and the value arrived is your
EMI. Let us understand this better:

Calculate reset


48



Table 13: EMI calculation in the flat rate system

A flat rate loan is the most expensive as in this case the interest is calculated on the entire loan
amount and no principal deduction is taken into account. Thus the effective rate of interest works
out to be much higher.
Reducing balance system:
The interest is charged on the outstanding balance of the loan, which goes on reducing. Hence the
cost of the same loan amount on an annual reducing balance method works out to 29% and 35%
on a monthly reducing balance method. Again in case of reducing system, there are three types:




Table 14: EMI calculation in Reduced balanced system


Daily reducing balance method (Used by SBI)



49


Here, there is immediate reduction in principal thereby reducing the interest calculated on it. If
you have taken a loan of Rs.1, 00,000/- at 21% interest for 3 years and you pay Rs.3, 760/- on Jan
10, the lender will consider total outstanding principal as Rs.96, 240/- from Jan 11. The interest
will be calculated on Rs.1,00,000/- from Jan 1 to Jan 10 and from Jan 11, interest will be
calculated on Rs.96,240/-. With a lower outstanding principal, the total interest paid out reduces
and so does the EMI.

Monthly reducing balance method

Here, the principal component is deducted at the end of every month and then the interest is
calculated on this new outstanding reduced principal. The above table gives the cash outflow on a
loan of Rs.1, 00,000/- at 21% interest for 3 years, when interest is calculated by monthly reducing
balance method.
Annual reducing balance method

Here the principal component of EMI though reduced every month, is summated annually.
Therefore, the interest is calculated on the original loan amount for the entire year. At the end of
the year, the accumulated principal component is deducted from the original loan amount and the
interest for the next year is on this reduced loan amount. If you have taken a loan of Rs.1,00,000/-
at 21% interest for 3 years, the EMI will be Rs.4,018/-.

Which EMI plan to choose?

Payment of EMIs in advance or in arrears?

Paying the EMI at the beginning of the month (EMI in advance) means that you lock your money
for the month; while paying in arrears, (i.e. at the end of the month) gives you an extra month
before the payout. The effective rate of interest on the loan also goes up when you pay the EMI at
the beginning of the month. Hence if two schemes offer the same EMI, choose the one, which
allows payment in arrears.

Advance EMI payment

In advance EMI schemes a certain number of EMIs are collected from the borrower in advance.
The number of EMIs that have to be paid out in advance varies with the interest charged on the
loan. The more you pay in advance the lesser should be the interest charges.
Also in 100% financed loans, some EMIs have to be paid upfront as advance. This effectively
reduces the loan amount and in real terms the financier has not given you 100% finance but
charges interest on the entire cost of the asset.
Deposit linked plan
Here, the financier offers a lower rate of interest, provided the borrower invests 20% to 25% of
the asset cost as a fixed deposit with the financier. The interest on this deposit is usually lower
than the interest charged on the loan. Here again you must consider the cost of parking your funds
in the deposit as the returns on it may not weigh favorably with the low interest charged on the
loan.


50


In the end, the thumb rule of EMI to remember: EMI is lowest, when interest is calculated on a
daily reducing basis. The reason why EMI varies for the same loan amount, tenure and interest
rate is the difference in the compounding frequency of interest rates.
We can remember that one liner joke - Why sharks never take lenders? The answer is
Professional courtesy.


Pre-EMI:

In case of part of disbursement of the loan, monthly interest is payable only on the
disbursement amount. This interest is payable monthly till the final disbursement is made, after
the EMIs would commence.

5.6. MONETARY CEILINGS

The Maximum Permissible Loan Amount is subject to following monetary ceilings:

Repairs/Renovation Rs. 10 lacs Above Rs.10 lacs require
prior administrative
clearance of network GM
Furnishings and
consumer durables
10% of the Project Cost
(or)
3 lacs
Whichever is less where
additional security is
available
Table 15: monetary ceilings

5.7. TOTAL PROJECT COST

The total value house or flat or the project cost includes:

- The cost of undivided share of the flat/land /construction cost,
- Additional Amenities like Car Parking, KEB & BWSSB deposits,
- Insurance premium
- VAT & service taxes,
- Maintenance cost &
- Stamp duty and Registration expenses subject to your eligibility as calculated above
whichever is lower for purchase /construction of new or old property.

5.8. MARGIN


51



Purchase/ Construction of a new House/ Flat/ Plot of land:

The SBI home loan borrower should pay 20% of the cost of home for loans up to Rs 1 crore and
25% for loans above Rs 1 crore.


Loan Amount Margin (Min.) Maximum LTV* Ratio
(Max.)
Upto Rs. 75 Lacs 20% 80%
Above Rs. 75 Lacs. 25% 75%
Table 16: criteria of margin amount

Repairs/ Renovation of an existing House/ Flat: 20%

*LTV ratio - Loan to value ratio=Loan amount/Value(project)


5.9. SECURITIZATION

In most cases, the property to be purchased itself becomes the security and
is mortgaged to the bank till the entire loan is repaid.

Equitable or Registered mortgage of property

(or) Other tangible security of adequate value like NSCs, Life Insurance
policies etc., if the property cannot be mortgaged

Table 17: Securitization

5.10. FEES OR CHARGES

5.10.1. Pre-Sanction Fees

(i) Processing Fee:

The revised processing fee structure (including service tax) from 9th November 2009 is as under:
Loan Amount Processing Fee (Revised):
Upto Rs.5 Lac Rs.1000/
Above Rs.5 Lac and upto
Rs.10 Lac
Rs.2000/


52


Above Rs.10 Lac and upto
Rs.20 Lac
Rs.5000/
Above Rs.20 Lac and upto
Rs.50 Lac
Rs.7,000/
Above Rs.50 Lac and upto
Rs.1 Cr
Rs.8,000/
Above Rs.1 Cr and upto
Rs.5 Cr
Rs.10,000/
Above Rs.5 Cr Rs.20,000/
Table 18: Processing fee amounts


5.11. RATE OF INTEREST

Interest Rates w.e.f. 29.06.2009

a) Floating Rates linked to SBAR
SBAR w.e.f. 29.06.2009 = 11.75 % p.a.
Loan amount Loan Tenure -> Upto 5
Yrs
Above 5
Yrs & upto
15 Yrs
Above 15
Yrs & upto
25 Yrs
Loans upto Rs.30 lacs
for new loans
sanctioned on or after
29.06.2009
Linkage with SBAR in the loan
document
2.25%
below
SBAR,
2.00 below
SBAR
1.75%
below SBAR
Special product level discount
Which may be withdraw/
Revised solely at the
Discretion of the bank

0.25% 0.25% 0.25%
Effective
Rate
9.50%
p.a.
9.75% p.a. 10.00%
p.a.
Loans (i.e. Sanctioned limits) above Rs.30 Lacs and upto Rs.75 Lacs Loan Tenure ->

Loans (i.e. Sanctioned limits) above Rs.30 Lacs and upto Rs.75 Lacs
Loan
tenure ->
Upto 5
yrs
Above 5 Yrs Above 15 Yrs
& upto 25yrs
upto 15 Yrs
Above Rs.30 lacs
and upto Rs.75
Lacs w.e.f.
29.06.2009
Linkage with
SBAR
2.00%
below
SBAR
1.75% below
SBAR
1.50% below
SBAR
Effective rate 9.75%
p.a.
10.00% p.a. 10.25% p.a.



