INDUSRTY - BANKING SECTOR BANK STATE BANK OF INDIA

PRODUCT HOUSING LOAN

Submitted to:
Mr. Sourabh Kumar

Submitted by:
Manhar Parmjot Singh 10900912 RM39B1A56

TABLE OF CONTENTS
1. Overview of Banking Industry 2. Company Profile 2.1 Introduction 2.2 Background 2.3 Evolution of SBI 3. SBI Housing Loan 3.1 Unique features 3.2 Purpose 3.3 Eligibility 3.4 Loan Amount 3.5 Margin 3.6 Processing Fee 3.7 Pre-closure Penalty 3.8 Security 3.9 Maximum Repayment Period 3.10 Moratorium 3.11 Disbursement 3.12 Documents 3.13 SBI-Flexi Home Loans 3.14 SBI-Maxgain Home Loans 3.15 SBI-Realty Home Loans 3.16 SBI-Freedom Home Loans 3.17 SBI-Optima Additional Home Loans 3.18 SBI-Homeline Special Personal Loans 3.19 Purpose 3.20 Eligibility 3.21 Interest Rates/processing fee 3.22 Other Salient Features 3.23 Credit Khazana 3.24 Eligibility 3.25 Concession in Interest 3.26 Concession in Margin 3.27 Security 4. Total cost 5. Competitors of State Bank of India 6. Demand Estimation

1. Overview of Banking Industry

The Indian banking industry has been on the path of reformation and recovery ever since the process of liberalization had begun. While the earlier highly regulated, or rather, restricted system had hampered down heavily on the sector as a whole, the liberalization process led to a total makeover of the entire sector, making it more customer and industry friendly. One of the major policies that liberalization brought in was the removal of entry barriers to the banking sector, thus ushering in a number of foreign and private banks. Thus, thanks to liberalization, the Indian banking sector became a true monopolistic competition.

2. Company Profile
2.1 Introduction State Bank of India is an India-based bank. As of March 31, 2012, the Bank had a network of 20,193 branches, including 5,096 branches of its five associate banks. In addition to banking, the Company, through its various subsidiaries, provides a range of financial services, which include life insurance, merchant banking, mutual funds, credit card, factoring, security trading, pension fund management, custodial services, general insurance (non-life insurance) and primary dealership in the money market. Its segments include Treasury, which includes investment portfolio and trading in foreign exchange contracts and derivative contracts; Corporate/Wholesale Banking, which comprises lending activities of Corporate Accounts Group, Mid Corporate Accounts Group and Stressed Assets Management Group; Retail Banking, which comprises of branches in National Banking Group, which includes personal banking activities, including lending activities to corporate customers, and Other Banking Business. 2.2 Background The State Bank of India is the oldest and largest bank in India, with more than $250 billion (USD) in assets. It is the second-largest bank in the world in number of branches; it opened its 10,000th branch in 2008. The bank has 84 international branches located in 32 countries and approximately 8,500 ATMs. Additionally, SBI has controlling or complete interest in a number of affiliate banks, resulting in the availability of banking services at more than 14,600 branches and nearly 10,000 ATMs. SBI traces its heritage to the 1806 formation of the Bank of Calcutta. The bank was renamed the Bank of Bengal in 1809 and operated as one of the three premier "presidency" banks (the presidency banks had the exclusive rights to manage and circulate currency and were provided capital to establish branch networks). In 1921, the government consolidated the three presidency banks into the Imperial Bank of India. The Imperial Bank of India continued until 1955, when India's central bank, the Reserve Bank of India, acquired the majority interest in the bank and changed its name to the State Bank of India (SBI).In 1959, the Indian government passed the State Bank of India Act, resulting in the acquisition (majority shareholding) of eight state-affiliated banks and the creation of the State Bank of India Group (SBI Group). The SBI itself is now majority owned by the Indian government, which purchased the shares held by the Reserve Bank of India.

2.3 Evolution of SBI The origin of the State Bank of India goes back to the first decade of the nineteenth century with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806. Three years later the bank received its charter and was re-designed as the Bank of Bengal (2 January 1809). A unique institution, it was the first joint-stock bank of British India sponsored by the Government of Bengal. The Bank of Bombay (15 April 1840) and the Bank of Madras (1 July 1843) followed the Bank of Bengal. These three banks remained at the apex of modern banking in India till their amalgamation as the Imperial Bank of India on 27 January 1921. Primarily Anglo-Indian creations, the three presidency banks came into existence either as a result of the compulsions of imperial finance or by the felt needs of local European commerce and were not imposed from outside in an arbitrary manner to modernize India's economy. Their evolution was, however, shaped by ideas culled from similar developments in Europe and England, and was influenced by changes occurring in the structure of both the local trading environment and those in the relations of the Indian economy to the economy of Europe and the global economic framework.