53


Loans (i.e. Sanctioned limits) above Rs.75 Lacs
Above Rs.75
Lacs w.e.f.
29.06.2009
Linkage with
SBAR
2.00% below
SBAR
1.75% below
SBAR
1.25% below
SBAR
Effective rate 9.75% p.a. 10.00% p.a. 10.50% p.a.

d) Current Rate of Interest by Products:
Loan Schemes 1st Year 2nd and 3rd year After 3rd Year
SBI HI-FIVE Loan
Loan Amount upto
Rs. 5 Lacs
8.00% (p.a.) Fixed
interest rate
9.00% (p.a.)
Floating Interest
Rates OR 10.50%
(p.a.) Fixed
Interest Rates
9.00% (p.a.)
Floating Interest
Rates OR 10.50%
(p.a.) Fixed
Interest Rates
SBI Easy Home
Loan Loan Amount
upto Rs. 50 Lacs
8.00% (p.a.) Fixed
interest rate
8.50% (p.a.) Fixed
Interest Rate
9.00% (p.a.)
Floating Interest
Rate OR 10.50%
(p.a.) Fixed
Interest Rate
SBI Advantage
Home Loan Loan
Amount Above Rs.
50 Lacs
8.00% (p.a.) Fixed
interest rate
9.00% (p.a.) Fixed
Interest Rates
10.00% (p.a.)
Floating Interest
Rate OR 11.00%
(p.a.) Fixed
Interest Rate
Table 19: Rate of interests

5.12. MORATORIUM

Upto 18 months from the date of disbursement of first instalment or 2 months after final
disbursement in respect of loans for construction of new house/ flat (moratorium period will be
included in the maximum repayment period)

5.13. GUARANTOR :

O The bank insists on a Guarantor till the property is registered/title transferred on your name
and Equitable Mortgage registered in favour of the bank.
O Guarantor details in the application with Assets & Liabilities duly filled in along with the
above mentioned documents are required.

O For Takeover Loans From Other Banks Guarantor Is A Must

O An eligibility criterion of guarantor is that: 80% of the net credit worthiness of the guarantor
should be more than the loan amount (takeover amount).



54


O The Title holders of the property should ONLY be the borrowers. If the agreement is on the
joint names (maximum three persons), then the Sale deed also should be on the joint names and
the loan also will be on the joint names. The same is also applicable for take over loans.

i.e. Joint Owners then Joint name in the loan application / Single Owner then Single name in the
loan application.

5.14. TAX BENEFITS

+ Both principal as well as interest of home loans attract tax benefits. With effect from 1st
April 2005 (i.e. assessment year 2005-07) under section 80C of the Income Tax Act 1965:
+ Principal amount of repayment of loan along with other savings such as PF, PPF, Life
Insurance premium etc up to a maximum of Rs 1, 00,000/- will be eligible for deduction from
gross income.
+ Interest paid on loan after completion of construction will be deductible from income from
property
+ For self occupied - Income will be treated as nil and interest payment will be treated as
minus income which will be adjusted against other income. For rental property - It will be
adjusted against rental income.

5.15. PACKAGE OF EXCLUSIVE BENEFITS

+ Complimentary international ATM-Debit card.
+ Complimentary SBI Classic/ International Credit Card with waiver of joining and first year's
fees.
+ Option for E-banking.
+ Concessional package under 'Credit Khazana' for prospective car loan borrowers whose
accounts are conducted satisfactorily.
+ 50% concession in charges in respect of all personal remittances/ collection of outstation
cheques.








55


Purpose Of Home Loan
Valuation Policy
Construction of new dwelling unit Valuation of land plus project cost i.e.stae-
wise estimated expenditure obtained from
the empanelled architect / engineer
irrespective of loan amount. Disbursement
to be made according to the stage of
construction.
For loans unto rs 2 laces at rural /semi-
urban branches, the sanctioning authority
may waive valuation as above and my
assess the valuation based on market prices
by enquiry and a certificate by the
contractor/engineer involved in
construction.
Purchase of second sale plot /dwelling
units
Valuation report obtained from the
empanelled architect/engineer/valuer
irrespective of the loan amount and age of
the property.
Purchase of new dwelling units For loans up to rs 20 lacks, reasonableness
of the price mentioned in the underlying
sale did/agreement to sale etc.ascertained
by the sanctioning authority as per
prevailing market prices. For loans above
rs 20 lacks, valuation report obtained from
an external empanelled architect/ engineer /
valuer.
Purchase of plot for constructions of
dwelling unit from regional govt.housing
development authorities/boards/
Property valued at cost price as per the
agreement of sale/lease.
Table 20: valuation policies















56


CHAPTER - 6

6. SYSTEMS AND PROCEDURES

6.1. STAFF INVLOVED AND THEIR Roll


6.2. PROMOTION AND DISTRIBUTION OF THE PRODUCTS

(a) PROMOTION:

State Bank of India, has come up with a non-conventional method to promote its home loan
business.
SBI promotes home loan segment at its Home Fair Melas at each circle level.
SBI also use to enter into an agreement with the known builders to promote its home loan
segment.
The bank is looking forward to develop special processing channels so as to provide quick
services to home loan customers.
There would be no processing fees on loans, adding that the home loans approved at the fair
would bear 0.25 per cent less interest than the nominal rate from the start of fourth year of
repayment.
Around 24 property dealers and builders were present at the fair.
Several kinds of staff are involved in these Fairs, who include:
Marketing Associates
Field Officers
Associated Builders and
The staff from respective Retail Asset Central Processing Cells (RACPC).
The staff do undertake several initiatives with the prospective customers at these Fairs itself
like:
Enquiries
Guidance
Instructions
Requirement Specifications
Application forms distribution
Application Approvals and
Customer Services

(b) DISTRIBUTION:



57


State Bank of India supplies and sells its home loan products through its over 11,440 branches
nation-wide and associated RACPCs.


6.3. PROCESS UNDERTAKEN

6.3.1. APPLICATION SUBMISSION

The home loan application form of SBI is rather lengthy compared to the forms at other
private sector lenders.
Completely filled in Form along with the necessary documents.
Need to submit the documents from builder.
In my case, the project had APF no in SBI (basically already approved by SBI); so not much
documentation was required.
Otherwise they would make a surge report, which can consume some time. I guess they are
quite strict about it.

6.3.2. PRE-SANCTION PROCESS

The Field Officers hold Personal Discussion with the prospect customer regarding Interest
Rate, Eligibility, EMI and all the terms and conditions
The prospect customers options and acceptance are ascertained and recorded.
Necessary documents are collected from the customer.
Pre-Inspection Sheet is maintained along with the documents to record inspection by the
Banks staff (or) outsourced agency.
Bank's Field Investigation for address proof/Employment etc.
All the documents are sent to Retail Assets Central Processing Cell (RACPC) for credit
appraisal based on the customers financial capacities.
All the terms are conditions including Loan amount, interest rate, tenure, EMI etc are
determined.
The RACPC would submit its credit appraisal report on the customer to the branch.

O Legal Opinion:

Empanelled Lawyer(s) does submit the Title Deed verification and the search report for 30
years in respect of properties of the customer.


58


have to be obtained from an advocate from Bank panel.

avoided and the prospect borrower may be asked to rectify it.