3. SBI Housing Loan

"THE MOST PREFERRED HOME LOAN PROVIDER" voted in AWAAZ Consumer Awards along with the MOST PREFERRED BANK AWARD in a survey conducted by TV 18 in association with AC Nielsen-ORG Marg in 21 cities across India. SBI HOME LOANS now offers Interest Rates concessions on GREEN HOMES in accordance with SBI's commitment to Environment protection.SBI Home Loans come to you on the solid foundation of trust and transparency built in the tradition of State Bank of India.Best Practices followed in SBI mentioned below will tell you why it makes sense to do business with State Bank of India. Best practices followed in SBI People dealing with End to End service by Permanent employees of SBI who are you accountable to you. Place Price Prepayment charges Costs hidden fine print Transparency in SBI branch of your choice will service your loan account. You can always meet our employees face to face. Complete transparency. Interest charged on the daily reducing balance. No penalty for prepayments made, out of bonafide savings or windfall gains for which evidence is produced. No hidden costs Complete transparency. All the features of our product, including interest rates, are in the public domain.

3.1 Unique features Provision for on the spot "In principle" approval. Loan sanctioned within 6 days of submission of required documents. Option to avail Home Loan as a Term Loan or as an Overdraft facility to save on interest and maximise gains (see SBI MaxGain in the following sections) Option to club income of your spouse and children 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 upto Rs.40 Lac. Optional Group Insurance from SBI Life at concessional premium (Upfront premium financed as part of project cost) Interest calculated on daily reducing balance basis, and starts from the date of disbursement. 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 Option to avail loan at the place of employment or at the place of construction Complimentary international ATM-Debit card Complimentary SBI Classic/ International Credit Card Option for internet-banking Concessional package under Credit Khazana for prospective Auto Loan, Student Loan, Personal Loan borrowers whose accounts are conducted satisfactorily 50% concession in charges in respect of all personal remittances/ collection of outstation cheques Personal loan at attractive rates under SBI Home Plus scheme tailored exclusively for SBI Home Loan customers. 3.2 Purpose Purchase/ Construction of 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.

3.3 Eligibility 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. Availability of sufficient, regular and continuous source of income for servicing the loan repayment.

3.4 Loan Amount 40 to 60 times of NMI, depending on repayment capacity as % of NMI as under; Net Annual Income Upto Rs.2 lacs Above Rs. 5 lacs EMI/NMI Ratio 40% 55%

Above Rs.2 lac to Rs. 5 lacs 50%

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 is proposed to be rented out. 3. Depreciation, subject to some conditions. 4. Regular income from all sources. Note: NMI Net Monthly Income EMI Equated Monthly Installment. 3.5 Margin Purchase/ Construction of a new House/ Flat/ Plot of land: 20% for loans up to Rs.30 Lacs, 20% for loans above Rs.30 lacs and upto Rs.75 lacs. 25% for loans above Rs.75 lacs. (w.e.f. 01.01.2009). 3.6 Processing Fee 0.50% of Loan amount with a cap of Rs.10,000/-(including Service Tax) 3.7 Pre-closure Penalty No penalty if the loan is preclosed from own savings/windfall gains for which documentary evidence is produced by the customer. In case, such proof is not produced by the borrower, penalty @2% on the amount prepaid in excess of normal EMI dues shall be levied if the loan is pre-closed within 3 years from the date of commencement of repayment. 3.8 Security Equitable mortgage of the property.Other tangible security of adequate value like NSCs, Life Insurance policies etc., if the property cannot be mortgaged. 3.9 Maximum Repayment Period For applicants up to 45 years of age: 25 years For applicants over 45 years of age: 15 years

3.10 Moratorium Up to 18 months from the date of disbursement of first installment 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) 3.11 Disbursement In lump sum direct in favour of the builder/ seller in respect of outright purchase In stages depending upon the actual progress of work in respect of construction of house/ flat etc. 3.12 Documents Completed application form Passport size photograph Proof of Identity PAN Card/ Voters ID/ Passport/ Driving License Proof of Residence Recent Telephone Bill/ Electricity Bill/ Property tax receipt/ Passport/ Voters ID Proof of business address in respect of businessmen/ industrialists Sale Deed, Agreement of Sale, Letter of Allotment, Non encumbrance certificate, Land/ Building Tax paid receipt etc. (as applicable and subject to satisfaction report from our empanelled lawyer) Copy of approved plan and approval from the Local Body Statement of Bank Account/ Pass Book for last 6 months 3.13 SBI-Flexi Home Loans A customized product designed to enable borrowers to hedge their Home Loan against unfavorable movement in interest rates. The product gives you a one time 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. Minimum Loan Amount: Rs.5 lacs (Other terms and conditions as applicable to regular Home Loans). 3.14 SBI-Maxgain Home Loans 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 (Other terms and conditions as applicable to regular Home Loans).