O Valuation check:

The Engineers valuation of the property and estimate for the construction to be obtained with
bank panel engineer.
them should be more than the takeover amount.

PRECAUTIONS TO BE TAKEN :

Applications form to be complete in all respects.
Market information about the potential borrower should be gathered.
Pre-sanction survey should be conducted wherever required.
The authenticity of salary slip, form 16 return, and proof of identification, address and
income etc. should be cross checked.
Income from all sources is to be considered, wherever applicable, when the sanctioning
authority is satisfied about the quantum and uninterrupted flow thereof during the tenure of the
loan.

6.3.3. SANCTION STAGE


The branch manager would consider the credit appraisal report of RACPC and will take a
decision whether to sanction or not the loan to the customer.
The decision is informed to the prospect customer the decision so taken via Field Officer.
If the decision is sanctioned, the Field Officer would issue Offer letter to the prospect.

6.3.4. POST-SANCTION PROCESS

O Registration of Property documents
O Signing of Agreements and submitting post-dated cheques


59


O SBI insists on all the margin money contributions to have been made to the seller and the
money receipts to be handed over to them prior to the loan disbursement.
O The customer needs to submit the cash amount for various stamps, mortgage fee etc.
O They would take 12 cheques of SBI a/c for security.
O You can link your SBI savings a/c to have standing instruction to deduct EMI.

Normally, almost all home purchase transactions will entail payment of an advance to the seller
and on the day of registration, the remaining contribution from the buyer and the loan amount
from the bank are exchanged with the property documents. Not with SBI.

And once the registration is done, the loan applicant needs to get the latest
Encumberance Certificate (EC) from the Registrars Office and submit it to SBI. Subsequent to
this process, SBI will create an equitable mortgage on the property in favour of the bank as
collateral. This entails a fee of Rs 7000 (I understand that this is a percentage of the registered
value of the property) to the loan applicant. Only after all this is done, will the process be
complete. I never saw this equitable mortgage fee being mentioned anywhere in the high decibel
advertisements from SBI.


6.3.5. DISBURSEMENT

The disbursement is made in phases correlating to the actual progress made in the
construction.
The proper end-use of funds is ensured by visits to the sites.
Certificate from the engineer may be required to be submitted by the borrower stating the
status of the project.
By BC/DD crossed A/c Payee only incorporating the builders/sellers A/c No. and bankers
name and sent directly to builder/seller by Regd. AD/Speed Post.

6.3.6. POST- DISBURSEMENT PROCESS

Property inspection is carried out and recorded in the Inspection Register at each stage of
disbursement by the field officers.
The installments are disbursed in different proportions in different phases as per the progress
of the work.

6.3.7. REPAYMENT

+ Loan repayment options:

SBI lays down certain rules and regulations pertaining to the repayment of loans.


60


The loan applicants can repay the amount in the form of equated monthly installments.
The repayment is allowed up to the age of 70 years.

+ Repayment period:

Maximum 25 years (or) Up to the age of 70 years (the age by which the loan should be
fully repaid) of the borrower, whichever is early.

































61


CHAPTER -7

7. PERFORMANCE EVALUATION

7.1. COMPETITORS

S.No. Competitor Severity of
Competition
(Low/moderate/High)
?
1 ICICI low
2 HDFC moderate
3 Andhra Bank low
Interpretation:
Majority of the competitors for the bank are from private sector in region.
The closest competitor for the bank is HDFC .Virtually; there was an ad war with teasing
rates between the two banks.
Others include the local player Andhra bank and the private giant ICICI.

SBI moves ahead of HDFC in home loans

The biggest bank in the country is also its top home loan lender. State Bank of India (SBI)
has finally pulled ahead of its long-time, neck-and-neck competitor, the Housing
Development Finance Corporation (HDFC).
At the end of December 31, 2010, outstanding loans in the retail segment stood at Rs82,376
crore for SBI, around 11% higher than HDFCs Rs74,155 crore.
Outstanding retail home loans make up about 13% of SBIs total outstanding loans.
As per a report released by Icra in June 2010, HDFC Group and SBI had market share of
17% each, based on loans outstanding as of March 31, 2010. In fact, together with ICICI
Bank (along with ICICI Home Finance) and LIC Housing Finance, they accounted
for 55% of total housing credit in the country.
A senior SBI official conceded that continuing the teaser scheme helped the bank pull ahead
of its closest competitor. To a large extent, I agree it was due to the extension of teaser
loans. But the product had value for the customers.
SBI is still running the teaser loans scheme and plans to continue it even after March 31,
2011 as the response has been pretty good. The final decision on this will be taken in March,
the official said.
For HDFC, the retail portfolio works out to 68% of its outstanding loans of Rs1,09,051 crore
as on December 31, 2010. According to a company spokesperson, this does not include
Rs11,631 crore of loans securitised (including which the retail book would be higher).
Similarly SBIs retail portfolio of Rs82,376 crore does not include loans securitised by the
bank.


62


HDFC was offering teaser loans till last November, but discontinued the scheme after the
Reserve Bank of India raised concerns about the teaser rate scheme fearing it might increase
home loan defaults in the times to come. Under the schemes offered by HDFC, interest rates
were 8.50% for the first year (till March 2011), 9.25% for the second year (March 2012) and
at floating rate thereafter.
Another factor which dampened sentiments for HDFC was that from December 1, just the
day after discontinuing teaser loans, the retail prime lending rate was jacked up by 75 basis
points.
On its part, under the teaser loan it was offering till December 31, 2010, SBI charged interest
at 8% for the first year, 9% for the second and third years and at a floating rate thereafter. The
bank has since linked the teaser loans to its base rate, which currently stands at 8.25%.
We have never chased market share. We are always for growth, which is manageable
without compromising the loan quality or customer service quality, said the HDFC
spokesperson.
As per RBI data, the housing loans outstanding as on December 17, 2010 were Rs3,32,533
crore, up 13.24% year on year. As on December 19, 2008 the figure stood at Rs2,73,071
crore.

7.2. STRENGTHS AND WEAKNESSES

S.NO. Strengths Weaknesses
1 Able Work Force Long Turnaround
Time
2 Network Multiple Visits
3 Innovative Schemes Documentation
Needs
4 Loan Pricing Competition
5 Lack Of Prepayment
Penalty,
Varied Customer
Demands
6 Transparency Shortage Of Staff
7 The Interest Rates
Table 23: strengths and weaknesses
Interpretation:
The biggest strength of the bank has been its large distribution network and able workforce.
The weakest elements of the institution are the long processing times and the shortage of
staff.
7.3. DEMAND TREND:

Financial Year

Number of
Enquiries
2006-07 65
2007-08 40
2008-09 60


63


2009-10 48

Enquiries for Home loans

Figure 10: demand trends
Interpretation:



-07, there
were enquiries for the home
loan from 65 individuals at the
branch.
down slightly to 40 and then
rose to 60 in the next year.



an increasing demand in the
current year.
0
10
20
30
40
50
60
70
2006-7 2007-8 2008-9 2009-10
Series 1


64



In April, bank's book grew by `1,000 crore, in May it is still slower, compared with
`1,400 crore a month last fiscal
The discontinuation of State Bank of India's (SBI) "Easy Home Loan and Advantage Home
Loan scheme" popularly known as teaser loans has impacted growth in the bank's home
loans.
In April growth in the bank's loan book was around `1,000 crore, down 28% from the `1,400
crore average growth per month seen in last fiscal.
In May, the number has dropped further, said sources in the know, who did not want to be
named. As of May 31, the home loan portfolio of SBI stood at around Rs88,000 crore, one
source said.
SBI officials in charge of home loans refused to comment. The lender's retail home loan
portfolio at the end of the last fiscal, that is March 31, 2011, stood at `86,769 crore. It was up
22% from fiscal 2010.
Signs of a deceleration in teaser loans was visible in April despite the bank continuing with
the scheme, analysts said.
In April, SBI's home loans grew 17.3% year on year despite high real-estate prices and
lending rates. That was two percentage points more than the growth seen in March, which
was 15%.
Suresh Ganapathy, head of financial research team at Macquarie Securities, said the drop
may have begun in April because O P Bhatt, the former chairman of the bank, who had
vigorously pushed the teaser loans, retired on March 31 and the new chief Pratip Chaudhuri,
who took over from April 1, had a different perspective on it.
"SBI still has a reasonably large market share," in home loans, said Vaibhav Agrawal, vice-
president (research), Angel Broking.
7.4. CUSTOMER CAPACITY

NMI Range No. of Borrowers Total Amount (Rs.)
Upto Rs.2 Lacs 48 5.25 crore
Between Rs.2 Lacs and
Rs. 5 Lacs
0
Above Rs.5 Lacs 0
Table 25: customer capacity profile
Interpretation:
The repayment capacity of all of the existing customers was just below Rs.2 lacs p.a.
There were no customers with repayment capacity more than Rs.2 lacs p.a.


65



7.5. SANCTIONS-DISBURSEMENTS


Customers (2008-09) Number of Proposals
Enquiries 60
Applied(Applications) 50
Approved 48
Sanctioned 48
Disbursed 48
Table 26: sanctions and disbursals



Table 27: customer portfolio

Interpretation:
There has been an increase in the Approvals to Enquiries Ratio from the year 2006-
07(81.5%) to the year 2008-09 (95%) and a slight decrease in the next year to 83.3%.
However, there has been huge improvement in Sanction-Disbursal to Approvals ratio to 96%
in 2008-09 from average Ratio of 83.3% in the preceding years.
One can understand the trend in terms of transforming the stringent system to hassle-free
system.

0
10
20
30
40
50
60
70
enquiries applied approved


66



Figure 12: customer portfolio
Interpretation:

Majority of the customers are salaried individuals in the region.
The other section of customers is local self- employed.
There is no housing finance to the normal individuals and the weaker sections.

Purpose Number of Accounts Amount(Rs.)
To Pay for First homes 40 5 crore
To Purchase second
homes
- -
To Improve/renovate
existing homes
8 25 lacs

Sales
business man
salaried individuals
realtors
staff


67



Figure 13: purpose portfolio
Interpretation:

More than half of the existing customers are sanctioned loan amount not exceeding Rs. 5
lacs.
The second majority of the customers are sanctioned loan amount above Rs.5 lacs to Rs. 10
lacs.
The low repayment capacity of the customers in the region could be the main reason for the
sanction of smaller quantities of loan.
This implies that there was a demand for the lower weight products like SBI HI-FIVE
LOANS in the region.

7.8. QUANTUM OF LOAN

Loan Amount sanctioned No. of
Borrowers
Upto Rs.5 Lac 25
Above Rs.5 Lac and upto Rs.10 Lac 19
Above Rs.10 Lac and upto Rs.20 Lac 04
Above Rs.20 Lac and upto Rs.50 Lac -
Table 29: amounts of loans sanctioned
Column1
first home
renovation


68



Figure 14: Loan amount portfolio
Interpretation:

More than half of the existing customers are sanctioned loan amount not exceeding Rs. 5
lacs.
The second majority of the customers are sanctioned loan amount above Rs.5 lacs to Rs. 10
lacs.
The low repayment capacity of the customers in the region could be the main reason for the
sanction of smaller quantities of loan.
This implies that there was a demand for the lower weight products like SBI HI-FIVE
LOANS in the region.

7.9. SIZE OF HOME LOAN BOOK


Financial Year Amount(Rs.
crores) lent
2006-07 2.50
2007-08 3.62
2008-09 5.25

Sales
<5 lacs
05-Oct
10-20 lacs


69



Figure 15: Home loan book sizes
Interpretation:

There has been steady increase in the home loan book size of the branch.
In the year 2008-09, the size had grown to 5.25 cr from 2.50 cr in the year 2006-07, which
implies the size had doubled in two years.

7.10. CREDIT GROWTH TREND

Financial
Year
% Growth
rate
2007-08 44.8
2008-09 45.02

Table 31: credit growth trend

0
1
2
3
4
5
6
2006-7 2007-8 2009-10


70



Figure 16: credit growth trend
Interpretation:
There has been a slight growth trend seen from the year 2007-08 to 2008-09.
The growth rate of 44.8 of the year 2007-08 was almost sustained in the year 2008- 09.
The trend can be attributed to the reflection of decrease in demand and the impact of global
recessional sentiments in the banking sector.


7.11. SHARE OF HOME LOANS in retail portfolio

Retail Credit segment Amount in Rs. crores
Home loans 5.25
Other advances 4.725
Total retail advances 52.5

Table 32: share of home loan segment in the retail portfolio

43.4
43.6
43.8
44
44.2
44.4
44.6
44.8
45
45.2
2007-8 2008-9


71



Figure 17: share of home loan segment in the retail portfolio
Interpretation:
home loan segment had got a very small i.e., 10% share in the total retail segment of advances by the
branch in the year 2008-09.
retail advances of Rs.52.5 crores in the year.

7.13. OUTSTANDINGS

Number of Accounts
Outstanding
94
Total Amount
Outstanding(Rs.)
5.25 crore
Total Outstanding/Total
Advances (%)
10%
Sales
home loans
others


72


Table 34: outstanding amounts


Interpretation:

90% of the short-term loans lent during the period 2006-09 have been recovered leaving rest
of 10% yet to be recovered or repaid by the customers in installments i.e., 94 accounts.
Of Course, all the advances lent in the current year have been pending i.e., outstanding
amount of Rs.5.25 cr.

0%
20%
40%
60%
80%
100%
120%
2006-9 2009-10


73



Figure 18: Quality of Assets

7.14. QUALITY OF ASSETS

Total Assets Non Performing
Assets in Home
loan Segment
Total Advances NPAs/Total
Assets
NPAs/Total
Advances
52.57 crores 5.257 lacs 52.57crore 1% 1%

Interpretation:

Advances amounting to Rs.52.25 lacs went default out of the total advances in the year
2008-09.
That implies the ratio of NPAs to total Advances is 1%, Of course well within the limits.


7.15. INCOME GENERATED

Net Interest Income
generated on Home Loans
Total Net Interest Income % of Total Net Income
3.31 lacs 8.34 lacs 39.7
Table 36: income generated

Sales
standard assets
NPAs


74



Interpretation:

The branch could generate 45% of its interest income for the year 2008-09 from home loan
segment.
The interest income from the segment is Rs .3.31 lacs.




