3.15 SBI-Realty Home Loans A unique product if you are on the look out 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 25 years. You 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) 3.16 SBI-Freedom Home Loans 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. Repayment is highly customized, giving you the option to repay through regular EMIs or through maturity proceeds of the securities pledged. (Other terms and conditions as applicable to regular Home Loans). 3.17 SBI-Optima Additional Home Loans 3.18 SBI-Homeline Special Personal Loans 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. 3.19 Purpose SBI-Optima Additional Home Loans SBI-Homeline Special Personal Loans to meet expenditure towards major repair, renovation, addition to their house/flat, purchase of furniture, fixtures and consumer durables General purpose loan to meet expenditure to meet forseen/unforeseen contingencies

3.20 Eligibility SBI-Optima Additional Home Loans 18 times NMI (for salaried borrowers)/ 1 times NAI ( for others) or (i)25% of the original project cost of house/flat (ii) 85% of the cost of repairs etc. or (iii) gap between 85% of the current market price of flat/house and actual outstanding loan dues , whichever is lower (EMI/NMI ratio of all loans should not exceed 60%) 18 times NMI (for salaried borrowers)/ 1 times NAI (for others)

SBI-Homeline Special Personal Loans

3.21 Interest Rates/processing fee SBI-Optima Additional Home Loans SBI-Homeline Special Personal Loans As applicable to Home Loans Interest rates 50 bps above rates applicable to the repayment tenure (floating rates only) Processing fee : 0.50% of the loan amount (including service tax)

3.22 Other Salient Features Inbuilt provision for availment of the loans on the expiry of each bloc of 5 years, the first bloc commencing on the expiry of 5 years from the date of sanction of original Home Loan. Original Home Loan and all SBI-Optima Home Loans/SBI-HomeLine Personal Loans can run concurrently Comfortable repayment obligations Tenure of the loans equal to the residual maturity of the original Home Loans 3.23 Credit Khazana The "SBI Credit Khazana" Scheme offers Housing Loan customers, concessions in interest rates and margins when they subsequently avail of any of the following loans: Car Loan, Scoom, Education Loan, Personal Loan, Tractor Loan. 3.24 Eligibility Housing Loan customers who have serviced the loan regularly for at least one year and where Equitable Mortgage has been created.

3.25 Concession in Interest There will be a concession of 0.25% in interest when any of the above mentioned loans are availed. 3.26 Concession in Margin There will be a concession of 10% in case of Car Loan and 5% in case of Tractor Loan. Under the SCOOM Scheme, the margin has been maintained at 5%. 3.27 Security The security required to be taken under the individual schemes would be taken and additionally, the Equitable Mortgage taken for the Housing Loan would be extended to cover the new loan(s).

4. Total cost
MUMBAI: The country's largest bank, State Bank of India, has reduced its processing fee on home loans and car loans by half in a move aimed at attracting customers and beating competition. The decision comes soon after many PSU banks announced a complete waiver of processing fee for a limited period, while private banks announced innovative schemes to attract customers. State Bank of India has reduced the processing fee on home and auto loans by 50 per cent for loans availed from October 17 to December 31. For home loans of up to Rs 25 lakh, the processing fee is 0.12 per cent per cent of the loan amount, subject to a minimum of Rs 1000, from 0.25 per cent earlier. For loans between Rs 25 and Rs 75 lakh, the revised processing fee is Rs 3,250, against Rs 6,500 earlier and for loans of above Rs 75 lakh, the processing fee is Rs 5,000, against Rs 10,000 earlier. For take over home loans, the bank is charging a flat processing fee of Rs 1000, said a press release from the bank. With the advent of festival season India's largest lender - the State Bank of India (SBI) has embarked upon a special campaign to ramp up its home loan book. It is going to reduce the processing fee for home loans to Rs.1000 per loan irrespective of the size. The offer would be made available from September 01 onwards, a senior bank official told moneycontrol.com. Currently, loan processing is at 0.25% of the loan amount subject to a cap of Rs 6,500 for loans upto Rs.75 lakhs. For any higher loan amount, the maximum fee ceiling is Rs.10,000. For example, if you apply for a loan of Rs. 20 lakhs, you need to pay a processing charge of Rs.1000/- With the new offer, it will be uniform at Rs.1,000 for a home loan. However, the offer would end on 30th November, 2012. At the same time, the banking behemoth is actively mulling reduction in conversion fee which is presently at 1%. For all banks, conversion fees are in the range of 0.50-2%. This move, if implemented, will help the existing (SBI) home loan customers, who are not entitled to get the