Sales
from other advances
from home loans


75


CHAPTER- 8

SBI HOME LOANS MARKET SHARES IN 2010-2011

SBI holds 17 percent of the total market shares in housing finance
The countrys largest lender, State Bank India, has captured 17% of the domestic housing
finance market share, same as HDFCs share as on March 2010.
According to Icra report on Performance review of housing finance companies and Indian
mortgage finance market for 2009-10, both SBI and HDFC have 17% market share each
while the ICICI Bank which has slowed down its housing finance exposure has 13%
share. LIC housing finance and IDBI Group have 8% and 4%, respectively.
As of March 31, 2010, HDFC, State Bank of India, ICICI Bank and LIC Housing Finance
clearly dominate the domestic mortgage market, together accounting for 55% of the total
housing credit in India, said the report.
Apart from these big players, there are some housing finance companies with relatively
smaller credit portfolios operating in their respective geographies or serving niche customers.
While small HFCs, over the past few years, have been growing their portfolio rapidly, the
rating agency expects the currently dominant players to continue maintain their market share,
henceforth.
Meanwhile, banks which together hold around 70% of the total individual home loan market,
are expected to maintain a sizable market share, even as HFCs are likely to grow by offering
superior service levels and by tapping underdeveloped segments. Further, significant growth
plans of some of the new HFCs could also increase the overall market share of HFCs, said the
report. Although housing loans remain the main source of revenues for small HFCs, the
proportion of other loans in their loan book increased to 8% as on 31 March, 2010 from 7%
the previous fiscal.
Other loans consist mostly of loans against property, lease rental discounting, and builder
loans. One of the primary reasons for the shift in the portfolio mix of HFCs is the intense
competition from banks, which has pulled down incremental yields on housing loans. Non-
housing loans, on the other hand, offer relatively higher yields although the risks inherent in
these segments are higher than those in housing loans, ICRA said.
Public sector banks have profited most from the market share of deposits and loans since the
global financial crisis broke out in 2008.
Nationalized banks loan market share up RBI
Public sector banks have profited most from the market share of deposits and loans since the
global financial crisis broke out in 2008.


76


According to data released by the Reserve Bank of India (RBI):
At the end of December 2010, the 19 nationalized banks as a group accounted for 52.2% of
total deposits-an increase of almost four percentage points from 48.3% in December 2008.
Similarly, in the case of bank credit, the share of nationalized banks rose from 49% to 51.6%.
o The State Bank group has seen its market share in bank deposits drop from 24.4% in
December 2008 to 22.1% in December 2010. During the same period, the group has seen its
share of bank credit fall to 22.7% from 23.4%.
o Private Banks have still managed to gain some market share post crisis. In December 2008,
new and old generation private banks together accounted for 18.6% of bank deposits and
18.7% of bank credit. In December 2009, this had fallen to 17.1% and 17.8%.
o A year later in 2010, this had improved marginally to 17.9% and 18.2% respectively. In the
private sector, growth returned after ICICI Bank stopped shrinking its balance sheet and
started to grow business as well as its branch network.
Foreign banks, which were the worst hit by the crisis, saw their market share continue to fall.
Their total share of bank deposits slipped to 4.8% on December 2010 from 5.7% in
December 2008 while share of credit fell to 5.1% from 6.6% in 2008. Many foreign banks
saw a drop in deposits after 2008 because of a flight to safety. The share of foreign banks has
also declined because of the decision by a couple of banks to get out of the retail business.
After the global financial crisis foreign banks are still lagging behind nationalized banks. In
case of SBI, the drop in market share is actually a result of course correction. In the months
following the global financial crisis, SBI drew deposits from the rest of the industry by
offering attractive rates of interest through its special deposit scheme. At the same time, it
increased its share of credit by offering cheap home and other consumption loans, which put
further pressure on its margins, forcing the bank to end the special schemes last year.
Teasers gone, SBI home loans plunge 28%
In April growth in the banks loan book was around `1,000 crore, down 28% from the `1,400
crore average growth per month seen in last fiscal.
In May, the number has dropped further, said sources in the know, who did not want to be
named. As of May 31, the home loan portfolio of SBI stood at around Rs88,000 crore, one
source said.
SBI officials in charge of home loans refused to comment.
The lenders retail home loan portfolio at the end of the last fiscal, that is March 31, 2011,
stood at `86,769 crore. It was up 22% from fiscal 2010.
Signs of a deceleration in teaser loans was visible in April despite the bank continuing with
the scheme, analysts said.
In April, SBIs home loans grew 17.3% year on year despite high real-estate prices and
lending rates. That was two percentage points more than the growth seen in March, which
was 15%.
SBI has effected the steepest reduction in interest rate on home loan between Rs 30 lakh and
Rs 50 lakh. However, the interest rate will remain same for the first year at 8%, it will be


77


brought down to 8.5% from 9.5% during the second and third year. For the period beyond
third year, the floating rate on the loan has been cut by 1.25 percentage points. Earlier, the
rate was pegged at 1.5 percentage points below PLR, which has now been increased to 2.75
percentage point below the bench mark rate. So the effective home loan rate will become
lower. If the present condition remains the same and the bank does not change PLR, the new
rate will be 9% as against 10.25% earlier.
Parekh noted that main reason of the US housing loan crisis was such kind of loans that
offered artificially low interest rates in the initial years but once the rate normalised later,
many found themselves unable to service the loan. "These are the lessons one should learn
from," he said, pointing out that the same disturbing trend being seen in India where some
variation of teaser type housing loans are being offered in the market.
However, in its latest offerings, the interest rates on home loan offered by SBI will be lower
that that of HDFC for the entire period of repayment, Even for the later half, the rate will be
lower than HDFC. In fact, this aggressive stance of SBI will force the other banks to follow
suit soon.
State Bank of India said the market response to its special initiatives on home loans has been
encouraging, which is evident from the fact that the bank's net lending to individual home
loan borrowers has increased by Rs 10,076 crore during the year ending May 2009. Besides
this, it is also not taking any processing fees.
In case of home loan up to Rs 30 lakh, the benefit for the first year will remain the same with
interest rate at 8%. But for the next two years, the interest rate has been cut by 0.5 percentage
points to 8.5% from 9%. The fall in the interest rates after that will be 75 basis points.
Unique features:
No cap on maximum loan amount for purchase/ construction of house/ flat
Option to club income of your spouse and children to compute eligible loan amount
Provision to club expected rent accruals from property proposed to compute eligible
loan amount Provision to finance cost of furnishing and consumer durables as part of
project cost
Repayment permitted upto 70 years of age
Free personal accident insurance cover
Optional Group Insurance from SBI Life at concessional premium (Upfront premium
financed as part of project cost)
Interest applied on daily diminishing balance basis
'Plus' schemes which offer attractive packages with concessional interest rates to
Govt. Employees, Teachers, Employees in Public Sector Oil Companies.
Special scheme to grant loans to finance Earnest Money Deposits to be paid to Urban
Development Authority/ Housing Board, etc. in respect of allotment of sites/ house/
flat
No Administrative Charges or application fee
Prepayment penalty is recovered only if the loan is pre-closed before half of the
original tenure (not recovered for bulk payments provided the loan is not closed)


78


Provision for downward refixation of EMI in respect of floating rate borrowers who
avail Housing Loans of Rs.5 lacs and above, to avail the benefit of downward revision
of interest rate by 1% or more
In-principle approval issued to give you flexibility while negotiating purchase of a
property
Option to avail loan at the place of employment or at the place of construction
Attractive packages in respect of loans granted under tie-up with Central/ State
Governments/ PSUs/ reputed corporates and tie-up with reputed builders (Please
contact your nearest branch for details)
Package of exclusive benefits:
Complimentary international ATM-Debit card
Complimentary SBI Classic/ International Credit
Card with waiver of joining and first year's fees
Option for E-banking
Concessional package under 'Credit Khazana' for
prospective car loan borrowers whose accounts
are conducted satisfactorily
50% concession in charges in respect of all
personal remittances/ collection of outstation
cheques
Purpose
Purchase/ Construction of new House/ Flat
Purchase of an existing House/ Flat
Purchase of a plot of land for construction of House
Extension/ repair/ renovation/ alteration of an existing House/ Flat
Purchase of Furnishings and Consumer Durables as a part of the project cost
Takeover of an existing loan from other Banks/ Housing Finance Companies
Eligibility
Minimum age 18 years as on the date of sanction
Steady source of income
Loan Amount
Applicant/ any one of the applicants are aged over 21 years and upto 45 years - 60
times Net Monthly Income (NMI) or 5 times Net Annual Income (NAI), subject to
aggregate repayment obligations not exceeding 57.50% of NMI/ NAI
Applicant(s) aged over 45 years of age- 48 times NMI or 4 times NAI, subject to
aggregate repayment obligations not exceeding 50%of NMI/ NAI
To enhance loan eligibility you have option to add:
HOME LOAN PROVIDERS -
BANKS
State Bank of India
Punjab National Bank
Dena Bank
Bank of India
HSBC
Standard Chartered - Grindlays
Citibank




79


Income of your spouse
Income of your son/ daughter living with you, provided they have a steady income
and his/ her salary account is maintained with SBI
Expected rent accruals (less taxes, cess, etc.) if the house/ flat being purchased is
proposed to be rented out
Regular income from all sources
CORPORATE STRATEGY & NEW BUSINESSES

The New Businesses Department has been successful in achieving the objectives
withwhich it was set up.
Two new lines of business viz. Custodial Services and GeneralInsurance have been
successfully set up and are in the process of stabilization.
Otherinitiatives being pursued are Private Equity, Financial Planning & Advisory
Services(FP&AS) and Mobile Banking.
During the year, the consultants, appointed for assistingthe Bank to consolidate the
Payment Solution Business, have since submitted theirrecommendations.
Seven niche areas viz. Mobile Banking, Merchant Acquisition Business, SMECurrent
account and Supply Chain Finance, Savings Bank, Cash Management Product,
NRIremittances and Govt.
Business have been identified for implementing a comprehensivestrategy, an
aggressive business plan, improved processes and matching organizationalstructure.
New initiatives taken up during the year are Merchant Acquisition and
PaymentSolutions.
Financial Planning and Advisory Services (FP & AS)
In the wake of recent development in regulatory position regarding distribution offinancial
products through advisory mode rather than the distribution mode and alsoconsidering the
Swarup Committee recommendations on "Consumer awareness and Investorprotection", our
Financial Planning and Advisory Services, launched in March 2009,addresses the needs of
the modern day customers as also the regulatory concerns.
Under this service, customers are guided to finalise their financial goals viz.childs
education/marriage, buying a house, building a retirement corpus etc., andare advised a suite
of products comprising mutual funds, fixed deposits and insuranceproducts. The Service was
initially launched in 502 branches which has been extended to924 branches by March 2010
(including 500 branches in Super Circle of Excellence subset).
Further, the Bank plans to introduce Wealth Management services in a phased manner
in2010-11 to help HNI (High Net-worth Individual) clients to preserve and grow their wealth.
Demat & Online Trading


80


Demat services and eZ-trade@sbi (Online Trading) Services are now available at morethan
2,800 branches across India making our Bank one of the largest players in theindustry in
terms of the reach / distribution. In FY 2009-10, the Bank has crossed themilestone of having
more than 2 lacs Demat account holders in its fold.
The 3-in-1 account i.e. eZ-trade@sbi is offered in alliance with SBICAP Securities Ltd.(SSL)
and Motilal Oswal Securities Ltd. (MOSL). The product offers convenient onlinetrading
facility in Equities and Derivatives. The customers can access our Demat Serviceseither from
the comfort of home or office through our Internet Banking facility(OnlineSBI.com) or
through our Mobile Banking platform (SB Freedom).
Our objective for the next financial year is to further broad base our reach, whilecontinuously
honing our products by adding more value added services and conveniences forthe
customers.
Payment Solutions
The Bank is in the process of implementing "Integrated Payment Hub" as theprimary
processor of all payment activities. This will facilitate substantial revenuegeneration for this
business segment. With a view to providing more focus on payment,Organisational
restructuring is also under way.
Mobile Banking Service (MBS)
Mobile Banking Service is convenient, user friendly, secure and offers 24X7
inexpensivebanking services to customers. This is expected to increase customer satisfaction
andthus, will be a customer retention tool, in addition to reinforcing brand recognition.State
Bank Freedom has been launched in all our branches and is available over application(on
SMS/ GPRS), Wireless Application Protocol and USSD (Unstructured Supplementary
ServiceData).
For application / WAP based MBS, the facilities available include Account enquiry(balance
enquiry and mini statement), Cheque Book request, Demat Account enquiries, FundTransfer
within the Bank and to other Banks in India, Mobile Top ups, recharge of TataSky, obtaining
PINs of other DTHs, Bill Payment, Payment of premium of SBI Life.Facilities in the pipeline
include Railway / Airline ticket booking through MBS, StateBank Mobile Banking as
payment option in the Shopping application of leading aggregatorsand Recharge of e-Tag of
Gurgaon-Delhi Highway. For MBS over USSD, fund transfer, accountenquiry and mobile top
up are offered. The Bank is also considering integration with IVRplatform for merchant
payments and introduction of Mobile Wallets. As on 31-03-2010, atotal number of 2,18,434
customers had registered for full fledged MB services.
NEFT/RTGS


81


Substantial growth in both inward and outward RTGS/NEFT remittances has been
achieveddue to sustained efforts for migrating more Corporates and individuals to
RTGS/NEFT. TheBank has maintained its leadership position in RTGS (with a market share
of 14.15% as on31.03.2010) and also has a significant position in NEFT registering a growth
of 135.71%over the last year. Both remittance facilities are available through internet banking
andacross the counter, while NEFT has also been enabled over Mobile Banking.
Debit Cards
Promotion Campaigns & Loyalty Rewards Programs have significantly helped inincreasing
the Debit Card usage at the Point-of-Sale terminal. In addition to our existingSBI Shopping &
ATM Debit Card, SBI Gold International Debit Card and SBI Yuva Card,the Bank has
recently launched Platinum International Debit Card to cater to the needs ofHNI & Affluent
customers. As on 31.03.2010, the Bank has a total of 70.96 millionDebit Cards.
Prepaid Cards
The Bank offers comprehensive range of Prepaid Cards viz. SBI Vishwa Yatra Card, eZ-
PayCard and Gift Card to cater to the various payment needs of its customers. Apart
frompromoting financial inclusion, other benefits to Bank include availability of
float,interchange and fee income. In our effort to maintain competitive edge, product
featuresof SBI Vishwa Yatra Card have been refined.
General Insurance
As part of its strategy to enhance its value proposition to its customers, the Bank hassince set
up SBI General Insurance Company Ltd. (SBI General) as a Subsidiary with anauthorized
and paid-up capital of Rs. 150 crores. While the Bank has invested in 74% sharein the equity
capital, IAG International Pty. Ltd, has invested in the remaining 26%share.
Insurance Regulatory and Development Authority (IRDA) issued the Certificate
ofRegistration (IRDA-R3) to SBI General on December 15, 2009. Bancassurance will be one
ofthe major channels of distribution and the Subsidiary would leverage the vast network ofthe
Bank for distribution of its products through a Corporate Agency Agreement with theBank.
The Company has commenced limited business operations in March 2010. IT backed
fulllaunch of business operations is expected later this year.
Custodial Services
The Indian financial market today is greatly influenced by the trading activity of theFIIs as
they bring in very huge volumes and volatility into the market. The FIIs areregulated by
SEBI, which makes it mandatory for them to have a Custodian for their marketoperations.