benefit of reduced interest rates to avail of the lowered interest rates. Lets assume the loan size is Rs.30 lakhs and a customer has already repaid Rs.10 lakhs. Therefore, he has to pay Rs.20,000/-(i.e. 1% of 30-10 lakhs) one-time upfront for the conversion. Earlier, SBI cut the interest rates on home and auto loans by over 50 basis points, effective from August 07. However, it did not change the base rate (remains at 10% p.a), the benchmark rate below which the Reserve Bank of India does not allow any bank to lend. Now, a home loan borrower can avail of a home loan with interest at 10.25% as against 10.75% prior to the rate cut, for a ticket size of Rs 30 lakhs. The interest rate will be 10.40% for loans above Rs. 30 lakhs. The EMI on Home Loan tenor of 30 years is Rs.897 per lakh which is the lowest in the market. However, the new rates are available only to the new customers. So, a customer who had taken a loan at a higher floating rate viz. 11.25% will be keen to avail the benefit of the current lower rate. So, he can convert his loan to the new rate by paying the conversion fee. "Those proposed moves by RBI will certainly benefit customers, who should tap opportunities right in time. However, the bank cannot just keep on doing this beyond a point as it may hurt their margins," said Anil Rego, CEO and founder, Rights Horizons, a Bangalore based advisory firm. With 26% market share, SBI continues to be the leader in home loan market followed by the privately held housing finance company- HDFC . "We have got some surplus funds after RBI cut statutory liquidity ratio by 1% to 23%. We have decided to utilize it in expanding our retail business. The Bank is aiming at 20-25% growth in its home loan portfolio. As the country's largest bank, we have a vital role to play in supporting the economy", said the official. As of July, SBI's home loan portfolio stood at around Rs 1.06 lakh plus crores. Total retail loans stood at Rs 1.86 lakh crores in the April-June quarter. New Delhi: In festive mood, country's largest lender, the State Bank of India (SBI), has halved the processing fee on home and automobile loans. The reduced processing fee is available till the end of 2012. This comes days after the SBI slashed home and auto loans by 50 basis points. "With this reduction, the bank is quoting the lowest processing fee on both home and auto loans to our esteemed customers," it said. For home loans up to Rs 25 lakh, the processing charge has become 0.125 per cent of the loan amount from 0.25 per cent, it said. In case of loans between Rs 25 lakh and Rs 75 lakh, the processing fee would be Rs 3,250 as against Rs 6,500 while loans above Rs 75 lakh, it would be flat Rs 5,000 as compared to Rs 10,000 per application earlier. With regard to auto loan, the processing charge has been slashed to 0.255 per cent of the loan amount as against 0.51 per cent. Almost a month back, the SBI had slashed its base rate, the minimum benchmark rate below which the Reserve Bank of India (RBI) does not allow a bank to lend, by 25 basis points to 9.75 per cent. The bank had taken the decision in its asset liability committee meeting.

5. Competitors of State Bank of India

PNB ICICI HDFC

Domestic Data(Round off figures) State Bank of India ICICI Bank

Total Deposits 4,355.2

Total Advances 3,373.4

Net Profit

Total Assets

Branches

45.4

5,665.7

10,186

2,305.1

1,958.7

31.1

3,453.1

1,400

Punjab National Bank HDFC Bank

1,398.6

1,990.5

20.5

1,990.5

4,500

1,007.7

634.3

16.0

1,332.5

1,412

6. Demand Estimation
YEARS 2006 2007 2008 2009 2010 SALES IN Rs.LAKH CRORES 45 52 48 55 60

The equation for the straight line trend is Y = a + bx a-intercept b-shows impact of independent variable The Y intercept and the slope of the line are found by making substitutions in the following normal equations: Y = na + b x XY = a x + b x2 X2

YEARS

2006 2007 2008 2009 2010 N=5

SALES Rs LAKH CRORES (Y) 45 52 48 55 60 Y=260

XY

1 2 3 4 5 X=15

1 4 9 16 25 X2=55

45 104 144 220 300 XY=813

Substituting the above values in the normal equations: 260=5a +15b 813=15a + 55b solving the two equations, a = 42.1 , b = 3.3

Therefore, the equation for the straight line trend is Y=42.1 + 3.3X Using this equation we can find the trend values for the previous years and estimate the sales for the year 2011 as follows: Y 2006 Y 2007 Y 2008 Y 2009 Y 2010 Y 2011 = = = = = = 42.1+3.3(1) 42.1+3.3(2) 42.1+3.3(3) 42.1+3.3(4) 42.1+3.3(5) 42.1+3.3(6) = = = = = = 45.4 48.7 52.0 55.3 58.6 61.9

Thus, the forecast sales for year 2011 is Rs.61.9 lakh Crores.