82


The JV Company formed by the Bank with Socit Gnrale Securities Services (SGSS)will offer
a single point delivery of all Custodial Services like Settlement, Safekeeping& Corporate
Action. In addition, the JV would provide other value added services likeFund
administration, proxy voting etc. at competitive rates. Apart from FIIs, it willtarget Mutual
Funds, Pension Funds and Trusts, Foreign and Domestic Venture Capital Funds,Insurance
companies, Portfolio Management companies, Corporates, Trading members on
StockExchanges, HNIs, Banks and others.
The vision of the Company is to garner a substantial market share in 3 years time byfocusing
on world Class services at competitive pricing.
The Company has since commenced business during March 2010.
Private Equity
As part of the Banks overall corporate strategy to enter into new businesses, theBank has
identified the establishment and management of Private Equity funds as one of theimportant
new initiatives. The Bank has made significant progress in this area.
The Bank has already set up an Infrastructure Fund in collaboration with MacquarieGroup,
Australia and IFC, Washington to invest into Indian Infrastructure sector. Allnecessary
regulatory approvals have been obtained. The first closing of the internationalleg of the fund
was done with commitments of USD 1.037 billion (including SBIscommitment of Rupee
equivalent of USD 150 million). The fund raising of the Domestic Legof the Fund is in
progress. The Bank is in the process of signing a Joint Venture agreement for setting up
aGeneral Purpose Private Equity Fund with Sovereign entities of Oman.
Merchant Acquiring Business
During the year, the Bank decided to foray into Merchant Acquiring Business (MAB).There
are only 5 lacs Point of Sales (PoS) terminals in India as against a merchant baseof 15
million. The Bank plans to deploy 6 lacs Point of Sales terminals during first fiveyears of its
operations. The deployment will be across all geographies viz., Metro, Urban,Semi-urban and
rural. The initiative would facilitate Banks debit card acceptanceacross the country as the
facility is presently available at Metro, Urban and touristcentres only. It is proposed to
conduct the Merchant Acquiring Business under a separatecompany with an experienced and
reputed global partner. The Bank has since finalised VISAINC. and ELAVON as JV Partner.







83


CHAPTER -9

9. RECOMMENDATIONS

On the basis of the collected data and the analysis along with detailed discussion made in
conclusion of this report, some suggestions can be made to the bank which will be helpful to
them in improving their services operational and financial performance.
These suggestions have been discussed as follows:

Using Information Technology and Electronic Data Interchange at various stages of lending
process would definitely give an edge to the bank in fighting competition and arrive at a more
realistic lending decision. E.g.:
mission of Applications.
-2010 to be set up) for
Title/Deed verification, which will ensure that no two borrowers in the country will be able to
raise institutional loans against the same asset. This would help the bank in reducing NPAs.

avoid frauds.

ls and Repayments.

The Bank should make sufficient provisioning for bad loans and in this regard, the bank
should strictly, abide by the guidelines of RBI.
To increase their customers, the bank should provide specialized services in this sector.
These services can be such as proper guidance to the customer regarding the processing of loans,
especially for the customers who are illiterate.
To satisfy their customers and for good dealings in future, the bank should make prompt
disbursement of loan amount to the customers so that they can buy or construct their dream home
as early as possible.
91

The Bank should use easy procedure, or say, less lengthy procedure for the


The Bank should use easy procedure, or say, less lengthy procedure for the sanctioning of
loan to the customer. There should be less number of legal formalities, in case this exists, then,
these should be completed in less time. This will be helpful in attracting more customers.
Although the interest rates on specific norms, yet customers seek uniform interest rate giving
equal justice to both the existing as well as new customers.


84


The bank should improve their overall services to increase the number of customers for
home loans. They should recruit professionals to provide such services and to satisfy the
customers.
Although SBI Bank is a market leader in 'home loans' sector but they should innovate their
services, viewing the- increasing competitions from other banks such as HDFC.
The Bank should drop its tease rates as early as possible as their customers face problems in
future paying high installment due to their financial problem.
As the banks provide loan according to the repaying capacity of the customer and his/her
eligibility. Due to which, some customers are not able to get amount of loan needed by them. So,
the banks should soften their norms regarding the loan amount.
The Banks should try to provide proper knowledge regarding their home loan schemes, even
to people who don't know about such schemes and their benefits especially in rural areas. So they
should provide knowledge to the ignorant customers, especially in rural areas and backward
urban area.
So, above are the main suggestions provided to the banks. By considering these suggestions,
the banks can strengthen their customer base in home loans sector.
They should improve their services and reduce legal proceedings and should be friendly to
their customers.
The bank needs to take serious and sincere steps in reducing the processing times by taking
certain measures like using Information Technology to process the documents.

9. UPDATE ON HOME LOANS MARKET SHARES
Business line (business daily from THE HINDU GROUP OF
PUBLICATIONS)
Major banks build up home loan market shar



85



M. V. S. Santosh Kumar
BL Research Bureau
Even as growth in the home loan market stayed in the single digit in 2009-10, larger banks
managed to expand their market share in this segment, by edging out smaller players.
The top 10 banks' home loan portfolio grew at 13.8 per cent for 2009-10, even as overall
bank lending to housing grew only 8 per cent. State Bank of India saw a 32 per cent growth
in its home loan portfolio for 2009-10 and became the top mortgage lender among banks. The
top ten banks garnered 65 per cent of the total outstanding housing loans (of scheduled
commercial banks) in 2009-10, up from 61.5 per cent last year.
Housing loans were among the rapidly growing segments of retail lending, which saw a tepid
4 per cent expansion in 2009-10. Education loans, at 31 per cent, grew the fastest.
Improving market share
SBI contributed 78 per cent of the incremental home lending in 2009-10. SBI's teaser loans,
apart from getting it new customers, prompted a good number of borrowers to switch to the
bank. SBI's consistent ahead-of-market growth in home loans has seen its market share
improving from 17 per cent in March 2008 to 24 per cent by March 2010.
Strong growth
ICICI Bank from being the largest mortgage lending bank fell to second place in the last year.
The bank's home loan book shrank 17 per cent over the year. Other private banks such as
HDFC Bank and Axis Bank witnessed expansion in their home loan portfolios, which were
up by 74 per cent and 41 per cent respectively.


86


Bank of India was the only major public sector bank to witness a single digit growth rate of 7
per cent. Non-Banking financial companies active in this segment such as HDFC and LIC
Housing Finance saw their book expanding by 15 per cent and 38 per cent respectively. As
the teaser rates are being phased out it remains to be seen if there would be a shift in
incremental market share to private players and NBFCs.
Kolkata/Mumbai: State Bank of Indias (SBI) fourth quarter profit was almost wiped out by what
the new chairman of the countrys largest lender referred to as a one-time clean up higher
provisioning towards sticky assets and retirement benefits.
The state-owned banks worst performance since reporting a Rs. 115.2 crore loss in the third
quarter of 1999-2000 sent its stock tumbling.
Source: DNA By Neelasri Barman Teasers gone, SBI home loans plunge 28%

The Reserve Bank of India (RBI) had repeatedly frowned at teaser loans during Bhatt's
tenure. Under the teaser scheme, SBI used to charge slightly lower interest rate for the first
few years of the loan.
N S Srinath, executive director, Bank of Baroda, said his bank has followed a gradual
approach to building up a mortgage portfolio.
"Banks which had clocked a sudden jump in their loan book may see some slowdown," he
said.
Housing Development Finance Corporation (HDFC) and ICICI Bank had discontinued teaser
loans in November 2010.
"SBI still has a reasonably large market share," in home loans, said Vaibhav Agrawal, vice-
president (research), Angel Broking.


87





























88


APPENDIX

QUESTIONNAIRE

Dear Sir/ Madam,
As part of my MBA curriculum, I, P. Prajwala Devi, am undertaking a study Project on Home
Loans for which I need your views regarding banking products & services in shape of a
questionnaire designed by me. The data being collected are solely for academic purpose. I request
you to kindly extend your co-operation.

1.How many Home Loan Products that you know which is offering to the
customers ?
a) 1
b) 2
c) 3
d) 4






0%
10%
20%
30%
40%
50%
60%
Category 1 Category 2 Category 3 Category 4


89


2. do you have home loan by sbi ?
a) YES
b) No












Sales
yes
no


90


3. number of running loans by sbi?
a) 0
b) 2
c) 3
d) MORE THAN 3



5. are you satisfied by the facilities and treatment given by state bank of india?
a) YES
b) N


0
0.5
1
1.5
2
2.5
3
3.5
0 1 2 3
NUMBER OF ACCOUNTS
85%
15%
SATISFACTION LEVEL
YES
NO


91


6) Who are you think the main competitors for SBI.

a) HDFC
B) ICICI
C) LIC
d) AXIS



















0%
5%
10%
15%
20%
25%
30%
35%
40%
HDFC ICICI LIC AXIS


92


7) what is the custmer prefrence(fixed/floting) intrest rate?

a) FIXED
b) FLOTING











0%
10%
20%
30%
40%
50%
60%
70%
FLOTING FIXED


93


8) Do you have any complain received by SBI?
a) yes
b) no










46%
47%
48%
49%
50%
51%
52%
53%
yes no
Series 1
Column1
Column2


94


CONCLUSION

41% for Hong-Kong and more than 80%foor developed countries, thus providing for further
growth in the housing sector during the coming years. Hence, the banks shall have more
opportunities to tap the market.

from other banks as well as Housing Finance Companies.

home loans, existing
customers continue to ply higher rate of interest. The Indian Banks Association has planned
to introduce a uniform rate for all borrowers. As being a Largest Lender in the segment SBI
needs to carry the same spirit and the move is in the right direction is certainly expected from
all the banks. We need to watch how banks / HFCs adjust their lending portfolios to this
effect in future.

your Boss by whom, finally, your decision has to be moulded.

The message that comes out of the event is loud and clear - the focus of the model
has to shift significantly to ensure that it finds space in the business strategies of the banks
and not in the footnotes of their annual reports. The BC model is in its infancy. The different
experiments being tried out enhance the understanding and the skill sets of the sector to make
the model a viable and feasible instrument of increasing financial services outreach. In the
initial stages, the focus seems to be on inclusion. The experiments are by and large not
treating the BC-led inclusion as a commercial prospect and seek to contain costs, not only of
the current kind but also of investments which are critical from a long-term point of view.
The regulatory stance is to learn from on going implementation and incrementally remove
hindrances as is seen in the recent relaxation of distance norms for BCs operations. This
stance while not entirely proactive, is sufficiently supportive. While the technology service
providers have taken a keener interest to prove the practicability of the model, they
necessarily focus on technology aspects rather than the customer aspects. The key to success
of BCs lies in banks making client acquisition and business expansion a business proposition;
and not treating it as a CSR activity. When BC becomes an instrument of business expansion
and profitability, banks will ask different questions and find practical answers to the many
problems that exist today.





95


REFERENCE

o The Training and Guidance Material supplied to the staff of the Branch.
o The material supplied by the Faculty Guide.
o Annual Reports of RBI(made available on its website (www.rbi.org.in)
o Daily News Papers: Economic Times of India and Business Standard.
o Indian Journal of Finance
o Magazines like Business India etc.
COMPANY PROFILE BOOK
LITERATURE ON BUSINESS CORRESPONDENT
LITERATURE ON KIOSK BANKING
LITERATURE ON RATES
WEBSITES
- www.google.ccom
- www.sbi.co.in
- www.statebanktimes.com
- a. www.statebankofindia.com
- b. www.onlinesbi.com
- c. www.apnaloan.com
- d. www.consumercomplaints.in
- e. www.Consumercourt.in
- f. www.lendingtree.com
- g. www.guide2homeloan.com
- h. www.indiahousing.com
- i. www.deal4loans.com
- j. Many other online Books and Documents available on
Scribd.com
Docstoc.com

















96


Snehlata Singh
2/671, Rashmi Khand Sharda Nagar,
LDA Colony,
Lucknow
Uttar Pradesh 226002
Mobile: +91 9161696852
Sneha671.singh@gmail.com
Date of Birth: 05/12/1989

CAREER OBJECTIVE
Seeking a position in an organization of your repute where my interpersonal skills and
knowledge especially in the area of Human Resources and Marketing can be utilized
gainfully for our mutual growth.

EDUCATION

Qualifications Specialization Board/Univ. Year CGPA/%age
MBA(pursuing) HR & Marketing AUUP 2010- 12 Pursuing
BSc Science BVP 2010 60%
SSC Science UP 2006 75%
HSC Science UP 2004 74%






97


ACADEMIC PROJECTS
BSc Final Year Project:
A project on poultry industry
PROFESSIONAL ACTIVITIES

Seminars Attended:
International Marketing and its Emergence in Todays Business World
E- Commerce
Rural Marketing and its scope

PERSONAL ACTIVITIES / ACHIEVEMENTS
Honors & Awards /Accomplishments:
Organized a cultural programmes in Bharti Vidya Peeth Unversity,pune

Got 2nd prize at school level in Bhartiya Sanskriti Gyan Pariksha (2005) .
Participate in debate competition organized by Lucknow Public School, Lucknow .
Got 2
nd
position in chess compition at Bharti Vidya Peeth University, Pune
Got 2nd position in criket inter collage compition at Bharti Vidya Peeth University,
Pune
Got 1
st
prize in dance competition in Lucknow Public School , Lucknow (2005)

Personal Skills & Attributes:
Hard-working, punctual, confident, self-disciplined, self-motivated.
Communicative,keen insight of human character,good listening skills.

Interests / Hobbies:
Listening to Music, Travelling, Chess.

Languages:
Proficient in Hindi & English, Elementary knowledge of German.

REFERENCES:
Ms Sohini Car
Senior lead-HR,Lucknow,
U.P.
Mobile: +91 991877533


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THANK YOU